Exhibit 10.6

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated
as of May 13, 2015 (the “Effective Date”), between SILICON VALLEY BANK, a
California corporation (“Bank”), and TRACON PHARMACEUTICALS, INC., a Delaware
corporation (“Borrower”), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank.  The parties agree as follows:

Recitals

A.Bank and Borrower have entered into that certain Loan and Security Agreement
dated as of November 14, 2013 (as amended, the “Prior Loan Agreement”).

B.Borrower has requested, and Bank has agreed, to replace, amend and restate the
Prior Loan Agreement in its entirety.  Bank and Borrower hereby agree that the
Prior Loan Agreement is amended and restated in its entirety as follows:

1

ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP.  Calculations and determinations must be made following GAAP.  Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13.  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.

2

LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay.  Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

2.1.1 Growth Capital Loan.

(a) Availability.  Subject to the terms and conditions of this Agreement, Bank
agrees to make advances to Borrower (each a “Growth Capital Advance” and
collectively the “Growth Capital Advances”), from time to time, prior to the
Growth Capital Commitment Termination Date, in an aggregate amount not to exceed
the Growth Capital Loan Commitment.  After repayment, no Growth Capital Advance
may be reborrowed.

(i) Bank shall make one (1) Growth Capital Advance to Borrower in a principal
amount equal to Eight Million Dollars ($8,000,000) of the Growth Capital Loan
Commitment on or about the Effective Date, which amounts shall be used by
Borrower to repay in full all amounts outstanding under the Prior Loan Agreement
as of the Effective Date, including, without limitation, the Final Payment (as
defined in the Prior Loan Agreement) and the Growth Capital Final Payment (as
defined in the Prior Loan Agreement), provided that no Prepayment Fee (as
defined in the Prior Loan Agreement) shall be due and payable in connection with
such repayment.

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(ii) The remaining Two Million Dollars ($2,000,000) of the Growth Capital Loan
Commitment (the “Second Tranche”) shall be available beginning on the Effective
Date through the Growth Capital Commitment Termination Date.  Each Growth
Capital Advance under the Second Tranche must be in an amount of not less than
the lesser of One Million Dollars ($1,000,000) or the amount remaining under the
Growth Capital Loan Commitment.

(b) Repayment of Growth Capital Advances.

(i) Interest-Only Payments.  For each Growth Capital Advance, Borrower shall
make monthly payments of interest-only commencing on the first (1st) Business
Day of the first (1st) month following the month in which the Funding Date
occurs with respect to such Growth Capital Advance and continuing thereafter
during the Interest-Only Period, on the first (1st) Business Day of each
successive month.

(ii) Principal and Interest Payments.  For each Growth Capital Advance
outstanding as of the last day of the Interest-Only Period, Borrower shall make
thirty (30) consecutive equal monthly payments of principal plus accrued but
unpaid interest commencing on the first (1st) Business Day of the first (1st)
month after the Interest-Only Period (the “Conversion Date”), in amounts that
would fully amortize the applicable Growth Capital Advance, as of the Conversion
Date, over the Repayment Period.  The Final Payment and all unpaid principal and
accrued and unpaid interest on each Growth Capital Advance are due and payable
in full on the Growth Capital Maturity Date.

(c) Voluntary Prepayment.  Borrower shall have the option to prepay all Growth
Capital Advances in full, provided Borrower (i) shall provide written notice to
Bank of its election to prepay the Growth Capital Advances at least ten (10)
days prior to such prepayment and (ii) pays, on the date of such prepayment,
(A) all outstanding principal and accrued but unpaid interest, plus (B) the
Final Payment, plus (C) the Prepayment Fee, plus (D) all other sums, including
Bank Expenses, if any, that shall have become due and payable.    

(d) Mandatory Prepayment Upon an Acceleration.  If the Growth Capital Advances
are accelerated following the occurrence of an Event of Default, Borrower shall
immediately pay to Bank an amount equal to the sum of (i) all outstanding
principal and accrued but unpaid interest, plus (ii) the Final Payment, plus
(iii) the Prepayment Fee, plus (iv) all other sums, including Bank Expenses, if
any, that shall have become due and payable.

2.2 Payment of Interest on the Credit Extensions.    

(a) Interest Rate.  Subject to Section 2.2(b), the principal amount outstanding
for each Growth Capital Advance shall accrue interest at a fixed per annum rate
equal to six and one half percent (6.50%), which shall be payable monthly.

(b) Default Rate.  Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall bear interest at a rate per annum which
is four percentage points (4.0%) above the rate that is otherwise applicable
thereto (the “Default Rate”).  Fees and expenses which are required to be paid
by Borrower pursuant to the Loan Documents (including, without limitation, Bank
Expenses) but are not paid when due shall bear interest until paid at a rate
equal to the highest rate applicable to the Obligations.  Payment or acceptance
of the increased

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interest rate provided in this Section 2.2(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank.

(c) Payment; Interest Computation.  Interest is payable monthly on the first
calendar day of each month and shall be computed on the basis of a 360-day year
for the actual number of days elapsed.  In computing interest, (i) all payments
received after 12:00 p.m. Pacific time on any day shall be deemed received at
the opening of business on the next Business Day, and (ii) the date of the
making of any Credit Extension shall be included and the date of payment shall
be excluded; provided, however, that if any Credit Extension is repaid on the
same day on which it is made, such day shall be included in computing interest
on such Credit Extension.

2.3 Fees.  Borrower shall pay to Bank the following: 

(a) Expenses.  All Bank Expenses (including reasonable and invoiced attorneys’
fees and expenses, plus reasonable and invoiced out-of-pocket expenses for
documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due (or, if no stated due date, promptly following demand
by Bank).

(b) Fees Fully Earned.  Unless otherwise provided in this Agreement or in a
separate writing by Bank, Borrower shall not be entitled to any credit, rebate,
or repayment of any fees earned by Bank pursuant to this Agreement
notwithstanding any termination of this Agreement or the suspension or
termination of Bank’s obligation to make loans and advances hereunder.  Bank may
deduct amounts owing by Borrower under the clauses of this Section 2.3 pursuant
to the terms of Section 2.4(c).  Bank shall provide Borrower written notice of
deductions made from the Designated Deposit Account pursuant to the terms of the
clauses of this Section 2.3.

2.4 Payments; Application of Payments; Debit of Accounts. 

(a) All payments to be made by Borrower under any Loan Document shall be made in
immediately available funds in Dollars, without setoff or counterclaim, before
12:00 p.m. Pacific time on the date when due.  Payments of principal and/or
interest received after 12:00 p.m. 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 shall be due the next Business Day, and
additional fees or interest, as applicable, shall continue to accrue until paid.

(b) Bank has the exclusive right to determine the order and manner in which all
payments with respect to the Obligations may be applied.  Borrower shall have no
right to specify the order or the accounts to which Bank shall allocate or apply
any payments required to be made by Borrower to Bank or otherwise received by
Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.

(c) Bank may debit any of Borrower’s deposit accounts, including the Designated
Deposit Account, for principal and interest payments or any other amounts
Borrower owes Bank when due.  These debits shall not constitute a set-off.

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2.5 Withholding.  Payments received by Bank from Borrower under this Agreement
will be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, duties, deductions, withholdings, assessments,
fees or other charges imposed by any Governmental Authority (including any
interest, additions to tax or penalties applicable thereto).  Specifically,
however, if at any time any Governmental Authority, applicable law, regulation
or international agreement requires Borrower to make any withholding or
deduction from any such payment or other sum payable hereunder to Bank, Borrower
hereby covenants and agrees that the amount due from Borrower with respect to
such payment or other sum payable hereunder will be increased to the extent
necessary to ensure that, after the making of such required withholding or
deduction, Bank receives a net sum equal to the sum which it would have received
had no withholding or deduction been required, and Borrower shall pay the full
amount withheld or deducted to the relevant Governmental Authority.  Borrower
will, upon reasonable request, furnish Bank with proof reasonably satisfactory
to Bank indicating that Borrower has made such withholding payment; provided,
however, that Borrower need not make any withholding payment if the amount or
validity of such withholding payment is contested in good faith by appropriate
and timely proceedings and as to which payment in full is bonded or reserved
against by Borrower.  The agreements and obligations of Borrower contained in
this Section 2.5 shall survive the termination of this Agreement.

