EXHIBIT 10.1

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

by and among

 

SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA 95054

Attn: Loan Services

(408) 496-2429

 

 

and

 

 

XENOGEN CORPORATION

860 Atlantic Avenue

Alameda, California 94501

 

and

 

XENOGEN BIOSCIENCES CORPORATION

5 Cedar Brook Drive

Cranbury, New Jersey 08512

 

TOTAL CREDIT AMOUNT: $13,000,000

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TABLE OF CONTENTS

 

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1.

   ACCOUNTING AND OTHER TERMS    - 1 -

2.

   LOAN AND TERMS OF PAYMENT    - 1 -      2.1    Credit Extensions    - 1 -  
        2.1.1    Revolving Advances    - 2 -           2.1.2    Cash Management
Services Sublimit    - 2 -           2.1.3    Letters of Credit Sublimit   
- 2 -      2.2    Overadvances    - 3 -      2.3    Interest Rate, Payments   
- 3 -      2.4    Fees    - 3 -

3.

   CONDITIONS OF LOANS    - 3 -      3.1    Conditions Precedent to initial
Credit Extensions    - 3 -      3.2    Conditions Precedent to all Credit
Extensions    - 4 -

4.

   CREATION OF SECURITY INTEREST    - 4 -      4.1    Grant of Security Interest
   - 4 -

5.

   REPRESENTATIONS AND WARRANTIES    - 5 -      5.1    Due Organization and
Authorization    - 5 -      5.2    Collateral    - 5 -      5.3    Litigation   
- 6 -      5.4    No Material Adverse Change in Financial Statements    - 6 -  
   5.5    Solvency    - 6 -      5.6    Regulatory Compliance    - 6 -      5.7
   Subsidiaries    - 6 -      5.8    Full Disclosure    - 7 -

6.

   AFFIRMATIVE COVENANTS    - 7 -      6.1    Government Compliance    - 7 -  
   6.2    Financial Statements, Reports, Certificates    - 7 -      6.3   
Inventory; Returns    - 8 -      6.4    Taxes    - 8 -      6.5    Insurance   
- 8 -

 

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TABLE OF CONTENTS

(continued)

 

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     6.6    Accounts    - 9 -      6.7    Notice of Management Change    - 9 -  
   6.8    Remaining Months Liquidity    - 9 -      6.9    Control Agreements   
- 9 -      6.10    Further Assurances    - 9 -

7.

   NEGATIVE COVENANTS    - 9 -      7.1    Dispositions    - 9 -      7.2   
Changes in Business or Business Locations    - 10 -      7.3    Mergers or
Acquisitions    - 10 -      7.4    Indebtedness    - 10 -      7.5   
Encumbrance    - 10 -      7.6    Distributions; Investments    - 10 -      7.7
   Transactions with Affiliates    - 11 -      7.8    Subordinated Debt   
- 11 -      7.9    Compliance    - 11 -

8.

   EVENTS OF DEFAULT    - 11 -      8.1    Payment Default    - 11 -      8.2   
Covenant Default    - 12 -      8.3    Material Adverse Change    - 12 -     
8.4    Attachment    - 12 -      8.5    Insolvency    - 12 -      8.6    Other
Agreements    - 12 -      8.7    Judgments    - 13 -      8.8   
Misrepresentations    - 13 -      8.9    Guaranty    - 13 -      8.10    Change
of Control    - 13 -

9.

   BANK’S RIGHTS AND REMEDIES    - 13 -      9.1    Rights and Remedies   
- 13 -      9.2    Power of Attorney    - 14 -      9.3    Accounts Collection
   - 14 -

 

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TABLE OF CONTENTS

(continued)

 

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     9.4    Bank Expenses    - 15 -      9.5    Bank’s Liability for Collateral
   - 15 -      9.6    Remedies Cumulative    - 15 -      9.7    Demand Waiver   
- 15 -      9.8    Suretyship Waivers    - 15 -      9.9    Right of
Contribution    - 17 -

10.

   NOTICES    - 17 -

11.

   CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER    - 17 -

12.

   GENERAL PROVISIONS    - 17 -      12.1    Successors and Assigns    - 17 -  
   12.2    Indemnification    - 18 -      12.3    Time of Essence    - 18 -     
12.4    Severability of Provision    - 18 -      12.5    Amendments in Writing,
Integration    - 18 -      12.6    Counterparts    - 18 -      12.7    Survival
   - 18 -      12.8    Confidentiality    - 18 -      12.9    Attorneys’ Fees,
Costs and Expenses    - 19 -      12.10    Replacement Loan Agreement    - 19 -

13.

   DEFINITIONS    - 19 -

 

 

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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated August 2, 2005,
among SILICON VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and XENOGEN CORPORATION (“Xenogen”), a Delaware
corporation, whose address is 860 Atlantic Avenue, Alameda, California 94501 and
XENOGEN BIOSCIENCES CORPORATION (“XBC”), an Ohio corporation, whose address is 5
Cedar Brook Drive, Cranbury, New Jersey 08512 (individually each a “Borrower”,
and separately and collectively, the “Borrowers”) provides the terms on which
Bank will lend to Borrowers and Borrowers will repay Bank.

 

RECITALS

 

A. Xenogen and Bank entered into a Loan and Security Agreement, dated September
10, 2003, which has been amended by that certain Loan Modification Agreement
dated March 26, 2004, that certain Loan Modification Agreement dated July 1,
2004, that certain Loan Modification Agreement dated September 30, 2004 and that
certain Loan Modification Agreement dated March 31, 2005 (collectively referred
to as the “Loan Agreement”).

 

B. Xenogen has requested that Bank amend the Loan Agreement to, among other
things, increase the available amount of credit, extend the Revolving Maturity
Date and add XBC, its wholly owned subsidiary, as a borrower, and Bank is
willing to do so on the terms and conditions set forth herein.

 

C. The parties desire to amend and restate herein the Loan Agreement in its
entirety to effectuate these changes and consolidate the prior modifications.

 

D. This Agreement shall amend, re-evidence, restate and supercede in full the
Loan Agreement, but shall not evidence a novation or a release or relinquishment
of the priority of the security interests granted in connection with the Loan
Agreement and the other Loan Documents and other documents executed in
connection with the Loan Agreement;

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein
contained, Borrowers and Bank agree as follows:

 

1. ACCOUNTING AND OTHER TERMS.

 

Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP. The term “financial
statements” includes the notes and schedules. The terms “including” and
“includes” always mean “including (or includes) without limitation,” in this or
any Loan Document.

 

2. LOAN AND TERMS OF PAYMENT

 

2.1 Credit Extensions.

 

Borrowers will pay Bank the unpaid principal amount of all Credit Extensions and
interest on the unpaid principal amount of the Credit Extensions.

 

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2.1.1 Revolving Advances.

 

(a) Bank will make advances to Borrowers as follows:

 

(i) Bank will make Advances not exceeding an aggregate of $13,000,000 (the
“Committed Revolving Line”), minus (A) amounts deemed outstanding under the Cash
Management Services Sublimit, and minus (B) the amounts of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit).

 

(ii) Amounts borrowed under this Section may be repaid and reborrowed during the
term of this Agreement.

 

(iii) Borrower may terminate this Agreement at any time by: (1) providing Bank
with notice three (3) Business Days prior to such termination; (2) paying Bank
all outstanding Obligations at such time (including principal and accrued
interest); and (3) paying Bank a termination premium equal to the product of:
(y) the Minimum Interest (calculated using the Applicable Interest Rate in
effect on the effective date of such termination) multiplied by (z) the number
of full or partial months remaining from the effective date of such termination
through the Revolving Maturity Date.

 

(b) To obtain an Advance, Borrowers must notify Bank by facsimile or telephone
by 12:00 noon Pacific time on the Business Day the Advance is to be made. A
Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B, which shall be binding against both
Borrowers and to the extent only signed by one Borrower, any representations
made by the signing Borrower shall be deemed a representation made by the
non-signing Borrower. Bank will credit Advances to the signing Borrower’s
deposit account. Each Advance must be in a minimum amount of $100,000. Bank may
make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Borrower will indemnify Bank for any loss Bank suffers due to such
reliance.

 

(c) The Committed Revolving Line terminates on the Revolving Maturity Date, when
all Advances are immediately payable.

 

2.1.2 Cash Management Services Sublimit.

 

Borrowers may use up to Two Million Dollars ($2,000,000) for Bank’s Cash
Management Services, which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in various
cash management services agreements related to such services (the “Cash
Management Services”). All amounts Bank pays for any Cash Management Services
will be treated as Advances under the Committed Revolving Line.

 

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2.1.3 Letters of Credit Sublimit.

 

Bank will issue or have issued Letters of Credit (“Letters of Credit”) for
Borrowers’ account not exceeding (i) the Committed Revolving Line, minus (ii)
the outstanding principal balance of the Advances minus the Cash Management
Sublimit; however, the face amount of outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) may not exceed $2,000,000. Borrowers’
outstanding reimbursement obligation hereunder will be secured by unencumbered
cash on terms acceptable to Bank at any time upon the Revolving Maturity Date if
the term of this Agreement is not extended by Bank. Borrowers agree to execute
any further documentation in connection with the Letters of Credit as Bank may
reasonably request.

 

2.2 Overadvances.

 

If Borrowers’ Obligations under Sections 2.1.1, 2.1.2, and 2.1.3 exceed the
Committed Revolving Line, Borrowers must immediately pay Bank the excess.

 

2.3 Interest Rate, Payments.

 

(a) Interest Rate. Advances accrue interest on the outstanding principal balance
at a per annum rate equal to the Applicable Interest Rate. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed. Commencing on June 30, 2004,
regardless of the amount of Advances that may be outstanding from time to time,
Borrowers shall pay Bank on a monthly basis (and on the Revolving Maturity Date)
during the term of this Agreement, the greater of (i) the actual interest
accrued by the Advances or (ii) the Minimum Interest.

 

(b) Payments. Interest due on the Committed Revolving Line is payable on the
first day of each month. Bank may debit any of Borrowers’ deposit accounts
including Account Number 3300374106 for principal and interest payments owing or
any amounts Borrowers owe Bank. Bank will promptly notify Borrower when it
debits Borrowers’ accounts. These debits are not a set-off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.

 

2.4 Fees.

 

Borrowers will pay:

 

(a) Loan Fee. Borrowers shall pay Bank a loan fee in the amount of $248,333,
fully earned on the Closing Date and payable as follows: (i) $118,333 payable on
the Closing Date and (ii) $130,000 payable on the earlier of: (1) the first
anniversary of the Closing Date or (2) the termination of this Agreement. A good
faith deposit of $25,000 has already been paid to Bank and will be credited to
the amount due on the Closing Date.

 

(b) Intentionally Omitted.

 

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(c) Bank Expenses. All Bank Expenses incurred through and after the date of this
Agreement, are payable when due.

 

3. CONDITIONS OF LOANS

 

3.1 Conditions Precedent to continued Credit Extensions.

 

Bank’s obligation to continue making Credit Extensions is subject to the
following conditions precedent:

 

(a) receipt by Bank of the each Borrower’s resolution authorizing the
transaction in form and substance satisfactory to Bank;

 

(b) receipt by Bank of the Loan Fee due on the Closing Date;

 

(c) receipt by Bank of Xenogen’s consolidated financial projections approved by
Xenogen’s Board of Directors; and

 

(d) receipt by Bank of all other agreement and documents that Bank may
reasonably require.

 

3.2 Conditions Precedent to all Credit Extensions.

 

Bank’s obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

 

(a) timely receipt of any Payment/Advance Form; and

 

(b) the representations and warranties in Section 5 must be materially true on
the date of the Payment/Advance Form and on the effective date of each Credit
Extension and no Event of Default may have occurred and be continuing, or result
from the Credit Extension (provided, however, that those representations and
warranties expressly referring to another date shall be materially true as of
such date). Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties of Section 5 remain true.

 

4. CREATION OF SECURITY INTEREST

 

4.1 Grant of Security Interest.

 

Borrowers grant Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
Borrower’s material duties under the Loan Documents. Except for Permitted Liens,
any security interest will be a first priority security interest in the
Collateral. Notwithstanding the foregoing, the security interest granted herein
does not extend to and the term “Collateral” does not include any license or
contract rights to the extent (i) the granting of a security interest in it
would be contrary to applicable law, or (ii) that such rights are nonassignable
by their terms (but only to the extent

 

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such prohibition is enforceable under applicable law, including, without
limitation, Section 9406 of the Code) without the consent of the licensor or
other party (but only to the extent such consent has not been obtained). Except
as disclosed on the Schedule, neither Borrower is a party to, nor is bound by,
any material license or other similar agreement that prohibits or otherwise
restricts such Borrower from granting a security interest in such Borrower’s
interest in such license or agreement or any other property. Without prior
notice to Bank, neither Borrower shall enter into, or become bound by, any such
license or agreement which is reasonably likely to have a material impact on
such Borrower’s business or financial condition. Borrowers shall take such steps
as Bank requests to obtain the consent of, or waiver by, any person whose
consent or waiver is necessary for such licenses or contract rights to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future. If this Agreement
is terminated, Bank’s lien and security interest in the Collateral will continue
until Borrowers fully satisfy their Obligations. Notwithstanding anything
contained in this Agreement to the contrary, the term Collateral shall not
include any property that is subject to a Lien that is otherwise permitted
pursuant to paragraph (c) of the definition of “Permitted Liens” and Bank agrees
to execute any instruments or documents necessary to release its interest in
such property and to effect the foregoing. Bank agrees to terminate its security
interest and any relating UCC-1 financing statements upon payment in full, in
immediately available funds, of the Obligations.

 

5. REPRESENTATIONS AND WARRANTIES

 

Borrowers, jointly and severally, hereby represent and warrant to Bank, as of
the date hereof and as of the date of each Credit Extension that:

 

5.1 Due Organization and Authorization.

 

Each Borrower and each Subsidiary is duly existing and in good standing in its
jurisdiction of formation and qualified and licensed to do business in, and in
good standing in, any state in which the conduct of its business or its
ownership of property requires that it be qualified, except where the failure to
do so could not reasonably be expected to cause a Material Adverse Change.

 

The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrowers’ formation documents, nor
constitute an event of default under any material agreement by which either
Borrower is bound. Borrowers are not in default under any agreement to which or
by which it is bound in which the default could reasonably be expected to cause
a Material Adverse Change.

 

5.2 Collateral.

 

Borrowers have good title to the Collateral, free of Liens except Permitted
Liens. Borrowers have no other deposit accounts, other than the deposit accounts
described in the Schedule. The Accounts are bona fide, existing obligations, and
the service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and

 

- 5 -

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unconditional acceptance by the account debtor. The Collateral is not in the
possession of any third party bailee (such as at a warehouse). In the event that
Borrowers, after the date hereof, intend to store or otherwise deliver the
Collateral to such a bailee, then Borrowers will receive the prior written
consent of Bank and such bailee must acknowledge in writing that the bailee is
holding such Collateral for the benefit of Bank. Neither Borrower has notice of
any actual or imminent Insolvency Proceeding of any account debtor whose
accounts are an Eligible Account. All Inventory is in all material respects of
good and marketable quality, free from material defects.

 

5.3 Litigation.

 

Except as shown in the Schedule, there are no actions or proceedings pending or,
to the knowledge of Borrowers’ Responsible Officers and legal counsel,
threatened by or against Borrowers or any Subsidiary in which a likely adverse
decision could reasonably be expected to cause a Material Adverse Change.

 

5.4 No Material Adverse Change in Financial Statements.

 

All consolidated financial statements of Xenogen (which includes each
Subsidiary), delivered to Bank fairly present in all material respects Xenogen’s
consolidated financial condition and its consolidated results of operations.
There has not been any material deterioration in Xenogen’s consolidated
financial condition since the date of the most recent financial statements
submitted to Bank.

 

5.5 Solvency.

 

The fair salable value of each Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; each Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and each Borrower is able to pay its debts (including trade debts) as
they mature.

 

5.6 Regulatory Compliance.

 

Neither Borrower is an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act. Neither Borrower is
engaged as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors). Borrowers
have complied in all material respects with the Federal Fair Labor Standards
Act. Neither Borrower has violated any laws, ordinances or rules, the violation
of which could reasonably be expected to cause a Material Adverse Change. None
of Borrowers’ or any Subsidiary’s properties or assets has been used by
Borrowers or any Subsidiary or, to the best of Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. Each Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Each Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted, except where the failure to do so
could not reasonably be expected to cause a Material Adverse Change.

 

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5.7 Subsidiaries.

 

Borrowers do not own any stock, partnership interest or other equity securities
except for Permitted Investments.

 

5.8 Full Disclosure.

 

No written representation, warranty or other statement of Borrowers in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by
Borrowers 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 and forecasted results.

 

6. AFFIRMATIVE COVENANTS

 

On a continuing basis from the date of this Agreement until the Indebtedness is
paid in full and Borrowers have performed all of their other obligations
hereunder and under each other Loan Document, Borrowers, jointly and severally,
covenant and agree that:

 

6.1 Government Compliance.

 

Each Borrower will maintain its and all Subsidiaries’ legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on either Borrower’s business or operations.
Borrowers will comply, and have each Subsidiary comply, with all laws,
ordinances and regulations to which it is subject, noncompliance with which
could have a material adverse effect on either Borrower’s business or operations
or would reasonably be expected to cause a Material Adverse Change.

