Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is made and dated as of November 20, 2014 and
is entered into by and between GENOCEA BIOSCIENCES, INC., a Delaware corporation
(“Borrower”), the several banks and other financial institutions or entities
from time to time parties to this Agreement (collectively, referred to as
“Lender”) and HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a Maryland corporation,
in its capacity as administrative agent for itself and the Lender (in such
capacity, the “Agent”).

 

RECITALS

 

A.                                    Borrower has requested Lender to make
available to Borrower term loans (each a “Term Loan Advance” and collectively
the “Term Loan Advances”) in an aggregate principal amount of up to Twenty-Seven
Million Dollars ($27,000,000) (the “Maximum Term Loan Amount”); and

 

B.                                    Lender is willing to make the Term Loan
Advances on the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, Borrower, Agent and Lender agree as follows:

 

SECTION 1.  DEFINITIONS AND RULES OF CONSTRUCTION

 

1.1                               Unless otherwise defined herein, the following
capitalized terms shall have the following meanings:

 

“Account Control Agreement(s)” means any agreement entered into by and among
Agent, Borrower and a third party Bank or other institution (including a
Securities Intermediary) in which Borrower maintains a Deposit Account or an
account holding Investment Property, in each case, not constituting any (i)
accounts securing Borrower’s reimbursement obligations under letters of credit
permitted hereunder, (ii) accounts used solely to fund payroll or employee
benefits or (iii) withholding tax, benefits, trust, escrow or fiduciary
accounts, which grants to Agent a perfected first priority security interest in
the subject account or accounts.

 

“ACH Authorization” means the ACH Debit Authorization Agreement in substantially
the form of Exhibit H.

 

“ACH Failure” means the failure of the Automated Clearing House (ACH) system to
effect a transfer of the funds due to an administrative error in connection with
the institution and execution of the ACH Authorization.

 

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“Advance(s)” means a Term Loan Advance.

 

“Advance Date” means the funding date of any Advance.

 

“Advance Request” means a request for an Advance submitted by Borrower to Agent
in substantially the form of Exhibit A.

 

“Agent” has the meaning given to it in the preamble to this Agreement.

 

“Agreement” means this Loan and Security Agreement, as amended from time to
time.

 

“Amortization Date” means January 1, 2016; provided, however, that if the Draw
Period B Milestone Event occurs, at the request of Borrower, the Amortization
Date shall mean July 1, 2016.

 

“Assignee” has the meaning given to it in Section 11.13.

 

“Board” means Borrower’s board of directors.

 

“Borrower Products” means all products, software, service offerings, technical
data or technology currently being designed, manufactured or sold by Borrower or
which Borrower intends to sell, license, or distribute in the future including
any products or service offerings under development, collectively, together with
all products, software, service offerings, technical data or technology that
have been sold, licensed or distributed by Borrower since its incorporation.

 

“Business Day” means any day other than Saturday, Sunday and any other day on
which banking institutions in the State of California are closed for business.

 

“Cash” means all cash and liquid funds.

 

“Change in Control” means any (i) reorganization, recapitalization,
consolidation or merger (or similar transaction or series of related
transactions) of Borrower or any Subsidiary, sale or exchange of outstanding
shares (or similar transaction or series of related transactions) of Borrower or
any Subsidiary in which the holders of Borrower or Subsidiary’s outstanding
shares immediately before consummation of such transaction or series of related
transactions do not, immediately after consummation of such transaction or
series of related transactions, retain shares representing more than fifty
percent (50%) of the voting power of the surviving entity of such transaction or
series of related transactions (or the parent of such surviving entity if such
surviving entity is wholly owned by such parent), in each case without regard to
whether Borrower or Subsidiary is the surviving entity, or (ii) sale or issuance
by Borrower of equity securities to one or more purchasers, in a single
transaction or series of related transactions not registered under the
Securities Act, which securities represent, as of immediately following the
closing (or, if there be more than one, any closing) thereof, fifty percent
(50%) or more of the then-outstanding total combined voting power of Borrower,
other than an issuance of equity securities in a bona fide equity financing or
an issuance to the Borrower’s existing shareholders.

 

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“Claims” has the meaning given to it in Section 11.10.

 

“Closing Date” means the date of this Agreement.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Collateral” means the property described in Section 3.

 

“Common Stock” means the common stock, $0.001 par value per share, of Borrower.

 

“Confidential Information” has the meaning given to it in Section 11.12.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
Indebtedness, lease, dividend, letter of credit or other obligation of another,
including any such obligation directly or indirectly guaranteed, endorsed,
co-made or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards or
merchant services issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term “Contingent Obligation” shall not include endorsements for
collection or deposit in the ordinary course of business.  The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

 

“Copyright License” means any written agreement granting any right to use any
Copyright or Copyright registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.

 

“Copyrights” means all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof, or of any other
country.

 

“Default Rate” is defined in Section 2.3.

 

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the
UCC, and includes any checking account, savings account, or certificate of
deposit.

 

“Domestic Subsidiary” means a Subsidiary of that is a “United States person”
within the meaning of Section 7701(a)(30) of the Code.

 

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“Draw Period A” means the period commencing upon the Closing Date and ending on
the earlier to occur of (i) June 30, 2015, and (ii) an Event of Default.

 

“Draw Period B” means the period commencing upon the occurrence of the Draw
Period B Milestone Event and ending on the earlier to occur of (i) December 15,
2015, and (ii) an Event of Default.

 

“Draw Period B Milestone Event” means confirmation by Agent, in Agent’s
reasonable discretion, after the Closing Date, but on or prior to December 15,
2015, that (a) Borrower has received favorable data (including, without
limitation, data containing primary or secondary endpoints which provide
sufficient evidence to support the continued clinical progression of Borrower’s
GEN-003 product) with respect to its phase 2 “dose optimization” clinical study
of Borrower’s GEN-003 product, and (b) at least one (1) of the following
milestones have been achieved: (i) Borrower’s first (1st) patient has been
enrolled in a phase 2b “dose regimen” clinical study of Borrower’s GEN-003
product, or (ii) Borrower has received unrestricted and unencumbered net cash
proceeds in an amount equal to or greater than Forty Million Dollars
($40,000,000.00), resulting from (A) the issuance and sale by Borrower of its
equity securities and/or (B) upfront cash payments resulting from a strategic
corporate partnership(s).

 

“Draw Period C” means the period commencing upon the occurrence of the Draw
Period C Milestone Event and ending on the earlier to occur of (i) December 15,
2015, and (ii) an Event of Default.

 

“Draw Period C Milestone Event” means confirmation by Agent, in Agent’s
reasonable discretion, after the Closing Date, but on or prior to December 15,
2015, that Borrower has received favorable data (including, without limitation,
data containing primary or secondary endpoints which provide sufficient evidence
to support the continued clinical progression of Borrower’s GEN-004 product)
with respect to its phase 2a “human challenge” clinical study of Borrower’s
GEN-004 product.

 

“End of Term Charge” is defined in Section 2.5.

 

“Equity Rights Letter Agreement” means the Equity Rights Letter Agreement dated
as of even date hereof by and between Agent and Borrower.

 

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

 

“Event of Default” has the meaning given to it in Section 9.

 

“Facility Charge” means sixty-five-hundredths of one percent (0.65%) of the
Maximum Term Loan Amount, which is One Hundred Seventy-Five Thousand Five
Hundred Dollars ($175,500).

 

“Financial Statements” has the meaning given to it in Section 7.1.

 

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“Foreign Subsidiary” means any Subsidiary other than a Subsidiary organized
under the laws of any state within the United States.

 

“GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time, consistently applied, except that (i)
for purposes of the classification of operating leases, GAAP shall be determined
on the basis of such principles in effect on the Closing Date and (ii) for
purposes of Section 7.1, GAAP shall be determined on the basis of such
principles in effect on the Closing Date and consistent with those used in the
preparation of the most recent unqualified audited financial statements filed
with the Securities and Exchange Commission in a Form 10-K.

 

“Indebtedness” means indebtedness of any kind, including (a) all indebtedness
for borrowed money or the deferred purchase price of property or services,
including reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations; provided that Indebtedness shall not include (i) trade credit
entered into in the ordinary course of business due within sixty (60) days, (ii)
prepaid or deferred revenue arising in the ordinary course of business and (iii)
endorsements of checks or drafts arising in the ordinary course of business.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

 

“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents;
Licenses; trade secrets and inventions; mask works; Borrower’s applications
therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill
associated with any of the foregoing, together with Borrower’s rights to sue for
past, present and future infringement of Intellectual Property and the goodwill
associated therewith.

 

“Investment” means any beneficial ownership (including stock, partnership or
limited liability company interests) of or in any Person, or any loan, advance
or capital contribution to any Person or the acquisition of all, or
substantially all, of the assets of another Person.  The amount of any
Investment at any time shall be the original principal amount thereof less all
dividends, distributions, interest payments, returns of principal or equity or
other amount received on the sale or disposition of such Investment on or before
such time and shall, if made by the transfer or exchange of assets other than
cash, be deemed to have been made in an amount equal to the fair market value of
such assets at the time of such Investment.

 

“Joinder Agreements” means for each Subsidiary, a completed and executed Joinder
Agreement in substantially the form attached hereto as Exhibit G.

 

“Lender” has the meaning given to it in the preamble to this Agreement.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests.

 

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“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
against any property, any conditional sale or other title retention agreement,
and any lease in the nature of a security interest; provided that in no event
shall an operating lease entered into in the ordinary course of business or any
precautionary UCC filings made pursuant thereto by an applicable lessor or
lessee, be deemed to be a Lien.

 

“Loan” means the Advances made under this Agreement.

 

“Loan Documents” means this Agreement, the Notes (if any), the ACH
Authorization, the Account Control Agreements, the Joinder Agreements, all UCC
Financing Statements, the Warrant, the Equity Rights Letter Agreement, any
subordination agreement, and any other documents executed in connection with the
Secured Obligations or the transactions contemplated hereby, as the same may
from time to time be amended, modified, supplemented or restated.

 

“Material Adverse Effect” means a material adverse effect upon: (i) the
business, operations, properties, assets or condition (financial or otherwise)
of Borrower; or (ii) the ability of Borrower to perform the Secured Obligations
in accordance with the terms of the Loan Documents, or the ability of Agent or
Lender to enforce any of its rights or remedies with respect to the Secured
Obligations; or (iii) the Collateral or Agent’s Liens on the Collateral or the
priority of such Liens.

 

“Maximum Term Loan Amount” shall have the meaning assigned to such term in the
preamble to this Agreement.

 

“Maximum Rate” shall have the meaning assigned to such term in Section 2.2.

 

“Note(s)” means a promissory note or promissory notes to evidence Lender’s
Loans.

 

“Patent License” means any written agreement granting any right with respect to
any invention on which a Patent is in existence or a Patent application is
pending, in which agreement Borrower now holds or hereafter acquires any
interest.

 

“Patents” means all letters patent of, or rights corresponding thereto, in the
United States or in any other country, all registrations and recordings thereof,
and all applications for letters patent of, or rights corresponding thereto, in
the United States or any other country.

 

“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of Lender
or Agent arising under this Agreement or any other Loan Document; (ii)
Indebtedness existing on the Closing Date which is disclosed in Schedule 1A;
(iii) Indebtedness of up to $150,000 outstanding at any time secured by a Lien
described in clause (vii) of the defined term “Permitted Liens,” provided such
Indebtedness does not exceed the lesser of the cost or fair market value of the
Equipment financed with such Indebtedness; (iv) Indebtedness to trade creditors
incurred in the ordinary course of business, including Indebtedness incurred in
the ordinary course of

 

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business with corporate credit cards; (v) Indebtedness that also constitutes a
Permitted Investment; (vi) Subordinated Indebtedness; (vii) reimbursement
obligations in connection with letters of credit that are secured by cash or
cash equivalents and issued on behalf of Borrower or a Subsidiary thereof in an
amount not to exceed $475,000 at any time outstanding, (viii) other Indebtedness
in an amount not to exceed $150,000 at any time outstanding, and (ix)
extensions, refinancings, renewals, modifications, amendments or restatements of
any items of Permitted Indebtedness, provided that the principal amount is not
increased or the terms modified do not impose materially more burdensome terms
upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment” means: (i) Investments existing on the Closing Date which
are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one year from the date of acquisition thereof, (b)
commercial paper maturing no more than one year from the date of creation
thereof and currently having a rating of at least A-2 or P-2 from either
Standard & Poor’s Corporation or Moody’s Investors Service, (c) certificates of
deposit issued by any bank with assets of at least $500,000,000 maturing no more
than one year from the date of investment therein, and (d) money market
accounts; (iii) repurchases of stock from former employees, directors, or
consultants of Borrower under the terms of applicable repurchase agreements at
the original issuance price of such securities in an aggregate amount not to
exceed $250,000 in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases;
(iv) Investments accepted in connection with Permitted Transfers; (v)
Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of Borrower’s business; (vi) Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not affiliates, in the ordinary
course of business, provided that this subparagraph (vi) shall not apply to
Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans
not involving the net transfer on a substantially contemporaneous basis of cash
proceeds to employees, officers or directors relating to the purchase of capital
stock of Borrower pursuant to employee stock purchase plans or other similar
agreements approved by Borrower’s Board; (viii) Investments consisting of travel
advances in the ordinary course of business; (ix) Investments in newly-formed
Domestic Subsidiaries, provided that each such Domestic Subsidiary enters into a
Joinder Agreement promptly after its formation by Borrower and execute such
other documents as shall be reasonably requested by Agent; (x) Investments in
Foreign Subsidiaries approved in advance in writing by Agent; (xi) Investments
in joint ventures in which (a) Borrower has the power to direct or cause the
direction of the management and policies of such joint venture, whether through
ownership of voting securities or by contract or otherwise and (b) the aggregate
cash Investments by Borrower and/or its Subsidiaries with respect to, and in
connection with, any such joint venture, at any time outstanding does not exceed
$1,000,000 and not to exceed $3,000,000 in the aggregate for all joint ventures;
(xii) Investments consisting of Permitted Indebtedness and (xiii) additional
Investments that do not exceed $250,000 in the aggregate.