3

CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, such documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:

(a) duly executed original signatures to the Loan Documents;

(b) a duly executed original signature to the Warrant;

(c) duly executed original signatures to any Control Agreements;

(d) the Operating Documents and long-form good standing certificates of Borrower
and its Subsidiaries certified by the Secretary of State (or equivalent agency)
of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation
and each jurisdiction in which Borrower and each Subsidiary is qualified to
conduct business, each as of a date no earlier than thirty (30) days prior to
the Effective Date;

(e) duly executed original signatures to the completed Borrowing Resolutions for
Borrower;

(f) certified copies, dated as of a recent date, of financing statement
searches, as Bank may reasonably request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such
financing statements either constitute Permitted Liens, or have been, or in
connection with the initial Credit Extension will be, terminated or released;

(g) the Perfection Certificate executed by Borrower;

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(h) a copy of Borrower’s Registration Rights Agreement and/or Investors’ Rights
Agreement and any amendments thereto; and

(i) payment of the fees and Bank Expenses then due as specified in Section 2.3
hereof.

3.2 Conditions Precedent to all Credit Extensions.  Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, are subject to
the following conditions precedent:

(a) timely receipt of an executed Payment/Advance Form;

(b) the representations and warranties in this Agreement shall be true,
accurate, and complete in all material respects on the date of the
Payment/Advance Form and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the Credit
Extension.  Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties in this Agreement remain true,
accurate, and complete in all material respects; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and

(c) Bank determines to its satisfaction that there has not been any material
impairment in the general affairs, management, results of operation, financial
condition or the prospect of repayment of the Obligations; and there has not
been any material adverse deviation by Borrower from the most recent business
plan of Borrower presented to and accepted by Bank.

3.3 Covenant to Deliver.  Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition precedent to any
Credit Extension.  Borrower expressly agrees that a Credit Extension made prior
to the receipt by Bank of any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and any such Credit Extension in the
absence of a required item shall be made in Bank’s sole discretion.

3.4 Procedures for Borrowing.  Subject to the prior satisfaction of all other
applicable conditions to the making of a Credit Extension set forth in this
Agreement, to obtain a Credit Extension, Borrower shall notify Bank (which
notice shall be irrevocable) by electronic mail, facsimile, or telephone by
12:00 p.m. Pacific time on the Funding Date of the Credit Extension.  Together
with any such electronic or facsimile notification, Borrower shall deliver to
Bank by electronic mail or facsimile a completed Payment/Advance Form executed
by a Responsible Officer or his or her designee.  Bank may rely on any telephone
notice given by a person who Bank believes is a Responsible Officer or
designee.  Bank shall credit Credit Extensions to the Designated Deposit
Account.  Bank may make Credit Extensions under this Agreement based on

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instructions from a Responsible Officer or his or her designee or without
instructions if the Credit Extensions are necessary to meet Obligations that
have become due.

4

CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest.  Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.

Borrower acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank.  Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to
Permitted Liens that may have superior priority to Bank’s Lien in this
Agreement). 

 

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations and obligations
with respect to Bank Services that have been cash collateralized pursuant to the
terms of this Section 4.1) are satisfied in full, and at such time, Bank shall,
at Borrower’s sole cost and expense, terminate its security interest in the
Collateral and all rights therein shall revert to Borrower.  In the event (x)
all Obligations (other than inchoate indemnity obligations), except for Bank
Services, are satisfied in full, and (y) this Agreement is terminated, Bank
shall terminate the security interest granted herein upon Borrower providing
cash collateral acceptable to Bank in its good faith business judgment for Bank
Services, if any.  In the event such Bank Services consist of outstanding
Letters of Credit, Borrower shall provide to Bank cash collateral in an amount
equal to (x) if such Letters of Credit are denominated in Dollars, then at least
one hundred five percent (105.0%); and (y) if such Letters of Credit are
denominated in a Foreign Currency, then at least one hundred ten percent
(110.0%), of the Dollar Equivalent of the face amount of all such Letters of
Credit plus all interest, fees, and costs due or to become due in connection
therewith (as estimated by Bank in its good faith business judgment), to secure
all of the Obligations relating to such Letters of Credit.

4.2 Priority of Security Interest.  Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral (subject only
to Permitted Liens that are permitted pursuant to the terms of this Agreement to
have superior priority to Bank’s Lien under this Agreement).  If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.

4.3 Authorization to File Financing Statements.  Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, except as expressly
permitted hereby, by Borrower or any other Person, shall be deemed to violate
the rights of Bank under the Code.

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5

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization, Authorization; Power and Authority.  Borrower is duly
existing and in good standing as a Registered Organization in its jurisdiction
of formation and is qualified and licensed to do business and is in good
standing in any other jurisdiction 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 have a material adverse effect on
Borrower’s business.  In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower, entitled “Perfection
Certificate”.  Borrower represents and warrants to Bank that  Borrower’s exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof;  Borrower is an organization of the type, and is organized in the
jurisdiction, set forth in the Perfection Certificate; the Perfection
Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; the Perfection Certificate
accurately sets forth Borrower’s place of business, or, if more than one, its
chief executive office as well as Borrower’s mailing address (if different than
its chief executive office);  Borrower (and each of its predecessors) has not,
in the past five (5) years, changed its jurisdiction of formation,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and all other information set forth on the Perfection Certificate
pertaining to Borrower and each of its Subsidiaries is accurate and complete (it
being understood and agreed that Borrower may from time to time update certain
information in the Perfection Certificate after the Effective Date to the extent
permitted by one or more specific provisions in this Agreement and provided that
the Perfection Certificate shall be deemed to be updated to reflect the
information provided in any notice delivered by Borrower to Bank pursuant to
Section 7.2 of this Agreement).  If Borrower is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational identification
number.

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not conflict with any of
Borrower’s organizational documents,  contravene, conflict with, constitute a
default under or violate any material Requirement of Law,  contravene, conflict
with or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any of
its Subsidiaries or any of their property or assets may be bound or affected,
 require any action by, filing, registration, or qualification with, or
Governmental Approval from, any Governmental Authority (except such Governmental
Approvals that have already been obtained and are in full force and effect or
filings required to perfect Bank’s Liens) or  conflict with, contravene,
constitute a default or breach under, or result in or permit the termination or
acceleration of, any material agreement by which Borrower is bound.  Borrower is
not in default under any agreement to which it is a party or by which it is
bound in which the default could reasonably be expected to have a material
adverse effect on Borrower’s business.

5.2 Collateral.  Borrower has good title to, rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens.  Borrower
has no Collateral Accounts at or with any bank or financial institution other
than Bank or Bank’s Affiliates except for the Collateral Accounts

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described in the Perfection Certificate delivered to Bank in connection herewith
and which Borrower has taken such actions as are necessary to give Bank a
perfected security interest therein, pursuant to the terms of Section
6.6(b).  The Accounts are bona fide, existing obligations of the Account
Debtors.

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate or as
permitted pursuant to Section 7.2.  None of the components of the Collateral
shall be maintained at locations other than as provided in the Perfection
Certificate or as permitted pursuant to Section 7.2. 

All material Inventory is in all material respects of good and marketable
quality, free from material defects.

Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) non-exclusive licenses granted to its customers
in the ordinary course of business, (b) over-the-counter software that is
commercially available to the public, and (c) material Intellectual Property
licensed to Borrower and noted on the Perfection Certificate (or as identified
to Bank in writing from time to time pursuant to Section 6.8(b)).  Each Patent
which it owns or purports to own and which is material to Borrower’s business is
valid and enforceable, and no part of the Intellectual Property which Borrower
owns or purports to own and which is material to Borrower’s business has been
judged invalid or unenforceable, in whole or in part.  To the best of Borrower’s
knowledge, no claim has been made that any part of the Intellectual Property
violates the rights of any third party except to the extent such claim would not
reasonably be expected to have a material adverse effect on Borrower’s business.

Except as noted on the Perfection Certificate (or as identified to Bank in
writing from time to time pursuant to Section 6.8(b)), Borrower is not a party
to, nor is it bound by, any Restricted License.

5.3 Litigation.  There are no actions or proceedings pending or, to the
knowledge of any Responsible Officer, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than Fifty Thousand Dollars
($50,000) individually or in the aggregate.