 

6.2 Financial Statements, Reports, Certificates.

 

(a) Xenogen will deliver to Bank: (i) as soon as available, but no later than 30
days after the last day of each month, a company prepared consolidated balance
sheet and income statement covering Xenogen’s consolidated operations during the
period, in a form and certified by a Responsible Officer acceptable to Bank;
(ii) as soon as available, but no later than 120 days after the last day of
Xenogen’s fiscal year, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an opinion that is unqualified (other
than on going concern qualification) or otherwise consented to by Bank on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Bank; (iii) within 5 days of filing, copies of all
statements, reports and notices generally made available to each

 

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Borrower’s security holders or to any holders of Subordinated Debt; (iv) a
prompt report of any legal actions pending or threatened against either Borrower
or any Subsidiary that could result in damages or costs to such Borrower or any
Subsidiary of $250,000 or more; (v) as soon as available, but no later than 45
days after the last day of each fiscal year of Xenogen, Xenogen’s consolidated
financial projections for the year approved by its Board of Directors; and (vi)
budgets, sales projections, operating plans or other financial information Bank
reasonably requests. To the extent available, Xenogen may comply with the
requirements in clauses (i), (ii) and (iii) above by delivering an email with a
link to any of the required documents that have been publicly filed.

 

(b) Monthly, within 30 days after the last day of each month, Borrowers will
deliver to Bank aged listings of accounts receivable and accounts payable, and a
detailed Deferred Revenue Schedule.

 

(c) Within 30 days after the last day of each month, Xenogen will deliver to
Bank with the monthly consolidated financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit C.

 

(d) Bank has the right to audit Borrower’s Collateral at Borrowers’ expense, but
the audits will be conducted no more often than once every year unless an Event
of Default has occurred and is continuing.

 

6.3 Inventory; Returns.

 

Borrowers will keep all Inventory in good and marketable condition, free from
material defects. Returns and allowances between any Borrower and its account
debtors will follow that Borrower’s customary practices as they exist at
execution of this Agreement. Borrowers must promptly notify Bank of all returns,
recoveries, disputes and claims, that involve more than $300,000 in the
aggregate in any one fiscal year.

 

6.4 Taxes.

 

Each Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments, and will deliver to
Bank, on demand, appropriate certificates attesting to the payment; provided
that Borrowers or a Subsidiary need not make any payment if the amount or
validity of such payment is contested in good faith by appropriate proceedings
and is reserved against to the extent required by GAAP.

 

6.5 Insurance.

 

Each Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request. Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank’s
reasonable discretion. All property policies will have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank’s
request, Borrowers will

 

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deliver certified copies of policies and evidence of all premium payments. If no
Event of Default has occurred and is continuing, proceeds payable under any
casualty policy will, at Borrowers’ option, be payable to the affected Borrower
to replace the property subject to the claim, provided that any such replacement
property shall be deemed Collateral in which Bank has been granted a first
priority security interest. If an Event of Default has occurred and is
continuing, then, at Bank’s option, proceeds payable under any policy will be
payable to Bank on account of the Obligations.

 

6.6 Accounts.

 

Borrowers will maintain their primary operating accounts with Bank.
Additionally, each Borrower shall maintain no less than 85% of its cash and cash
equivalents in deposit or investment accounts maintained at Bank or one of
Bank’s Affiliates.

 

6.7 Notice of Management Change.

 

Borrowers shall notify Bank of the following parties separation from their
employment at Xenogen within 30 days of such separation: (i) David Carter,
Pamela Contag, Ph.D., Anthony F. Purchio, Ph.D., William Albright.

 

6.8 Remaining Months Liquidity.

 

Xenogen will maintain, at all times, a Remaining Months Liquidity Ratio of at
least (i) 4.0:1.0 until October 31, 2005 and (ii) 6.0:1.0 thereafter, measured
on a rolling three-month basis.

 

6.9 Control Agreements.

 

With respect to deposit accounts or investment accounts maintained at financial
institutions other than Bank, within 15 days of the opening of any such deposit
account or investment account (or of the Closing Date for any deposit accounts
and investment accounts existing as of the Closing Date), each Borrower will
execute and deliver to Bank, control agreements in form satisfactory to Bank in
order for Bank to perfect its security interest in each Borrower’s deposit
accounts or investment accounts. Notwithstanding anything to the contrary
herein, Bank will not require a control agreement on Borrowers’ existing Bank of
America account so long as within 30 days of the Closing Date, such account is
either (i) closed or (ii) set-up as an overnight sweep account to Borrowers’
primary operating account held with Bank.

 

6.10 Further Assurances.

 

Borrowers will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s security interest in the
Collateral or to effect the purposes of this Agreement.

 

9

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7. NEGATIVE COVENANTS

 

On a continuing basis from the date of this Agreement until the Indebtedness is
paid in full and Borrowers have performed all of their other obligations
hereunder and under each other Loan Document, Borrowers, jointly and severally,
covenant and agree that each Borrower, as appropriate will not do any of the
following without Bank’s prior written consent, which will not be unreasonably
withheld:

 

7.1 Dispositions.

 

Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than Transfers (i) of Inventory in the ordinary course of
business (including Transfers of the IVIS systems); (ii) of non-exclusive
licenses and similar arrangements for the use of the property of Borrowers or
its Subsidiaries in the ordinary course of business; (iii) of exclusive licenses
of Intellectual Property entered into the ordinary course of business and
approved in good faith by such Borrower’s Board of Directors, so long as: (x)
such licenses are limited to specific products or processes or a specific
geographic area outside of the United States or Canada; (y) the duration of any
such license does not exceed 5 years; and (z) such exclusive license arrangement
is not tantamount to a sale of the subject Intellectual Property; (iv) of
worn-out or obsolete Equipment, (v) Transfers permitted by this Section 7, (vi)
cross-licenses entered into in settlement of litigation or potential litigation;
or (vii) other Transfers which in the aggregate do not exceed $250,000 in any
fiscal year.

 

7.2 Changes in Business or Business Locations.

 

Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrowers or reasonably related thereto.
Neither Borrower will, without at least 30 days prior written notice, relocate
its chief executive office or add any new offices or business locations at which
assets having a value in excess of $100,000 will be located.

 

7.3 Mergers or Acquisitions.

 

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person,
except (A) where (i) the aggregate purchase price or other consideration for
such transactions do not in the aggregate exceed $2,000,000 (provided however,
that Borrowers may make a one-time acquisition valued at not more than
$7,000,000 (exclusive of the $2,000,000 amount) where the consideration is not
cash and Bank has reviewed, and in its sole discretion, consented to the
transaction), (ii) no Event of Default has occurred and is continuing or would
result from such action during the term of this Agreement, (iii) a Borrower is
the surviving entity after any such acquisition (to the extent a Borrower was a
party thereto), (iv) any single transaction does not result in a material
reduction of either Borrower’s cash and cash equivalents or a material increase
in Xenogen’s consolidated monthly cash burn, and (v) such transaction would not
result in a decrease of more than 25% of Tangible Net Worth, and (B) a
Subsidiary may merge or consolidate into another Subsidiary or into a Borrower.

 

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7.4 Indebtedness.

 

Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

 

7.5 Encumbrance.

 

Create, incur, or allow any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted here, subject
to Permitted Liens.

 

7.6 Distributions; Investments.

 

Directly or indirectly acquire or own any Person, or make any Investment in any
Person, other than Permitted Investments or as permitted by Section 7.3, or
permit any of its Subsidiaries to do so. Pay any dividends (other than dividends
payable solely in a Borrower’s capital stock or dividends payable by XBC to
Xenogen) or make any distribution or payment with respect to Xenogen’s capital
stock or redeem, retire or purchase any of Xenogen’s capital stock except for
(i) repurchases of stock from former employees, directors or service providers
of Borrowers under the terms of applicable repurchase agreements in an aggregate
amount not to exceed $150,000 in the aggregate in any fiscal year, provided that
no Event of Default has occurred, is continuing or would exist after giving
effect to the repurchases or (ii) the conversion by Xenogen of any of its
convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange therefor, and payments in cash
for any fractional shares.

 

7.7 Transactions with Affiliates.

 

Directly or indirectly enter into or permit any material transaction with any
Affiliate, on terms less favorable to Borrowers than would be obtained in an
arm’s length transaction with a non-affiliated Person, except transactions that
are in the ordinary course of either Borrower’s business.

 

7.8 Subordinated Debt.

 

Make or permit any payment on any Subordinated Debt, except under the terms of
the Subordinated Debt, or amend any provision (other than an amendment extending
the term of any such Subordinated Debt) in any document relating to the
Subordinated Debt without Bank’s prior written consent.

 

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7.9 Compliance.

 

Become an “investment company” or a company controlled by an “investment
company,” under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower’s
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

 

8. EVENTS OF DEFAULT

 

Any one of the following is an Event of Default:

 

8.1 Payment Default.

 

If Borrowers fail to pay any of the Obligations within 3 days after their due
date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);

 

8.2 Covenant Default.

 

If any Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between either Borrower and Bank and as to any default under a term, condition
or covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after such Borrower’s attempts within 10 day period, and the default may be
cured within a reasonable time, then such Borrower has an additional period (of
not more than 30 days) to attempt to cure the default. During the additional
time, the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);

 

8.3 Material Adverse Change.

 

If there (i) occurs a material adverse change in the business operations, or
condition (financial or otherwise) of Borrowers taken together; or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations; or (iii) is a material impairment of the value or priority of
Bank’s security interests in the Collateral (each a “Material Adverse Change”);

 

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8.4 Attachment.

 

If any material portion of either Borrower’s assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 15 Business Days, or if either Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business or if a judgment or other claim becomes a Lien on a
material portion of such Borrower’s assets, or if a notice of lien, levy, or
assessment is filed against any of Borrowers’ assets by any government agency
and not paid within 15 Business Days after either Borrower receives notice.
These are not Events of Default if stayed or if a bond is posted pending contest
by Borrowers (but no Credit Extensions will be made during the cure period);

 

8.5 Insolvency.

 

If either Borrower becomes insolvent or if either Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against a Borrower and not
dismissed or stayed within 45 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);

 

8.6 Other Agreements.

 

If there is a default in any agreement between either Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$500,000 or that could cause a Material Adverse Change;

 

8.7 Judgments.

 

If a money judgment(s) in the aggregate of at least $500,000 is rendered against
either Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied);

 

8.8 Misrepresentations.

 

If either Borrower or any Responsible Officer makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any communication delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document;

 

8.9 Guaranty.

 

Any guaranty of any Obligations ceases for any reason to be in full force or any
Guarantor does not perform any obligation under any guaranty of the Obligations,
or any material misrepresentation or material misstatement exists now or later
in any warranty or representation in any guaranty of the Obligations or in any
certificate delivered to Bank in connection with the guaranty, or any
circumstance described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor; or

 

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8.10 Change of Control.

 

If there shall be a Change of Control of Xenogen.

 

9. BANK’S RIGHTS AND REMEDIES

 

9.1 Rights and Remedies.

 

When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:

 

(a) Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

 

(b) Stop advancing money or extending credit for Borrowers’ benefit under this
Agreement or under any other agreement between either Borrower and Bank;

 

(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;

 

(d) Make any payments and do any acts it considers necessary or reasonable to
protect its security interest in the Collateral. Borrowers will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrowers grant Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank’s rights or remedies;

 

(e) Bank may place a “hold” on any account maintained with Bank and deliver a
notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any control agreement or similar agreements providing
control of any Collateral.

 

(f) Apply to the Obligations any (i) balances and deposits of Borrowers it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrowers;

 

(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral. Bank is granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrowers’ labels,
Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade
names, Trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrowers’ rights under all licenses
and all franchise agreements inure to Bank’s benefit; and

 

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(h) Dispose of the Collateral according to the Code.

 

9.2 Power of Attorney.

 

Effective only when an Event of Default occurs and continues, each Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse such Borrower’s
name on any checks or other forms of payment or security; (ii) sign such
Borrower’s name on any invoice or bill of lading for any Account or drafts
against account debtors, (iii) make, settle, and adjust all claims under such
Borrower’s insurance policies; (iv) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank
determines reasonable; and (v) transfer the Collateral into the name of Bank or
a third party as the Code permits. Bank may exercise the power of attorney to
sign either Borrower’s name on any documents necessary to perfect or continue
the perfection of any security interest regardless of whether an Event of
Default has occurred. Bank’s appointment as each Borrower’s attorney in fact,
and all of Bank’s rights and powers, coupled with an interest, are irrevocable
until all Obligations have been fully repaid and performed and Bank’s obligation
to provide Credit Extensions terminates.

 

9.3 Accounts Collection.

 

When an Event of Default occurs and continues, Bank may notify any Person owing
either Borrower money of Bank’s security interest in the funds and verify the
amount of the Account. Upon the occurrence and during the continuance of an
Event of Default, Borrowers must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.

 

9.4 Bank Expenses.

 

If any Borrower fails to pay any amount or furnish any required proof of payment
to third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank
deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due
and payable, bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank’s waiver of any Event of Default.

 

9.5 Bank’s Liability for Collateral.

 

If Bank complies with reasonable banking practices and Section 9-207 of the
Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other person.
Borrower bears all risk of loss, damage or destruction of the Collateral.

 

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9.6 Remedies Cumulative.

 

Bank’s rights and remedies under this Agreement, the Loan Documents, and all
other agreements are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an
election, and Bank’s waiver of any Event of Default is not a continuing waiver.
Bank’s delay is not a waiver, election, or acquiescence. No waiver is effective
unless signed by Bank and then is only effective for the specific instance and
purpose for which it was given.

 

9.7 Demand Waiver.

 

Borrowers each waive demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrowers are
liable.

 

9.8 Suretyship Waivers.

 

Each Borrower hereby expressly waives (A) diligence, presentment, demand for
payment, protest, benefit of any statute of limitations affecting such
Borrower’s liability under the Loan Documents; (B) discharge due to any
disability of any Borrower; (C) any defenses of any Borrower to obligations
under the Loan Documents not arising under the express terms of the Loan
Documents or from a material breach thereof by Borrower which under applicable
law has the effect of discharging any Borrower from the Obligations as to which
this Agreement is sought to be enforced; (D) the benefit of any act or omission
by Borrower which directly or indirectly results in or aids the discharge of any
Borrower from any of the Obligations by operation of law or otherwise; (E)
except as expressly provided herein, all notices whatsoever, including, without
limitation, notice of acceptance of the incurring of the Obligations; (F) any
right it may have to require Borrower to disclose to it any information that
Borrower may now or hereafter acquire concerning the financial condition or any
circumstances that bears on the risk of nonpayment by any other Borrower,
including, without limitation, the release of such other Borrower from its
Obligations hereunder; and (G) any requirement that Borrower exhaust any right,
power or remedy or proceed against any other Borrower or any other security for,
or any guarantor of, or any other party liable for, any of the Obligations, or
any portion thereof. Each Borrower specifically agrees that it shall not be
necessary or required, and Borrowers shall not be entitled to require, that
Borrower (i) file suit or proceed to assert or obtain a claim for personal
judgment against any other Borrower for all or any part of the Obligations; (ii)
make any effort at collection or enforcement of all or any part of the
Obligations from any Borrower; (iii) foreclose against or seek to realize upon
any security now or hereafter existing for all or any part of the Obligations;
(iv) file suit or proceed to obtain or assert a claim for personal judgment
against any Borrower or any guarantor or other party liable for all or any part
of the Obligations; (v) exercise or assert any other right or remedy to which
Borrower is or may be entitled in connection with the Obligations or any
security or guaranty relating thereto to assert; or (vi) file any claim against
assets of one Borrower before or as a condition of enforcing the liability of
any other Borrower under this Agreement or the Notes. Without limiting the
generality of the foregoing, each

 

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Borrower expressly waives the benefit of California Civil Code Sections 2809,
2810, 2819, 2839, 2845, 2848 (until such time as the Obligations are satisfied
in full), 2849 (until such time as the Obligations are satisfied in full), 2850,
2899 and 1432.

 

WITHOUT LIMITING THE FOREGOING IN ANY WAY, EACH BORROWER HEREBY IRREVOCABLY
WAIVES AND RELEASES:

 

(a) Any and all rights it may have at any time (whether arising directly or
indirectly, by operation of law, contract or otherwise) to require the
marshaling of any assets of any Borrower, which right of marshaling might
otherwise arise from any such payments made or obligations performed;

 

(b) Until such time as the Obligations have been satisfied in full, any and all
rights that would result in such Borrower being deemed a “creditor” under the
bankruptcy code of any other Borrower or any other person, on account of
payments made or obligations performed by such Borrower; and

 

(c) Until such time as the Obligations have been satisfied in full, any claim,
right or remedy which it may now have or hereafter acquire against any other
Borrower that arises hereunder and/or from the performance by it hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification or participation in
any claim, right or remedy of Bank against any other Borrower or any collateral
security which Bank now have or may hereafter acquire, whether or not such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise (including without limitation under section 9.9 hereof).