 

“Permitted Liens” means any and all of the following: (i) Liens in favor of
Agent or Lender; (ii) Liens existing on the Closing Date which are disclosed in
Schedule 1C; (iii) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being

 

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contested in good faith by appropriate proceedings; provided, that Borrower
maintains adequate reserves therefor in accordance with GAAP; (iv) Liens
securing claims or demands of materialmen, artisans, mechanics, carriers,
warehousemen, landlords and other like Persons arising in the ordinary course of
Borrower’s business and imposed without action of such parties; provided, that
the payment thereof is not yet required; (v) Liens arising from judgments,
decrees or attachments in circumstances which do not constitute an Event of
Default hereunder; (vi) the following deposits, to the extent made in the
ordinary course of business:  deposits under worker’s compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than Liens arising under ERISA or
environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds; (vii) Liens on Equipment or software or
other intellectual property constituting purchase money Liens and Liens in
connection with capital leases securing Indebtedness permitted in clause (iii)
of “Permitted Indebtedness”;  (viii) Liens incurred in connection with
Subordinated Indebtedness, provided such Liens only encumber  assets and
property of Borrower that are subject to a first priority perfected security
interest in favor of Agent (ix) leasehold interests in leases or subleases and
licenses granted in the ordinary course of business and not interfering in any
material respect with the business of the licensor; (x) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties that are promptly paid on or before the date they become due; (xi)
Liens on insurance proceeds securing the payment of financed insurance premiums
that are promptly paid on or before the date they become due (provided that such
Liens extend only to such insurance proceeds and not to any other property or
assets); (xii) statutory and common law rights of set-off and other similar
rights as to deposits of cash and securities in favor of banks, other depository
institutions and brokerage firms; (xiii) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business so long as they do not materially
impair the value or marketability of the related property; (xiv) Liens on cash
or cash equivalents securing obligations permitted under clause (vii) of the
definition of Permitted Indebtedness; and (xv) Liens incurred in connection with
the extension, renewal or refinancing of the Indebtedness secured by Liens of
the type described in clauses (i) through (xi) above; provided, that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed, refinanced, modified, amended or restated (as may have
been reduced by any payment thereon) does not increase.

 

“Permitted Transfers” means (i) sales of Inventory in the ordinary course of
business, (ii) licenses and similar arrangements for the use of Intellectual
Property in the ordinary course of business and licenses that could not result
in a legal transfer of title of the licensed property but that may be exclusive
in the ordinary course of business, (iii) dispositions of worn-out, obsolete or
surplus Equipment at fair market value in the ordinary course of business, (iv)
the use or transfer of money or cash equivalents in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents and in the
ordinary course of business, (v) consisting of Permitted Liens and (vi) other
Transfers of assets having a fair market value of not more than $250,000 in the
aggregate in any fiscal year.

 

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“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, other entity or government.

 

“Prepayment Charge” shall have the meaning assigned to such term in Section 2.4.

 

“Prime Rate” means the “prime rate” as reported in The Wall Street Journal, and
if not reported, then the prime rate most recently reported in The Wall Street
Journal.

 

“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents,
Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter
of credit, and Letter of Credit Rights, and (ii) all customer lists, software,
and business records related thereto.

 

“Required Lenders” means at any time, the holders of more than 50% of the
aggregate unpaid principal amount of the Term Loans then outstanding.

 

“Secured Obligations” means Borrower’s obligations under this Agreement and any
Loan Document (other than the Warrant), including any obligation to pay any
amount now owing or later arising.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subordinated Indebtedness” means Indebtedness subordinated to the Secured
Obligations in amounts and on terms and conditions satisfactory to Agent in its
sole reasonable discretion.

 

“Subsidiary” means an entity, whether corporate, partnership, limited liability
company, joint venture or otherwise, in which Borrower owns or controls 50% or
more of the outstanding voting securities, including each entity listed on
Schedule 1 hereto.

 

“Term Commitment” means as to any Lender, the obligation of such Lender, if any,
to make a Term Loan Advance to Borrower in a principal amount not to exceed the
amount set forth under the heading “Term Commitment” opposite such Lender’s name
on Schedule 1.1.

 

“Term Loan Advance” and “Term Loan Advances” are each defined in Recital A
hereof.

 

“Term Loan Interest Rate” means for any day, a floating per annum rate equal to
the greater of either (i) seven and one quarter of one percent (7.25%), or (ii)
the sum of (A) seven and one quarter of one percent (7.25%), plus (B) the Prime
Rate minus five percent (5.0%).  The Term Loan Interest Rate will change from
time to time on the day the Prime Rate changes.

 

“Term Loan Maturity Date” means July 1, 2018, provided, however, that if the
Draw Period B Milestone Event occurs, at the request of Borrower, the Term Loan
Maturity Date shall mean January 1, 2019.

 

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“Trademark License” means any written agreement granting any right to use any
Trademark or Trademark registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.

 

“Trademarks” means all trademarks (registered, common law or otherwise) and any
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof.

 

“UCC” means the Uniform Commercial Code as the same is, from time to time, in
effect in the State of California; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent’s Lien on any Collateral is
governed by the Uniform Commercial Code as the same is, from time to time, in
effect in a jurisdiction other than the State of California, then the term “UCC”
shall mean the Uniform Commercial Code as in effect, from time to time, in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.

 

“Warrant” means the Warrant Agreement dated as of even date hereof by and
between Hercules Technology Growth Capital, Inc. and Borrower, as may be
amended, restated or modified from time to time.

 

Unless otherwise specified, all references in this Agreement or any Annex or
Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule”
shall refer to the corresponding Section, subsection, Exhibit, Annex, or
Schedule in or to this Agreement.  Unless otherwise specifically provided
herein, any accounting term used in this Agreement or the other Loan Documents
shall have the meaning customarily given such term in accordance with GAAP, and
all financial computations hereunder shall be computed in accordance with GAAP,
consistently applied. Unless otherwise defined herein or in the other Loan
Documents, terms that are used herein or in the other Loan Documents and defined
in the UCC shall have the meanings given to them in the UCC.

 

SECTION 2.  THE LOAN

 

2.1                               Term Loan.

 

(a)                                 Advances.  Subject to the terms and
conditions of this Agreement, during Draw Period A, Lender will severally (and
not jointly) make, in an amount not to exceed its respective Term Commitment,
and Borrower may request, Term Loan Advances in an aggregate amount of up to
Seventeen Million Dollars ($17,000,000), provided that Borrower shall draw the
initial Term Loan Advance on the Closing Date in an amount of at least Twelve
Million Dollars ($12,000,000).  Subject to the terms and conditions of this
Agreement, during Draw Period B, Lender will severally (and not jointly) make,
in an amount not to exceed its respective Term Commitment, and Borrower may
request, one (1) additional Term Loan Advance in an amount of up to Five Million
Dollars ($5,000,000).  Subject to the terms and conditions of this Agreement,
during Draw Period C, Lender will severally (and not jointly) make, in an amount
not to exceed its

 

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respective Term Commitment, and Borrower may request, one (1) additional Term
Loan Advance in an amount of up to Five Million Dollars ($5,000,000).  The
aggregate outstanding Term Loan Advances shall not exceed the Maximum Term Loan
Amount.  Each Term Loan Advance shall be in a minimum amount of at least Two
Million Five Hundred Thousand Dollars ($2,500,000).  Proceeds of any Term Loan
Advance shall be deposited into an account that is subject to a first priority
perfected security interest in favor of Agent perfected by an Account Control
Agreement.

 

(b)                                 Advance Request.  To obtain a Term Loan
Advance, Borrower shall complete, sign and deliver an Advance Request to Agent
(at least five (5) Business Days before the Advance Date).  Lender shall fund
the Term Loan Advance in the manner requested by the Advance Request provided
that each of the conditions precedent to such Term Loan Advance are satisfied as
of the requested Advance Date.

 

(c)                                  Interest.  The principal balance of each
Term Loan Advance shall bear interest thereon from such Advance Date at the Term
Loan Interest Rate based on a year consisting of 360 days, with interest
computed daily based on the actual number of days elapsed.  The Term Loan
Interest Rate will float and change on the day the Prime Rate changes from time
to time.

 

(d)                                 Payment.  Borrower will pay interest on each
Term Loan Advance on the first (1st) Business Day of each month, beginning the
month after the Advance Date.  Commencing on the Amortization Date, and
continuing on the first (1st) Business Day of each month thereafter, until the
Secured Obligations are repaid, Borrower shall repay the aggregate principal
balance of Term Loan Advances that are outstanding on the day immediately
preceding the Amortization Date in equal monthly installments of principal and
interest (mortgage style) based upon an amortization schedule equal to thirty
(30) consecutive months.  After any change in the effective rate hereunder,
Agent shall recalculate future payments of principal and interest to fully
amortize the outstanding principal amount over the remaining scheduled monthly
payments hereunder prior to the Term Loan Maturity Date.  The entire principal
balance of the Term Loan Advances and all accrued but unpaid interest hereunder,
and all other Secured Obligations with respect to the Term Loan Advances, shall
be due and payable on Term Loan Maturity Date.  Borrower shall make all payments
under this Agreement without setoff, recoupment or deduction and regardless of
any counterclaim or defense. Lender will initiate debit entries to Borrower’s
account as authorized on the ACH Authorization (i) on each payment date of all
periodic obligations payable to Lender under each Term Advance and (ii)
reasonable and invoiced out-of-pocket legal fees and costs incurred by Agent or
Lender in connection with Section 11.11 of this Agreement.  Once repaid, a Term
Loan Advance or any portion thereof may not be reborrowed.

 

2.2                               Maximum Interest.  Notwithstanding any
provision in this Agreement or any other Loan Document, it is the parties’
intent not to contract for, charge or receive interest at a rate that is greater
than the maximum rate permissible by law that a court of competent jurisdiction
shall deem applicable hereto (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans)

 

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(the “Maximum Rate”).  If a court of competent jurisdiction shall finally
determine that Borrower has actually paid to Lender an amount of interest in
excess of the amount that would have been payable if all of the Secured
Obligations had at all times borne interest at the Maximum Rate, then such
excess interest actually paid by Borrower shall be applied as follows:  first,
to the payment of the Secured Obligations consisting of the outstanding
principal amount of the Term Loan Advances; second, after all principal is
repaid, to the payment of Lender’s accrued interest, costs, expenses,
professional fees and any other Secured Obligations; and third, after all
Secured Obligations are repaid, the excess (if any) shall be refunded to
Borrower.

 

2.3                               Default Interest.  In the event any payment is
not paid on the scheduled payment date (or within three (3) Business Days of the
scheduled payment date, provided that such late payment is due to an ACH
Failure), an amount equal to five percent (5%) of the past due amount shall be
payable on demand, provided that no such amount shall be payable if such
nonpayment is due to Lender’s failure to initiate debt entries pursuant to the
ACH Authorization. In addition, upon the occurrence and during the continuation
of an Event of Default hereunder, all Secured Obligations, including principal,
interest, compounded interest, and professional fees, shall bear interest at a
rate per annum equal to the rate set forth in Section 2.1(c), plus five percent
(5%) per annum (the “Default Rate”).  In the event any interest is not paid when
due hereunder, delinquent interest shall be added to principal and shall bear
interest on interest, compounded at the rate set forth in Section 2.1(c) or
Section 2.3, as applicable.