5.4 No Material Deviation in Financial Statements.  All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations as of the dates and for the
periods presented.  There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

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

5.6 Regulatory Compliance.  Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act of
1940, as amended.  Borrower is not engaged as one of its important activities in
extending credit for margin

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stock (under Regulations X, T and U of the Federal Reserve Board of
Governors).  Borrower (a) has complied in all material respects with all
Requirements of Law, and (b) has not violated any Requirements of Law the
violation of which could reasonably be expected to have a material adverse
effect on its business.  None of Borrower’s or any of its Subsidiaries’
properties or assets has been used by Borrower 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.  Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Governmental Authorities that are necessary to continue their respective
businesses as currently conducted.

5.7 Subsidiaries; Investments.  Borrower does not own any stock, partnership, or
other ownership interest or other equity securities except for Permitted
Investments.

5.8 Tax Returns and Payments; Pension Contributions.  Borrower has timely filed
all required tax returns and reports, or obtained extensions therefor, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except (a) to the
extent such taxes are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, so long as such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor, or (b) if such taxes, assessments, deposits and
contributions do not, individually or in the aggregate, exceed Ten Thousand
Dollars ($10,000). 

To the extent Borrower defers payment of any contested taxes, Borrower shall (i)
notify Bank in writing of the commencement of, and any material development in,
the proceedings, and (ii) post bonds or take any other steps required to prevent
the Governmental Authority levying such contested taxes from obtaining a Lien
upon any of the Collateral that is other than a “Permitted Lien.”  Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower in excess of Ten Thousand Dollars ($10,000).  Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

5.9 Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions
solely as working capital to fund its general business requirements and not for
personal, family, household or agricultural purposes.

5.10 Full Disclosure.  No written representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank, as of the date
such representation, warranty, or other statement was made, taken together with
all such written certificates and written statements given 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 Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results

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during the period or periods covered by such projections and forecasts may
differ from the projected or forecasted results). 

5.11 Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with a similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of any
Responsible Officer.

6

AFFIRMATIVE COVENANTS 

Borrower shall do all of the following:

6.1 Government Compliance.

(a) Maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain qualification in each
other jurisdiction in which the failure to so qualify would reasonably be
expected to have a material adverse effect on Borrower’s business or
operations.  Borrower shall comply, and have each Subsidiary comply, in all
material respects, with all laws, ordinances and regulations to which it is
subject.

(b) Obtain all of the Governmental Approvals necessary for the performance by
Borrower of its obligations under the Loan Documents to which it is a party and
the grant of a security interest to Bank in the Collateral.  Borrower shall
promptly provide copies of any such obtained Governmental Approvals to Bank.

6.2 Financial Statements, Reports, Certificates.  Provide Bank with the
following:

(a) Monthly Financial Statements.  Upon request by Bank for any month, company
prepared consolidated and consolidating balance sheet and income statement
covering Borrower’s consolidated and consolidating operations for such month
certified by a Responsible Officer and in a form reasonably acceptable to Bank; 

(b) Compliance Certificate.  Concurrently with the delivery of any financial
statements pursuant to clauses (a) or (e) or this Section 6.2, a duly completed
Compliance Certificate signed by a Responsible Officer, certifying that as of
the end of such period, Borrower was in full compliance with all of the terms
and conditions of this Agreement and such other information as Bank may
reasonably request;

(c) Annual Operating Budget and Financial Projections.  Prior to the earlier of
seven (7) days after approval by Borrower’s board of directors or sixty (60)
days after the end of each fiscal year of Borrower, (i) annual operating budgets
(including income statements, balance sheets and cash flow statements, by month)
for the upcoming fiscal year of Borrower, and (ii) annual financial projections
for the following fiscal year (on a quarterly basis) as approved by Borrower’s
board of directors, together with any related business forecasts used in the
preparation of such annual financial projections;

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(d) Other Statements.  Within five (5) days of delivery, copies of all
statements, reports and notices generally made available to Borrower’s security
holders or to any holders of Subordinated Debt;

(e) SEC Filings.  Within five (5) days of filing, copies of all material
periodic and other reports, proxy statements and other materials filed by
Borrower with the SEC, any Governmental Authority succeeding to any or all of
the functions of the SEC or with any national securities exchange, or
distributed to its shareholders, as the case may be.

(f) Legal Action Notice.  A prompt report of any legal actions pending or
threatened in writing against Borrower or any of its Subsidiaries that could
result in damages or costs to Borrower or any of its Subsidiaries of,
individually or in the aggregate, Fifty Thousand Dollars ($50,000) or more; and

(g) Other Financial Information.  Other financial information reasonably
requested by Bank.

6.3 Inventory; Returns.  Keep all material Inventory in good and marketable
condition, free from material defects.  Returns and allowances between Borrower
and its Account Debtors shall follow Borrower’s customary practices as they
exist at the Effective Date.  Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than One Hundred Thousand
Dollars ($100,000).

6.4 Taxes; Pensions.  Timely file, and require each of its Subsidiaries to
timely file, all required tax returns and reports, or obtain extensions
therefor, and timely pay, and require each of its Subsidiaries to timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower and each of its Subsidiaries, except for deferred
payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and
shall deliver to Bank, on demand, appropriate certificates attesting to such
payments, and pay all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms.

6.5 Insurance. 

(a) Keep its business and the Collateral insured for risks and in amounts
standard for companies in Borrower’s industry and location and as Bank may
reasonably request.  Insurance policies shall be in a form, with financially
sound and reputable insurance companies that are not Affiliates of Borrower, and
in amounts that are reasonably satisfactory to Bank.  Bank acknowledges that the
insurance maintained by Borrower as of the Effective Date complies with this
Section 6.5 for Borrower’s business and operations as they exist as of the
Effective Date.  All property policies shall have a lender’s loss payable
endorsement showing Bank as lender loss payee.  All liability policies shall
show, or have endorsements showing, Bank as an additional insured.  Bank shall
be named as lender loss payee and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral.

(b) Proceeds payable under any property policy are, at Bank’s option, payable to
Bank on account of the Obligations.

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(c) At Bank’s request, Borrower shall deliver certified copies of insurance
policies and evidence of all premium payments.  Each provider of any such
insurance required under this Section 6.5 shall agree, by endorsement upon the
policy or policies issued by it or by independent instruments furnished to Bank,
that it will give Bank thirty (30) days (ten (10) days for non-payment of
premium) prior written notice before any such policy or policies shall be
materially altered or canceled.  If Borrower fails to obtain insurance as
required under this Section 6.5 or to pay any amount or furnish any required
proof of payment to third persons and Bank, Bank may make all or part of such
payment or obtain such insurance policies required in this Section 6.5, and take
any action under the policies Bank deems prudent. 

6.6 Operating Accounts.

(a) Maintain its primary operating and other deposit accounts and securities
accounts with Bank and/or Bank’s Affiliates, provided that Borrower may maintain
Collateral Accounts with other financial institutions, including Wells Fargo and
JPMorgan, so long as (i) Borrower is at all times in compliance with Section
6.6(b) with respect to such Collateral Accounts, and (ii) Borrower at all times
maintains at least Fifteen Million Dollars ($15,000,000) in unrestricted cash
and Cash Equivalents with Bank and/or Bank’s Affiliates.

(b) Provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or Bank’s Affiliates.  For each Collateral Account that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder, which control agreements may not
be terminated without the prior written consent of Bank.  The provisions of the
previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s employees and identified to Bank by Borrower as such.

6.7 Reserved.

6.8 Protection of Intellectual Property Rights. 

(a)(i) Protect, defend and maintain the validity and enforceability of its
material Intellectual Property; (ii) promptly advise Bank in writing of material
infringements or any other event that could reasonably be expected to materially
and adversely affect the value of its Intellectual Property; and (iii) not allow
any Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent. 

(b)Provide written notice to Bank within ten (10) Business Days of entering or
becoming bound by any Restricted License (other than over-the-counter software
that is commercially available to the public).  Borrower shall take such
commercially reasonable steps as Bank requests to obtain the consent of, or
waiver by, any person whose consent or waiver is necessary for (i) any
Restricted License 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

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Restricted License, whether now existing or entered into in the future, and
(ii) Bank to have the ability in the event of a liquidation of any Collateral to
dispose of such Collateral in accordance with Bank’s rights and remedies under
this Agreement and the other Loan Documents.