 

9.9 Right of Contribution.

 

Borrowers under this Agreement together desire to allocate among themselves, in
a fair and equitable manner, the Obligations, provided that, with respect to a
Borrower as of any date of determination, the largest amount that may be
borrowed by or allocated to such Borrower is an amount that would not render its
Obligations subject to avoidance as a fraudulent transfer or conveyance under
Section 548 of the Bankruptcy Code or any applicable provisions of comparable
state or foreign law. Solely for purposes of calculating the amount with respect
to any Borrower for purposes of this Section 9.9, any assets or liabilities of
such Borrower arising by virtue of any rights to subrogation, reimbursement or
indemnification or any rights to or obligations of contribution hereunder shall
not be considered as assets or liabilities of such Borrower. The allocation
among Borrowers of their obligations as set forth in this Section 9.9 shall not
be construed in any way to limit the liability of any Borrower hereunder or
under any other Loan Document.

 

10. NOTICES

 

All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth at the beginning of this
Agreement. A party may change its notice address by giving the other party
written notice.

 

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11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California.

 

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

12. GENERAL PROVISIONS

 

12.1 Successors and Assigns.

 

This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrowers may not assign this Agreement or any rights
under it without Bank’s prior written consent which may be granted or withheld
in Bank’s discretion. Bank has the right, without the consent of or notice to
Borrowers, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits under this
Agreement.

 

12.2 Indemnification.

 

Each Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents, except for obligations, demands, claims, and
liabilities caused by Bank’s gross negligence or willful misconduct; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and either Borrower (including
reasonable attorneys fees and expenses), except for losses and Bank Expenses
caused by Bank’s gross negligence or willful misconduct.

 

12.3 Time of Essence.

 

Time is of the essence for the performance of all obligations in this Agreement.

 

12.4 Severability of Provision.

 

Each provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.

 

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12.5 Amendments in Writing, Integration.

 

All amendments to this Agreement must be in writing and signed by Borrowers and
Bank. This Agreement represents the entire agreement about this subject matter,
and supersedes prior negotiations or agreements, other than the Non-Disclosure
Agreement, dated as of June 30, 2004. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement merge into this Agreement and the Loan
Documents, other than the Non-Disclosure Agreement, dated as of June 30, 2004.

 

12.6 Counterparts.

 

This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
are an original, and all taken together, constitute one Agreement.

 

12.7 Survival.

 

All covenants, representations and warranties made in this Agreement continue in
full force while any Obligations remain outstanding. The obligations of
Borrowers in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.

 

12.8 Confidentiality.

 

In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank’s subsidiaries or affiliates in connection
with their present or prospective business relations with Borrower, (ii) to
prospective transferees or purchasers of any interest in the loans, (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank’s examination or audit and (v) as Bank considers
appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.

 

12.9 Attorneys’ Fees, Costs and Expenses.

 

In any action or proceeding between Borrowers and Bank arising out of the Loan
Documents, the prevailing party will be entitled to recover its reasonable
attorneys’ fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.

 

12.10 Replacement Loan Agreement.

 

So long as no Event of Default has occurred and is continuing, upon the
occurrence of a Threshold Event, Bank and Borrowers agree that this Agreement
shall automatically be deemed

 

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amended, restated and superseded by that certain Loan and Security Agreement
attached as Exhibit D (the “New Agreement”). Borrowers agree to take any actions
requested by Bank to fulfill the terms of this paragraph, but agree that, so
long as no Event of Default has occurred and is continuing, the New Agreement
shall be effective automatically without further action by Borrowers.

 

13. DEFINITIONS

 

In this Agreement:

 

“Accounts” are all existing and later arising accounts, contract rights, and
other obligations owed either Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by either Borrower and such Borrower’s Books relating to
any of the foregoing.

 

“Applicable Interest Rate” is a per annum rate equal to the greater of: (i) 150
basis points (1.50%) above the Prime Rate or (ii) five and one half percent
(5.5%). Upon the occurrence and during the continuance of an Event of Default,
the Applicable Interest Rate shall be 5 percent above the rate effective
immediately before the applicable Event of Default.

 

“Advance” or “Advances” is a loan advance (or advances) under the Committed
Revolving Line.

 

“Affiliate” of a Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person’s senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.

 

“Bank Expenses” are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

 

“Borrower’s Books” are, as to each Borrower, all such Borrower’s books and
records including ledgers, records regarding such Borrower’s assets or
liabilities, the Collateral, business operations or financial condition and all
computer programs or discs or any equipment containing the information.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which the
Bank is closed.

 

“Change in Control” is a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Act”)) becomes the “beneficial owner” (as defined in Rule
13d-3 under the Act), directly or indirectly, of greater than 50% of the shares
of all classes of stock then outstanding of Xenogen ordinarily entitled to vote
in the election of directors.

 

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“Closing Date” is the date of this Agreement.

 

“Code” is the California Uniform Commercial Code as amended, revised and
supplemented from time to time.

 

“Collateral” is the property described on Exhibit A.

 

“Committed Revolving Line” is as defined in Section 2.1.1(a) hereof.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.

 

“Copyrights” are all copyright rights, applications or registrations and like
protections in each work or authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.

 

“Credit Extension” is each Advance, Letter of Credit or any other extension of
credit by Bank for Borrower’s benefit.

 

“Deferred Revenue” is all amounts received in advance of performance under a
contract and not yet recognized as revenue.

 

“Eligible Accounts” are, as to each Borrower, Accounts in the ordinary course of
such Borrower’s business that meet all such Borrower’s representations and
warranties in Section 5; but Bank may change eligibility standards by giving a
Borrower notice. Unless Bank agrees otherwise in writing, Eligible Accounts will
not include:

 

(a) Accounts that the account debtor has not paid within 90 days of invoice
date;

 

(b) Accounts for an account debtor, 50% or more of whose Accounts have not been
paid within 90 days of invoice date;

 

(c) Credit balances over 90 days from invoice date;

 

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(d) Accounts for an account debtor, including Affiliates, whose total
obligations to either Borrower exceed 25% of all such Borrower’s Accounts, for
the amounts that exceed that percentage, unless the Bank approves in writing;

 

(e) Accounts for which the account debtor does not have its principal place of
business in the United States;

 

(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;

 

(g) Accounts for which either Borrower owes the account debtor, but only up to
the amount owed (sometimes called “contra” accounts, accounts payable, customer
deposits or credit accounts);

 

(h) Accounts for demonstration or promotional equipment, or in which goods are
consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or
other terms if account debtor’s payment may be conditional;

 

(i) Accounts for which the account debtor is either Borrower’s Affiliate,
officer, employee, or agent;

 

(j) Accounts in which the account debtor disputes liability or makes any claim
and Bank believes there may be a basis for dispute (but only up to the disputed
or claimed amount), or if the account debtor is subject to an Insolvency
Proceeding, or becomes insolvent, or goes out of business;

 

(k) Accounts with respect to which the goods giving rise to such Accounts have
not been shipped and billed to the account debtor, the services giving rise to
such Account have not been performed and accepted by the account debtor, or the
Account does not otherwise represent a final sale;

 

(l) Accounts that represent progress payments or other advance billings that are
due prior to the completion of performance by Borrower of the subject contract
for goods or services; and

 

(m) Accounts for which Bank reasonably determines collection to be doubtful.

 

“Equipment” is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which either
Borrower has any interest.

 

“ERISA” is the Employment Retirement Income Security Act of 1974, and its
regulations.

 

“GAAP” is generally accepted accounting principles.

 

- 22 -

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

“Guarantor” is any present or future guarantor of the Obligations.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

 

“Insolvency Proceeding” are proceedings 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 relief.

 

“Intellectual Property” is:

 

(a) Copyrights, Trademarks, and Patents including amendments, renewals,
extensions, and all licenses or other rights to use and all license fees and
royalties from the use;

 

(b) Any trade secrets and any intellectual property rights in computer software
and computer software products now or later existing, created, acquired or held;

 

(c) All design rights which may be available to either Borrower now or later
created, acquired or held;

 

(d) Any claims for damages (past, present or future) for infringement of any of
the rights above, with the right, but not the obligation, to sue and collect
damages for use or infringement of the intellectual property rights above;

 

All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.

 

“Inventory” is, with respect to each Borrower, present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or later owned by or in the custody or
possession, actual or constructive, of such Borrower, including inventory
temporarily out of its custody or possession or in transit and including returns
on any accounts or other proceeds (including insurance proceeds) from the sale
or disposition of any of the foregoing and any documents of title.

 

“Investment” is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

 

“Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

 

- 23 -

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

“Loan Documents” are, collectively, this Agreement, any note, or notes or
guaranties executed by either Borrower or Guarantor, and any other present or
future agreement between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated.

 

“Material Adverse Change” is defined in Section 8.3.

 

“Minimum Interest” is an amount equal to the interest accrued (at the Applicable
Interest Rate) if $8,000,000 of Advances were outstanding every day of the month
immediately prior to the applicable interest payment date; provided, that, for
the period commencing on the date of this Agreement to September 30, 2005,
“Minimum Interest” shall be an amount equal to the interest accrued (at the
Applicable Interest Rate) if $6,500,000 of Advances were outstanding every day
of the month immediately prior to the applicable interest payment date.

 

“Modified Quick Ratio” means a ratio of unrestricted cash (and equivalents)
maintained at Bank or one of its Affiliates (measured at any time) plus,
Eligible Accounts plus the PFG Availability (both as measured by the most
recently delivered Compliance Certificate) divided by the then total
outstandings under all Credit Extensions.

 

“Obligations” are debts, principal, interest, Bank Expenses and other amounts
Borrowers owe Bank now or later, including cash management services, letters of
credit and foreign exchange contracts, if any and including interest accruing
after Insolvency Proceedings begin and debts, liabilities, or obligations of
either Borrower assigned to Bank.

 

“Patents” are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

 

“Permitted Indebtedness” is:

 

(e) Borrowers’ indebtedness to Bank under this Agreement or any other Loan
Document;

 

(f) Indebtedness existing on the Closing Date and shown on the Schedule;

 

(g) Subordinated Debt;

 

(h) Indebtedness to trade creditors incurred in the ordinary course of business;

 

(i) Indebtedness secured by Permitted Liens;

 

(j) (i) Indebtedness of a Borrower to the other Borrower and Contingent
Obligations of any Borrower with respect to obligations of the other Borrower
(provided that the primary obligations are not prohibited hereby), (ii)
Indebtedness of Xenogen to any other Subsidiary and Contingent Obligations of
any other Subsidiary with respect to obligations of Xenogen (provided that the
primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);

 

- 24 -

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

(k) Other Indebtedness not otherwise permitted by Section 7.4 not exceeding One
Hundred Fifty Thousand Dollars ($150,000) in the aggregate outstanding at any
time; and

 

(l) Extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrowers or their Subsidiary, as the case
may be.

 

“Permitted Investments” are:

 

(m) Investments shown on the Schedule and existing on the Closing Date;

 

(n) Marketable direct obligations issued or unconditionally guaranteed by the
United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor’s Corporation
or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of deposit
issued maturing no more than 1 year after issue, and (iv) any Investments
permitted by Xenogen’s investment policy, as amended from time to time, provided
that such investment policy (and any such amendment thereto) has been approved
by Bank;

 

(o) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of either
Borrower;

 

(p) Investments accepted in connection with Transfers permitted by Section 7.1;

 

(q) Investments by a Borrower in or to another Borrower; Investments of
Subsidiaries in or to other Subsidiaries or Borrowers; and Investments by
Borrowers in Subsidiaries that are not a Borrower, in all cases, not to exceed
$250,000 in the aggregate in any fiscal year;

 

(r) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business not to
exceed $250,000 in any one fiscal year or $300,000 at any one time outstanding,
and (ii) loans to employees, officers or directors or other service providers
relating to the purchase of equity securities of either Borrower or its
Subsidiaries pursuant to employee stock purchase plans or agreements approved by
Xenogen’s Board of Directors;

 

(s) 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 business;

 

- 25 -

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

(t) 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 paragraph (h) shall not
apply to Investments of Borrowers in any Subsidiary;

 

(u) Investments pursuant to investment policy guidelines approved by Xenogen’s
Board of Directors and Bank set forth Exhibit E ; and

 

(v) Joint ventures or strategic alliances in the ordinary course of either
Borrower’s business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash investments by Borrowers do not exceed $50,000 in the aggregate in any
fiscal year.

 

“Permitted Liens” are:

 

(w) Liens existing on the Closing Date and shown on the Schedule or arising
under this Agreement or other Loan Documents;

 

(x) Liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for which each
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank’s security interests;

 

(y) Purchase money Liens (i) on Equipment acquired or held by either Borrower or
its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;

 

(z) Licenses or sublicenses granted in the ordinary course of either Borrower’s
business and any interest or title of a licensor or under any license or
sublicense;

 

(aa) Leases or subleases granted in the ordinary course of either Borrower’s
business, including in connection with such Borrower’s leased premises or leased
property;

 

(bb) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

 

(cc) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 8.4 or 8.7;

 

(dd) Liens in favor of other financial institutions arising in connection with
Borrowers’ deposit accounts held at such institutions, provided that Bank has a
perfected security interest in the amounts held in such deposit accounts;

 

(ee) Carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not overdue for
a period of more than 30 days or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the applicable Person;

 

- 26 -

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

(ff) Liens to secure payment of workers’ compensation, employment insurance, old
age pensions, social security or other like obligations incurred in the ordinary
course of business;

 

(gg) Easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person; and

 

(hh) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customs duties in connection with the importation of
goods.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“PFG Availability” means the amount available to Borrower to borrow under that
certain Loan and Security Agreement dated as of August 2, 2005 between Xenogen,
XBC and Partners for Growth, L.P.

 

“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not
Bank’s lowest rate.

 

“R&D Collaboration” is a transaction whereby an R&D Party provides a Borrower
with cash for the purpose of a research and development collaboration.

 

“R&D Deferred Revenue” is cash received by a Borrower from an R&D Party that due
to the structure of the applicable R&D Collaboration is reflected as Deferred
Revenue in that Borrower’s books.

 

“R&D Party” is any Person that enters into an R&D Collaboration with a Borrower.

 

“Remaining Months Liquidity Ratio” means a ratio of (i) (x) Xenogen’s
consolidated unrestricted cash (and equivalents) maintained at Bank or one of
its Affiliates plus (measured at any time) (y) 80% of Eligible Accounts (based
on the most recent Compliance Certificate) minus any Obligations hereunder to
(ii) Xenogen’s consolidated net income plus depreciation and amortization
expenses (based on the most recent Compliance Certificate); provided, that, if
Xenogen’s Modified Quick Ratio is equal to or greater than 2.0:1.0, then the
amount in clause (i)(y) shall not be less than 0 for the purposes of calculating
Remaining Months Liquidity Ratio.

 

“Responsible Officer” is, as to each Borrower, each of the Chief Executive
Officer, the President, the Chief Financial Officer, Vice President of Finance
and the Controller of that Borrower.

 

- 27 -

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

“Revolving Maturity Date” is August 2, 2007.

 

“Schedule” means that certain confidential letter of exceptions delivered by
Borrowers to Bank on or about the date hereof.

 

“Subordinated Debt” is debt incurred by a Borrower subordinated to Borrowers’
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.

 

“Subsidiary” is for any Person, or any other business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

 

“Tangible Net Worth” is, on any date, the consolidated total assets of Xenogen
and its Subsidiaries (including XBC) minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.

 

“Threshold Event” is a date on which Xenogen’s Modified Quick Ratio has fallen
below 2.00 to 1.00.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Xenogen’s consolidated balance sheet, including all
Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

 

“Trademarks” are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

 

*    *    *

 

- 28 -

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

BORROWERS:

XENOGEN CORPORATION

By:

 

/s/ William A. Albright

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

Title:

  Senior Vice President and Chief Financial Officer

XENOGEN BIOSCIENCES CORPORATION

By:

 

/s/ William A. Albright

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

Title:

  Chief Financial Officer

BANK:

SILICON VALLEY BANK

By:

 

/s/ Peter Scott

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

Title:

  Senior Vice President

 

- 29 -

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EXHIBIT A

 

The Collateral consists of all of Borrowers’ right, title and interest in and to
the following:

 

All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

 

All inventory, now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is held for
sale or lease, or to be furnished under a contract of service or is temporarily
out of Borrower’s custody or possession or in transit and including any returns
or repossession upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above;

 

All contract rights and general intangibles now owned or hereafter acquired,
including, without limitation, goodwill, trademarks, servicemarks, trade styles,
trade names, patents, patent applications, leases, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance, payment intangibles, and rights to payment of any kind;

 

All now existing and hereafter arising accounts (including health-care insurance
receivables), contract rights, royalties, license rights and all other forms of
obligations owing to Borrowers arising out of the sale or lease of goods, the
licensing of technology or the rendering of services by Borrowers, whether or
not earned by performance, and any and all credit insurance, guaranties, and
other security therefor, as well as all merchandise returned to or reclaimed by
Borrowers;

 

All documents (including negotiable documents), cash, deposit accounts,
securities, securities entitlements, securities accounts, investment property,
financial assets, letters of credit, letter of credit rights, money,
certificates of deposit, instruments (including promissory notes) and chattel
paper (including tangible and electronic chattel paper) now owned or hereafter
acquired and Borrowers’ Books relating to the foregoing;

 

All copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and

 

All Borrowers’ Books relating to the foregoing, and the computers and equipment
containing said books and records, and any and all claims, rights and interests
in any of the above and all substitutions for, additions and accessions to and
proceeds thereof.