 

2.4                               Prepayment.  At its option upon at least seven
(7) Business Days prior notice to Agent, Borrower may prepay all, or a portion
of, the outstanding Advances by paying the entire principal balance, or portion
thereof, all accrued and unpaid interest thereon, together with a prepayment
charge equal to the following percentage of the Advance amount being prepaid: if
such Advance amounts are prepaid in any of the first twelve (12) months
following the Closing Date, three percent (3.0%); after twelve (12) months
following the Closing Date but on or prior to twenty four (24) months following
the Closing Date, two percent (2.0%); and thereafter, one percent (1.0%) (each,
a “Prepayment Charge”).  Borrower agrees that the Prepayment Charge is a
reasonable calculation of Lender’s lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early repayment
of the Advances.  Upon the occurrence of a Change in Control, Borrower shall
prepay the outstanding amount of all principal and accrued interest through the
prepayment date and all unpaid Agent’s and Lender’s fees and expenses accrued to
the date of the repayment (including the End of Term Charge) together with the
applicable Prepayment Charge. Notwithstanding the foregoing, Agent and Lender
agree to waive the Prepayment Charge if Agent and Lender or any of their
respective affiliates (in their sole and absolute discretion) agree in writing
to refinance and redocument this Agreement prior to the Term Loan Maturity
Date.  Notwithstanding anything to the contrary contained in this Agreement,
Borrower may rescind any notice of prepayment if such prepayment would have
resulted from a refinancing of all or a portion of the Advances, which
refinancing shall not be consummated or shall otherwise be delayed.

 

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2.5                               End of Term Charge.  On the earliest to occur
of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the
outstanding Secured Obligations, or (iii) the date that the Secured Obligations
become due and payable, Borrower shall pay Lender a charge equal to four and
ninety-five hundredths of one percent (4.95%) of the aggregate original
principal amount of all Term Loan Advances extended by Lender (the “End of Term
Charge”). Notwithstanding the required payment date of such charge, it shall be
deemed earned by Lender as of the Closing Date.

 

2.6                               Notes.  If so requested by Lender by written
notice to Borrower, then Borrower shall execute and deliver to Lender (and/or,
if applicable and if so specified in such notice, to any Person who is an
assignee of Lender pursuant to Section 11.13) (promptly after Borrower’s receipt
of such notice) a Note or Notes to evidence Lender’s Loans.

 

2.7                               Pro Rata Treatment.  Each payment (including
prepayment) on account of any fee and any reduction of the Term Loans shall be
made pro rata according to the Term Commitments of the relevant Lender.

 

SECTION 3.  SECURITY INTEREST

 

3.1                               As security for the prompt, complete and
indefeasible payment when due (whether on the payment dates or otherwise) of all
the Secured Obligations, Borrower grants to Agent a security interest in all of
Borrower’s right, title, and interest in and to the following personal property
whether now owned or hereafter acquired (collectively, the “Collateral”):  (a)
Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other than
Intellectual Property); (e) Inventory; (f) Investment Property (but excluding
thirty-five percent (35%) of the capital stock of any Foreign Subsidiary that
constitutes a Permitted Investment); (g) Deposit Accounts; (h) Cash; (i) Goods;
and all other tangible and intangible personal property of Borrower (other than
Intellectual Property) whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Borrower and wherever located, and any of
Borrower’s property in the possession or under the control of Agent; and, to the
extent not otherwise included, all Proceeds of each of the foregoing and all
accessions to, substitutions and replacements for, and rents, profits and
products of each of the foregoing; provided, however, that the Collateral shall
include all Accounts and General Intangibles that consist of rights to payment
and proceeds from the sale, licensing or disposition of all or any part, or
rights in, the Intellectual Property (the “Rights to Payment”).  Notwithstanding
the foregoing, Borrower is not granting to Agent, and Agent is not receiving
from Borrower, any grant of a security interest in (a) any of the outstanding
capital stock or other equity interests of any directly owned Foreign Subsidiary
of Borrower in excess of sixty-five percent (65%) of the voting power of all
classes of such capital stock or other equity interests of such Subsidiary
entitled to vote, (b) any particular asset if the pledge thereof or the security
interest therein is prohibited or restricted by applicable law, rule or
regulation (including any requirement to obtain the consent of any governmental
authority, regulatory authority or third party), provided that the foregoing
exclusion of this clause (b) shall in no way be construed (1) to apply to the
extent that any described prohibition or restriction is unenforceable under
Section 9-406, 9-407, 9-408, or

 

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9-409 of the UCC or other applicable law or (2) to apply to the extent that any
consent or waiver has been obtained, or is hereafter obtained, that would permit
the Agent’s security interest or Lien notwithstanding the prohibition or
restriction on the pledge of such asset, or (c) rights held under a license that
are not assignable by their terms without the consent of the licensor thereof
(but only to the extent such restriction on assignment is enforceable under
applicable law).

 

SECTION 4.  CONDITIONS PRECEDENT TO LOAN

 

The obligation of Lender to make the Term Loan Advances hereunder is subject to
the satisfaction by Borrower of the following conditions:

 

4.1                               Initial Advance.  On or prior to the Closing
Date, Borrower shall have delivered to Agent the following:

 

(a)                                 executed originals of the Loan Documents, a
legal opinion of Borrower’s counsel, and any other documents and instruments
reasonably required by Agent to effectuate the transactions contemplated hereby
or to create and perfect the Liens of Agent with respect to all Collateral, in
all cases in form and substance reasonably acceptable to Agent;

 

(b)                                 certified copy of resolutions of Borrower’s
Board evidencing approval of (i) the Loan and other transactions evidenced by
the Loan Documents; and (ii) the Warrant and transactions evidenced thereby;

 

(c)                                  certified copies of the Certificate of
Incorporation and the Bylaws, as amended through the Closing Date, of Borrower;

 

(d)                                 a certificate of good standing for Borrower
from its state of incorporation and similar certificates from all other
jurisdictions in which it does business and where the failure to be qualified
would have a Material Adverse Effect;

 

(e)                                  duly executed original signature to a
payoff letter from Ares Capital Corporation, together with evidence that (i) the
Liens securing Indebtedness owed by Borrower to Ares Capital Corporation will be
terminated and (ii) the documents and/or filings evidencing the perfection of
such Liens, including without limitation any financing statements and/or control
agreements, have or will, concurrently with the initial Advance, be terminated
or released;

 

(f)                                   payment of the Facility Charge and
reimbursement of Agent’s and Lender’s current expenses reimbursable pursuant to
this Agreement, which amounts may be deducted from the initial Advance; and

 

(g)                                  such other documents as Agent may
reasonably request.

 

4.2                               All Advances.  On each Advance Date:

 

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(a)                                 Agent shall have received (i) an Advance
Request for the relevant Advance as required by Section 2.1(b), duly executed by
Borrower’s Chief Executive Officer or Chief Financial Officer, and (ii) any
other documents Agent may reasonably request.

 

(b)                                 The representations and warranties set forth
in Section 5 of this Agreement and in Section 5 of the Warrant shall be true and
correct in all material respects on and as of the Advance Date with the same
effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date.

 

(c)                                  Borrower shall be in compliance with all
the terms and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately after such
Advance no Event of Default shall have occurred and be continuing.

 

(d)                                 Each Advance Request shall be deemed to
constitute a representation and warranty by Borrower on the relevant Advance
Date as to the matters specified in paragraphs (b) and (c) of this Section 4.2
and as to the matters set forth in the Advance Request.

 

4.3                               No Default.  As of the Closing Date and each
Advance Date, (i) no fact or condition exists that would (or would, with the
passage of time, the giving of notice, or both) constitute an Event of Default
and (ii) no event that has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.

 

SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BORROWER

 

Borrower represents and warrants that:

 

5.1                               Corporate Status.  Borrower is a corporation
duly organized, legally existing and in good standing under the laws of the
State of Delaware, and is duly qualified as a foreign corporation in all
jurisdictions in which the nature of its business or location of its properties
require such qualifications and where the failure to be qualified could
reasonably be expected to have a Material Adverse Effect.  Borrower’s present
name, former names (if any), locations, place of formation, tax identification
number, organizational identification number and other information are correctly
set forth in Exhibit C, as may be updated by Borrower in a written notice
(including any Compliance Certificate) provided to Agent after the Closing Date.

 

5.2                               Collateral.  Borrower owns the Collateral and
the Intellectual Property, free of all Liens, except for Permitted Liens. 
Borrower has the power and authority to grant to Agent a Lien in the Collateral
as security for the Secured Obligations.

 

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5.3                               Consents.  Borrower’s execution, delivery and
performance of the Note(s) (if any), this Agreement and all other Loan
Documents, and Borrower’s execution of the Warrant, (i) have been duly
authorized by all necessary corporate action of Borrower, (ii) will not result
in the creation or imposition of any Lien upon the Collateral, other than
Permitted Liens and the Liens created by this Agreement and the other Loan
Documents, (iii) do not violate any provisions of Borrower’s Certificate or
Articles of Incorporation (as applicable), bylaws, or any, law, regulation,
order, injunction, judgment, decree or writ to which Borrower is subject and
(iv) except as described on Schedule 5.3, do not materially violate any material
contract or agreement or require the consent or approval of any other Person
which has not already been obtained except for consents and approvals the
failure of which to obtain could not reasonably be expected to have a material
adverse effect on Borrower’s business.  The individual or individuals executing
the Loan Documents and the Warrant are duly authorized to do so.

 

5.4                               Material Adverse Effect.  No event that has
had or could reasonably be expected to have a Material Adverse Effect has
occurred and is continuing.

 

5.5                               Actions Before Governmental Authorities. 
Except as described on Schedule 5.5, there are no actions, suits or proceedings
at law or in equity or by or before any governmental authority now pending or,
to the knowledge of Borrower, threatened against or affecting Borrower or its
property, which would reasonably be expected to result in liability in excess of
$100,000.

 

5.6                               Laws.  Borrower is not in violation of any
law, rule or regulation, or in default with respect to any judgment, writ,
injunction or decree of any governmental authority, where such violation or
default is reasonably expected to result in a Material Adverse Effect.  Borrower
is not in default in any manner under any provision of any material agreement or
instrument evidencing Indebtedness in excess of $100,000, or any other material
agreement to which it is a party or by which it is bound, which default could
reasonably be expected to have a material adverse effect on Borrower’s business.

 

5.7                               Information Correct and Current.  No
information, report, Advance Request, financial statement, exhibit or schedule
furnished, by or on behalf of Borrower to Agent in connection with any Loan
Document or included therein or delivered pursuant thereto, taken as a whole for
the relevant period, contained, contains or will contain any material
misstatement of fact or omitted, omits or will omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were, are or will be made, not misleading at the time such
statement was made or deemed made  (it being recognized by Agent and the Lenders
that the projections and forecasts provided by Borrower in good faith and based
upon reasonable assumptions are not viewed as facts and that actual results
during the period or periods covered by such projections and forecasts may
differ from the projected or forecasted results). Additionally, any and all
financial or business projections provided by Borrower to Agent, whether prior
to or after the Closing Date, shall be (i) provided in good faith and based on
the most current data and information available to Borrower, and (ii) the most
current of such projections provided to Borrower’s Board.

 

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5.8                               Tax Matters.  Except as described on Schedule
5.8, (a) Borrower has filed all federal, state and local tax returns that it is
required to file, (b) Borrower has duly paid or fully reserved for all taxes or
installments thereof (including any interest or penalties) as and when due,
which have or may become due pursuant to such returns, and (c) Borrower has paid
or fully reserved for any tax assessment received by Borrower for the three (3)
years preceding the Closing Date, if any (including any taxes being contested in
good faith and by appropriate proceedings), in each case ((a)-(c)) except with
respect to taxes that do not exceed $25,000 in the aggregate.

 

5.9                               Intellectual Property Claims.  Borrower is the
sole owner of, or otherwise has the right to use, the Intellectual Property. 
Each of the material Copyrights, Trademarks and Patents is valid and
enforceable, no material part of the Intellectual Property has been judged
invalid or unenforceable, in whole or in part, and no claim has been made to
Borrower that any material part of the Intellectual Property violates the rights
of any third party which could reasonably be expected to have a material adverse
effect on Borrower’s business. Exhibit D is a true, correct and complete list of
each of Borrower’s Patents, registered Trademarks, registered Copyrights, and
material agreements under which Borrower licenses Intellectual Property from
third parties (other than shrink-wrap software licenses), together with
application or registration numbers, as applicable, owned by Borrower or any
Subsidiary, in each case as of the Closing Date. Borrower is not in material
breach of, nor has Borrower failed to perform any material obligations under,
any of the foregoing contracts, licenses or agreements and, to Borrower’s
knowledge, no third party to any such contract, license or agreement is in
material breach thereof or has failed to perform any material obligations
thereunder which material breach could reasonably be expected to have a material
adverse effect on Borrower’s business.