6.9 Litigation Cooperation.  From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

6.10 Access to Collateral; Books and Records.  Allow Bank, or its agents, at
reasonable times, on three  (3) Business Days’ notice (provided no notice is
required if an Event of Default has occurred and is continuing), to inspect the
Collateral and audit and copy Borrower’s Books.  Such inspections or audits
shall be conducted no more often than once every twelve (12) months unless an
Event of Default has occurred and is continuing in which case such inspections
and audits shall occur as often as Bank shall determine is necessary.  The
foregoing inspections and audits shall be at Borrower’s expense.  In the event
Borrower and Bank schedule an audit more than ten (10) days in advance, and
Borrower cancels or seeks to reschedule the audit with less than ten (10) days
written notice to Bank, then (without limiting any of Bank’s rights or
remedies), if requested by Bank in writing, Borrower shall pay Bank a fee of One
Thousand Dollars ($1,000) plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of the cancellation or
rescheduling.

6.11 Formation or Acquisition of Subsidiaries.  Notwithstanding and without
limiting the negative covenants contained in Section 7.3 and 7.7 hereof, at the
time that Borrower forms any direct or indirect Subsidiary or acquires any
direct or indirect Subsidiary after the Effective Date, Borrower shall (a) cause
any such new Subsidiary that is a Domestic Subsidiary to provide to Bank a
joinder to the Loan Agreement to cause such Subsidiary to become a co-borrower
hereunder, together with such appropriate financing statements and/or Control
Agreements, all in form and substance reasonably satisfactory to Bank (including
being sufficient to grant Bank a first priority Lien (subject to Permitted
Liens) in and to the assets of such newly formed or acquired Subsidiary), (b)
provide to Bank appropriate certificates and powers and financing statements,
pledging all (or 65% with respect to any Foreign Subsidiary) of the direct or
beneficial ownership interest in such new Subsidiary, in form and substance
reasonably satisfactory to Bank, and (c) provide to Bank all other documentation
in form and substance reasonably satisfactory to Bank,  which in its opinion is
appropriate with respect to the execution and delivery of the applicable
documentation referred to above.  Any document, agreement, or instrument
executed or issued pursuant to this Section 6.11 shall be a Loan Document.

6.12 Further Assurances.  Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement.

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7

NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

7.1 Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose
of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, except for Transfers (a) of
Inventory in the ordinary course of business; (b) of worn‑out or obsolete
Equipment that is, in the reasonable judgment of Borrower, no longer
economically practicable to maintain or useful in the ordinary course of
business of Borrower; (c) consisting of Permitted Liens and Permitted
Investments; (d) consisting of the sale or issuance of any stock of Borrower
permitted under Section 7.2 of this Agreement; (e) consisting of Borrower’s use
or transfer of money or Cash Equivalents in the ordinary course of its business
for the payment of ordinary course business expenses in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents; and (f)
of non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business and licenses that could not
result in a legal transfer of title of the licensed property but that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discreet geographical areas outside of the United States.

7.2 Changes in Business, Management, Ownership or Business Locations. 
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve; or
(c)  fail to provide notice to Bank of any Key Person departing from or ceasing
to be employed by Borrower within ten  (10)  Business Days after his or her
departure from Borrower; or  permit or suffer any Change in Control. 

Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than One Hundred
Thousand Dollars ($100,000) in Borrower’s assets or property) or deliver any
portion of the Collateral valued, individually or in the aggregate, in excess of
One Hundred Thousand Dollars ($100,000) to a bailee at a location other than to
a bailee and at a location already disclosed in the Perfection Certificate, (2)
change its jurisdiction of organization, (3) change its organizational structure
or type, (4) change its legal name, or (5) change any organizational number (if
any) assigned by its jurisdiction of organization.  If Borrower intends to
deliver any portion of the Collateral valued, individually or in the aggregate,
in excess of One Hundred Thousand Dollars ($100,000) to a bailee, and Bank and
such bailee are not already parties to a bailee agreement governing both the
Collateral and the location to which Borrower intends to deliver the Collateral,
then such bailee shall execute and deliver a bailee agreement in form and
substance reasonably satisfactory to Bank, unless such Collateral is only
expected to be at such location for less than 90 days (provided that if any such
Collateral is for any reason held at such location for more than 90 days,
Borrower shall promptly cause such bailee to then execute and deliver a bailee
agreement in form and substance reasonably satisfactory to Bank).
 Notwithstanding anything to the contrary contained in this Section 7.2 and
without limiting anything contained in this Section 7.2, the Collateral shall be
maintained at no more than five (5) domestic bailee locations which are not
subject to a bailee agreement in form and substance reasonably satisfactory to
Bank. Notwithstanding anything to the contrary contained in this Section 7.2 and
without limiting anything contained in this Section 7.2, Borrower shall not be
permitted to

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maintain Collateral outside the United States other than (x) Collateral (other
than the Compound, as defined below) that is maintained outside the United
States at the locations specified on Schedule 7.2 not to exceed Two Hundred and
Fifty Thousand Dollars ($250,000) in the aggregate; (y)(i) from the Effective
Date until March 31, 2016, an unlimited amount of compound TRC-105 (the
“Compound”) outside the United States at the locations specified in Schedule
7.2, and (ii) after March 31, 2016, amounts of the Compound up to Five Hundred
Thousand Dollars ($500,000) in the aggregate outside the United States at the
locations specified in Schedule 7.2; and (z)(i) from and after that date on
which Borrower commences its first Phase 3 clinical trial with respect to the
Compound (the “First Trial Date”) until that date on which Borrower commences
its second Phase 3 clinical trial with respect to the Compound (the “Second
Trial Date”), amounts of the Compound to be used in connection with such first
Phase 3 clinical trial up to Two Million Five Hundred Thousand Dollars
($2,500,000) in the aggregate outside the United States, and (ii) from and after
the Second Trial Date, amounts of the Compound to be used in connection with
such first and second Phase 3 clinical trials up to Four Million Dollars
($4,000,000) in the aggregate outside the United States.

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 (including, without limitation, by
the formation of any Subsidiary).  A Subsidiary may merge or consolidate into
another Subsidiary or into Borrower.

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, allow, or suffer 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; permit any Collateral not to be subject to the first priority security
interest granted herein, subject only to Permitted Liens that are permitted
pursuant to the terms of this Agreement to have superior priority to Bank’s Lien
under this Agreement;  or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person that
directly or indirectly prohibits, or has the effect of prohibiting, Borrower
from assigning, mortgaging, pledging, granting a security interest in or upon,
or encumbering any of Borrower’s Intellectual Property, except as is otherwise
permitted in Section 7.1 hereof and the definition of “Permitted Lien” herein.

7.6 Maintenance of Collateral Accounts.  Maintain any Collateral Account except
pursuant to the terms of Section 6.6(b) hereof.

7.7 Distributions; Investments.  (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock; provided, that (i)
Borrower may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
thereof, (ii) Borrower may pay dividends solely in common stock; (iii) Borrower
may repurchase the stock of former employees or consultants pursuant to stock
repurchase agreements so long as an Event of Default does not exist at the time
of such repurchase and would not exist after giving effect to such repurchase,
provided that the aggregate amount of all such repurchases does not exceed Two
Hundred Thousand Dollars ($200,000) per

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fiscal year (including, without limitation, any cancellation of indebtedness
owed to Borrower) and (iv) Borrower may accept stock as payment of the exercise
price of stock options and may withhold stock upon settlement of restricted
stock units in satisfaction of applicable withholding taxes; or (b) directly or
indirectly make any Investment (including, without limitation, by the formation
of any Subsidiary) other than Permitted Investments, or permit any of its
Subsidiaries to do so.

7.8 Transactions with Affiliates.  Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower, except for (a)
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person, (b) equity
investments in Borrower not prohibited under Section 7.2, (c) unsecured debt
financings from Borrower’s investors so long as all such Indebtedness shall
constitute unsecured Subordinated Debt, (d) customary compensation arrangements
and benefit plans for officers and other employees of Borrower and its
Subsidiaries entered into or maintained in the ordinary course of business, (e)
reasonable and customary fees paid to members of Borrower’s Board of Directors
and its Subsidiaries in the ordinary course of business, (f) transactions
permitted pursuant to Section 7.2 and 7.7 hereof, and (g) transactions permitted
under clauses (f), (g), (h) and (l) of the definition of Permitted Investments.

7.9 Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt that would increase the amount
thereof, provide for earlier or greater principal, interest, or other payments
thereon, or adversely affect the subordination thereof to Obligations owed to
Bank.