 

Notwithstanding the foregoing, the Collateral shall not be deemed to include any
copyrights, copyright applications, copyright registration and like protection
in each work of authorship and derivative work thereof,

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

whether published or unpublished, now owned or hereafter acquired; any patents,
patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, and the goodwill of the business of
Borrowers connected with and symbolized by such trademarks, any trade secret
rights, including any rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; or any claims for damage by way of any past, present and
future infringement of any of the foregoing (collectively, the “Intellectual
Property”), except that the Collateral shall include the proceeds of all the
Intellectual Property that are accounts, (i.e. accounts receivable) of
Borrowers, or general intangibles consisting of rights to payment, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in
the underlying Intellectual Property is necessary to have a security interest in
such accounts and general intangibles of Borrowers that are proceeds of the
Intellectual Property, then the Collateral shall automatically, and effective as
of the Closing Date, include the Intellectual Property to the extent necessary
to permit perfection of Bank’s security interest in such accounts and general
intangibles of Borrowers that are proceeds of the Intellectual Property.

 

Notwithstanding anything contained in this paragraph, the term Collateral shall
not include any property that is subject to a Lien that is otherwise permitted
pursuant to paragraph (c) of the definition of “Permitted Liens.”

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

EXHIBIT B

 

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

 

DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON, P.S.T.

 

TO: CENTRAL CLIENT SERVICE DIVISION      DATE:  

 

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

FAX#: (408) 496-2426      TIME:  

 

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

 

FROM:

  XENOGEN CORPORATION        and        XENOGEN BIOSCIENCES
CORPORATION                                      
                                               

CLIENT NAME (BORROWER)

 

REQUESTED BY:

 
_____________________________________________________________________________________
   

AUTHORIZED SIGNER’S NAME

 

AUTHORIZED SIGNATURE:    ______________________________________________________________________________________________

PHONE
NUMBER:    ___________________________________________________________________________________________

 

FROM ACCOUNT #                      
        TO ACCOUNT #                                                  

 

REQUESTED TRANSACTION TYPE   REQUESTED DOLLAR AMOUNT PRINCIPAL INCREASE
(ADVANCE)   $__________________________________________ PRINCIPAL PAYMENT (ONLY)
  $__________________________________________ INTEREST PAYMENT (ONLY)  
$__________________________________________ PRINCIPAL AND INTEREST (PAYMENT)  
$__________________________________________

 

OTHER INSTRUCTIONS:
____________________________________________________________________________________

 

________________________________________________________________________________________________________

 

All Borrowers’ representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.

 

BANK USE ONLY

 

TELEPHONE REQUEST:

 

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

 

_______________________________________________________________________________________________________________________

Authorized Requester

  Phone #    

 

_______________________________________________________________________________________________________________________

Received By (Bank)

  Phone #    

 

_______________________________________________________________________________________________________________________

Authorized Signature (Bank)

       

 

 

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

EXHIBIT C

COMPLIANCE CERTIFICATE

 

TO:      SILICON VALLEY BANK FROM:      XENOGEN CORPORATION        860 Atlantic
Avenue        Alameda, California 94501

 

The undersigned authorized officer of XENOGEN CORPORATION (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for
the period ending                      with all required covenants except as
noted below and (ii) all representations and warranties in the Agreement are
true and correct in all material respects on this date. In addition, the
undersigned authorized officer of Borrower certifies that Borrower and each
Subsidiary (i) has timely filed all required tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP and (ii) does not have any legal
actions pending or threatened against Borrower or any Subsidiary which Borrower
has not previously notified in writing to Bank. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

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

  

Required

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

  

Complies

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

Monthly financial statements + CC    Monthly within 30 days    Yes    No Annual
(Audited)    FYE within 120 days    Yes    No A/R, A/P Agings, Deferred Revenue
Schedule    Monthly within 30 days after last day of month    Yes    No
Financial Projections    Initial and FYE within 45 days    Yes    No A/R Audit
   Annual    Yes    No

 

Threshold Event

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

  

Minimum

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

  Actual

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

   Trigger

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

Modified Quick Ratio

   2.00:1.00           :1.00    Yes    No

Covenants

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

  

Minimum

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

  Actual

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

   Trigger

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

Remaining Months

                  

Liquidity Ratio

   6.00:1.00*           :1.00    Yes    No

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

*  4.00:1.00 until October 31, 2005

 

Borrower only has deposit accounts located at the following institutions:
                                .

 

Comments Regarding Exceptions: See Attached.

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

Sincerely, XENOGEN CORPORATION

 

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

SIGNATURE

 

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

TITLE

 

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

DATE

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

EXHIBIT D

 

LOAN AND SECURITY AGREEMENT

(ASSET BASED FACILITY)

 

Silicon Valley Bank

 

Loan and Security Agreement

 

(Asset Based Facility)

 

Borrowers:

 

XENOGEN CORPORATION

a Delaware corporation

 

Address:

 

860 Atlantic Avenue

Alameda, California 94501

XENOGEN BIOSCIENCES CORPORATION

an Ohio corporation

 

5 Cedar Brook Drive

Cranbury, New Jersey 08512

 

Date:    August 2, 2005

 

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into on the
above date among SILICON VALLEY BANK (“Silicon”), whose address is 3003 Tasman
Drive, Santa Clara, California 95054, Xenogen Corporation (the “Parent”), whose
chief executive office is located at the above address (“Parent’s Address”) and
its wholly owned subsidiary, Xenogen Biosciences Corporation (“XBC”), whose
chief executive office is located at the above address (“XBC’s Address”) (Parent
and XBC are individually each a “Borrower”, and separately and collectively, the
“Borrowers”). The Schedule to this Agreement (the “Schedule”) shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral
part of this Agreement. (Definitions of certain terms used in this Agreement are
set forth in Section 8 below.) This Agreement shall only become effective upon
the occurrence of a Threshold Event in accordance with Section 9.19.

 

1. LOANS.

 

1.1 Loans. Silicon will make loans to Borrowers (the “Loans”) up to the amounts
(the “Credit Limit”) shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of Reserves for
accrued interest and such other Reserves as Silicon deems proper from time to
time in its good faith business judgment.

 

- 3 -

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1.2 Interest. All Loans shall bear interest at the rate shown on the Schedule,
except where expressly set forth to the contrary in this Agreement. Interest
shall be payable monthly, on the last day of the month. Interest may, in
Silicon’s discretion, be charged to Borrower’s loan account, and the same shall
thereafter bear interest at the same rate as the other Loans. Silicon may, in
its discretion, charge interest to Borrowers’ Deposit Accounts maintained with
Silicon.

 

1.3 Overadvances. If at any time or for any reason the total of all outstanding
Loans and all other monetary Obligations exceeds the Credit Limit (an
“Overadvance”), Borrowers shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrowers’ obligations to
repay to Silicon the amount of any Overadvance, Borrowers agree to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.

 

1.4 Fees. Borrowers shall pay Silicon the fees shown on the Schedule, which are
in addition to all interest and other sums payable to Silicon and are not
refundable.

 

1.5 Loan Requests. To obtain a Loan, Borrowers shall make a request to Silicon
by facsimile or telephone. Loan requests received after 12:00 Noon will not be
considered by Silicon until the next Business Day. Silicon may rely on any
telephone request for a Loan given by a person whom Silicon believes is a
Responsible Officer of either or both Borrowers, and Borrowers will indemnify
Silicon for any loss Silicon suffers as a result of that reliance. Each request
for a Loan shall be in a minimum amount of $100,000.

 

1.6 Intentionally Omitted.

 

2. SECURITY INTEREST.

 

(a) To secure the payment and performance of all of the Obligations when due,
Borrowers hereby grant to Silicon a security interest in all of the following
(collectively, the “Collateral”): all right, title and interest of Borrowers in
and to all of the following, whether now owned or hereafter arising or acquired
and wherever located: all Accounts; all Inventory; all Equipment; all Deposit
Accounts; all General Intangibles; all Investment Property (excluding 35% of the
equity interests of Subsidiaries formed in jurisdictions outside of the United
States); all Other Property; and any and all claims, rights and interests in any
of the above, and all guaranties and security for any of the above, and all
substitutions and replacements for, additions, accessions, attachments,
accessories, and improvements to, and proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties) of,
any and all of the above, and all Borrowers’ books relating to any and all of
the above.

 

(b) Notwithstanding the foregoing, the Collateral shall not be deemed to include
any copyrights, copyright applications, copyright registration and like
protection in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and

 

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continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, and the goodwill of the business of either
Borrower connected with and symbolized by such trademarks, any trade secret
rights, including any rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; or any claims for damage by way of any past, present and
future infringement of any of the foregoing (collectively, the “Intellectual
Property”), except that the Collateral shall include the proceeds of all the
Intellectual Property that are accounts, (i.e. accounts receivable) of either
Borrower, or general intangibles consisting of rights to payment, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in
the underlying Intellectual Property is necessary to have a security interest in
such accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property, then the Collateral shall automatically, and effective as
of the Closing Date, include the Intellectual Property to the extent necessary
to permit perfection of Silicon’s security interest in such accounts and general
intangibles of Borrowers that are proceeds of the Intellectual Property.
Notwithstanding anything contained in this paragraph, the term Collateral shall
not include any property that is subject to a Lien is otherwise permitted
pursuant to paragraph (c) of the definition of “Permitted Liens.”

 

(c) Notwithstanding anything contained in this Section 2, the term Collateral
shall not include any property that is subject to a lien that is otherwise
permitted pursuant to subsection (c) of the definition of “Permitted Liens.”

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. In order to induce
Silicon to enter into this Agreement and to make Loans, and except to the extent
set forth in the Schedule to the Original Agreement (as defined in Section 9.19)
or the Representations, Borrowers jointly and severally, represent and warrant
to Silicon as follows, and Borrowers jointly and severally covenant that
Borrowers will at all times comply with all of the following covenants,
throughout the term of this Agreement and until all Obligations have been paid
and performed in full:

 

3.1 Corporate Existence and Authority. Each Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change. The execution, delivery and
performance by each Borrower of this Agreement, and all other documents
contemplated hereby (i) have been duly and validly authorized, (ii) are
enforceable against such Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors’
rights generally), and (iii) do not violate either Borrower’s articles or
certificate of incorporation, or such Borrower’s bylaws, or any law or any
material agreement or instrument which is binding upon that Borrower or its
property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any agreement or instrument which is binding
upon either Borrower or its property.

 

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3.2 Name; Trade Names and Styles. The name of each Borrower set forth in the
heading to this Agreement, or such other name of which such Borrower has
notified Silicon in accordance with this Section 3.2, is its correct name.
Listed in the Representations are all prior names of each Borrower and all of
such Borrower’s present and prior trade names. Each Borrower shall give Silicon
30 days’ prior written notice before changing its name or doing business under
any other name other than Xenogen. Each Borrower has complied, and will in the
future comply, in all material respects, with all laws relating to the conduct
of business under a fictitious business name, except where the failure to so
comply would not reasonably be expected to result in a Material Adverse Change.

 

3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement (or such other address of which each Borrower has
given notice pursuant to this Section 3.3) is the applicable Borrower’s chief
executive office. In addition, each Borrower has places of business and
Collateral is located only at the locations set forth in the Representations (or
such other address of which either Borrower has given notice pursuant to this
Section 3.3). Borrowers will give Silicon at least 30 days prior written notice
before opening any additional place of business, changing either Borrower’s
chief executive office, or moving any of the Collateral to a location other than
a Borrower’s Address or one of the locations set forth in the Representations
(or such other address of which Borrowers have given notice pursuant to this
Section 3.3), except that Borrowers may maintain sales offices in the ordinary
course of business at which not more than a total of $100,000 fair market value
of Equipment is located.

 

3.4 Title to Collateral; Perfection; Permitted Liens.

 

(a) Borrowers are now, and will at all times in the future be, the sole owner of
all the Collateral, except for items of Equipment which are leased to Borrowers.
The Collateral now is and will remain free and clear of any and all liens,
charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrowers will at all times defend Silicon and
the Collateral against all claims of others.

 

(b) Borrowers have set forth in the Representations all of Borrowers’ Deposit
Accounts, and each Borrower will give Silicon five Business Days advance written
notice before establishing any new Deposit Accounts with a bank other than
Silicon and will cause the institution where any such new Deposit Account is
maintained to execute and deliver to Silicon a control agreement in form
sufficient to perfect Silicon’s security interest in the Deposit Account and
otherwise satisfactory to Silicon in its good faith business judgment. Nothing
herein limits any requirements which may be set forth in the Schedule as to
where Deposit Accounts will be maintained.

 

(c) In the event that either Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting and in
which the potential

 

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recovery exceeds $100,000, such Borrower shall promptly notify Silicon thereof
in writing and provide Silicon with such information regarding the same as
Silicon shall request (unless providing such information would waive the
Borrower’s attorney-client privilege). Such notification to Silicon shall
constitute a grant of a security interest in the commercial tort claim and all
proceeds thereof to Silicon, and Borrowers shall execute and deliver all such
documents and take all such actions as Silicon shall request in connection
therewith.

 

(d) None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture. Neither Borrower is,
nor will it become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair either
Borrower’s right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest,
Borrowers shall, whenever requested by Silicon, use their commercially
reasonable efforts to cause such third party to execute and deliver to Silicon,
in form acceptable to Silicon, such waivers and subordinations as Silicon shall
specify in its good faith business judgment. Each Borrower will keep in full
force and effect, and will comply with all material terms of, any lease of real
property where any of the Collateral now or in the future may be located.

 

3.5 Maintenance of Collateral. Borrowers will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrowers will not use
the Collateral for any unlawful purpose. Borrowers will promptly advise Silicon
in writing of any material loss or damage to the Collateral.

 

3.6 Books and Records. Each Borrower has maintained and will maintain at
Parent’s Address complete and accurate books and records sufficient to prepare
financial statements in accordance with GAAP.

 

3.7 Financial Condition, Statements and Reports. Subject to the absence of
footnotes and year-end adjustments in the case of interim financial statements,
all financial statements now or in the future delivered to Silicon have been,
and will be, prepared in conformity with GAAP and now and in the future will
fairly present in all material respects the results of operations and financial
condition of Parent and its consolidated Subsidiaries (including XBC), in
accordance with GAAP, at the times and for the periods therein stated. Between
the last date covered by any such statement provided to Silicon and the date
hereof, there has been no Material Adverse Change.

 

3.8 Tax Returns and Payments; Pension Contributions. Parent has timely filed,
and will timely file, all required tax returns except where failure to file
would not reasonably be expected to cause a Material Adverse Change and reports,
and Parent has timely paid, and will timely pay, all foreign, federal, state and
local taxes, assessments, deposits and contributions now or in the future owed
by Parent on a consolidated basis, except where such unpaid taxes, assessment,
deposits and contributions do not exceed $100,000 in the aggregate and either:
(y) cannot result in the imposition of a lien over such Borrower’s assets or (z)
cannot result in a Material Adverse Change. Notwithstanding the foregoing,
either Borrower may, however, defer payment of any

 

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contested taxes, provided that such Borrower (i) in good faith contests such
Borrower’s obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (ii) notifies Silicon in writing of the
commencement of, and any material development in, the proceedings, and (iii)
posts bonds or takes any other steps required to keep the contested taxes from
becoming a lien upon any of the Collateral. Neither Borrower is aware of any
claims or adjustments proposed for any of such Borrower’s prior tax years which
could result in additional taxes becoming due and payable by such Borrower in an
amount that could reasonably be expected to cause a Material Adverse Change.
Each Borrower has paid, and shall continue to pay all amounts necessary to fund
all present and future pension, profit sharing and deferred compensation plans
in accordance with their terms, and each Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any liability of such Borrower in an amount
that could reasonably be expected to cause a Material Adverse Change, including
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

 

3.9 Compliance with Law. Each Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to such
Borrower, including, but not limited to, those relating to such Borrower’s
ownership of real or personal property, the conduct and licensing of Borrower’s
business, and all environmental matters, except where failure to do so could not
reasonably be expected to cause a Material Adverse Change.

 

3.10 Litigation. There is no claim, suit, litigation, proceeding or
investigation pending or (to Borrower’s knowledge) threatened against either
Borrower in any court or before any governmental agency which could reasonably
be expected to result, either separately or in the aggregate, in any Material
Adverse Change. Borrowers will promptly inform Silicon in writing of any claim,
proceeding, litigation or investigation in the future threatened or instituted
against Borrowers involving any single claim of $250,000 or more, or involving
$750,000 or more in the aggregate.

 

3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for lawful
business purposes. Borrowers are not purchasing or carrying any “margin stock”
(as defined in Regulation U of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan will be used to purchase or
carry any “margin stock” or to extend credit to others for the purpose of
purchasing or carrying any “margin stock.”