 

5.10                        Intellectual Property.  Except as described on
Schedule 5.10, Borrower has, or in the case of any proposed business, will have,
all material rights with respect to Intellectual Property necessary in the
operation or conduct of Borrower’s business as currently conducted and proposed
to be conducted by Borrower.  Without limiting the generality of the foregoing,
and in the case of Licenses, except for restrictions that are unenforceable
under Division 9 of the UCC, Borrower has the right, to the extent required to
operate Borrower’s business, to freely transfer, license or assign Intellectual
Property owned by Borrower without condition, restriction or payment of any kind
(other than license payments in the ordinary course of business) to any third
party, and Borrower owns or has the right to use, pursuant to valid licenses,
all software development tools, library functions, compilers and all other
third-party software and other items that are used in the design, development,
promotion, sale, license, manufacture, import, export, use or distribution of
Borrower Products, except customary covenants in inbound license agreements,
equipment leases and real property leases where Borrower is the licensee or
lessee.

 

5.11                        Borrower Products.  No Intellectual Property owned
by Borrower or Borrower Product has been or is subject to any actual or, to the
knowledge of Borrower, threatened litigation, proceeding (including any
proceeding in the United States Patent and Trademark Office or any corresponding
foreign office or agency) or outstanding decree,

 

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order, judgment, settlement agreement or stipulation that restricts in any
manner Borrower’s use, transfer or licensing thereof or that may affect the
validity, use or enforceability thereof, in each case, which could reasonably be
expected to have a material adverse effect on Borrower’s business. There is no
decree, order, judgment, agreement, stipulation, arbitral award or other
provision entered into in connection with any litigation or proceeding that
obligates Borrower to grant licenses or ownership interest in any future
Intellectual Property related to the operation or conduct of the business of
Borrower or Borrower Products.  Except as set forth on the Compliance
Certificate, Borrower has not received any written notice or claim, or, to the
knowledge of Borrower, oral notice or claim, challenging or questioning
Borrower’s ownership in any Intellectual Property material to Borrower’s
business (or written notice of any claim challenging or questioning the
ownership in any licensed Intellectual Property material to Borrower’s business
of the owner thereof) or suggesting that any third party has any claim of legal
or beneficial ownership with respect thereto nor, to Borrower’s knowledge, in
each case, is there a reasonable basis for any such claim.  Neither Borrower’s
use of its Intellectual Property material to Borrower’s business nor the
production and sale of Borrower Products infringes the Intellectual Property or
other rights of others.

 

5.12                        Financial Accounts.  Exhibit E, as may be updated by
Borrower in a written notice provided to Agent after the Closing Date, is a
true, correct and complete list of (a) all banks and other financial
institutions at which Borrower or any Subsidiary maintains Deposit Accounts and
(b) all institutions at which Borrower or any Subsidiary maintains an account
holding Investment Property, and such exhibit correctly identifies the name,
address and telephone number of each bank or other institution, the name in
which the account is held, a description of the purpose of the account, and the
complete account number therefor.

 

5.13                        Employee Loans.  Except as permitted by Section
7.7(c), Borrower has no outstanding loans to any employee, officer or director
of Borrower nor has Borrower guaranteed the payment of any loan made to an
employee, officer or director of Borrower by a third party.

 

5.14                        Subsidiaries.  Borrower does not own any stock,
partnership interest or other securities of any Person, except for Permitted
Investments.  Attached as Schedule 1, as may be updated by Borrower in a written
notice provided after the Closing Date, is a true, correct and complete list of
each Subsidiary.

 

SECTION 6.  INSURANCE; INDEMNIFICATION

 

6.1                               Coverage.  Borrower shall cause to be carried
and maintained commercial general liability insurance, on an occurrence form,
against risks customarily insured against in Borrower’s line of business.  Such
risks shall include the risks of bodily injury, including death, property
damage, personal injury, advertising injury, and contractual liability per the
terms of the indemnification agreement found in Section 6.3.  Borrower must
maintain a minimum of $2,000,000 of commercial general liability insurance for
each occurrence.  Borrower has and agrees to maintain a minimum of $2,000,000 of
directors’ and officers’

 

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insurance for each occurrence and $5,000,000 in the aggregate.  So long as there
are any Secured Obligations outstanding, Borrower shall also maintain a key man
life insurance policy for the Chief Executive Officer/President in form and
substance reasonably satisfactory to Agent, naming Agent as designated payee. So
long as there are any Secured Obligations outstanding, Borrower shall also cause
to be carried and maintained insurance upon the Collateral, insuring against all
risks of physical loss or damage howsoever caused, in an amount not less than
the full replacement cost of the Collateral, provided that such insurance may be
subject to standard exceptions and deductibles.

 

6.2                               Certificates.  Borrower shall deliver to Agent
certificates of insurance that evidence Borrower’s compliance with its insurance
obligations in Section 6.1 and the obligations contained in this Section 6.2. 
Borrower’s insurance certificate shall state Agent is an additional insured for
commercial general liability, a designated payee for the key man life insurance
policy, a loss payee for all risk property damage insurance, subject to the
insurer’s approval, and a loss payee for property insurance and additional
insured for liability insurance for any future insurance that Borrower may
acquire from such insurer.  Attached to the certificates of insurance will be
additional insured endorsements for liability and lender’s loss payable
endorsements for all risk property damage insurance.  All certificates of
insurance will provide for a minimum of thirty (30) days advance written notice
to Agent of cancellation or any other change adverse to Agent’s interests,
except for cancellations for non-payment which will provide for a minimum of ten
(10) days advance written notice to Agent.  Any failure of Agent to scrutinize
such insurance certificates for compliance is not a waiver of any of Agent’s
rights, all of which are reserved.

 

6.3                               Indemnity.  Borrower agrees to indemnify and
hold Agent, Lender and their officers, directors, employees, agents, in-house
attorneys, representatives and shareholders (each, an “Indemnified Person”)
harmless from and against any and all claims, costs, expenses, damages and
liabilities (including such claims, costs, expenses, damages and liabilities
based on liability in tort, including strict liability in tort), including
reasonable and invoiced out-of-pocket costs (including reasonable attorneys’
fees) and disbursements and other costs of investigation or defense (including
those incurred upon any appeal) within ten (10) days of receipt of such invoice
(collectively, “Liabilities”), that may be instituted or asserted against or
incurred by such Indemnified Person as the result of credit having been
extended, suspended or terminated under this Agreement and the other Loan
Documents or the administration of such credit, or in connection with or arising
out of the transactions contemplated hereunder and thereunder, or any actions or
failures to act in connection therewith, or arising out of the disposition or
utilization of the Collateral, excluding in all cases Liabilities to the extent
resulting solely from any Indemnified Person’s gross negligence or willful
misconduct. Borrower agrees to pay, and to save Agent and Lender harmless from,
any and all liabilities with respect to, or resulting from any delay in paying,
any and all excise, sales or other similar taxes (excluding taxes imposed on or
measured by the net income of Agent or Lender) that may be payable or determined
to be payable with respect to any of the Collateral or this Agreement.  In no
event shall any Indemnified Person be liable on any theory of liability for any
special, indirect, consequential or punitive damages (including any loss of
profits, business or anticipated savings).

 

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SECTION 7.  COVENANTS OF BORROWER

 

Borrower agrees as follows:

 

7.1                               Financial Reports.  Borrower shall furnish to
Agent the financial statements and reports listed hereinafter (the “Financial
Statements”):

 

(a)                                 as soon as practicable (and in any event
within 30 days) after the end of each calendar month, unaudited interim and
year-to-date financial statements as of the end of such month (prepared on a
consolidated and consolidating basis, if applicable), including balance sheet
and related statements of income and cash flows accompanied by a report
detailing any material contingencies (including the commencement of any material
litigation by or against Borrower) or any other occurrence that would reasonably
be expected to have a Material Adverse Effect, all certified by Borrower’s Chief
Executive Officer or Chief Financial Officer to the effect that they have been
prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii)
that they are subject to normal year end adjustments, and (iii) they do not
contain certain non-cash items that are customarily included in quarterly and
annual financial statements;

 

(b)                                 as soon as practicable (and in any event
within 45 days) after the end of last day of each of the first three fiscal
quarters of each fiscal year, the unaudited interim and year-to-date financial
statements as of the end of such applicable fiscal quarter filed with the
Securities and Exchange Commission in a Form 10-Q; provided that if a Form 10-Q
is not filed, Borrower shall provide the unaudited interim and year-to-date
financial statements as of the end of such fiscal quarter (prepared on a
consolidated and consolidating basis, if applicable), including balance sheet
and related statements of income and cash flows accompanied by a report
detailing any material contingencies (including the commencement of any material
litigation by or against Borrower) or any other occurrence that would reasonably
be expected to have a Material Adverse Effect,  certified by Borrower’s Chief
Executive Officer or Chief Financial Officer to the effect that they have been
prepared in accordance with GAAP, except (i) for the absence of footnotes, and
(ii) that they are subject to normal year end adjustments;

 

(c)                                  (i) the unqualified audited financial
statements as of the end of such year within five (5) days of filing with the
Securities and Exchange Commission in a Form 10-K and (ii) as soon as practical
(and in any event within ten (10) days after delivery of the audit in clause
(c)(i), any management report from the accounting firm that prepared the audited
financial statements included in such Form 10-K; provided that if a Form 10-K is
not filed, Borrower shall provide, within one hundred fifty (150) days) after
the end of each fiscal year, unqualified audited financial statements as of the
end of such year (prepared on a consolidated and consolidating basis, if
applicable), including balance sheet and related statements of income and cash
flows, and setting forth in comparative form the corresponding figures for the
preceding fiscal year, certified by a firm of independent certified public
accountants selected by Borrower and reasonably acceptable to Agent, and (ii) as
soon as practical (and in any event within ten (10) days after delivery of the
audit) any management report from such accountants;

 

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(d)                                 as soon as practicable (and in any event
within 30 days) after the end of each month, a Compliance Certificate in the
form of Exhibit F;

 

(e)                                  promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports that Borrower has made available to holders of its capital
stock and copies of any regular, periodic and special reports or registration
statements that Borrower files with the Securities and Exchange Commission or
any governmental authority that may be substituted therefor, or any national
securities exchange; and

 

(f)                                   financial and business projections
promptly following their approval by Borrower’s Board, as well as budgets,
operating plans and other financial information reasonably requested by Agent
(excluding any materials subject to attorney-client privilege and attorney
work-product.

 

Borrower shall not make any change in its (a) accounting policies or reporting
practices except for any change required by GAAP through the mandate of new
procedures or (b) fiscal years or fiscal quarters.  The fiscal year of Borrower
shall end on December 31.

 

The executed Compliance Certificate may be sent via facsimile to Agent at (650)
473-9194 or via e-mail to BJadot@herculestech.com.  All Financial Statements
required to be delivered pursuant to clauses (a), (b) and (c) shall be sent via
e-mail to financialstatements@herculestech.com with a copy to
BJadot@herculestech.com and BBang@herculestech.com provided, that if e-mail is
not available or sending such Financial Statements via e-mail is not possible,
they shall be sent via facsimile to Agent at: (866) 468-8916, attention Chief
Credit Officer.

 

7.2                               Management Rights.  Borrower shall permit any
representative that Agent or Lender authorizes, including any of their attorneys
and accountants, to inspect the Collateral and examine and make copies and
abstracts of the books of account and records of Borrower at reasonable times
and upon reasonable notice during normal business hours.  In addition, any such
representative shall have the right to meet with management and officers of
Borrower to discuss such books of account and records at reasonable times and
upon reasonable notice during normal business hours.  In addition, Agent or
Lender shall be entitled at reasonable times and intervals acceptable to
Borrower to consult with and advise the management and officers of Borrower
concerning significant business issues affecting Borrower, provided that
management and officers of Borrower are not bound to accept any such
advisement.  Such consultations shall not unreasonably interfere with Borrower’s
business operations.  The parties intend that the rights granted Agent and
Lender shall constitute “management rights” within the meaning of 29 C.F.R
Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or
participation by Agent or Lender with respect to any business issues shall not
be deemed to give Agent or Lender, nor be deemed an exercise by Agent or Lender
of, control over Borrower’s management or policies.