7.10 Compliance.  Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940, as amended, or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent
a Reportable Event or Prohibited Transaction, as defined in ERISA, from
occurring, or (c) comply with the Federal Fair Labor Standards Act, the failure
of any of the conditions described in clauses (a) through (c) which could
reasonably be expected to have a material adverse effect on Borrower’s business;
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 permit any
of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.

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8

EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

8.1 Payment Default.  Borrower fails to  make any payment of principal or
interest on any Credit Extension when due, or  pay any other Obligations within
three (3) Business Days after such Obligations are due and payable (which three
(3) Business Day grace period shall not apply to payments due on the Growth
Capital Maturity Date).  During the cure period, the failure to make or pay any
payment specified in clause (b) hereunder is not an Event of Default (but no
Credit Extension will be made during the cure period);

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4,
6.5, 6.6, 6.8(b), 6.10, 6.11, or 6.12 or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period).  Cure periods provided under this section shall not
apply, among other things, to financial covenants or any other covenants set
forth in clause (a) above;

8.3 Material Adverse Change.  A Material Adverse Change occurs;

8.4 Attachment; Levy; Restraint on Business.  

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under the control of Borrower (including
a Subsidiary) in excess of Fifty Thousand Dollars ($50,000), or (ii) a notice of
lien or levy is filed against any of Borrower’s assets by any Governmental
Authority, and the same under subclauses (i) and (ii) hereof are not, within ten
(10) days after the occurrence thereof, discharged or stayed (whether through
the posting of a bond or otherwise); provided, however, no Credit Extensions
shall be made during any ten (10) day cure period; or

(b) (i) any material portion of Borrower’s assets is attached, seized, levied
on, or comes into possession of a trustee or receiver, or (ii) any court order
enjoins, restrains, or prevents Borrower from conducting all or any material
part of its business;

8.5 Insolvency.  (a) Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or

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(c) an Insolvency Proceeding is begun against Borrower and not dismissed or
stayed within forty-five  (45) days (but no Credit Extensions shall be made
while any of the conditions described in clause (a) exist and/or until any
Insolvency Proceeding is dismissed);

8.6 Other Agreements.  There is, under any agreement to which Borrower or any
Guarantor is a party with a third party or parties, (a) any default resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount individually or in the aggregate
in excess of Fifty Thousand Dollars ($50,000); or (b) any breach or default by
Borrower or Guarantor, the result of which could have a material adverse effect
on Borrower’s or any Guarantor’s business; provided, however, that the Event of
Default under this Section 8.6 caused by the occurrence of a breach or default
under such other agreement shall be cured or waived for purposes of this
Agreement upon Bank receiving written notice from the party asserting such
breach or default of such cure or waiver of the breach or default under such
other agreement, if at the time of such cure or waiver under such other
agreement (x) Bank has not declared an Event of Default under this Agreement
and/or exercised any rights with respect thereto; (y) any such cure or waiver
does not result in an Event of Default under any other provision of this
Agreement or any Loan Document; and (z) in connection with any such cure or
waiver under such other agreement, the terms of any agreement with such third
party are not modified or amended in any manner which could in the good faith
business judgment of Bank be materially less advantageous to Borrower or any
Guarantor;

8.7 Judgments; Penalties.  One or more fines, penalties or final judgments,
orders, or decrees for the payment of money in an amount, individually or in the
aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by
independent third-party insurance as to which liability has been accepted by
such insurance carrier) shall be rendered against Borrower by any Governmental
Authority, and the same are not, within ten (10) days after the entry,
assessment or issuance thereof, discharged, satisfied, or paid, or after
execution thereof stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the satisfaction, payment, discharge, stay, or
bonding of such fine, penalty, judgment, order, or decree);

8.8 Misrepresentations.  Borrower or any Person acting for Borrower makes any
representation, warranty or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;

8.9 Subordinated Debt.  A default or breach occurs under any agreement between
Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement; or

8.10 Governmental Approvals.  Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in a materially adverse manner or
not renewed in the ordinary course for a full term or (b) subject to any
decision by a Governmental Authority that designates a hearing with respect to
any applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in

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clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) causes, or could reasonably be expected to
cause, a Material Adverse Change, or (ii) materially adversely affects the legal
qualifications of Borrower or any of its Subsidiaries to hold such Governmental
Approval in any applicable jurisdiction and such revocation, rescission,
suspension, modification or non-renewal could reasonably be expected to
materially adversely affect the status of or legal qualifications of Borrower or
any of its Subsidiaries to hold any Governmental Approval in any other
jurisdiction, except where such failure to hold such Governmental Approval could
not reasonably be expected to cause a Material Adverse Change.

9

BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies.  Upon the occurrence and during the continuance of an
Event of Default, 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 Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

(c) for any Letters of Credit, demand that Borrower (i) deposit cash with Bank
in an amount equal to at least 105% (110% for Letters of Credit denominated in a
Foreign Currency) of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit remaining undrawn (plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment)), to secure all of the Obligations relating to such Letters
of Credit, as collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid
or payable over the remaining term of any Letters of Credit;

(d) terminate any FX Contracts;

(e) verify the amount of, demand payment of and performance under, and collect
any Accounts and General Intangibles, settle or adjust disputes and claims
directly with Account Debtors for amounts on terms and in any order that Bank
considers advisable, notify any Person owing Borrower money of Bank’s security
interest in such funds;

(f) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral.  Borrower
shall assemble the Collateral if Bank requests 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 that appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

(g) apply to the Obligations any balances and deposits of Borrower it holds, or
any amount held by Bank owing to or for the credit or the account of Borrower;

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(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale and sell the Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, 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, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;

(i) place a “hold” on any account maintained with Bank and/or 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;

(j) demand and receive possession of Borrower’s Books; and

(k) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).

9.2 Power of Attorney.  Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of
an Event of Default, to:  endorse Borrower’s name on any checks or other forms
of payment or security; sign Borrower’s name on any invoice or bill of lading
for any Account or drafts against Account Debtors; settle and adjust disputes
and claims about the Accounts directly with Account Debtors, for amounts and on
terms Bank determines reasonable; make, settle, and adjust all claims under
Borrower’s insurance policies; pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or
any judgment based thereon, or otherwise take any action to terminate or
discharge the same; and transfer the Collateral into the name of Bank or a third
party as the Code permits.  Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral,
regardless of whether an Event of Default has occurred, until all Obligations
(other than inchoate indemnity obligations) have been satisfied in full and Bank
is under no further obligation to make Credit Extensions hereunder.  Bank’s
foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights
and powers, coupled with an interest, are irrevocable until all Obligations
(other than inchoate indemnity obligations) have been fully repaid and performed
and Bank’s obligation to provide Credit Extensions terminates.

9.3 Protective Payments.  If Borrower fails to obtain the insurance called for
by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document or which may be required to preserve the Collateral, Bank may obtain
such insurance or make such payment, and all amounts so paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then highest
rate applicable to the Obligations, and secured by the Collateral.  Bank will
make reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time thereafter.  No
payments by Bank are deemed an agreement to make similar payments in the future
or Bank’s waiver of any Event of Default.

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9.4 Application of Payments and Proceeds Upon Default.  If an Event of Default
has occurred and is continuing, Bank shall have the right to apply in any order
any funds in its possession, whether from Borrower account balances, payments,
proceeds realized as the result of any collection of Accounts or other
disposition of the Collateral, or otherwise, to the Obligations.  Bank shall pay
any surplus to Borrower by credit to the Designated Deposit Account or to other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency.  If Bank, directly or indirectly, enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.

9.5 Bank’s Liability for Collateral.  So long as Bank complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Bank, Bank shall not be liable or responsible for:  the
safekeeping of the Collateral; any loss or damage to the Collateral; any
diminution in the value of the Collateral; or any act or default of any carrier,
warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage
or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or
therewith.  No waiver hereunder shall be effective unless signed by the party
granting the waiver and then is only effective for the specific instance and
purpose for which it is given.  Bank’s rights and remedies under this Agreement
and the other Loan Documents 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 shall not preclude Bank from exercising any other
remedy under this Agreement or other remedy available at law or in equity, and
Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay
in exercising any remedy is not a waiver, election, or acquiescence.