 

4. ACCOUNTS.

 

4.1 Representations Relating to Accounts. Borrowers jointly and severally,
represent and warrant to Silicon as follows: Each Account with respect to which
Loans are requested by Borrowers shall, on the date each Loan is requested and
made, (i) represent an undisputed bona fide existing unconditional obligation of
the Account

 

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Debtor created by the sale, delivery, and acceptance of goods or the rendition
of services, or the licensing of Intellectual Property, in the ordinary course
of each Borrower’s business, and (ii) meet the Minimum Eligibility Requirements
set forth in Section 8 below.

 

4.2 Representations Relating to Documents and Legal Compliance. Borrowers,
jointly and severally, represent and warrant to Silicon as follows: All
statements made and all unpaid balances appearing in all invoices, instruments
and other documents evidencing the Accounts are and shall be true and correct
and all such invoices, instruments and other documents and all of Borrowers’
books and records are and shall be genuine and in all respects what they purport
to be. All sales and other transactions underlying or giving rise to each
Account shall comply in all material respects with all applicable laws and
governmental rules and regulations. To the best of each Borrower’s knowledge,
all signatures and endorsements on all documents, instruments, and agreements
relating to all Accounts are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, moratorium and other similar laws
affecting creditors’ rights generally and by equitable principles regardless of
whether enforcement is sought in equity or at law.

 

4.3 Schedules and Documents relating to Accounts. Borrowers shall deliver to
Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Silicon’s
security interest and other rights in all of Borrowers’ Accounts, nor shall
Silicon’s failure to advance or lend against a specific Account affect or limit
Silicon’s security interest and other rights therein. If requested by Silicon,
Borrowers shall furnish Silicon with copies (or, at Silicon’s request,
originals) of all contracts, orders, invoices, and other similar documents, and
all shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave rise
to such Accounts, and each Borrower warrants the genuineness of all of the
foregoing. Borrowers shall also furnish to Silicon an aged accounts receivable
trial balance as provided in the Schedule. In addition, Borrowers shall deliver
to Silicon, on its request, the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Accounts, in the same form as received, with all necessary
indorsements, and copies of all credit memos.

 

4.4 Collection of Accounts. Each Borrower shall have the right to collect all
Accounts owing to such Borrower, unless and until a Default or an Event of
Default has occurred and is continuing. Whether or not an Event of Default has
occurred and is continuing, each Borrower shall hold all payments on, and
proceeds of, Accounts in trust for Silicon. Borrowers shall immediately notify
and direct all of the such Borrower’s Account Debtor’s to make all payment’s for
the Accounts to a lockbox account established with Silicon (“Lockbox”) or to
wire transfer payments to a cash collateral account that Silicon controls. It
will be considered an immediate Event of Default if the Lockbox is not set-up
and operational within 30 days of the effective date of this Agreement.

 

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4.5 Remittance of Proceeds. All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrowers to Silicon in the original
form in which received by either Borrower not later than the following Business
Day after receipt by such Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrowers shall not be obligated to
remit to Silicon the proceeds of the sale of worn out or obsolete Equipment
disposed of by Borrowers in good faith in an arm’s length transaction for an
aggregate purchase price of $25,000 or less (for all such transactions in any
fiscal year). Each Borrower agrees that it will not commingle proceeds of
Collateral with any of such Borrower’s other funds or property, but will hold
such proceeds separate and apart from such other funds and property and in an
express trust for Silicon. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.

 

4.6 Disputes. Borrowers shall notify Silicon promptly of all disputes or claims
relating to Accounts. Neither Borrower shall forgive (completely or partially),
compromise or settle any Account for less than payment in full, or agree to do
any of the foregoing, except that Borrowers may do so, provided that: (i)
Borrowers do so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm’s length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.

 

4.7 Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to either Borrower, such Borrower shall
promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrowers shall hold the returned Inventory in trust for
Silicon, and immediately notify Silicon of the return of the Inventory.

 

4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

 

4.9 No Liability. Silicon shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Silicon be deemed to
be responsible for any of Borrowers’ obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve Silicon from
liability for its own gross negligence or willful misconduct.

 

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5. ADDITIONAL DUTIES OF BORROWERS.

 

5.1 Financial and Other Covenants. Borrowers shall at all times comply with the
financial and other covenants set forth in the Schedule.

 

5.2 Insurance. Each Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for each Borrower’s industry and locations, and each Borrower shall
provide evidence of such insurance to Silicon. All such casualty insurance
policies shall name Silicon as an additional loss payee, and shall contain a
lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon
receipt of the proceeds of any such insurance, Silicon shall apply such proceeds
in reduction of the Obligations as Silicon shall determine in its good faith
business judgment, except that, provided no Default or Event of Default has
occurred and is continuing, Silicon shall release to the applicable Borrower
insurance proceeds which shall be utilized by such Borrower for the replacement
or repair of the damaged or destroyed property with respect to which the
insurance proceeds were paid. Silicon may require reasonable assurance that the
insurance proceeds so released will be so used. If either Borrower fails to
provide or pay for any insurance, Silicon may, but is not obligated to, obtain
the same at Borrowers’ expense. Borrowers shall promptly deliver to Silicon
copies of all material reports made to insurance companies.

 

5.3 Reports. Borrowers, at their expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to each Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
request in its good faith business judgment.

 

5.4 Access to Collateral, Books and Records. At reasonable times, and on one
Business Day’s notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy each Borrower’s books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrowers’ expense and the charge therefor
shall be $750 per person per day, plus reasonable out-of-pocket expenses. In the
event a Borrower and Silicon schedule an audit more than 10 days in advance, and
either Borrower seeks to reschedules the audit with less than 10 days written
notice to Silicon, then (without limiting any of Silicon’s rights or remedies),
such Borrower shall pay Silicon a cancellation fee of $1,000 plus any
out-of-pocket expenses incurred by Silicon, to compensate Silicon for the
anticipated costs and

 

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expenses of the cancellation. Any inspections of Collateral under this Section
5.4 shall be limited to three (3) per year unless (i) an Event of Default has
occurred and is continuing or (ii) in Silicon’s reasonable business judgment
conditions otherwise warrant such inspection.

 

5.5 Negative Covenants. Neither Borrower shall, without Silicon’s prior written
consent do any of the following:

 

(i) merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with another Person, or acquire, or permit any of its Subsidiaries
to acquire, all or substantially all of the assets or capital stock of any
Person, except that (A) any Subsidiary of Parent may merge into Parent or XBC
and (B) a Borrower may acquire another Person if: (v) the aggregate
consideration paid for all such transactions do not in the aggregate exceed
$2,000,000 in any fiscal year (provided however, that Borrowers may make a
one-time acquisition valued at not more than $7,000,000 (exclusive of the
$2,000,000 amount) where the consideration is not cash and Bank has reviewed,
and in its sole discretion, consented to the transaction), (w) no Event of
Default has occurred and is continuing or would result from such action during
the term of this Agreement, (x) such Borrower is the surviving entity after any
such acquisition (to the extent a Borrower was a party thereto), (y) any single
transaction does not result in a material reduction of either Borrower’s cash
and cash equivalents or a material increase in Parent’s consolidated monthly
cash burn, and (z) such transaction would not result in a decrease of more than
25% of Parent’s Tangible Net Worth;

 

(ii) convey, sell, lease, transfer or otherwise dispose of (collectively
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, other than Transfers (A) of Inventory in the ordinary
course of business (including Transfers of the IVIS systems); (B) of
non-exclusive licenses and similar arrangements for the use of the property of
either Borrower or its Subsidiaries in the ordinary course of business; (C) of
exclusive licenses of Intellectual Property entered into the ordinary course of
business and approved in good faith by such Borrower’s Board of Directors, so
long as: (x) such licenses are limited to specific products or processes or a
specific geographic area outside of the United States or Canada; (y) the
duration of any such license does not exceed 5 years; and (z) such exclusive
license arrangement is not tantamount to a sale of the subject Intellectual
Property; (D) of worn out or obsolete Equipment, (E) Transfers permitted by this
Section 5.5, (F) cross-licenses entered into in settlement of litigation or
potential litigation; or (G) other Transfers which in the aggregate do not
exceed $250,000 in any fiscal year;

 

(iii) store any Inventory or other Collateral with any warehouseman or other
third party not specified in the Representations or otherwise consented to in
writing by Silicon;

 

(iv) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or
other contingent basis and report such transactions to Silicon as Eligible
Accounts;

 

(v) directly or indirectly acquire or own any Person, or make any Investment in
any Person, other than Permitted Investments or as permitted by Section 5.5(i);

 

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(vi) create, incur, assume, or be liable for any Indebtedness other than
Permitted Indebtedness;

 

(vii) pay any dividends (other than dividends payable solely in capital stock of
either Borrower or dividends payable by XBC to Parent) or make any distribution
or payment with respect to Parent’s capital stock or redeem, retire, or purchase
or otherwise acquire, directly or indirectly, any of Parent’s capital stock
except for (i) repurchases of stock from former employees or directors of either
Borrower under the terms of applicable repurchase agreements in an aggregate
amount not to exceed $150,000 in the aggregate in any fiscal year, provided that
no Event of Default has occurred, is continuing or would exist after giving
effect to the repurchases or (ii) the conversion by either Borrower of any of
its convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange therefor, and payments in cash
for any fractional shares;

 

(viii) engage, directly or indirectly, in any business other than the businesses
currently engaged in by Borrower or reasonably related thereto; or

 

(ix) dissolve or elect to dissolve.

 

(x) Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.

 

5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
either Borrower, Borrowers shall, without expense to Silicon, use reasonable
efforts to make available Borrowers and their officers, employees and agents and
each Borrower’s books and records, to the extent that Silicon may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.

 

5.7 Further Assurances. Borrowers agree, at their expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon’s perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.

 

6. TERM.

 

6.1 Maturity Date. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the “Maturity Date”), subject to Section 6.3
below.

 

6.2 Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrowers, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence and during the continuance of an Event of Default, without
notice, effective immediately.

 

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6.3 Payment of Obligations. On the Maturity Date or on any earlier effective
date of termination, Borrowers shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Notwithstanding
any termination of this Agreement, all of Silicon’s security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that Silicon may, in its sole discretion, refuse to
make any further Loans after termination. No termination shall in any way affect
or impair any right or remedy of Silicon, nor shall any such termination relieve
Borrowers of any Obligation to Silicon, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Silicon shall promptly terminate
its financing statements with respect to the Borrowers and deliver to each
Borrower such other documents as may be required to fully terminate Silicon’s
security interests.

 

7. EVENTS OF DEFAULT AND REMEDIES.

 

7.1 Events of Default. The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrowers shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrowers or
any of Borrowers’ officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrowers shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit and Borrowers shall not
immediately repay the excess as provided in Section 1.3; or (d) Borrowers fail
to perform any other nonmonetary Obligation which by its nature cannot be cured
(including those in Section 5.5) or shall fail to permit Silicon to conduct an
inspection or audit as specified in Section 5.4 hereof; or (e) Borrowers shall
fail to perform any other nonmonetary Obligation, which failure is not cured
within: (y) five Business Days after the date due with respect to the delivery
of any financial statements, compliance certificate, or Borrowing Base
Certificate and (z) within 10 Business Days of their due date for all other
nonmonetary obligations which by their nature can be cured; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within 10
days after the occurrence of the same; or (g) any event of default occurs under
any Indebtedness in excess of $100,000, which gives the holder of the
Indebtedness the right to accelerate the maturity of such Indebtedness and which
is not cured within any applicable cure period or waived in writing by the
holder of the Indebtedness; or (h) either Borrower breaches any material
contract or obligation, which has resulted or may reasonably be expected to
result in a Material Adverse Change; or (i) Dissolution, termination of
existence, insolvency of either Borrower; or the acquiescence of either Borrower
in the appointment of a receiver, trustee or custodian, for all or any material
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by either Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any

 

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jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against a Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or (k) Borrowers make
any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(n) there shall be a Change of Control; or (o) Borrowers shall generally not pay
their debts as they become due, or Borrowers shall conceal, remove or transfer
any part of its property, with intent to hinder, delay or defraud its creditors,
or make or suffer any transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or (p) a Material
Adverse Change shall occur. Silicon may cease making any Loans hereunder during
any of the above cure periods, and thereafter if an Event of Default has
occurred and is continuing.

 

7.2 Remedies. Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Silicon, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrowers),
may do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrowers under this Agreement or any other Loan Document;
(b) Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation; (c)
Take possession of any or all of the Collateral wherever it may be found, and
for that purpose Borrowers hereby authorize Silicon without judicial process to
enter onto any of Borrowers’ premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the
premises or cause a custodian to remain on the premises in exclusive control
thereof, without charge for so long as Silicon deems it necessary, in its good
faith business judgment, in order to complete the enforcement of its rights
under this Agreement or any other agreement; provided, however, that should
Silicon seek to take possession of any of the Collateral by court process, each
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession; (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and (iii) any requirement that
Silicon retain possession of, and not dispose of, any such Collateral until
after trial or final judgment; (d) Require Borrowers to assemble any or all of
the Collateral and make it available to Silicon at places designated by Silicon
which are reasonably convenient to Silicon and Borrowers, and to remove the
Collateral to such locations as Silicon may deem advisable; (e) Complete the
processing, manufacturing or repair of any Collateral prior to a disposition
thereof and, for such purpose and for the purpose of removal, Silicon shall have
the right to use Borrowers’ premises, vehicles, hoists, lifts, cranes, and other
Equipment and all other property without charge; (f) Sell, lease or otherwise
dispose of any of the Collateral, in its condition at the time Silicon obtains
possession of it or after further manufacturing,

 

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processing or repair, at one or more public and/or private sales, in lots or in
bulk, for cash, exchange or other property, or on credit, and to adjourn any
such sale from time to time without notice other than oral announcement at the
time scheduled for sale. Silicon shall have the right to conduct such
disposition on Borrowers’ premises without charge, for such time or times as
Silicon deems reasonable, or on Silicon’s premises, or elsewhere and the
Collateral need not be located at the place of disposition. Silicon may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrowers of any liability Borrower may have if any Collateral is defective as
to title or physical condition or otherwise at the time of sale; (g) Demand
payment of, and collect any Accounts and General Intangibles comprising
Collateral and, in connection therewith, each Borrower irrevocably authorizes
Silicon to endorse or sign such Borrower’s name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to Borrowers and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in Silicon’s good faith business judgment,
to grant extensions of time to pay, compromise claims and settle Accounts and
the like for less than face value; (h) Offset against any sums in any of
Borrowers’ general, special or other Deposit Accounts with Silicon against any
or all of the Obligations; and (i) Demand and receive possession of any of
Borrowers’ federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys’ fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
any of Silicon’s rights and remedies, from and after the occurrence and during
the continuance of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional four percent per annum (the
“Default Rate”).

 

7.3 Standards for Determining Commercial Reasonableness. Borrowers and Silicon
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrowers at least
ten days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least five days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, nonspecific terms; (iii) The sale is
conducted at a place designated by Silicon, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier’s check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, Silicon may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrowers any and all information concerning the same. Silicon shall be
free to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.

 

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7.4 Power of Attorney. Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon’s other rights and remedies, each
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrowers, and at Borrowers’ expense, to
do any or all of the following, in either Borrower’s name or otherwise, but
Silicon agrees that if it exercises any right hereunder, it will do so in good
faith and in a commercially reasonable manner: (a) Execute on behalf of such
Borrower any documents that Silicon may, in its good faith business judgment,
deem advisable in order to perfect and maintain Silicon’s security interest in
the Collateral, or in order to exercise a right of either Borrower or Silicon,
or in order to fully consummate all the transactions contemplated under this
Agreement, and all other Loan Documents; (b) Execute on behalf of either
Borrower, any invoices relating to any Account, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any Notice of Lien, claim of mechanic’s, materialman’s or other lien, or
assignment or satisfaction of mechanic’s, materialman’s or other lien; (c) Take
control in any manner of any cash or noncash items of payment or proceeds of
Collateral; endorse the name of either Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon’s
possession; (d) Endorse all checks and other forms of remittances received by
Silicon; (e) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (f)
Grant extensions of time to pay, compromise claims and settle Accounts and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (g) Pay any sums required on account of
either Borrower’s taxes or to secure the release of any liens therefor, or both;
(h) Settle and adjust, and give releases of, any insurance claim that relates to
any of the Collateral and obtain payment therefor; (i) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrowers to give Silicon the same rights of access and other rights with
respect thereto as Silicon has under this Agreement; and (j) Take any action or
pay any sum required of Borrowers pursuant to this Agreement and any other Loan
Documents. Any and all reasonable sums paid and any and all reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Silicon with
respect to the foregoing shall be added to and become part of the Obligations,
shall be payable on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. In no event shall
Silicon’s rights under the foregoing power of attorney or any of Silicon’s other
rights under this Agreement be deemed to indicate that Silicon is in control of
the business, management or properties of Borrowers.