 

7.3                               Further Assurances.  Borrower shall from time
to time execute, deliver and file, alone or with Agent, any financing
statements, security agreements, collateral

 

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assignments, notices, control agreements, or other documents to perfect or give
the highest priority to Agent’s Lien on the Collateral.  Borrower shall from
time to time procure any instruments or documents as may be requested by Agent,
and take all further action that may be necessary or desirable, or that Agent
may reasonably request, to perfect and protect the Liens granted hereby and
thereby.  In addition, and for such purposes only, Borrower hereby authorizes
Agent to execute and deliver on behalf of Borrower and to file such financing
statements, collateral assignments, notices, control agreements, security
agreements and other documents without the signature of Borrower either in
Agent’s name or in the name of Agent as agent and attorney-in-fact for
Borrower.  Borrower shall protect and defend Borrower’s title to the Collateral
and Agent’s Lien thereon against all Persons claiming any interest adverse to
Borrower or Agent other than Permitted Liens.

 

7.4                               Indebtedness.  Borrower shall not create,
incur, assume, guarantee or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness, or prepay any Indebtedness (other than in connection with any
refinancings thereof) or take any actions which impose on Borrower an obligation
to prepay any Indebtedness, except for the conversion of Indebtedness into
equity securities and the payment of cash in lieu of fractional shares in
connection with such conversion.

 

7.5                               Collateral.  Borrower shall at all times keep
the Collateral, the Intellectual Property and all other property and assets used
in Borrower’s business or in which Borrower now or hereafter holds any interest
free and clear from any legal process or Liens whatsoever, and shall give Agent
prompt written notice of any legal process affecting the Collateral, the
Intellectual Property, such other property and assets, or any Liens thereon,
provided however, that the Collateral and such other property and assets may be
subject to Permitted Liens except that there shall be no Liens whatsoever on
Intellectual Property.  Borrower shall cause its Subsidiaries to protect and
defend such Subsidiary’s title to its assets from and against all Persons
claiming any interest adverse to such Subsidiary, and Borrower shall cause its
Subsidiaries at all times to keep such Subsidiary’s property and assets free and
clear from any legal process or Liens whatsoever (except for Permitted Liens,
provided however, that there shall be no Liens whatsoever on Intellectual
Property), and shall give Agent prompt written notice of any legal process
affecting such Subsidiary’s assets. Borrower shall not agree with any Person
other than Agent or Lender not to encumber its property other than (i) as is
otherwise permitted in the definition of “Permitted Liens” herein and “Permitted
Transfers” herein, and (ii) restrictions by reason of customary provisions
restricting assignment, subletting or other transfers contained in leases,
licenses and similar agreements entered into in the ordinary course of business
(provided that such restrictions are limited to the property or assets secured
by such Liens or the property or assets subject to such leases, licenses or
similar agreements as the case may be).

 

7.6                               Investments.  Borrower shall not directly or
indirectly acquire or own, or make any Investment in or to any Person, or permit
any of its Subsidiaries so to do, other than Permitted Investments.

 

7.7                               Distributions.  Except as permitted in clause
(iii) of the definition of “Permitted Investments”, Borrower shall not, and
shall not allow any Subsidiary to, (a)

 

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repurchase or redeem any class of stock or other equity interest other than
pursuant to employee, director or consultant repurchase plans or other similar
agreements, provided, however, in each case the repurchase or redemption price
does not exceed the original consideration paid for such stock or equity
interest, or (b) declare or pay any cash dividend or make a cash distribution on
any class of stock or other equity interest, except that a Subsidiary may pay
dividends or make distributions to Borrower, or (c) lend money to any employees,
officers or directors or guarantee the payment of any such loans granted by a
third party in excess of $100,000 in the aggregate or (d) waive, release or
forgive any Indebtedness owed by any employees, officers or directors in excess
of $100,000 in the aggregate.

 

7.8                               Transfers.  Except for Permitted Transfers,
Borrower shall not voluntarily or involuntarily transfer, sell, lease, license,
lend or in any other manner convey any equitable, beneficial or legal interest
in any material portion of its assets.

 

7.9                               Mergers or Acquisitions.  Borrower shall not
merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with or into any other business organization (other than mergers or
consolidations of (a) a Subsidiary which is not a Borrower into another
Subsidiary or into Borrower or (b) a Borrower into another Borrower), or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property of another Person without the prior written
consent of the Agent.

 

7.10                        Taxes.  Borrower and its Subsidiaries shall pay when
due all taxes, fees or other charges of any nature whatsoever (together with any
related interest or penalties) now or hereafter imposed or assessed against
Borrower, Agent, Lender or the Collateral or upon Borrower’s ownership,
possession, use, operation or disposition thereof or upon Borrower’s rents,
receipts or earnings arising therefrom.  Borrower shall file on or before the
due date therefor all personal property tax returns in respect of the
Collateral.  Notwithstanding the foregoing, Borrower may contest, in good faith
and by appropriate proceedings, taxes for which Borrower maintains adequate
reserves therefor in accordance with GAAP.

 

7.11                        Corporate Changes.  Neither Borrower nor any
Subsidiary shall change its corporate name, legal form or jurisdiction of
formation without twenty (20) days’ prior written notice to Agent.  Neither
Borrower nor any Subsidiary shall suffer a Change in Control.  Neither Borrower
nor any Subsidiary shall relocate its chief executive office or its principal
place of business unless: (i) it has provided prior written notice to Agent; and
(ii) such relocation shall be within the continental United States.  Neither
Borrower nor any Subsidiary shall relocate any item of Collateral (other than
(x) sales of Inventory in the ordinary course of business, (y) relocations of
Equipment having an aggregate value of up to $150,000 in any fiscal year, and
(z) relocations of Collateral from a location described on Exhibit C to another
location described on Exhibit C) unless (i) it has provided prompt written
notice to Agent, (ii) such relocation is within the continental United States
and, (iii) if such relocation is to a third party bailee, it has used its
commercially reasonable efforts to deliver a bailee agreement in form and
substance reasonably acceptable to Agent.

 

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7.12                        Deposit Accounts.  Neither Borrower nor any
Subsidiary shall maintain any Deposit Accounts, or accounts holding Investment
Property, except with respect to which Agent has an Account Control Agreement,
provided that no Account Control Agreement shall be required for any (i)
accounts securing Borrower’s reimbursement obligations under letters of credit
permitted hereunder, (ii) accounts used solely to fund payroll or employee
benefits or (iii) withholding tax, benefits, trust, escrow or fiduciary
accounts.

 

7.13                        Subsidiaries.  Borrower shall notify Agent of each
Subsidiary formed subsequent to the Closing Date and, within 15 days of
formation, shall cause any such Subsidiary to execute and deliver to Agent a
Joinder Agreement.

 

7.14                        Notification of Event of Default.  Borrower shall
notify Agent immediately of the occurrence of any Event of Default.

 

7.15                        Post-Closing Deliverables.  Borrower shall deliver
to Agent: (i) within five (5) Business Days after the Closing Date, in form and
substance satisfactory to Agent,  fully-executed Account Control Agreements by
and among Borrower, Agent, and Silicon Valley Bank, and (ii) within twenty (20)
Business Days after the Closing Date, in form and substance satisfactory to
Agent, endorsements to its property and liability policies, which endorsements
shall name Agent as lender loss payee and additional insured and provide that
Agent shall receive prior notice of cancellation of such property and liability
policies.

 

SECTION 8.  RIGHT TO INVEST

 

8.1                               Lender or its assignee or nominee shall have
the right, in its discretion, to participate in any Subsequent Financing (as
defined in the Equity Rights Letter Agreement) pursuant to the terms set forth
in the Equity Rights Letter Agreement.

 

SECTION 9.  EVENTS OF DEFAULT

 

The occurrence of any one or more of the following events shall be an Event of
Default:

 

9.1                               Payments.  Borrower fails to (i) make any
payments of principal or interest due under this Agreement, the Notes, or any of
the other Loan Documents on the due date (or within three (3) Business Days of
the due date, provided that such late payment is due to an ACH Failure),
provided that Lender’s failure to initiate debt entries pursuant to the ACH
Authorization shall not constitute an Event of Default hereunder or (ii) pay any
other Secured Obligations, including fees or other amounts within three (3)
Business Days after the same are due and payable; or

 

9.2                               Covenants.  Borrower breaches or defaults in
the performance of any covenant or Secured Obligation under this Agreement, or
any of the other Loan Documents or any other agreement among Borrower, Agent and
Lender, and (a) with respect to a default under any covenant under this
Agreement (other than under Sections 6 (other than delivery of certificates of
insurance pursuant to Section 6.2), 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, and

 

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7.14 and 7.15), any other Loan Document or any other agreement among Borrower,
Agent and Lender, such default continues for more than fifteen (15) days (or
three (3) days with respect to a default due to the failure to deliver
certificates of insurance pursuant to Section 6.2) after the earlier of the date
on which (i) Agent or Lender has given notice of such default to Borrower and
(ii) Borrower has actual knowledge of such default or (b) with respect to a
default under any of Sections 6 (other than delivery of certificates of
insurance pursuant to Section 6.2), 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, and 7.14 and
7.15, the occurrence of such default; or

 

9.3                               Material Adverse Effect.  A circumstance has
occurred that would reasonably be expected to have a Material Adverse Effect; or

 

9.4                               Representations.  Any representation or
warranty made by Borrower in any Loan Document shall have been false or
misleading in any material respect; or

 

9.5                               Insolvency.  Borrower (A) (i) shall make an
assignment for the benefit of creditors; or (ii) shall be unable to pay its
debts as they become due, or be unable to pay or perform under the Loan
Documents, or shall become insolvent; or (iii) shall file a voluntary petition
in bankruptcy; or (iv) shall file any petition, answer, or document seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation pertinent to such circumstances; or (v) shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower
or of all or any substantial part (i.e., 33-1/3% or more) of the assets or
property of Borrower; or (vi) shall cease operations of its business as its
business has normally been conducted, or terminate substantially all of its
employees; or (vii) Borrower or its Board or majority shareholders shall take
any action initiating any of the foregoing actions described in clauses (i)
through (vi); or (B) either (i) thirty (30) days shall have expired after the
commencement of an involuntary action against Borrower seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, without such
action being dismissed or all orders or proceedings thereunder affecting the
operations or the business of Borrower being stayed; or (ii) a stay of any such
order or proceedings shall thereafter be set aside and the action setting it
aside shall not be timely appealed; or (iii) Borrower shall file any answer
admitting or not contesting the material allegations of a petition filed against
Borrower in any such proceedings; or (iv) the court in which such proceedings
are pending shall enter a decree or order granting the relief sought in any such
proceedings; or (v) thirty (30) days shall have expired after the appointment,
without the consent or acquiescence of Borrower, of any trustee, receiver or
liquidator of Borrower or of all or any substantial part of the properties of
Borrower without such appointment being vacated; or

 

9.6                               Attachments; Judgments.  Any portion of
Borrower’s assets is attached or seized, or a levy is filed against any such
assets, or a judgment or judgments is/are entered, for the payment of money,
individually or in the aggregate, of at least $100,000, or Borrower is enjoined
or in any way prevented by court order from conducting any part of its business,
and such attachment, seizure, levy, judgment, or enjoinment is not, within

 

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fifteen (15) days after the occurrence thereof, discharged or stayed (whether
through the posting of a bond or otherwise); provided, however, no Advances
shall be made during any fifteen (15) day cure period; or

 

9.7                               Other Obligations.  The occurrence of any
default under any agreement or obligation of Borrower involving any Indebtedness
in excess of $100,000 after giving effect to any applicable grace period
thereunder (if any).

 

SECTION 10.  REMEDIES

 

10.1                        General.  Upon and during the continuance of any one
or more Events of Default, (i) Agent may, at its option, accelerate and demand
payment of all or any part of the Secured Obligations together with a Prepayment
Charge and declare them to be immediately due and payable (provided, that upon
the occurrence of an Event of Default of the type described in Section 9.5, all
of the Secured Obligations shall automatically be accelerated and made due and
payable, in each case without any further notice or act), (ii) Agent may, at its
option, sign and file in Borrower’s name any and all collateral assignments,
notices, control agreements, security agreements and other documents it deems
necessary or appropriate to perfect or protect the repayment of the Secured
Obligations, and in furtherance thereof, Borrower hereby grants Agent an
irrevocable power of attorney coupled with an interest, and (iii) Agent may
notify any of Borrower’s account debtors to make payment directly to Agent,
compromise the amount of any such account on Borrower’s behalf and endorse
Agent’s name without recourse on any such payment for deposit directly to
Agent’s account.  Agent may exercise all rights and remedies with respect to the
Collateral under the Loan Documents or otherwise available to it under the UCC
and other applicable law, including the right to release, hold, sell, lease,
liquidate, collect, realize upon, or otherwise dispose of all or any part of the
Collateral and the right to occupy, utilize, process and commingle the
Collateral.  All Agent’s rights and remedies shall be cumulative and not
exclusive.