9.7 Demand Waiver.  Borrower waives 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 Borrower is
liable.

10

NOTICES

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; upon transmission, when sent by electronic mail or
facsimile transmission; one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or when delivered, if hand-delivered
by messenger, all of which shall be addressed to the party to be notified and
sent to the address, facsimile number, or email address indicated below.  Bank
or Borrower may change its mailing or electronic mail address or facsimile

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number by giving the other party written notice thereof in accordance with the
terms of this Section 10.

 

 

If to Borrower:

Tracon Pharmaceuticals, Inc.

 

8910 University Center Lane, Suite 700

 

San Diego, CA 92122

 

Attn:  Patricia Bitar, Chief Financial Officer

 

Fax:  858-550-0786

 

Email:  pbitar@traconpharma.com 

 

Website URL: www.traconpharma.com

 

 

With a copy to:

Cooley LLP

 

4401 Eastgate Mall

 

San Diego, CA 92121

 

Attn:  Sean Clayton

 

Fax:  858-550-6420

 

Email:  sclayton@cooley.com

 

 

If to Bank:

Silicon Valley Bank

 

4370 La Jolla Village Drive, Suite 1050

 

San Diego, CA 92122

 

Attn:  Igor DaCruz

 

Fax:  (858) 622-1424

 

Email:  idacruz@svb.com

 

11

CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

Except as otherwise expressly provided in any of the Loan Documents, 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; provided however, that
nothing in this Agreement shall be deemed to operate to preclude Bank from
bringing suit or taking other legal action in any other jurisdiction to realize
on the Collateral or any other security for the Obligations, or to enforce a
judgment or other court order in favor of Bank.  Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based upon
lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.  Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10, or subsequently provided by Borrower in accordance with, Section 10
of this Agreement and that service so made shall be deemed completed upon the
earlier to occur of Borrower’s actual receipt thereof or three (3) days after
deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS

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AGREEMENT, 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.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court.  The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive.  The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers.  All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed.  If during the course of any dispute, a party desires to
seek provisional relief, but a judge has not been appointed at that point
pursuant to the judicial reference procedures, then such party may apply to the
Santa Clara County, California Superior Court for such relief.  The proceeding
before the private judge shall be conducted in the same manner as it would be
before a court under the rules of evidence applicable to judicial
proceedings.  The parties shall be entitled to discovery which shall be
conducted in the same manner as it would be before a court under the rules of
discovery applicable to judicial proceedings.  The private judge shall oversee
discovery and may enforce all discovery rules and orders applicable to judicial
proceedings in the same manner as a trial court judge.  The parties agree that
the selected or appointed private judge shall have the power to decide all
issues in the action or proceeding, whether of fact or of law, and shall report
a statement of decision thereon pursuant to California Code of Civil Procedure §
644(a).  Nothing in this paragraph shall limit the right of any party at any
time to exercise self-help remedies, foreclose against collateral, or obtain
provisional remedies.  The private judge shall also determine all issues
relating to the applicability, interpretation, and enforceability of this
paragraph.

This Section 11 shall survive the termination of this Agreement.

12

GENERAL PROVISIONS

12.1 Termination Prior to Maturity Date; Survival.  All covenants,
representations and warranties made in this Agreement continue in full force
until this Agreement has terminated pursuant to its terms and all Obligations
(other than inchoate indemnity obligations) have been satisfied.  So long as
Borrower has satisfied the Obligations (other than inchoate indemnity
obligations, any other obligations which, by their terms, are to survive the
termination of this Agreement, and any Obligations under Bank Services
Agreements that are cash collateralized in accordance with Section 4.1 of this
Agreement), this Agreement may be terminated prior to the

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Growth Capital Maturity Date by Borrower in accordance with Section
2.1.1.  Those obligations that are expressly specified in this Agreement as
surviving this Agreement’s termination shall continue to survive notwithstanding
this Agreement’s termination.

12.2 Successors and Assigns.  This Agreement binds and is for the benefit of the
successors and permitted assigns of each party.  Borrower may not assign this
Agreement or any rights or obligations 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 Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents (other than the Warrant, as to which assignment, transfer and other
such actions are governed by the terms thereof).  Notwithstanding the foregoing,
prior to the occurrence of an Event of Default, Bank shall not assign any
interest in the Loan Documents to an operating company which is a direct
competitor of Borrower.

12.3 Indemnification.  Borrower agrees to indemnify, defend and hold Bank and
its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against:  (i) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (ii) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except as to (i) and (ii) for Claims and/or losses and/or
expenses (including Bank Expenses) directly caused by such Indemnified Person’s
gross negligence or willful misconduct.

This Section 12.3 shall survive until all statutes of limitation with respect to
the Claims, losses, and expenses for which indemnity is given shall have run.

 

12.4 Time of Essence.  Time is of the essence for the performance of all
Obligations in this Agreement.

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

12.6 Correction of Loan Documents.  Bank may correct patent errors and fill in
any blanks in this Agreement and the other Loan Documents consistent with the
agreement of the parties so long as Bank provides Borrower with written notice
of such correction and allows Borrower at least ten (10) days to object to such
correction.  In the event of such objection, such correction shall not be made
except by an amendment signed by both Bank and Borrower.

12.7 Amendments in Writing; Waiver; Integration.  No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought.  Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence,

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an amendment, supplement or waiver or have any other effect on any Loan
Document.  Any waiver granted shall be limited to the specific circumstance
expressly described in it, and shall not apply to any subsequent or other
circumstance, whether similar or dissimilar, or give rise to, or evidence, any
obligation or commitment to grant any further waiver.  The Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements.  All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of the Loan Documents merge into the Loan Documents.

12.8 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, is an original, and all taken together, constitute one Agreement.

12.9 Confidentiality.  In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with
Bank, collectively, “Bank Entities”); (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, Bank
shall use its best efforts to obtain any prospective transferee’s or purchaser’s
agreement to the terms of this provision); (c) as required by law, regulation,
subpoena, or other order; (d) to Bank’s regulators or as otherwise required in
connection with Bank’s examination or audit; (e) as Bank considers appropriate
in exercising remedies under the Loan Documents; and (f) to third-party service
providers of Bank so long as such service providers have executed a
confidentiality agreement with Bank with terms no less restrictive than those
contained herein.  Confidential information does not include information that is
either: (i) in the public domain or in Bank’s possession when disclosed to Bank,
or becomes part of the public domain (other than as a result of its disclosure
by Bank in violation of this Agreement) after disclosure to Bank; or (ii)
disclosed to Bank by a third party if Bank does not know that the third party,
is prohibited from disclosing the information.

Bank Entities may use anonymous forms of confidential information for aggregate
datasets, for analyses or reporting, and for any other uses not expressly
prohibited in writing by Borrower.  The provisions of the immediately preceding
sentence shall survive termination of this Agreement.

12.10 Attorneys’ Fees, Costs and Expenses.  In any action or proceeding between
Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.

12.11 Electronic Execution of Documents.  The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

12.12 Captions.  The headings used in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.

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12.13 Construction of Agreement.  The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement.  In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.

12.14 Relationship.  The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement.  The parties do not
intend to create any agency, partnership, joint venture, trust, fiduciary or
other relationship with duties or incidents different from those of parties to
an arm’s-length contract.

12.15 Third Parties.  Nothing in this Agreement, whether express or implied, is
intended to: (a) confer any benefits, rights or remedies under or by reason of
this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

12.16 No Novation.  Nothing contained herein shall in any way impair the Prior
Loan Agreement and the other Loan Documents now held for the Obligations, nor
affect or impair any rights, powers, or remedies under the Prior Loan Agreement
or any Loan Document, it being the intent of the parties hereto that this
Agreement shall not constitute a novation of the Prior Loan Agreement or an
accord and satisfaction of the Obligations.  Borrower hereby ratifies and
reaffirms the validity and enforceability of all of the liens and security
interests heretofore granted pursuant to the Loan Documents, as collateral
security for the Obligations, and acknowledges that all of such liens and
security interests, and all Collateral heretofore pledged as security for the
Obligations, continues to be and remains Collateral for the Obligations from and
after the date hereof.

13

DEFINITIONS

13.1 Definitions.  As used in the Loan Documents, the word “shall” is mandatory,
the word “may” is permissive, the word “or” is not exclusive, the words
“includes” and “including” are not limiting, the singular includes the plural,
and numbers denoting amounts that are set off in brackets are negative.  As used
in this Agreement, the following capitalized terms have the following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

“Affiliate” is, with respect to any Person, each other 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.