 

7.5 Application of Proceeds. All proceeds realized as the result of any sale of
the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole

 

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discretion. Any surplus shall be paid to Borrowers or other persons legally
entitled thereto; Borrowers shall remain liable to Silicon for any deficiency.
If, Silicon, in its good faith business judgment, directly or indirectly enters
into a deferred payment or other credit transaction with any purchaser at any
sale of Collateral, Silicon shall have the option, exercisable at any time, in
its good faith business judgment, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Silicon of the cash therefor.

 

7.6 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and either Borrower, and all of such rights
and remedies are cumulative and none is exclusive. Exercise or partial exercise
by Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.

 

8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:

 

“Account Debtor” means the obligor on an Account.

 

“Accounts” means all present and future “accounts” as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all accounts
receivable and other sums owing to Borrower.

 

“Affiliate” means, with respect to any Person, a relative, 10% shareholder,
director, officer, or employee of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.

 

“Business Day” means a day on which Silicon is open for business.

 

“Change in Control” is a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Act”)) becomes the “beneficial owner” (as defined in Rule
13d-3 under the Act), directly or indirectly, of greater than 50% of the shares
of all classes of stock then outstanding of Xenogen ordinarily entitled to vote
in the election of directors.

 

“Code” means the Uniform Commercial Code as adopted and in effect in the State
of California from time to time.

 

“Collateral” has the meaning set forth in Section 2 above.

 

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“Contingent Obligations” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement

 

“continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.

 

“Copyrights” are all copyright rights, applications or registrations and like
protections in each work or authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.

 

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 7.2 above.

 

“Deferred Revenue” is all amounts received in advance of performance under a
contract and not yet recognized as revenue.

 

“Deposit Accounts” means all present and future “deposit accounts” as defined in
the California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all general and special bank accounts, demand accounts, checking accounts,
savings accounts and certificates of deposit.

 

“Eligible Accounts” means, as to each Borrower, Accounts and General Intangibles
arising in the ordinary course of such Borrower’s business from the sale of
goods or the rendition of services, or the nonexclusive licensing of
Intellectual Property, which Silicon, in its good faith business judgment, shall
deem eligible for borrowing. Without limiting the fact that the determination of
which Accounts are eligible for borrowing is a matter of Silicon’s good faith
business judgment, the following (the “Minimum Eligibility Requirements”) are
the minimum requirements for a Account to be an Eligible Account: (i) the
Account must not be outstanding for more than 90 days from its invoice date (the
“Eligibility Period”), (ii) the Account must not represent progress billings, or
be due under a fulfillment or requirements contract with the Account Debtor,
(iii) the Account must not be subject to any contingencies (including Accounts
arising from sales on consignment, guaranteed sale or other terms pursuant to
which payment by

 

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the Account Debtor may be conditional), (iv) the Account must not be owing from
an Account Debtor with whom the Borrower has any dispute (whether or not
relating to the particular Account) (but only the amount in dispute shall be
excluded), (v) the Account must not be owing from an Affiliate of the Borrower,
(vi) the Account must not be owing from an Account Debtor which is subject to
any insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Account must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to Silicon’s satisfaction, with the United States Assignment of Claims Act),
(viii) the Account must not be owing from an Account Debtor located outside the
United States or Canada (unless preapproved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Account must not be owing from an
Account Debtor to whom the Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise (but, in such case, the Account will be deemed
not eligible only to the extent of any amounts owed by that Borrower to such
Account Debtor), or (x) the Account must not be owing by an R&D Party but
amounts of such Account in excess of any existing R&D Deferred Revenue relating
to such R&D Party shall be deemed Eligible Accounts. Accounts owing from one
Account Debtor will not be deemed Eligible Accounts to the extent they exceed
25% of the total Accounts outstanding. In addition, if more than 50% of the
Accounts owing from an Account Debtor are outstanding for a period longer than
their Eligibility Period (without regard to unapplied credits) or are otherwise
not eligible Accounts, then all Accounts owing from that Account Debtor will be
deemed ineligible for borrowing. Silicon may, from time to time, in its good
faith business judgment, extend the Eligibility Period to 120 days for certain
Accounts or otherwise revise the Minimum Eligibility Requirements, upon written
notice to the Borrower.

 

“Equipment” means all present and future “equipment” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.

 

“Event of Default” means any of the events set forth in Section 7.1 of this
Agreement.

 

“GAAP” means generally accepted accounting principles consistently applied.

 

“General Intangibles” means all present and future “general intangibles” as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all Intellectual Property, payment intangibles, royalties, contract
rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income tax refunds, security and
other deposits, options to purchase or sell real or personal property, rights in
all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

 

“good faith business judgment” means honesty in fact and good faith (as defined
in Section 1201 of the Code) in the exercise of Silicon’s business judgment.

 

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“including” means including (but not limited to).

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

 

“Intellectual Property” is:

 

(a) Copyrights, Trademarks, and Patents including amendments, renewals,
extensions, and all licenses or other rights to use and all license fees and
royalties from the use;

 

(b) Any trade secrets and any intellectual property rights in computer software
and computer software products now or later existing, created, acquired or held;

 

(c) All design rights which may be available to either Borrower now or later
created, acquired or held;

 

(d) Any claims for damages (past, present or future) for infringement of any of
the rights above, with the right, but not the obligation, to sue and collect
damages for use or infringement of the intellectual property rights above;

 

All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.

 

“Inventory” means all present and future “inventory” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of either Borrower’s custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.

 

“Investment Property” means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.

 

“Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

 

“Loan Documents” means, collectively, this Agreement, the Representations, and
all other present and future documents, instruments and agreements between
Silicon and either Borrower, including, but not limited to those relating to
this Agreement, and all amendments and modifications thereto and replacements
therefor.

 

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“Material Adverse Change” means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Parent and its Subsidiaries taken as a whole, or (ii) a material impairment of
the prospect of repayment of any portion of the Obligations; or (iii) a material
impairment of the value or priority of Silicon’s security interests in the
Collateral.

 

“Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrowers to Silicon, whether evidenced by this Agreement or any note or other
instrument or document, or otherwise, whether arising from an extension of
credit, opening of a letter of credit, banker’s acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
either Borrower’s debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney’s fees, expert witness fees, audit fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
interest charges and any other sums chargeable to Borrower under this Agreement
or under any other Loan Documents.

 

“Other Property” means the following as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and all
rights relating thereto: all present and future “commercial tort claims”
(including without limitation any commercial tort claims identified in the
Representations), “documents”, “instruments”, “promissory notes”, “chattel
paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm
products” and “money”; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the Code.

 

“Patents” are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

 

“Payment” means all checks, wire transfers and other items of payment received
by Silicon (including proceeds of Accounts and payment of the Obligations in
full) for credit to Borrowers’ outstanding Loans or, if the balance of the Loans
have been reduced to zero, for credit to its Deposit Accounts.

 

“Permitted Indebtedness” is:

 

(a) each Borrower’s indebtedness to Silicon under this Agreement or any other
Loan Document;

 

(b) Indebtedness existing on the Closing Date and shown on the Schedule;

 

(c) Subordinated Debt;

 

(d) Indebtedness to trade creditors incurred in the ordinary course of business;

 

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(e) Indebtedness secured by Permitted Liens;

 

(f) Indebtedness of each Borrower to any Subsidiary and Contingent Obligations
of any Subsidiary with respect to obligations of Borrowers (provided that the
primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);

 

(g) Other Indebtedness not otherwise permitted by Section 5.5 not exceeding One
Hundred Fifty Thousand Dollars ($150,000) in the aggregate outstanding at any
time; and

 

(h) Extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon either Borrower or its Subsidiary, as the
case may be.

 

“Permitted Investments” are:

 

(a) Investments shown on the Representations and existing on the date hereof;

 

(b) Marketable direct obligations issued or unconditionally guaranteed by the
United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor’s Corporation
or Moody’s Investors Service, Inc., and (iii) Silicon’s certificates of deposit
issued maturing no more than 1 year after issue, and (iv) any Investments
permitted by Parent’s investment policy, as amended from time to time, provided
that such investment policy (and any such amendment thereto) has been approved
by Silicon;

 

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of each
Borrower’s business;

 

(d) Investments accepted in connection with Transfers permitted by Section 5.5;

 

(e) Investments of Subsidiaries in or to other Subsidiaries or Borrowers and
Investments by Borrowers in Subsidiaries not to exceed $250,000 in the aggregate
in any fiscal year;

 

(f) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business not to
exceed $250,000 in any one fiscal year or $300,000 at any one time outstanding,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of either Borrower or its Subsidiaries pursuant to employee
stock purchase plans or agreements approved by such Borrower’s Board of
Directors;

 

(g) 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 business;

 

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(h) 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 paragraph (h) shall not
apply to Investments of either Borrower in any Subsidiary;

 

(i) Investments pursuant to investment policy guidelines approved by either
Borrower’s Board of Directors and Silicon set forth Exhibit E to the Original
Agreement; and

 

(j) Joint ventures or strategic alliances in the ordinary course of either
Borrower’s business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash investments by Borrowers does not exceed $50,000 in the aggregate in
any fiscal year.

 

“Permitted Liens” are:

 

(a) Liens existing on the Closing Date and shown on the Schedule or arising
under this Agreement or other Loan Documents;

 

(b) Liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for which the
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Silicon’s security interests;

 

(c) Purchase money Liens (i) on Equipment acquired or held by either Borrower or
its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;

 

(d) Licenses or sublicenses granted in the ordinary course of each Borrower’s
business and any interest or title of a licensor or under any license or
sublicense;

 

(e) Leases or subleases granted in the ordinary course of each Borrower’s
business, including in connection with such Borrower’s leased premises or leased
property;

 

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

 

(g) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 7.1;

 

(h) Liens in favor of other financial institutions arising in connection with
either Borrower’s deposit accounts held at such institutions, provided that
Silicon has a perfected security interest in the amounts held in such deposit
accounts;

 

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(i) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not overdue for
a period of more than 30 days or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the applicable Person;

 

(j) Liens to secure payment of workers’ compensation, employment insurance, old
age pensions, social security or other like obligations incurred in the ordinary
course of business;

 

(k) easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person; and

 

(l) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;
and

 

(m) additional security interests and Liens consented to in writing by Silicon,
which consent may be withheld in Silicon’s good faith business judgment.

 

Silicon will have the right to require, as a condition to its consent under
subparagraph (m) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Silicon’s then standard form,
acknowledge that the security interest is subordinate to the security interest
in favor of Silicon, and agree not to take any action to enforce its subordinate
security interest so long as any Obligations remain outstanding, and that
Borrowers agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

 

“Representations” means the written Representations and Warranties attached as
Exhibit C provided by the Borrowers to Silicon upon the Threshold Event (as
defined in the Original Agreement).

 

“R&D Collaboration” is a transaction whereby an R&D Party provides either
Borrower with cash for the purpose of a research and development collaboration.

 

“R&D Deferred Revenue” is cash received by either Borrower from an R&D Party
that due to the structure of the applicable R&D Collaboration is reflected as
Deferred Revenue in such Borrower’s books.

 

“R&D Party” is any Person that enters into an R&D Collaboration with either
Borrower.

 

“Reserves” means, as of any date of determination, such amounts as Silicon may
from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans and other financial accommodations which would
otherwise be available to Borrowers

 

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under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by Silicon in its good
faith business judgment, do or may adversely affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Accounts), (ii) the assets,
business or prospects of either Borrower or any Guarantor, or (iii) the security
interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon’s
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrowers or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.

 

“Responsible Officer” is, as to each Borrower, each of the Chief Executive
Officer, the President, the Chief Financial Officer, Vice President of Finance
and the Controller of that Borrower.

 

“Subordinated Debt” is debt incurred by either Borrower subordinated to such
Borrower’s indebtedness owed to Silicon and which is reflected in a written
agreement in a manner and form acceptable to Silicon and approved by Silicon in
writing.

 

“Subsidiary” is for any Person, or any other business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

 

“Tangible Net Worth” is, on any date, the consolidated total assets of each
Parent and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized debt discount and expense, Patents,
trade and service marks and names, Copyrights and research and development
expenses except prepaid expenses, and (c) reserves not already deducted from
assets, and (ii) Total Liabilities.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Parent’s consolidated balance sheet, including all
indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

 

“Trademarks” are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

 

Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

 

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9. GENERAL PROVISIONS.

 

9.1 Interest Computation; Float Charge. In computing interest on the
Obligations, all Payments received after 12:00 Noon on any day shall be deemed
received on the next Business Day. In addition, Silicon shall be entitled to
charge Borrower a “float” charge in an amount equal to three Business Days
interest, at the interest rate applicable to the Loans, on all Payments received
by Silicon (except for Payments made by wire transfer to Silicon for which
Borrower shall receive credit on the date of receipt). The float charge for each
month shall be payable on the last day of the month.

 

9.2 Application of Payments. All payments with respect to the Obligations may be
applied, and in Silicon’s good faith business judgment reversed and reapplied,
to the Obligations, in such order and manner as Silicon shall determine in its
good faith business judgment.

 

9.3 Charges to Accounts. Silicon may, in its discretion, require that Borrowers
pay monetary Obligations in cash to Silicon, or charge them to Borrower’s Loan
account, in which event they will bear interest at the same rate applicable to
the Loans. Silicon may also, in its discretion, charge any monetary Obligations
to either Borrower’s Deposit Accounts maintained with Silicon.

 

9.4 Monthly Accountings. Silicon shall provide Borrowers monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrowers and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Silicon), unless Borrowers notify Silicon in
writing to the contrary within 60 days after such account is rendered,
describing the nature of any alleged errors or omissions.

 

9.5 Notices. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or either Borrower at the addresses shown in the heading to
this Agreement, or at any other address designated in writing by one party to
the other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.

 

9.6 Severability. Should any provision of this Agreement be held by any court of
competent jurisdiction to be void or unenforceable, such defect shall not affect
the remainder of this Agreement, which shall continue in full force and effect.

 

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9.7 Integration. This Agreement and such other written agreements, documents and
instruments as may be executed in connection herewith (including the
Non-Disclosure Agreement, dated as of June 30, 2004) are the final, entire and
complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

 

9.8 Waivers; Indemnity.

 

(a) The failure of Silicon at any time or times to require Borrowers to strictly
comply with any of the provisions of this Agreement or any other Loan Document
shall not waive or diminish any right of Silicon later to demand and receive
strict compliance therewith. Any waiver of any default shall not waive or affect
any other default, whether prior or subsequent, and whether or not similar. None
of the provisions of this Agreement or any other Loan Document shall be deemed
to have been waived by any act or knowledge of Silicon or its agents or
employees, but only by a specific written waiver signed by an authorized officer
of Silicon and delivered to Borrowers. Each Borrower waives the benefit of all
statutes of limitations relating to any of the Obligations or this Agreement or
any other Loan Document, and Borrower waives demand, protest, notice of protest
and notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrowers are or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement. Each
Borrower, jointly and severally, hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys’ fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between Silicon and either Borrower, or any other
matter, relating to Borrowers or the Obligations; provided that this indemnity
shall not extend to damages proximately caused by the indemnitee’s own gross
negligence or willful misconduct. Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect.

 

(b) Suretyship Waivers. Each Borrower hereby expressly waives (i) diligence,
presentment, demand for payment, protest, benefit of any statute of limitations
affecting such Borrower’s liability under the Loan Documents; (ii) discharge due
to any disability of any Borrower; (iii) any defenses of any Borrower to
obligations under the Loan Documents not arising under the express terms of the
Loan Documents or from a material breach thereof by Borrower which under
applicable law has the effect of discharging any Borrower from the Obligations
as to which this Agreement is sought to be enforced; (iv) the benefit of any act
or omission by Borrower which directly or indirectly results in or aids the
discharge of any Borrower from any of the Obligations by operation of law or
otherwise; (v) except as expressly provided herein, all notices whatsoever,
including, without limitation, notice of acceptance of the

 

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incurring of the Obligations; (vi) any right it may have to require Borrower to
disclose to it any information that Borrower may now or hereafter acquire
concerning the financial condition or any circumstances that bears on the risk
of nonpayment by any other Borrower, including, without limitation, the release
of such other Borrower from its Obligations hereunder; and (vii) any requirement
that Borrower exhaust any right, power or remedy or proceed against any other
Borrower or any other security for, or any guarantor of, or any other party
liable for, any of the Obligations, or any portion thereof. Each Borrower
specifically agrees that it shall not be necessary or required, and Borrowers
shall not be entitled to require, that Borrower (i) file suit or proceed to
assert or obtain a claim for personal judgment against any other Borrower for
all or any part of the Obligations; (ii) make any effort at collection or
enforcement of all or any part of the Obligations from any Borrower; (iii)
foreclose against or seek to realize upon any security now or hereafter existing
for all or any part of the Obligations; (iv) file suit or proceed to obtain or
assert a claim for personal judgment against any Borrower or any guarantor or
other party liable for all or any part of the Obligations; (v) exercise or
assert any other right or remedy to which Borrower is or may be entitled in
connection with the Obligations or any security or guaranty relating thereto to
assert; or (vi) file any claim against assets of one Borrower before or as a
condition of enforcing the liability of any other Borrower under this Agreement
or the Notes. Without limiting the generality of the foregoing, each Borrower
expressly waives the benefit of California Civil Code Sections 2809, 2810, 2819,
2839, 2845, 2848 (until such time as the Obligations are satisfied in full),
2849 (until such time as the Obligations are satisfied in full), 2850, 2899 and
1432. WITHOUT LIMITING THE FOREGOING IN ANY WAY, EACH BORROWER HEREBY
IRREVOCABLY WAIVES AND RELEASES:

 

(A) Any and all rights it may have at any time (whether arising directly or
indirectly, by operation of law, contract or otherwise) to require the
marshaling of any assets of any Borrower, which right of marshaling might
otherwise arise from any such payments made or obligations performed;

 

(B) Until such time as the obligations have been satisfied in full, any and all
rights that would result in such Borrower being deemed a “creditor” under the
bankruptcy code of any other Borrower or any other person, on account of
payments made or obligations performed by such Borrower; and

 

(C) Until such time as the obligations have been satisfied in full, any claim,
right or remedy which it may now have or hereafter acquire against any other
Borrower that arises hereunder and/or from the performance by it hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification or participation in
any claim, right or remedy of Bank against any other Borrower or any collateral
security which Bank now have or may hereafter acquire, whether or not such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise (including without limitation under section 9.9 hereof).