 

10.2                        Collection; Foreclosure.  Upon the occurrence and
during the continuance of any Event of Default, Agent may, at any time or from
time to time, apply, collect, liquidate, sell in one or more sales, lease or
otherwise dispose of, any or all of the Collateral, in its then condition or
following any commercially reasonable preparation or processing, in such order
as Agent may elect.  Any such sale may be made either at public or private sale
at its place of business or elsewhere.  Borrower agrees that any such public or
private sale may occur upon ten (10) calendar days’ prior written notice to
Borrower.  Agent may require Borrower to assemble the Collateral and make it
available to Agent at a place designated by Agent that is reasonably convenient
to Agent and Borrower.  The proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be applied by Agent in
the following order of priorities:

 

First, to Agent and Lender in an amount sufficient to pay in full Agent’s and
Lender’s costs and professionals’ and advisors’ fees and expenses as described
in Section 11.11;

 

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Second, to Lender in an amount equal to the then unpaid amount of the Secured
Obligations (including principal, interest, and the Default Rate interest), in
such order and priority as Agent may choose in its sole discretion; and

 

Finally, after the full, final, and indefeasible payment in Cash of all of the
Secured Obligations, to any creditor holding a junior Lien on the Collateral, or
to Borrower or its representatives or as a court of competent jurisdiction may
direct.

 

Agent shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it complies with the obligations of a
secured party under the UCC.

 

10.3                        No Waiver.  Agent shall be under no obligation to
marshal any of the Collateral for the benefit of Borrower or any other Person,
and Borrower expressly waives all rights, if any, to require Agent to marshal
any Collateral.

 

10.4                        Cumulative Remedies.  The rights, powers and
remedies of Agent hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative.  The exercise of
any one or more of the rights, powers and remedies provided herein shall not be
construed as a waiver of or election of remedies with respect to any other
rights, powers and remedies of Agent.

 

SECTION 11.  MISCELLANEOUS

 

11.1                        Severability.  Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under such law, such provision shall be ineffective only to the
extent and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

 

11.2                        Notice.  Except as otherwise provided herein, any
notice, demand, request, consent, approval, declaration, service of process or
other communication (including the delivery of Financial Statements) that is
required, contemplated, or permitted under the Loan Documents or with respect to
the subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given, delivered, and received upon the earlier of: (i) the day
of transmission by facsimile or hand delivery or delivery by an overnight
express service or overnight mail delivery service; or (ii) the third calendar
day after deposit in the United States mails, with proper first class postage
prepaid, in each case addressed to the party to be notified as follows:

 

(a)                                 If to Agent:

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
Legal Department
Attention:  Chief Legal Officer and Mr. Bryan Jadot
400 Hamilton Avenue, Suite 310
Palo Alto, California 94301
Facsimile:  650-473-9194

 

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Telephone:  650-289-3060
E-mail: BBang@herculestech.com and BJadot@herculestech.com

 

(b)                                 If to Lender:

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
Legal Department
Attention:  Chief Legal Officer and Mr. Bryan Jadot
400 Hamilton Avenue, Suite 310
Palo Alto, California 94301
Facsimile:  650-473-9194
Telephone:  650-289-3060

E-mail: BBang@herculestech.com and BJadot@herculestech.com

 

(c)                                  If to Borrower:

 

Genocea Biosciences, Inc.

Attention:  Jonathan Poole
100 Acorn Park Drive, 5th Floor
Cambridge, Massachusetts 02140
Facsimile:  617.876.8192
Telephone:  617.715.7795

E-mail: jonathan.poole@genocea.com

 

or to such other address as each party may designate for itself by like notice.

 

11.3                        Entire Agreement; Amendments.

 

(a)                                 This Agreement and the other Loan Documents
constitute the entire agreement and understanding of the parties hereto in
respect of the subject matter hereof and thereof, and supersede and replace in
their entirety any prior proposals, term sheets, non-disclosure or
confidentiality agreements, letters, negotiations or other documents or
agreements, whether written or oral, with respect to the subject matter hereof
or thereof (including Agent’s revised proposal letter dated October 9, 2014).

 

(b)                                 Neither this Agreement, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 11.3(b).  The
Required Lenders and Borrower party to the relevant Loan Document may, or, with
the written consent of the Required Lenders, Agent and Borrower party to the
relevant Loan Document may, from time to time, (i) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of Lenders or of Borrower
hereunder or thereunder or (ii) waive, on such terms and conditions as the
Required Lenders or Agent, as the case may be, may specify in such instrument,
any of the requirements of this Agreement or the other Loan Documents or any
default or Event of Default and its consequences; provided, however, that no
such waiver and no such

 

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amendment, supplement or modification shall (A) forgive the principal amount or
extend the final scheduled date of maturity of any Loan, extend the scheduled
date of any amortization payment in respect of any Term Loan, reduce the stated
rate of any interest or fee payable hereunder, or extend the scheduled date of
any payment thereof, in each case without the written consent of each Lender
directly affected thereby; (B) eliminate or reduce the voting rights of any
Lender under this Section 11.3(b) without the written consent of such Lender;
(C) reduce any percentage specified in the definition of Required Lenders,
consent to the assignment or transfer by Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, release all or
substantially all of the Collateral or release a Borrower from its obligations
under the Loan Documents, in each case without the written consent of all
Lenders; or (D) amend, modify or waive any provision of Section 11.17 without
the written consent of Agent.  Any such waiver and any such amendment,
supplement or modification shall apply equally to each Lender and shall be
binding upon Borrower, Lender, Agent and all future holders of the Loans.

 

11.4                        No Strict Construction.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.

 

11.5                        No Waiver.  The powers conferred upon Agent and
Lender by this Agreement are solely to protect its rights hereunder and under
the other Loan Documents and its interest in the Collateral and shall not impose
any duty upon Agent or Lender to exercise any such powers.  No omission or delay
by Agent or Lender at any time to enforce any right or remedy reserved to it, or
to require performance of any of the terms, covenants or provisions hereof by
Borrower at any time designated, shall be a waiver of any such right or remedy
to which Agent or Lender is entitled, nor shall it in any way affect the right
of Agent or Lender to enforce such provisions thereafter.

 

11.6                        Survival.  All agreements, representations and
warranties contained in this Agreement and the other Loan Documents or in any
document delivered pursuant hereto or thereto shall be for the benefit of Agent
and Lender and shall survive the execution and delivery of this Agreement and
the expiration or other termination of this Agreement.

 

11.7                        Successors and Assigns.  The provisions of this
Agreement and the other Loan Documents shall inure to the benefit of and be
binding on Borrower and its permitted assigns.  Borrower shall not assign its
obligations under this Agreement or any of the other Loan Documents without
Agent’s express prior written consent, and any such attempted assignment shall
be void and of no effect.  Agent and Lender may assign, transfer, or endorse its
rights hereunder and under the other Loan Documents without prior notice to
Borrower, and all of such rights shall inure to the benefit of Agent’s and
Lender’s successors and assigns.

 

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11.8                        Governing Law.  This Agreement and the other Loan
Documents have been negotiated and delivered to Agent and Lender in the State of
California, and shall have been accepted by Agent and Lender in the State of
California.  Payment to Agent and Lender by Borrower of the Secured Obligations
is due in the State of California.  This Agreement and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of California, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.

 

11.9                        Consent to Jurisdiction and Venue.  All judicial
proceedings (to the extent that the reference requirement of Section 11.10 is
not applicable) arising in or under or related to this Agreement or any of the
other Loan Documents may be brought in any state or federal court located in the
State of California.  By execution and delivery of this Agreement, each party
hereto generally and unconditionally: (a) consents to nonexclusive personal
jurisdiction in Santa Clara County, State of California; (b) waives any
objection as to jurisdiction or venue in Santa Clara County, State of
California; (c) agrees not to assert any defense based on lack of jurisdiction
or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement or the other Loan
Documents.  Service of process on any party hereto in any action arising out of
or relating to this Agreement shall be effective if given in accordance with the
requirements for notice set forth in Section 11.2, and shall be deemed effective
and received as set forth in Section 11.2.  Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of either party to bring proceedings in the courts of any other
jurisdiction.

 

11.10                 Mutual Waiver of Jury Trial / Judicial Reference.

 

(a)                                 Because disputes arising in connection with
complex financial transactions are most quickly and economically resolved by an
experienced and expert Person and the parties wish applicable state and federal
laws to apply (rather than arbitration rules), the parties desire that their
disputes be resolved by a judge applying such applicable laws.  EACH OF
BORROWER, AGENT AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM
OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST AGENT,
LENDER OR THEIR RESPECTIVE ASSIGNEE OR BY AGENT, LENDER OR THEIR RESPECTIVE
ASSIGNEE AGAINST BORROWER.  This waiver extends to all such Claims, including
Claims that involve Persons other than Agent, Borrower and Lender; Claims that
arise out of or are in any way connected to the relationship among Borrower,
Agent and Lender; and any Claims for damages, breach of contract, tort, specific
performance, or any equitable or legal relief of any kind, arising out of this
Agreement, any other Loan Document.

 

(b)                                 If the waiver of jury trial set forth in
Section 11.10(a) is ineffective or unenforceable, the parties agree that all
Claims shall be resolved by reference to a private judge sitting without a jury,
pursuant to Code of Civil Procedure Section 638, before a mutually acceptable
referee or, if the parties cannot agree, a referee selected by the

 

30

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Presiding Judge of the Santa Clara County, California.  Such proceeding shall be
conducted in Santa Clara County, California, with California rules of evidence
and discovery applicable to such proceeding.

 

(c)           In the event Claims are to be resolved by judicial reference,
either party may seek from a court identified in Section 11.9, any prejudgment
order, writ or other relief and have such prejudgment order, writ or other
relief enforced to the fullest extent permitted by law notwithstanding that all
Claims are otherwise subject to resolution by judicial reference.

 

11.11      Professional Fees.  Borrower promises to pay Agent’s and Lender’s
reasonable invoiced out-of-pocket fees and expenses necessary to finalize the
loan documentation, including but not limited to reasonable attorneys fees, UCC
searches, filing costs, and other miscellaneous expenses. In addition, Borrower
promises to pay within ten (10) days after receipt of an invoice any and all
reasonable attorneys’ and other professionals’ fees and expenses (including fees
and expenses of in-house counsel) incurred by Agent and Lender after the Closing
Date in connection with or related to:  (a) the Loan; (b) the administration,
collection, or enforcement of the Loan; (c) the amendment or modification of the
Loan Documents; (d) any waiver, consent, release, or termination under the Loan
Documents; (e) the protection, preservation, audit, field exam, sale, lease,
liquidation, or disposition of Collateral or the exercise of remedies with
respect to the Collateral; (f) any legal, litigation, administrative,
arbitration, or out of court proceeding in connection with or related to
Borrower or the Collateral, and any appeal or review thereof; and (g) any
bankruptcy, restructuring, reorganization, assignment for the benefit of
creditors, workout, foreclosure, or other action related to Borrower, the
Collateral, the Loan Documents, including representing Agent or Lender in any
adversary proceeding or contested matter commenced or continued by or on behalf
of Borrower’s estate, and any appeal or review thereof.  For the avoidance of
doubt, the Facility Charge and payment of Agent’s and Lender’s current expenses
reimbursable pursuant to this Agreement (including reasonable attorneys’ fees
and expenses), shall be deducted from the initial Advance on the Closing Date.

 

11.12      Confidentiality.  Agent and Lender acknowledge that certain items of
Collateral and information provided to Agent and Lender by Borrower are
confidential and proprietary information of Borrower, if and to the extent such
information either (x) is marked as confidential by Borrower at the time of
disclosure, or (y) should reasonably be understood to be confidential (the
“Confidential Information”).  Accordingly, Agent and Lender agree that any
Confidential Information it may obtain shall not be disclosed to any other
Person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of Borrower, except that Agent and Lender may disclose any
such information:  (a) to its own directors, officers, employees, accountants,
counsel and other professional advisors and to its affiliates if Agent or Lender
in their sole discretion determines that any such party should have access to
such information in connection with such party’s responsibilities in connection
with the Loan or this Agreement and, provided that such recipient of such
Confidential Information either (i) agrees to be bound by the confidentiality
provisions of this paragraph or (ii) is otherwise subject to confidentiality

 

31

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restrictions that reasonably protect against the disclosure of Confidential
Information; (b) if such information is generally available to the public; (c)
if required or appropriate in any report, statement or testimony submitted to
any governmental authority having or claiming to have jurisdiction over Agent or
Lender; (d) if required or appropriate in response to any summons or subpoena or
in connection with any litigation, to the extent permitted or deemed advisable
by Agent’s or Lender’s counsel; (e) to comply with any legal requirement or law
applicable to Agent or Lender; (f) to the extent reasonably necessary in
connection with the exercise of any right or remedy under any Loan Document,
including Agent’s sale, lease, or other disposition of Collateral after an Event
of Default; (g) to any participant or assignee of Agent or Lender or any
prospective participant or assignee; provided, that such participant or assignee
or prospective participant or assignee agrees in writing to be bound by this
Section prior to disclosure; or (h) otherwise with the prior consent of
Borrower; provided, that any disclosure made in violation of this Agreement
shall not affect the obligations of Borrower or any of its affiliates or any
guarantor under this Agreement or the other Loan Documents.