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“Agreement” is defined in the preamble hereof.

“Bank” is defined in the preamble hereof.

“Bank Entities” is defined in Section 12.9.

“Bank Expenses” are all reasonable and invoiced audit fees and out-of-pocket
costs and expenses (including reasonable and invoiced attorneys’ fees and
expenses) for preparing, amending, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in
connection with appeals or Insolvency Proceedings and those identified as Bank
Expenses in Section 9.3 hereof) or otherwise incurred with respect to Borrower.

“Bank Services”  are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

“Borrower” is defined in the preamble hereof.

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
substantially in the form attached hereto as Exhibit C.

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

“Cash Equivalents”  means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; and (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue.

“Change in Control” means any event, transaction, or occurrence as a result of
which any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner
(within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of Borrower, representing forty-nine percent (49%) or
more of the combined voting power of Borrower’s then outstanding securities.

“Claims” is defined in Section 12.3.

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“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of California, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit D.

“Compound” is defined in Section 7.2.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation, in each
case, 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; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) 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 any guarantee or other support arrangement.

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

“Conversion Date” is defined in Section 2.1.1(b)(ii).

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“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

“Credit Extension” is any Growth Capital Advance or any other extension of
credit by Bank for Borrower’s benefit under this Agreement.

“Default Rate” is defined in Section 2.2(b).

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is the multicurrency account denominated in
Dollars, account number *******4031, maintained by Borrower with Bank.

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United
States or any state or territory thereof or the District of Columbia.

“Effective Date” is defined in the preamble hereof.

“Equipment” is all “equipment” as defined in the Code 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.

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

“Event of Default” is defined in Section 8.

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due in accordance
with Section 2.1.1 above, equal to the original principal amount of the
applicable Growth Capital Advance multiplied by the Final Payment Percentage.

“Final Payment Percentage” is eight and one half percent (8.50%).

“First Trial Date” is defined in Section 7.2.

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“Foreign Currency” means lawful money of a country other than the United States.

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower, which shall be a Business Day.

“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, that are
applicable to the circumstances as of the date of determination.

“General Intangibles” is all “general intangibles” as defined in the 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, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, 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.

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Growth Capital Advance” is defined in Section 2.1.1(a).

“Growth Capital Commitment Termination Date” is December 31, 2015.

“Growth Capital Loan Commitment”  is Ten Million Dollars ($10,000,000).

“Growth Capital Maturity Date”  is the first (1st) calendar day of the month
that is twenty-nine (29) months from the Conversion Date, but, in any event, no
later than March 1, 2019.

“Guarantor” is any Person providing a Guaranty in favor of Bank (if any).

“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.

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

 

“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.

“Indemnified Person” is defined in Section 12.3.

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

“Intellectual Property” means, with respect to any Person, all of such Person’s
right, title, and interest in and to the following:

(a) its Copyrights, Trademarks and Patents;

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

(c) any and all source code;

(d) any and all design rights which may be available such Person;

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents.

“Interest-Only Period” means, for any Growth Capital Advance, the period
commencing on the first (1st) Business Day following the Funding Date of such
Growth Capital Advance and continuing through June 30, 2016, provided that if
Borrower announces positive Phase 2 data in at least one (1) existing clinical
trial, the Interest-Only Period shall be extended to September 30, 2016.

“Inventory” is all “inventory” as defined in the 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 Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

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

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

 

“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Charles
Theuer as of the Effective Date, and (b) Chief Financial Officer, who is
Patricia L. Bitar as of the Effective Date.

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

“Loan Documents” are, collectively, this Agreement and any schedules, exhibits,
certificates, notices, and any other documents related to this Agreement, the
Warrant, any Bank Services Agreement, any subordination agreement, any note, or
notes or guaranties executed by Borrower or any Guarantor, and any other present
or future agreement by Borrower and/or any Guarantor with or for the benefit of
Bank in connection with this Agreement or Bank Services, all as amended,
restated, or otherwise modified.

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.

“Obligations” are Borrower’s obligation to pay when due any debts, principal,
interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or
later, whether under this Agreement, the other Loan Documents (other than the
Warrant), or otherwise, including, without limitation, any interest accruing
after Insolvency Proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Bank, and the performance of Borrower’s duties under the
Loan Documents (other than the Warrant).

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Payment/Advance Form” is that certain form attached hereto as Exhibit B.

“Perfection Certificate” is defined in Section 5.1.

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

 

“Permitted Indebtedness” is:

(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

(c) Subordinated Debt;

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

(e) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

(f) Indebtedness in an aggregate principal amount not to exceed One Hundred
Thousand Dollars ($100,000) secured by Permitted Liens;

(g) Indebtedness of Subsidiaries corresponding to the Investments permitted
under clause (g) of the definition of Permitted Investments hereunder; and

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

“Permitted Investments” are:

(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;

(b) (i) Investments consisting of Cash Equivalents, and (ii) any Investments
permitted by Borrower’s investment policy, as amended from time to time,
provided that such investment policy (and any such amendment thereto) has been
approved in writing by Bank;

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

(d) Investments consisting of deposit accounts or securities accounts in which
Bank has a perfected security interest except as otherwise provided in Section
6.6(b);

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

(f) Investments consisting of the creation of a Subsidiary for the purpose of
consummating a merger transaction permitted by Section 7.3 of this Agreement,
which is otherwise a Permitted Investment;

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

 

(g) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries not to exceed Fifty Thousand Dollars
($50,000) in the aggregate in any fiscal year;

(h) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors;

(i) 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;

(j) 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 (j) shall not
apply to Investments of Borrower in any Subsidiary;

(k) non-cash Investments in joint ventures or strategic alliances in the
ordinary course of Borrower’s business consisting of the non-exclusive licensing
of technology, the development of technology or the providing of technical
support; and

(l) repurchases of stock permitted by Section 7.7.

“Permitted Liens” are:

(a) Liens existing on the Effective Date and shown on the Perfection Certificate
or arising under this Agreement and the other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies,
either not due and payable or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, provided that no notice of
any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;

(c) purchase money Liens and Liens in respect of capitalized lease obligations
(i) on Equipment acquired or held by Borrower incurred for financing the
acquisition of the Equipment securing no more than One Hundred Thousand Dollars
($100,000) in the aggregate amount outstanding, or (ii) existing on Equipment
when acquired, if the Lien is confined to the property and improvements and the
proceeds of the Equipment;

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Fifty Thousand Dollars ($50,000) and which are not delinquent or
remain payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;

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

 

(e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c); provided that 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) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Bank a security interest
therein;

(h) licenses of Intellectual Property permitted under Section 7.1;

(i) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;

(j) deposits to secure the performance of bids, trade contracts (other than for
borrowed money), contracts for the purchase of property permitted hereunder,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case, incurred in the ordinary course of
business and not representing an obligation for borrowed money in an amount not
to exceed One Hundred Thousand Dollars ($100,000); and

(k) Liens in favor of other financial institutions arising in connection with
Borrower’s deposit and/or securities accounts held at such institutions,
provided that Bank has a perfected security interest in the amounts held in such
deposit and/or securities accounts except as otherwise provided in Section
6.6(b).

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

“Prepayment Fee” shall be, in connection with any prepayment of the Growth
Capital Advances, an amount equal to (i) three percent (3%) of the outstanding
principal balance of all Growth Capital Advances if such prepayment occurs one
(1) year or less after the Effective Date, (ii) two percent (2%) of the
outstanding principal balance of all Growth Capital Advances if such prepayment
occurs more than one (1) year and less than two (2) years after the Effective
Date, and (iii) one percent (1%) of the outstanding principal balance of all
Growth Capital Advances if such prepayment occurs two (2) years or more after
the Effective Date; provided that no Prepayment Fee shall be charged if the
Growth Capital Advances are replaced with a new facility from Bank.

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

“Repayment Period” is a period of time commencing on the Conversion Date and
ending on the Growth Capital Maturity Date.

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

 

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer, Chief Business Officer or Controller of Borrower. 

“Restricted License” is any material license or other agreement with respect to
which Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default under or
termination of could interfere with the Bank’s right to sell any Collateral. 

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.

“Second Tranche” is defined in Section 2.1.1(a)(ii).

“Second Trial Date” is defined in Section 7.2.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance reasonably
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person.  Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or
Guarantor.