 

9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any

 

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kind whatsoever, made, claimed, incurred or suffered by Borrowers or any other
party through the ordinary negligence of Silicon, or any of its directors,
officers, employees, agents, attorneys or any other Person affiliated with or
representing Silicon, but nothing herein shall relieve Silicon from liability
for its own gross negligence or willful misconduct.

 

9.10 Amendment. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of Silicon.

 

9.11 Time of Essence. Time is of the essence in the performance by Borrowers of
each and every obligation under this Agreement.

 

9.12 Attorneys Fees and Costs. Borrowers shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys’ fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrowers; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend actions
by, Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; subject to any limitations on fees specified elsewhere herein; examine,
audit, copy, and inspect any of the Collateral or any of Borrowers’ books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon’s security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrowers’ obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon’s attorneys, Buchalter, Nemer,
Fields & Younger, but Borrowers acknowledge and agree that Buchalter, Nemer,
Fields & Younger is representing only Silicon and not Borrower in connection
with this Agreement. If either Silicon or Borrower files any lawsuit against the
other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorneys’ fees,
including (but not limited to) reasonable attorneys’ fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys’ fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrowers’
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.

 

9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrowers and Silicon; provided, however,
that Borrowers may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrowers
from its liability for the Obligations.

 

 

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9.14 Intentionally Deleted.

 

9.15 Limitation of Actions. Any claim or cause of action by Borrowers against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, occurred,
done, omitted or suffered to be done by Silicon, its directors, officers,
employees, agents, accountants or attorneys, shall be barred unless asserted by
Borrowers by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter. Each Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrowers to investigate
and act upon any such claim or cause of action. The one-year period provided
herein shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other Loan Document.

 

9.16 Paragraph Headings; Construction. Paragraph headings are only used in this
Agreement for convenience. Borrowers and Silicon acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. This Agreement has been fully
reviewed and negotiated between the parties and no uncertainty or ambiguity in
any term or provision of this Agreement shall be construed strictly against
Silicon or Borrowers under any rule of construction or otherwise.

 

9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrowers
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, each Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon’s option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrowers may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.

 

9.18 Mutual Waiver of Jury Trial. EACH BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING

 

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TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT
BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR
BORROWERS OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWERS, IN ALL OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

9.19 Effectiveness; Amended and Restated Agreement. This Agreement shall be
effective automatically and without further action on the part of Borrowers and
Silicon upon the occurrence of a Threshold Event, as such term is defined in
that certain Amended and Restated Loan and Security Agreement, dated as of even
date herewith (as the same may be amended, supplemented, modified, or amended
and restated from time to time, the “Original Agreement”). Borrowers and Silicon
hereby agree that, effective upon such Threshold Event, the terms and provisions
of the Original Agreement shall be and hereby are amended, restated and
superseded in their entirety by the terms and provisions of this Agreement.
Nothing herein contained shall be construed as a substitution or novation of the
obligations of Borrowers outstanding under the Original Agreement or instruments
securing the same, which obligations shall remain in full force and effect,
except to the extent that the terms thereof are modified hereby or by
instruments executed concurrently herewith. Nothing expressed or implied in this
Agreement shall be construed as a release or other discharge of any guarantor
from any of its obligations or liabilities under the Original Agreement or any
of the security agreements, pledge agreements, mortgages, guaranties or other
loan documents executed in connection therewith. Each Borrower hereby (i)
confirms and agrees that each Loan Document to which it is a party is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects except that on and after the date this Agreement becomes effective
all references in any such Loan Document to “the Loan Agreement”, “thereto”,
“thereof”, “thereunder” or words of like import referring to the Original
Agreement shall mean the Original Agreement as amended and restated by this
Agreement; and (ii) confirms and agrees that to the extent that the Original
Agreement or any Loan Document executed in connection therewith purports to
assign or pledge to Silicon or to grant to Silicon a security interest in or
lien on, any collateral as security for the Obligations of Borrowers from time
to time existing in respect of the Original Agreement, such pledge, assignment
or grant of the security interest or lien is hereby ratified and confirmed in
all respects and shall remain effective as of the first date it became
effective.

 

9.20 In handling any confidential information, Silicon will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Silicon’s subsidiaries or
affiliates in connection with their present or prospective business relations
with Borrowers, (ii) to prospective transferees or purchasers of any interest in
the loans, (iii) as required by law, regulation, subpoena, or other order, (iv)
as required in connection with Silicon’s examination or audit and (v) as Silicon
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in

 

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the public domain or in Silicon’s possession when disclosed to Silicon, or
becomes part of the public domain after disclosure to Silicon; or (b) is
disclosed to Silicon by a third party, if Silicon does not know that the third
party is prohibited from disclosing the information.

 

[Remainder of page left intentionally blank]

 

 

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This Amended and Restated Loan and Security Agreement is executed by the parties
as of the date first set forth above.

 

Borrower:

 

XENOGEN CORPORATION

 

Silicon:

 

SILICON VALLEY BANK

By  

 

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

  By  

 

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

   

President or Vice President

  Title  

 

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

By  

 

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

           

Secretary or Ass’t Secretary

        XENOGEN BIOSCIENCES CORPORATION         By  

 

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

           

President or Vice President

        By  

 

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

           

Secretary or Ass’t Secretary

       

 

Signature Page to Amended and Restated

Loan and Security Agreement (Asset Based)

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

Silicon Valley Bank

 

Schedule to

Loan and Security Agreement

 

(Asset Based Facility)

 

Borrower:   XENOGEN CORPORATION and XENOGEN BIOSCIENCES CORPORATION Address:  
860 Atlantic Avenue   5 Cedar Brook Drive     Alameda, California 94501  
Cranbury, New Jersey 08512 Date:   August 2, 2005    

 

This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrowers of even date.

 

1.    CREDIT LIMIT          (Section 1.1):   An amount not to exceed the lesser
of: (i) $13,000,000 at any one time outstanding (the “Maximum Credit Limit”); or
(ii) 80% (the “Advance Rate”) of the amount of Parent’s consolidated Eligible
Accounts (as defined in Section 8 above).          Silicon may, from time to
time, modify the Advance Rate, in its good faith business judgment, upon notice
to the Borrowers, based on changes in collection experience with respect to
Accounts or other issues or factors relating to the Accounts or other
Collateral.      Cash Management          Services and Reserves:   Borrowers may
use up to $1,000,000 of Loans available hereunder for Silicon’s Cash Management
Services (as defined below), including, merchant services, business credit card,
ACH and other services identified in the cash management services agreement
related to such service (the “Cash Management Services”). Silicon may, in its
sole discretion, reserve against Loans which would otherwise be available
hereunder such sums as Silicon shall determine in its good faith business
judgment in connection with the Cash Management Services, and Silicon may charge
to Borrowers’ Loan account, any amounts that may become

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         due or owing to Silicon in connection with the Cash Management
Services. Borrowers agree to execute and deliver to Silicon all standard form
applications and agreements of Silicon in connection with the Cash Management
Services, and, without limiting any of the terms of such applications and
agreements, Borrowers will pay all standard fees and charges of Silicon in
connection with the Cash Management Services. The Cash Management Services shall
terminate on the Maturity Date. 2.    INTEREST.         
Interest Rate (Section 1.2):   A rate equal to the “Prime Rate” in effect from
time to time, plus 2.50% per annum, provided that the interest rate in effect on
any day shall not be less than 6.5% per annum. Interest shall be calculated on
the basis of a 360-day year for the actual number of days elapsed. “Prime Rate”
means the rate announced from time to time by Silicon as its “prime rate;” it is
a base rate upon which other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The interest rate applicable to
the Obligations shall change on each date there is a change in the Prime Rate.
3.    FEES (Section 1.4):          Loan Fee:   None.      Collateral Monitoring
         Fee:   $1,000, per month, payable in arrears (prorated for any partial
month at the beginning and at termination of this Agreement) provided, however,
that this fee shall be waived if no Loans were outstanding during the applicable
month.      Unused Line Fee:   On the first day of each month and on the
Maturity Date, Borrowers agree to pay to Silicon, an unused line fee (the
“Unused Line Fee”) equal to the one percent (1%) per annum times the amount by
which (a) $13,000,000 exceeds (b) the greater of: (i) the average daily
outstanding amount of Loans and (ii) $5,000,000, during the immediately
preceding month or shorter period if calculated on the date this Agreement
becomes effective or on the Maturity Date.

 

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          The Unused Line Fee shall be computed on the basis of a 360-day year
for the actual number of days elapsed. 4.    MATURITY DATE           (Section
6.1):    August 2, 2007. 5.    REPORTING.           (Section 5.3): Each Borrower
shall provide Silicon with the following:           1.Weekly transaction reports
and schedules of collections, on Silicon’s standard form.           2.Monthly
accounts receivable agings, aged by invoice date, within fifteen days after the
end of each month.           3.Monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers, if any, within fifteen days after
the end of each month.           4.Monthly reconciliations of accounts
receivable agings (aged by invoice date), transaction reports, and general
ledger, within fifteen days after the end of each month.           5.Monthly
unaudited financial statements, as soon as available, and in any event within
thirty days after the end of each month.           6.Monthly Compliance
Certificates, within thirty days after the end of each month, in the form of
Exhibit A attached hereto or such form as Silicon shall reasonably specify,
signed by the Chief Financial Officer of the Xenogen, certifying that as of the
end of such month Borrower was in full compliance with all of the terms and
conditions of this Agreement and such other information as Silicon shall
reasonably request, including, without limitation, a statement that at the end
of such month there were no held checks.

 

- 3 -

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

          7.Annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal year of the
Borrower within forty-five days prior to the end of each fiscal year of the
Borrower. Such operating budgets must be approved by the Board of Directors.  
        8.Annual financial statements, as soon as available, and in any event
within 120 days following the end of Borrower’s fiscal year, certified by, and
with an unqualified opinion of, independent certified public accountants
acceptable to Silicon.           9.Monthly, within fifteen days after the end of
each month, a borrowing base certificate signed by a Chief Financial Officer in
the form of Exhibit B (the “Borrowing Base Certificate”) attached hereto
together with a schedule of Deferred Revenue detailing all Deferred Revenue a
specifying R & D Deferred Revenue. 6.    INTENTIONALLY OMITTED.      7.   
ADDITIONAL PROVISIONS:                (1) Banking Relationship. Borrowers shall
at all times maintain their primary banking relationship with Silicon. Without
limiting the generality of the foregoing, Borrowers shall, at all times,
maintain not less than 85% of its total cash and investments on deposit with
Silicon or one of Silicon’s affiliates. As to any Deposit Accounts and
investment investment accounts maintained with another institution, each
Borrower shall cause such institution, within 30 days after the date of this
Agreement, to enter into a control agreement in form acceptable to Silicon in
its good faith business judgment in order to perfect Silicon’s first-priority
security interest in said Deposit Accounts and investment accounts.          
(2) Subordination of Inside Debt. All present and future indebtedness of
Borrowers to its officers, directors and shareholders (“Inside Debt”) shall, at
all times, be subordinated to the Obligations pursuant to a subordination

 

- 4 -

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

    agreement on Silicon’s standard form. Each Borrower represents and warrants
that there is no Inside Debt presently outstanding, except for the following:
                    . Prior to incurring any Inside Debt in the future, Borrower
shall cause the person to whom such Inside Debt will be owed to execute and
deliver to Silicon a subordination agreement on Silicon’s standard form.     (3)
Financial Covenant. Borrowers will maintain, at all times, a Remaining Months
Liquidity Ratio of at least (i) 4.0:1.0 until October 31, 2005 and (ii) 6.0:1.0
thereafter, measured on a rolling three-month basis For purposes hereof,
“Remaining Month’s Liquidity Ratio” means a ratio of (i) unrestricted cash (and
equivalents) maintained at Bank or one of its Affiliates (measured at any time)
plus 80% of Eligible Accounts (as measured by the most recently delivered
Compliance Certificate) minus any Obligations hereunder to (ii) net income plus
depreciation and amortization expenses.

 

Borrower:   Silicon:

XENOGEN CORPORATION

a Delaware corporation

 

SILICON VALLEY BANK

 

  By  

 

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

By  

 

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

  Title  

 

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

   

President or Vice President

        By  

 

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

           

Secretary or Ass’t Secretary

        XENOGEN BIOSCIENCES CORPORATION         a Delaware corporation        
By  

 

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

           

President or Vice President

        By  

 

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

           

Secretary or Ass’t Secretary

       

 

 

- 5 -

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

EXHIBIT A

 

COMPLIANCE CERTIFICATE

 

TO:   SILICON VALLEY BANK FROM:           XENOGEN CORPORATION     860 Atlantic
Avenue     Alameda, California 94501

 

The undersigned authorized officer of XENOGEN CORPORATION (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Silicon (the “Agreement”), (i) Borrower is in complete compliance
for the period ending                          with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. In
addition, the undersigned authorized officer of Borrower certifies that Borrower
and each Subsidiary (i) has timely filed all required tax returns and paid, or
made adequate provision to pay, all material taxes, except those being contested
in good faith with adequate reserves under GAAP and (ii) does not have any legal
actions pending or threatened against Borrower or any Subsidiary which Borrower
has not previously notified in writing to Silicon. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

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

  

Required

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

   Complies

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

Monthly financial statements + CC    Monthly within 30 days    Yes      No
Annual (Audited)    FYE within 120 days    Yes      No A/R, A/P Agings, Deferred
Revenue Schedule, and Borrowing Base Certificate    Monthly within 30 days   
Yes      No Financial Projections    Initial and FYE within 45 days    Yes     
No A/R Audit    Three times per year    Yes      No

 

Covenants

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

   Minimum

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

   Actual

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

   Trigger

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

Remaining Month’s Liquidity Ratio

   6.0:1.0        :1.00    Yes        No    

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

Borrower only has deposit accounts located at the following institutions:
                        .

 

Comments Regarding Exceptions: See Attached.

 

Sincerely, XENOGEN CORPORATION

 

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

SIGNATURE

 

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

TITLE

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

EXHIBIT B

 

BORROWING BASE CERTIFICATE

 

Borrower:  

Xenogen Corporation

 

860 Atlantic Avenue

 

Alameda, CA 94501

   Bank:  

Silicon Valley Bank

 

3003 Tasman Drive

 

Santa Clara, CA 95054

 

Commitment Amount: $13,000,000

 

ACCOUNTS RECEIVABLE

 

1. Accounts Receivable Book Value as of              $                

 

2. Additions (please explain on reverse) $                

 

3. TOTAL ACCOUNTS RECEIVABLE $                

 

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

4. Amounts over 90 days due $                

 

5. Balance of 50% over 90 day accounts $                

 

6. Credit balances over 90 days $                

 

7. Concentration Limits $                

 

8. Foreign Accounts $                

 

9. Governmental Accounts $                

 

10. Contra Accounts $                

 

11. Promotion or Demo Accounts             $                

 

12. Intercompany/Employee Accounts      $                

 

13. Undelivered Goods or Services           $                

 

14. Progress Payments and Advance Billings $                

 

15. R&D Offset $                

 

16. Other (please explain on reverse) $                

 

17. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $                

 

18. Eligible Accounts (#3 minus #17) $                

 

19. LOAN VALUE OF ACCOUNTS (80% of #18) $                

 

BALANCES

 

20. Maximum Loan Amount $                

 

21. Total Funds Available [Lesser of #20 or #19] $                

 

22. Present balance owing on Line of Credit $                

 

23. Outstanding under Sublimits $                

 

RESERVE POSITION (#21 minus #22 and #23) $                

 

The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

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

COMMENTS   BANK USE ONLY XENOGEN CORPORATION   Rec’d By  

 

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

By:  

 

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

     

Authorized Signer

Authorized Signer

  Date:  

 

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

        Verified:  

 

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

           

Authorized Signer

        Date:  

 

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

 

 

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

EXHIBIT C

 

REPRESENTATIONS AND WARRANTIES

 

TO:   SILICON VALLEY BANK     Commercial Finance Division     3003 Tasman Drive
    Mail Sort NC491     Santa Clara, California 95054

 

The undersigned, Xenogen Corporation, a Delaware corporation (the “Company”)
hereby represents and warrants to you that the following information is true,
accurate and complete. (The Company acknowledges that your acceptance of these
Representations and Warranties does not imply any commitment on your part to
enter into a loan transaction with the Company, and that any such commitment may
only be made by an express written loan commitment, signed by one of your
authorized officers.)