 

11.13      Assignment of Rights.  Borrower acknowledges and understands that
Agent or Lender may sell and assign all or part of its interest hereunder and
under the Loan Documents to any Person or entity (an “Assignee”).  After such
assignment the term “Agent” or “Lender” as used in the Loan Documents shall mean
and include such Assignee, and such Assignee shall be vested with all rights,
powers and remedies of Agent and Lender hereunder with respect to the interest
so assigned; but with respect to any such interest not so transferred, Agent and
Lender shall retain all rights, powers and remedies hereby given.  No such
assignment by Agent or Lender shall relieve Borrower of any of its obligations
hereunder.  Lender agrees that in the event of any transfer by it of the
Note(s)(if any), it will endorse thereon a notation as to the portion of the
principal of the Note(s), which shall have been paid at the time of such
transfer and as to the date to which interest shall have been last paid thereon.

 

11.14      Revival of Secured Obligations.  This Agreement and the Loan
Documents shall remain in full force and effect and continue to be effective if
any petition is filed by or against Borrower for liquidation or reorganization,
if Borrower becomes insolvent or makes an assignment for the benefit of
creditors, if a receiver or trustee is appointed for all or any significant part
of Borrower’s assets, or if any payment or transfer of Collateral is recovered
from Agent or Lender.  The Loan Documents and the Secured Obligations and
Collateral security shall continue to be effective, or shall be revived or
reinstated, as the case may be, if at any time payment and performance of the
Secured Obligations or any transfer of Collateral to Agent, or any part thereof
is rescinded, avoided or avoidable, reduced in amount, or must otherwise be
restored or returned by, or is recovered from, Agent, Lender or by any obligee
of the Secured Obligations, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment, performance, or transfer
of Collateral had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or
recovered, the Loan Documents and the Secured Obligations shall be deemed,
without any further action or documentation, to have been revived and reinstated
except to the extent of the full, final, and indefeasible payment to Agent or
Lender in Cash.

 

32

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11.15      Counterparts.  This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.

 

11.16      No Third Party Beneficiaries.  No provisions of the Loan Documents
are intended, nor will be interpreted, to provide or create any third-party
beneficiary rights or any other rights of any kind in any Person other than
Agent, Lender and Borrower unless specifically provided otherwise herein, and,
except as otherwise so provided, all provisions of the Loan Documents will be
personal and solely among Agent, Lender and Borrower.

 

11.17      Agency.

 

(a)           Lender hereby irrevocably appoints Hercules Technology Growth
Capital, Inc. to act on its behalf as Agent hereunder and under the other Loan
Documents and authorizes Agent to take such actions on its behalf and to
exercise such powers as are delegated to Agent by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto.

 

(b)           Lender agrees to indemnify Agent in its capacity as such (to the
extent not reimbursed by Borrower and without limiting the obligation of
Borrower to do so), according to its respective Term Commitment percentages
(based upon the total outstanding Term Loan Commitments) in effect on the date
on which indemnification is sought under this Section 11.17, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever that
may at any time be imposed on, incurred by or asserted against Agent in any way
relating to or arising out of, this Agreement, any of the other Loan Documents
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
Agent under or in connection with any of the foregoing; The agreements in this
Section shall survive the payment of the Loans and all other amounts payable
hereunder.

 

(c)           Agent in Its Individual Capacity.  The Person serving as Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the Agent and
the term “Lender” shall, unless otherwise expressly indicated or unless the
context otherwise requires, include each such Person serving as Agent hereunder
in its individual capacity.

 

(d)           Exculpatory Provisions.  Agent shall have no duties or obligations
except those expressly set forth herein and in the other Loan Documents. 
Without limiting the generality of the foregoing, Agent shall not:

 

(i)    be subject to any fiduciary or other implied duties, regardless of
whether any default or any Event of Default has occurred and is continuing;

 

33

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(ii)   have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that Agent is required to
exercise as directed in writing by Lender, provided that Agent shall not be
required to take any action that, in its opinion or the opinion of its counsel,
may expose Agent to liability or that is contrary to any Loan Document or
applicable law; and

 

(iii)  except as expressly set forth herein and in the other Loan Documents,
have any duty to disclose, and Agent shall not be liable for the failure to
disclose, any information relating to Borrower or any of its affiliates that is
communicated to or obtained by any Person serving as the Agent or any of its
affiliates in any capacity.

 

(e)           Agent shall not be liable for any action taken or not taken by it
(i) with the consent or at the request of Lender or as Agent shall believe in
good faith shall be necessary, under the circumstances or (ii) in the absence of
its own gross negligence or willful misconduct.

 

(f)            Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the contents of
any certificate, report or other document delivered hereunder or thereunder or
in connection herewith or therewith, (iii) the performance or observance of any
of the covenants, agreements or other terms or conditions set forth herein or
therein or the occurrence of any default or Event of Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or (v) the satisfaction
of any condition set forth in Section 4 or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to Agent.

 

(g)           Reliance by Agent.  Agent may rely, and shall be fully protected
in acting, or refraining to act, upon, any resolution, statement, certificate,
instrument, opinion, report, notice, request, consent, order, bond or other
paper or document that it has no reason to believe to be other than genuine and
to have been signed or presented by the proper party or parties or, in the case
of cables, telecopies and telexes, to have been sent by the proper party or
parties.  In the absence of its gross negligence or willful misconduct, Agent
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
Agent and conforming to the requirements of the Loan Agreement or any of the
other Loan Documents.  Agent may consult with counsel, and any opinion or legal
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, not taken or suffered by Agent hereunder or
under any Loan Documents in accordance therewith.  Agent shall have the right at
any time to seek instructions concerning the administration of the Collateral
from any court of competent jurisdiction.  Agent shall not be under any
obligation to exercise any of the rights or powers granted to Agent by this
Agreement, the Loan Agreement and the other Loan Documents at the

 

34

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request or direction of Lenders unless Agent shall have been provided by Lender
with adequate security and indemnity against the costs, expenses and liabilities
that may be incurred by it in compliance with such request or direction.

 

11.18      Publicity.  None of the parties hereto nor any of its respective
member businesses and affiliates shall, without the other parties’ prior written
consent (which shall not be unreasonably withheld or delayed), publicize or use
(a) the other party’s name (including a brief description of the relationship
among the parties hereto), logo or hyperlink to such other parties’ web site,
separately or together, in written and oral presentations, advertising,
promotional and marketing materials, client lists, public relations materials or
on its web site (together, the “ Publicity Materials”); (b) the names of
officers of such other parties in the Publicity Materials; and (c) such other
parties’ name, trademarks, servicemarks in any news or press release concerning
such party; provided however, notwithstanding anything to the contrary herein,
no such consent shall be required (i) to the extent necessary to comply with the
requests of any regulators, legal requirements or laws applicable to such party,
pursuant to any listing agreement with any national securities exchange (so long
as such party provides prior notice to the other party hereto to the extent
reasonably practicable) and (ii) to comply with Section 11.12.

 

(SIGNATURES TO FOLLOW)

 

35

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IN WITNESS WHEREOF, Borrower, Agent and Lender have duly executed and delivered
this Loan and Security Agreement as of the day and year first above written.

 

 

BORROWER:

 

 

 

GENOCEA BIOSCIENCES, INC.

 

 

 

Signature:

/s/ Jonathan Poole

 

 

 

 

Print Name:

Jonathan Poole

 

 

 

 

Title:

Chief Financial Officer

 

--------------------------------------------------------------------------------

 

Accepted in Palo Alto, California:

 

 

AGENT:

 

 

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

Signature:

/s/ Ben Bang

 

 

 

 

Print Name:

Ben Bang

 

 

 

 

Title:

Associate General Counsel

 

 

 

LENDER:

 

 

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

Signature:

/s/ Ben Bang

 

 

 

 

Print Name:

Ben Bang

 

 

 

 

Title:

Associate General Counsel

 

--------------------------------------------------------------------------------

 

Table of Exhibits and Schedules

 

 

Exhibit A:

Advance Request

 

Attachment to Advance Request

 

 

Exhibit B:

Promissory Note

 

 

Exhibit C:

Name, Locations, and Other Information for Borrower

 

 

Exhibit D:

Borrower’s Patents, Trademarks, Copyrights and Licenses

 

 

Exhibit E:

Borrower’s Deposit Accounts and Investment Accounts

 

 

Exhibit F:

Compliance Certificate

 

 

Exhibit G:

Joinder Agreement

 

 

Exhibit H:

ACH Debit Authorization Agreement

 

 

Schedule 1

Subsidiaries

Schedule 1.1

Commitments

Schedule 1A

Existing Permitted Indebtedness

Schedule 1B

Existing Permitted Investments

Schedule 1C

Existing Permitted Liens

Schedule 5.3

Consents, Etc.

Schedule 5.5

Actions Before Governmental Authorities

Schedule 5.8

Tax Matters

Schedule 5.10

Intellectual Property

 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

 

ADVANCE REQUEST

 

To:

Agent:

Date:                           , 2014

 

 

 

 

Hercules Technology Growth Capital, Inc. (the “Agent”)

 

 

400 Hamilton Avenue, Suite 310

 

 

Palo Alto, CA 94301

 

 

Facsimile: 650-473-9194

 

 

Attn:

 

 

Genocea Biosciences, Inc. (“Borrower”) hereby requests from Hercules Technology
Growth Capital, Inc. (“Lender”) an Advance in the amount of
                                           Dollars
($                                ) on                             ,           
(the “Advance Date”) pursuant to the Loan and Security Agreement among Borrower,
Agent and Lender (the “Agreement”). Capitalized words and other terms used but
not otherwise defined herein are used with the same meanings as defined in the
Agreement.

 

Please:

 

(a)

Issue a check payable to Borrower

 

 

 

 

 

 

 

or

 

 

 

 

 

 

(b)

Wire Funds to Borrower’s account

 

 

 

 

 

 

 

Bank:

 

 

 

Address:

 

 

 

 

 

 

 

ABA Number:

 

 

 

Account Number:

 

 

 

Account Name:

 

 

 

Borrower represents that the conditions precedent to the Advance set forth in
the Agreement are satisfied, waived or shall be satisfied upon the making of
such Advance, including but not limited to:  (i) that no event that has had or
could reasonably be expected to have a Material Adverse Effect has occurred and
is continuing; (ii) that the representations and warranties set forth in the
Agreement and in the Warrant are and shall be true and correct in all material
respects on and as of the Advance Date with the same effect as though made on
and as of such date, except to the extent such representations and warranties
expressly relate to an earlier date; (iii) that Borrower is in compliance in all
material respects with all the terms and provisions set forth in each Loan
Document on its part to be observed or performed; and (iv) that as of the
Advance Date, no fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute an Event of Default under the
Loan Documents.  Borrower understands and acknowledges that Agent has the right
to review the financial information supporting this representation and, based
upon such review in its sole discretion, Lender may decline to fund the
requested Advance.

 

--------------------------------------------------------------------------------

 

Borrower hereby represents that Borrower’s corporate status and locations have
not changed since the date of the Agreement or, if the Attachment to this
Advance Request is completed, are as set forth in the Attachment to this Advance
Request.

 

Borrower agrees to notify Agent promptly before the funding of the Loan if any
of the matters which have been represented above shall not be true and correct
on the Borrowing Date and if Agent has received no such notice before the
Advance Date then the statements set forth above shall be deemed to have been
made and shall be deemed to be true and correct as of the Advance Date.

 

Executed as of [              ], 20[   ].

 

 

BORROWER:

 

 

 

GENOCEA BIOSCIENCES, INC.

 

 

 

SIGNATURE:

 

 

TITLE:

 

 

PRINT NAME:

 

 

--------------------------------------------------------------------------------

 

ATTACHMENT TO ADVANCE REQUEST

 

Dated:                                

 

Borrower hereby represents and warrants to Agent that Borrower’s current name
and organizational status is as follows:

 

Name:

Genocea Biosciences, Inc.