“Trademarks” means any trademark, trade name and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.

“Transfer” is defined in Section 7.1.

“Warrant” is, collectively, (a) that certain Warrant to Purchase Stock dated as
of November 14, 2013, executed by Borrower in favor of Bank, (b) that certain
Warrant to Purchase Stock dated as of June 4, 2014, executed by Borrower in
favor of Bank, and (c) that certain Warrant to Purchase Stock dated as of the
Effective Date executed by Borrower in favor of Bank.

[Signature page follows.]

 

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

BORROWER:

TRACON PHARMACEUTICALS, INC.

By: /S/ Charles P. Theuer

Name: Charles P. Theuer

Title:  President and CEO

BANK:

SILICON VALLEY BANK

By: /S/ Igor DaCruz 

Name:  Igor DaCruz

Title:  Vice President

 

 

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

 

EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), securities, and all
other investment property, supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include (a) more than 65%
of the presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any Foreign Subsidiary which shares entitle
the holder thereof to vote for directors or any other matter, (b) any interest
of Borrower as a lessee under an Equipment lease if Borrower is prohibited by
the terms of such lease from granting a security interest in such lease or under
which such an assignment or Lien would cause a default to occur under such
lease; provided, however, that upon termination of such prohibition, such
interest shall immediately become Collateral without any action by Borrower or
Bank.; and (c) any Intellectual Property, whether now owned or hereafter
acquired; provided, however, the Collateral shall include all Accounts and all
proceeds of Intellectual Property.  If a judicial authority (including a U.S.
Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts
and such property that are proceeds of Intellectual Property, then the
Collateral shall automatically, and effective as of the Effective Date, include
the Intellectual Property solely to the extent necessary to permit perfection of
Bank’s security interest in such Accounts and such other property of Borrower
that are proceeds of the Intellectual Property.

 

 

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

 

EXHIBIT B

Loan Payment/Advance Request Form

Deadline for same day processing is Noon Pacific Time.

Fax To:  (858) 622-1424Date: _____________________

LOAN PAYMENT:

TRACON PHARMACEUTICALS, INC.

From Account #________________________________To Account
#__________________________________________________

(Deposit Account #)(Loan Account #)

Principal $____________________________________and/or Interest
$________________________________________________

Authorized Signature:Phone Number:________________________________________

Print Name/Title:__________________________________

 

 

Loan Advance:

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

From Account #________________________________To Account
#__________________________________________________
(Loan Account #)(Deposit Account #)
Amount of Advance $___________________________

All Borrower’s representations and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
on the date of the request for an advance; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date:

 

Authorized Signature:  _________________________________________Phone Number
__________________________:
Print Name/Title:  ______________________________________________

 

Outgoing Wire Request:

Complete only if all or a portion of funds from the loan advance above is to be
wired.

Deadline for same day processing is noon, P.S.T.

 

Beneficiary Name: _____________________________Amount of Wire:
$________________________________

Beneficiary Bank: ______________________________Account
Number:_________________________________

City and State:

 

Beneficiary Bank Transit (ABA) #: Beneficiary Bank Code (Swift, Sort, Chip,
etc.):

(For International Wire Only)

 

Intermediary Bank: Transit (ABA) #: ____________________________________

For Further Credit
to:__________________________________________________________________________________________

 

 

Special
Instruction:_________________________________________________________________________________________________________

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

Authorized Signature: ___________________________2nd Signature (if required):
_______________________________________

Print Name/Title: ______________________________Print Name/Title:
______________________________________________

Telephone #: Telephone #:  _________________________________________________

 

 

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

 

EXHIBIT C

BORROWING RESOLUTIONS

svb_logo_primary_color_(standard) [tcon-20150331ex1069ccac3g001.jpg]

CORPORATE BORROWING CERTIFICATE

 

 

 

 

Borrower:

TRACON Pharmaceuticals, Inc.

Date:   May 13, 2015

Bank:

Silicon Valley Bank

 

 

I hereby certify as follows, as of the date set forth above:

1.  I am the Secretary, Assistant Secretary or other officer of Borrower.   My
title is as set forth below.

2.  Borrower’s exact legal name is set forth above.  Borrower is a corporation
existing under the laws of the State of Delaware. 

3.  Attached hereto are true, correct and complete copies of Borrower’s
Certificate of Incorporation (including amendments), as filed with the Secretary
of State of the state in which Borrower is incorporated as set forth
above.  Such Certificate of Incorporation have not been amended, annulled,
rescinded, revoked or supplemented, and remain in full force and effect as of
the date hereof. 

4.  The following resolutions were duly and validly adopted by Borrower’s Board
of Directors at a duly held meeting of such directors (or pursuant to a
unanimous written consent or other authorized corporate action).  Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and Silicon Valley
Bank (“Bank”) may rely on them until Bank receives written notice of revocation
from Borrower.

Resolved, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name

Title

Signature

Authorized to Add or Remove Signatories

Charles P. Theuer

President and Chief Executive Officer

/s/ Charles P. Theuer

X

Patricia L. Bitar

Chief Financial Officer

/s/ Patricia L. Bitar

X

 

 

 

☐

 

 

 

☐

 

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

 

Resolved Further, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

Resolved Further,  that such individuals may, on behalf of Borrower:

Borrow Money.  Borrow money from 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.

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

Enter Derivative Transactions.  Execute spot or forward foreign exchange
contracts, interest rate swap agreements, or other derivative transactions.

Issue Warrants.  Issue warrants for Borrower’s capital stock.

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effect these resolutions.

Resolved Further, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

5.  The persons listed above are Borrower's officers or employees with their
titles and signatures shown next to their names.

 

By:

/s/ H Casey Logan

 

Name:

H Casey Logan

 

Title:

Secretary

 

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

I, the                                                          of Borrower,
hereby certify as to paragraphs 1 through 5 above, as of the date set forth
above.

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

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

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

TO:      SILICON VALLEY BANKDate: ________________________

FROM:TRACON PHARMACEUTICALS, INC.

The undersigned authorized officer of TRACON PHARMACEUTICALS, INC. (“Borrower”)
certifies that under the terms and conditions of the Amended and Restated Loan
and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower
is in complete compliance for the period ending _______________ with all
required covenants except as noted below, (2) there are no Events of Default,
except as noted below, (3) all representations and warranties in the Agreement
are true and correct in all material respects on this date except as noted
below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4)
Borrower, and each of its Subsidiaries, have timely filed all required tax
returns and reports or obtained extensions therefor, and Borrower has timely
paid all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except as otherwise permitted pursuant to the
terms of Section 5.8 of the Agreement, and (5) no Liens have been levied or
claims made against Borrower or any of its Subsidiaries relating to unpaid
employee payroll or benefits of which Borrower has not previously provided
written notification to Bank.  Attached are the required documents supporting
the certification.  The undersigned certifies that these are prepared in
accordance with GAAP consistently applied from one period to the next except as
explained in an accompanying letter or footnotes and except, with respect to
unaudited financial statements, for the absence of footnotes and subject to
year-end adjustments.  The undersigned 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.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

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

 

Reporting Covenant

Required

Complies

 

 

 

Monthly financial statements with
Compliance Certificate

Upon request by Bank

Yes  No

Compliance Certificate

To be delivered with any financial statements delivered to Bank

Yes  No

Annual Board Approved Financial Projections

Within earlier of 7 days of approval or 60 days after FYE

Yes  No

10‑Q, 10‑K, 8-K, and any other material SEC filings

Within 5 days after filing with SEC (if applicable)

Yes   No

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

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

TRACON PHARMACEUTICALS, INC.

By:______________________________

Name: ___________________________

Title: ____________________________

BANK USE ONLY

Received by: _____________________

authorized signer

Date: _________________________

Verified: ________________________

authorized signer

Date: _________________________

Compliance Status:Yes  No

 

 

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

 

 

Schedule 7.2

 

Inventory is held at the following locations outside of United States:

 

 

Lonza Biologics plc

228 Bath Road

Slough, Berkshire, SL1 4DX UK 

 

Patheon UK Limited

Kingfisher Drive

Covingham, Swindon, Wiltshire

UK SN3 5BZ

 

Catalent UK Packaging Limited

Lancaster Way

Wingates Industrial Estate, Westhoughton

Bolton, BL5 3XX, United Kingdom

 

 

 

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