 

1. NAMES OF THE COMPANY

 

A. The exact corporate name of the Company as it appears in its current Articles
or Certificate of Incorporation is as follows:             

 

B. The federal employer identification number of the Company is as follows:
            

 

C. The Company was incorporated on              under the laws of the State of
             and is in good standing under those laws.

 

D. The following is a list of all other names (including fictitious names,
d/b/a’s, trade names or similar names) currently used by the Company or used
within the past six years:

 

Name

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

 

Period of Use

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

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

The following are the names of all corporations which have been merged into the
Company during the past six years:

 

Name of Merged Company

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

 

Year of Merger

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

_______   _______ _______   _______

 

E. The following are the names and addresses of all entities from whom the
Company has acquired any personal property in a transaction not in the ordinary
course of business during the past six years, together with the date of such
acquisition and the type of personal property acquired (e.g., equipment,
inventory, etc.):

 

Name

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

 

Street and Mailing Address

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

 

Date of Acquisition

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

   Type of Property

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

_______   _______   _______    _______ _______   _______   _______    _______
_______   _______   _______    _______

 

2. NAMES OF SUBSIDIARIES/PARENT OF THE COMPANY.

 

A. The exact corporate name of each subsidiary and parent of the Company is as
follows. (A “parent” is a company owning more than 50% of the outstanding
capital stock of the Company.)

 

Name

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

  

Subsidiary/Parent

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

 

Fed. Employer ID No.

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

_______    Sub  ¨  Parent ¨   _______ _______    Sub  ¨  Parent ¨   _______
_______    Sub  ¨  Parent ¨   _______

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

B. The following is a list of the jurisdiction and date of incorporation of each
subsidiary of the Company:

 

Name

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

   Jurisdiction

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

   Date of Incorporation

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

_______    _______    _______ _______    _______    _______ _______    _______
   _______

 

C. The following is a list of all other names (including fictitious names,
d/b/a’s, trade names or similar names) used by each subsidiary of the Company
during the past six years:

 

Name

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

  Subsidiary

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

    _______   _______     _______   _______     _______   _______    

 

D. The following are the names of all corporations which have been merged into a
subsidiary of the Company during the six years:

 

Name

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

   Subsidiary

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

     _______    _______      _______    _______      _______    _______     

 

E. The following are the names and addresses of all entities from whom each
subsidiary of the Company has acquired any personal property in a transaction
not in the ordinary course of business during the past six years, together with
the date of such acquisition and the type of personal property acquired (e.g.,
equipment, inventory, etc.):

 

Name

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

   Mailing
Address

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

   Date of
Acquisition

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

   Type of
Property

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

   Subsidiary

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

_______    _______    _______    _______    _______ _______    _______   
_______    _______    _______ _______    _______    _______    _______   
_______

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

3. LOCATIONS OF COMPANY AND ITS SUBSIDIARIES.

 

A. The chief executive offices of the Company and its subsidiaries are presently
located at the following addresses:

 

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______   Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub _______
  Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub

 

B. During the past six years, the Company’s chief executive office and the chief
executive offices of its subsidiaries have been located at the following
additional addresses:

 

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______   Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub _______
  Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub

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

C. The following are all the locations in the United States where the Company
and its subsidiaries maintain any books or records relating to any of their
accounts receivable:

 

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______   Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub _______
  Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub

 

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______   Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub _______
  Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub

 

D. The following are all of the locations in the United States where the Company
and its subsidiaries maintain any equipment, fixtures, inventory or other
property:

 

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______   Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub _______
  Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub

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

E. The following are all the locations in the United States where the Company
and its subsidiaries own, lease, or occupy any real property:

 

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______   Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub _______
  Company ¨  OR Name of Sub _______   Company ¨  OR Name of Sub

 

The following are the names and addresses of all warehousemen or bailees who
have possession of any of the Company’s inventory or any of the inventory of its
subsidiaries:

 

Name

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

  

Complete Street and Mailing Address, including County and Zip Code

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

 

Company/Subsidiary

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

_______

           _______   Company ¨  OR Name of Sub

_______

           _______   Company ¨  OR Name of Sub

_______

           _______   Company ¨  OR Name of Sub

_______

           _______   Company ¨  OR Name of Sub

 

4. SPECIAL TYPES OF COLLATERAL

 

The Company and its subsidiaries own the following kinds of assets. (If the
answer is “Yes” to any of the following questions, attach a schedule describing
each such asset owned by the Company or its subsidiaries and identifying which
party owns the asset.)

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

Copyrights or copyright applications registered with the U.S. Copyright Office

   Yes  ¨   No  ¨

Software registered with the U.S. Copyright Office

   Yes  ¨   No  ¨

Software not registered with the U.S. Copyright Office

   Yes  ¨   No  ¨

Patents and patent applications

   Yes  ¨   No  ¨

Trademarks or trademark applications (including any service marks, collective
marks and certification marks)

   Yes  ¨   No  ¨

Licenses to use trademarks, patents and copyrights of others

   Yes  ¨   No  ¨

Franchise, marketing agreements or similar agreements:

   Yes  ¨   No  ¨

Stocks, Bonds or other securities:

   Yes  ¨   No  ¨

Promissory notes, or other instruments or evidence of indebtedness:

   Yes  ¨   No  ¨

Leases of equipment, security agreements naming such person as secured party, or
other chattel paper:

   Yes  ¨   No  ¨

Aircraft:

   Yes  ¨   No  ¨

Vessels, Boats or Ships:

   Yes  ¨   No  ¨

Railroad Rolling Stock

   Yes  ¨   No  ¨

Motor Vehicles

   Yes  ¨   No  ¨

 

A. The following are all governmental permits and licenses held by the Company
and its subsidiaries:

 

Description of License

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

     

Company/Subsidiary

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

_______

      Company ¨  OR Name of Sub

_______

     

_______

 

_______

  Company ¨  OR Name of Sub

_______

     

_______

  _______   Company ¨  OR Name of Sub

 

5. OFFICERS OF THE COMPANY AND ITS SUBSIDIARIES

 

The following are the names and titles of the officers of the Company and its
Subsidiaries.

 

82

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

Office/Title

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

  

Name of Officer

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

  

Company/Subsidiary

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

_________

  

_________

   Company ¨  OR Name of Sub

_________

  

_________

   Company ¨  OR Name of Sub

_________

  

_________

   Company ¨  OR Name of Sub

_________

  

_________

   Company ¨  OR Name of Sub

_________

  

_________

   Company ¨  OR Name of Sub

_________

  

_________

   Company ¨  OR Name of Sub

 

6. LEGAL COUNSEL.

 

The following firm will represent the Company in connection with the loan
documents:

 

Attorney

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

 

Law Firm

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

 

Telephone

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

   Fax

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

   Email

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

_________

 

_________

 

_________

   _________    _________

 

The undersigned undertakes to advise you of any change or modification to any of
the foregoing information. Until such notice is received by you, you shall be
entitled to rely upon all of the foregoing and presume it is correct and
accurate in all respects.

 

Date:                     , 200    

  XENOGEN CORPORATION     By:  

 

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

    Its:         Email:    

 

 

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

Continuation Page—Additional Information

 

 

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

EXHIBIT E

 

INVESTMENT POLICY

 

Xenogen Corporation

 

Amended Investment Guidelines1

I. Purpose

 

These investment guidelines have been adopted by the Board of Directors of
Xenogen Corporation in order to establish policy and guidelines for investing
surplus corporate cash, with the goal of capital preservation and liquidity. All
investments must be made in compliance with these guidelines, the Investment
Company Act of 1940 (the “1940 Act”) and the non-exclusive safe harbor for
research and development companies set forth in rule 3a-8 of the 1940 Act.

 

“Surplus cash” is cash not required for short-term debt repayment, working
capital, capital investment, or other outstanding near-term financial
obligations.

 

Objectives

 

The key objectives of the company investment policy are the preservation of
capital and maintenance of appropriate short-term liquidity.

 

More specifically:

 

  A. Preserve capital;

 

  B. Maintain sufficient liquidity to meet forecasted cash needs;

 

  C. Maintain diversified portfolio of investments in order to minimize the
concentration risks;

 

  D. Maximize yield on investments within the parameters set forth below;

 

  E. Establish fiduciary control of cash and investments.

 

II. Liquidity Guidelines

 

Excess cash is invested with liquidity in mind, and without any loss of
principal.

 

Daily liquidity is essential; restrictions on liquidity are:

 

  1. Twice the amount of the monthly burn must be available each business day
with no loss of principal.

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

1 Guidelines originally adopted by the Board on July 22, 2003; Amended and
Restated Guidelines adopted by the Audit Committee on October 21, 2004

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

  2. The remainders of the funds are to be invested, consistent with anticipated
cash needs, in securities with maturities no longer than 24 months. The
weighted-average-maturity cannot exceed 12-months. Repositioning of these
securities before their maturity, generating small gains or losses, is permitted
for managing liquidity requirements only. Any loss from such repositioning can
only be incurred if the gain in the previous three months fully offsets this
loss.

 

III. Investment Restrictions

 

Investments shall be made in the context of the following investment guidelines.

 

  A. Investment Portfolio

 

  1. No more than 10 percent of the company’s total assets may consist of
investments other than Capital Preservation Investments (defined below).

 

  B. Capital Preservation Investments

 

  1. Direct obligations of the U.S. Treasury, including bills, notes, and bonds.

 

  2. Obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government.

 

  3. Municipal securities (taxable and tax-exempt, when appropriate), including
variable rate demand notes and auction rate municipals.

 

  4. Bank obligations, including certificates of deposit, bank notes, and
bankers acceptances.

 

  5. Corporate obligations, including commercial paper, corporate notes,
medium-term notes and corporate bonds.

 

  6. Repurchase agreements collateralized at a minimum of 102% with U.S.
Treasury securities or other securities rated “AAA” or equivalent that would be
permitted by this policy.

 

  7. Money market funds over $1 billion in assets (must be AAA-rated), with an
historically constant dollar net asset value, consisting of acceptable
securities as stated above are appropriate for investing, as long as the fund’s
manager has been in business over five years, has name recognition, and has
performance that is easily tracked.

 

  8. U.S. dollar-denominated international corporate debt of all types is
acceptable as long as the issuer meets credit rating and marketability
guidelines.

 

  9. Derivative instruments are ineligible as investments. This would cover all
investments where the value is based on an underlying variable causing the
coupon and/or the maturity value to be unknown for the life of the security.

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

  C. Credit Quality

 

  1. In all categories described above, the emphasis will be on securities of
high credit quality.

 

  2. Investments which bear a short-term credit rating must be explicitly rated
by two of the three following rating services: A1 by Standard & Poor’s, P1 by
Moody’s and/or F-1 by Fitch (no split-rated paper permitted).

 

  3. Investments which bear a long-term credit rating must be explicitly rated
by two of the following rating services: A by Standard & Poor’s, A2 by Moody’s
and/or A by Fitch.

 

  4. Investments which bear an AAA-rating may only be rated by one of the three
rating agencies.

 

IV. Maturities

 

The maximum maturity of individual securities in the portfolio may not exceed
Twenty-four (24) months.

 

The dollar-weighted-average maturity of the portfolio may not exceed twelve (12)
months.

 

For securities which have put dates, reset dates or auction dates, the put date,
reset date or auction date will be used, instead of the final maturity date, for
maturity guideline purposes.

 

V. Concentration Limits/Restrictions

 

There is no limit to the percentage of the portfolio which may be maintained in
securities issued by the U.S. Treasury or by its agencies and instrumentalities.

 

No one issuer or group of issuers from the same holding company is to exceed 10%
of the portfolio or $1.0 million, whichever is greater of the portfolio at time
of purchase, with the exception of Government securities.

 

AND, no more than 10% of the total issue size outstanding at time of purchase.

 

Any investment in common stocks, preferred stocks, options (put or calls),
commodities, foreign securities, futures or mutual funds whose underlying
securities are not considered Capital Preservation Investments must comply with
Part III.A of this policy.

 

VI. Investment Performance

 

The company shall review the performance of the selected investment-banking
group on quarterly basis. The investment banks will issue separate quarterly
investment performance analysis using time-weighted measures.

 

The net income derived from investments for the last four fiscal quarters
combined may not exceed twice the amount of the company’s research and
development expenses for the same period.

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

Expenses for investment advisory and management activities, investment research
and custody for the last four fiscal quarters combined may not exceed five
percent of the company’s total expenses for the same period.

 

VII. Marketability

 

All securities are to be purchased through investment banking and brokerage
firms of high quality and reputation, with a history of making markets for the
securities in which we invest. In the unlikely event that securities must be
sold before their maturity, the securities must be easily re-marketed. To
accomplish this, the securities must be conventional “products” with strong name
recognition.

 

VIII. Trading Guidelines

 

Normal investing practice is to reinvest the funds on the day a security
matures, to minimize lost interest. A daily transaction log is to be maintained
and available for review at any time. All trading firms must generate a hard
copy document for each transaction which is mailed to us on a timely basis, and
then matched to the transaction log. Quarterly summaries of our investment
holdings and cash usage are to be made available for Board review.

 

IX. Communication

 

The investment manager will contact the Chief Financial Officer immediately upon
the occurrence of any of the following events:

 

  A. An issuer is placed on “CreditWatch” with Negative Implications” and/or on
“Negative Outlook” whereby any whereby any potential action could result in a
credit rating cut;

 

  B. A decline in the issuer’s credit rating below the minimum credit quality
standards stated in this Investment Policy.

 

  C. Research and development expenses for the last four fiscal quarters
combined are no longer a substantial percentage of the company’s total expenses
for the same period.

 

  D. The company is not in compliance with any of these guidelines.

 

X. Safekeeping

 

Assets/investment securities are to be held in segregated bank account; they
cannot be co-mingled. Assets/investment securities can be held by the investment
manager as long as the manager’s minimum long-term rating is A2 by Moody’s and A
by S&P.

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

XI. Fiduciary Discretion

 

The Chief Financial Officer or other individual appointed by the Board and
his/her authorized employees are responsible for securing and managing
investments and cash for operations. These individuals have full discretion to
invest any excess capital subject to strict adherence to these guidelines. These
guidelines and the performance of the investments are to be reviewed
periodically with the Board of Directors and only then can guideline revisions
be made.

 

By:  

 

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

   Title:  

 

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

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

CORPORATE BORROWING RESOLUTION

 

Borrower:   

XENOGEN CORPORATION

 

860 Atlantic Avenue

Alameda, California 94501

   Bank:   

Silicon Valley Bank

 

3003 Tasman Drive

Santa Clara, CA 95054-1191

 

I, the Secretary or Assistant Secretary of Xenogen Corporation (“Borrower”),
CERTIFY that Borrower is a corporation existing under the laws of the State of
Delaware.

 

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

 

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

 

NAMES

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

 

POSITIONS

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

 

ACTUAL SIGNATURES

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

_________________________   _________________________  
_________________________ _________________________   _________________________
  _________________________ _________________________  
_________________________   _________________________ _________________________
  _________________________   _________________________

 

may act for Borrower and:

 

Borrow Money. Borrow money from Silicon Valley Bank (“Bank”).

 

Execute Loan Documents. Execute any loan documents Bank requires.

 

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

 

Letters of Credit. Apply for letters of credit from Bank.

 

Foreign Exchange Contracts. Execute spot or forward foreign exchange contracts.

 

-i-

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

Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

 

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

 

CERTIFIED TO AND ATTESTED BY: X  

 

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

    *Secretary or Assistant Secretary X  

 

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

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

* NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

 

-ii-

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

CORPORATE BORROWING RESOLUTION

 

Borrower:  

XENOGEN BIOSCIENCES CORPORATION

 

860 Atlantic Avenue

Alameda, California 94501

   Bank:  

Silicon Valley Bank

 

3003 Tasman Drive

Santa Clara, CA 95054-1191

 

I, the Secretary or Assistant Secretary of Xenogen Biosciences Corporation
(“Borrower”), CERTIFY that Borrower is a corporation existing under the laws of
the State of Delaware.

 

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

 

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

 

NAMES

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

 

POSITIONS

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

 

ACTUAL SIGNATURES

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

_________________________   _________________________  
_________________________ _________________________   _________________________
  _________________________ _________________________  
_________________________   _________________________ _________________________
  _________________________   _________________________

 

may act for Borrower and:

 

Borrow Money. Borrow money from Silicon Valley Bank (“Bank”).

 

Execute Loan Documents. Execute any loan documents Bank requires.

 

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

 

Letters of Credit. Apply for letters of credit from Bank.

 

Foreign Exchange Contracts. Execute spot or forward foreign exchange contracts.

 

-iii-

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

Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

 

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

 

CERTIFIED TO AND ATTESTED BY: X  

 

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

*Secretary or Assistant Secretary X  

 

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

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

* NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

-iv-