 

 

Type of organization:

Corporation

 

 

State of organization:

Delaware

 

 

Organization file number:

[                          ]

 

Borrower hereby represents and warrants to Agent that the street addresses,
cities, states and postal codes of its current locations are as follows:

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

PROMISSORY NOTE

 

$[  ],000,000

Advance Date:            , 20[  ]

 

 

 

Maturity Date:                  , 20[  ]

 

FOR VALUE RECEIVED, Genocea Biosciences, Inc., a Delaware corporation (the
“Borrower”) hereby promises to pay to the order of Hercules Technology Growth
Capital, Inc., a Maryland corporation or the holder of this Note (the “Lender”)
at 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301 or such other place of
payment as the holder of this Secured Term Promissory Note (this “Promissory
Note”) may specify from time to time in writing, in lawful money of the United
States of America, the principal amount of [  ] Million Dollars ($[  ],000,000)
or such other principal amount as Lender has advanced to Borrower, together with
interest at a floating rate equal to the greater of either (i) seven and one
quarter of one percent (7.25%), or (ii) the sum of (A) seven and one quarter of
one percent (7.25%), plus (B) the Prime Rate minus five percent (5.0%) per annum
based upon a year consisting of 360 days, with interest computed daily based on
the actual number of days in each month.

 

This Promissory Note is the Note referred to in, and is executed and delivered
in connection with, that certain Loan and Security Agreement dated
[              ], 2014, by and among Borrower, Hercules Technology Growth
Capital, Inc., a Maryland corporation (the “Agent”) and the several banks and
other financial institutions or entities from time to time party thereto as
lender (as the same may from time to time be amended, modified or supplemented
in accordance with its terms, the “Loan Agreement”), and is entitled to the
benefit and security of the Loan Agreement and the other Loan Documents (as
defined in the Loan Agreement), to which reference is made for a statement of
all of the terms and conditions thereof.  All payments shall be made in
accordance with the Loan Agreement.  All terms defined in the Loan Agreement
shall have the same definitions when used herein, unless otherwise defined
herein.  An Event of Default under the Loan Agreement shall constitute a default
under this Promissory Note.

 

Borrower waives presentment and demand for payment, notice of dishonor, protest
and notice of protest under the UCC or any applicable law.  Borrower agrees to
make all payments under this Promissory Note without setoff, recoupment or
deduction and regardless of any counterclaim or defense.  This Promissory Note
has been negotiated and delivered to Lender and is payable in the State of
California.  This Promissory Note shall be governed by and construed and
enforced in accordance with, the laws of the State of California, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.

 

[Signature page follows]

 

 

BORROWER FOR ITSELF AND

 

 

ON BEHALF OF ITS SUBSIDIARIES:

 

GENOCEA BIOSCIENCES, INC.

 

 

 

 

 

By:

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

 

EXHIBIT C

 

NAME, LOCATIONS, AND OTHER INFORMATION FOR BORROWER

 

1.  Borrower represents and warrants to Agent that Borrower’s current name and
organizational status as of the Closing Date is as follows:

 

Name:

Genocea Biosciences, Inc.

 

 

 

 

Type of organization:

Corporation

 

 

 

 

State of organization:

Delaware

 

 

 

 

Organization file number:

[             ]

 

 

2.  Borrower represents and warrants to Agent that for five (5) years prior to
the Closing Date, Borrower did not do business under any other name or
organization or form except the following:

 

Name: [N/A]

Used during dates of:  [N/A]

Type of Organization: [N/A]

State of organization:  [N/A]

Organization file Number: [N/A]

Borrower’s fiscal year ends on 12/31

Borrower’s federal employer tax identification number is: 51-0596811

 

3.  Borrower represents and warrants to Agent that its chief executive office is
located at 100 Acorn Park Drive 5Th Floor, Cambridge MA 02140.

 

--------------------------------------------------------------------------------

 

EXHIBIT D

 

BORROWER’S PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

 

See attached.

 

--------------------------------------------------------------------------------

 

 

EXHIBIT E

 

BORROWER’S DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS

 

ACCOUNT

 

ACCOUNT DETAILS

 

HRA

 

 

 

Analysis Checking

 

 

 

Collateral MMA

 

 

 

SBV Asset Management (MM & Treasuries)

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT F

 

COMPLIANCE CERTIFICATE

 

Hercules Technology Growth Capital, Inc.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301

 

Reference is made to that certain Loan and Security Agreement dated
[               ], 2014 and all ancillary documents entered into in connection
with such Loan and Security Agreement all as may be amended from time to time,
(hereinafter referred to collectively as the “Loan Agreement”) by and among
Hercules Technology Growth Capital, Inc., the several banks and other financial
institutions or entities from time to time party thereto (collectively, the
“Lender”) and Hercules Technology Growth Capital, Inc., as agent for the Lender
(the “Agent”) and Genocea Biosciences, Inc. (the “ Borrower”) as Borrower. All
capitalized terms not defined herein shall have the same meaning as defined in
the Loan Agreement.

 

The undersigned is an officer of Borrower, knowledgeable of all Borrower
financial matters, and is authorized to provide certification of information
regarding Borrower; hereby certifies in his/her individual capacity as an
officer of the Borrower and not in his/her individual capacity that in
accordance with the terms and conditions of the Loan Agreement, Borrower is in
compliance for the period ending                        of all covenants,
conditions and terms and hereby reaffirms that all representations and
warranties contained therein are true and correct in all material respects on
and as of the date of this Compliance Certificate with the same effect as though
made on and as of such date, except to the extent such representations and
warranties expressly relate to an earlier date, after giving effect in all cases
to any standard(s) of materiality contained in the Loan Agreement as to such
representations and warranties.  Attached are the required documents supporting
the above certification.  The undersigned further certifies that these are
prepared in accordance with GAAP (except for the absence of footnotes with
respect to unaudited financial statement and subject to normal year end
adjustments) and are consistent from one period to the next except as explained
below.

 

REPORTING REQUIREMENT

REQUIRED

CHECK IF ATTACHED

 

 

 

Interim Financial Statements

Monthly within 30 days

 

 

 

 

Interim Financial Statements

Quarterly within 45 days for first three quarters/ Form 10-Q

 

 

 

 

Audited Financial Statements

FYE within 150 days/Form 10-K

 

 

Has the Borrower received any written notice or claim, oral notice or claim,
challenging or questioning Borrower’s ownership in any Intellectual

 

Yes

No

 

--------------------------------------------------------------------------------

 

Property material to Borrower’s business (or written notice of any claim
challenging or questioning the ownership in any licensed Intellectual Property
material to Borrower’s business of the owner thereof) or suggesting that any
third party has any claim of legal or beneficial ownership with respect thereto?
If yes, provide details below:

 

 

 

Very Truly Yours,

 

 

 

GENOCEA BIOSCIENCES, INC.

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Its:

 

 

--------------------------------------------------------------------------------

 

EXHIBIT G

 

FORM OF JOINDER AGREEMENT

 

This Joinder Agreement (the “Joinder Agreement”) is made and dated as of
[          ], 20[  ], and is entered into by and
between                                    ., a                       
corporation (“Subsidiary”), and HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a
Maryland corporation (as “Agent”).

 

RECITALS

 

A.  Subsidiary’s affiliate, GENOCEA BIOSCIENCES, INC. (“Borrower”) [has
entered/desires to enter] into that certain Loan and Security Agreement dated
[         ], 2014, with the several banks and other financial institutions or
entities from time to time party thereto as lender (collectively, the “Lender”)
and Agent, as such agreement may be amended (the “Loan Agreement”), together
with the other agreements executed and delivered in connection therewith;

 

B.  Subsidiary acknowledges and agrees that it will benefit both directly and
indirectly from Borrower’s execution of the Loan Agreement and the other
agreements executed and delivered in connection therewith;

 

AGREEMENT

 

NOW THEREFORE, Subsidiary and Agent agree as follows:

 

1.              The recitals set forth above are incorporated into and made part
of this Joinder Agreement.  Capitalized terms not defined herein shall have the
meaning provided in the Loan Agreement.

 

2.              By signing this Joinder Agreement, Subsidiary shall be bound by
the terms and conditions of the Loan Agreement the same as if it were the
Borrower (as defined in the Loan Agreement) under the Loan Agreement, mutatis
mutandis, provided however, that (a) with respect to (i) Section 5.1 of the Loan
Agreement, Subsidiary represents that it is an entity duly organized, legally
existing and in good standing under the laws of [        ], (b) neither Agent
nor Lender shall have any duties, responsibilities or obligations to Subsidiary
arising under or related to the Loan Agreement or the other agreements executed
and delivered in connection therewith, (c) that if Subsidiary is covered by
Borrower’s insurance, Subsidiary shall not be required to maintain separate
insurance or comply with the provisions of Sections 6.1 and 6.2 of the Loan
Agreement, and (d) that as long as Borrower satisfies the requirements of
Section 7.1 of the Loan Agreement, Subsidiary shall not have to provide Agent
separate Financial Statements.  To the extent that Agent or Lender has any
duties, responsibilities or obligations arising under or related to the Loan
Agreement or the other agreements executed and delivered in connection
therewith, those duties, responsibilities or obligations shall flow only to
Borrower and not to Subsidiary or any other Person or entity.  By way of example
(and not an exclusive list): (i) Agent’s providing notice to Borrower in
accordance with the Loan Agreement or as otherwise agreed among Borrower, Agent
and Lender shall be deemed provided to Subsidiary; (ii) a Lender’s providing an
Advance to Borrower shall be deemed an Advance to Subsidiary; and
(iii) Subsidiary shall have no right to request an Advance or make any other
demand on Lender.

 

3.              Subsidiary agrees not to certificate its equity securities
without Agent’s prior written consent, which consent may be conditioned on the
delivery of such equity securities to Agent in order to perfect Agent’s security
interest in such equity securities.

 

4.              Subsidiary acknowledges that it benefits, both directly and
indirectly, from the Loan Agreement, and hereby waives, for itself and on behalf
on any and all successors in interest (including without

 

--------------------------------------------------------------------------------

 

limitation any assignee for the benefit of creditors, receiver, bankruptcy
trustee or itself as debtor-in-possession under any bankruptcy proceeding) to
the fullest extent provided by law, any and all claims, rights or defenses to
the enforcement of this Joinder Agreement on the basis that (a) it failed to
receive adequate consideration for the execution and delivery of this Joinder
Agreement or (b) its obligations under this Joinder Agreement are avoidable as a
fraudulent conveyance.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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[SIGNATURE PAGE TO JOINDER AGREEMENT]

 

SUBSIDIARY:

 

 

 

                                                                       .

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

Address:

 

 

 

 

 

 

 

 

Telephone:

 

 

Facsimile:

 

 

 

 

AGENT:

 

 

 

 

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

Address:

 

400 Hamilton Ave., Suite 310

 

Palo Alto, CA 94301

 

Facsimile: 650-473-9194

 

Telephone: 650-289-3060

 

 

--------------------------------------------------------------------------------

 

EXHIBIT H

 

ACH DEBIT AUTHORIZATION AGREEMENT

 

Hercules Technology Growth Capital, Inc.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301

 

Re:  Loan and Security Agreement dated November     , 2014  (the “Agreement”) by
and among Genocea Biosciences, Inc. (“Borrower”), Hercules Technology Growth
Capital, Inc., as agent (“Agent”) and the lenders party thereto (collectively,
the “Lender”)

 

In connection with the above referenced Agreement, Borrower hereby authorizes
Agent to initiate debit entries for (i) the periodic payments due under the
Agreement and (ii) out-of-pocket legal fees and costs incurred by Agent or
Lender pursuant to Section 11.11 of the Agreement to Borrower’s account
indicated below.  Borrower authorizes the depository institution named below to
debit to such account.

 

DEPOSITORY NAME
SILICON VALLEY BANK

 

BRANCH
3003 TASMAN DRIVE

 

 

 

CITY
SANTA CLARA

 

STATE AND ZIP CODE
CALIFORNIA, 95054

 

 

 

TRANSIT/ABA NUMBER

 

ACCOUNT NUMBER

 

This authority will remain in full force and effect so long as any amounts are
due under the Agreement.

 

 

GENOCEA BIOSCIENCES, INC.

 

 

 

 

 

 

 

(Borrower)(Please Print)

 

 

 

By:

 

 

 

 

 

Date:

 

 

 

--------------------------------------------------------------------------------

 

Acknowledged and agreed to:

 

AGENT:

 

 

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

BY:

 

 

NAME:

 

 

TITLE:

 

 

 

 

 

 

LENDER:

 

 

 

 

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

Address:

 

400 Hamilton Ave., Suite 310

 

Palo Alto, CA 94301

 

Facsimile: 650-473-9194

 

Telephone: 650-289-3060

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 1.1

 

COMMITMENTS

 

LENDER

 

TERM COMMITMENT

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

$

27,000,000

 

 

 

 

 

 

TOTAL COMMITMENTS

 

$

27,000,000

 

 

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