Exhibit 10.1

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT (as amended, restated, amended and restated,
supplemented or otherwise modified from time to time, this “Agreement”) dated as
of May 21, 2020 (the “Closing Date”) is entered into among MOLECULAR TEMPLATES
OPCO, INC., a Delaware corporation (“Borrower Representative”, and together with
each other Person from time to time party hereto as a borrower, collectively,
“Borrowers”, and each, a “Borrower”), MOLECULAR TEMPLATES, INC., a Delaware
corporation (“Parent”, and together with each other Person party hereto or to
any other Loan Documents from time to time as a guarantor, collectively,
“Guarantors” and each, a “Guarantor”, and together with Borrowers, collectively,
“Loan Parties”, and each, a “Loan Party”), the lenders from time to time party
hereto (collectively, “Lenders”, and each, a “Lender”), K2 HEALTHVENTURES LLC,
as administrative agent for Lenders (in such capacity, together with its
successors, “Administrative Agent”), and ANKURA TRUST COMPANY, LLC, as
collateral agent for Lenders (in such capacity, together with its successors,
“Collateral Trustee”).

AGREEMENT

Borrower Representative, each Loan Party from time to time party hereto,
Administrative Agent, Collateral Trustee and Lenders hereby agree as follows:

1.    ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed in accordance
with GAAP, and calculations and determinations shall be made following GAAP,
consistently applied. Capitalized terms not otherwise defined in this Agreement
shall have the meanings set forth on Exhibit A. All other terms contained in
this Agreement, unless otherwise indicated, shall have the meaning provided by
the Code to the extent such terms are defined therein. 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. Unless otherwise specified, all references in this
Agreement or any Annex or Schedule hereto to a “Section,” “subsection,”
“Exhibit,” “Annex,” or “Schedule” shall refer to the corresponding Section,
subsection, Exhibit, Annex, or Schedule in or to this Agreement. For purposes of
the Loan Documents, whenever a representation or warranty is made to a Person’s
knowledge or awareness, knowledge or awareness means the actual knowledge, after
reasonable investigation, of any Responsible Officer of such Person. For
purposes of calculations made pursuant to the terms of this Agreement or
otherwise for purposes of compliance herewith, GAAP will be deemed to treat
operating leases and capital lease obligations in a manner consistent with the
treatment thereof under GAAP as in effect on December 31, 2018, notwithstanding
any modifications or interpretive changes thereto that have occurred. Any
documents or agreements referred to herein or in any other Loan Documents shall
mean any such documents or agreements as amended, restated, amended and restated
and/or otherwise supplemented or modified from time to time.

2.    LOAN AND TERMS OF PAYMENT

2.1    Promise to Pay. Each Borrower hereby unconditionally promises to pay each
Lender, ratably, the outstanding principal amount of all Loans, accrued and
unpaid interest, fees and charges thereon and to pay all Obligations as and when
due in accordance with this Agreement.

2.2    Availability and Repayment of the Loans.

(a)    Availability.

(i)    Subject to the terms and conditions of this Agreement, each Lender
agrees, severally and not jointly, to make to Borrowers an advance on the
Closing Date in principal amount equal to its First Tranche Term Loan Commitment
(the “First Tranche Term Loans”). Lenders’ commitments to make the First Tranche
Term Loans shall terminate upon the funding of the First Tranche Term Loans on
the Closing Date.

(ii)    Subject to the terms and conditions of this Agreement, each Lender
agrees, severally and not jointly, to make to Borrowers an advance during the
Second Tranche Availability Period in principal amount equal to its Second
Tranche Term Loan Commitment (the “Second Tranche Term Loans”). Lenders’
commitments to make the Second Tranche Term Loans shall terminate upon the
earlier of (i) the end of the Second Tranche Availability Period, and (ii) the
date the Second Tranche Term Loans have been funded.

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

(iii)    Subject to Lenders’ approval in each Lender’s sole and absolute
discretion and the terms and conditions of this Agreement, each Lender may,
severally and not jointly, make to Borrowers an advance during the Third Tranche
Availability Period in principal amount equal to its Third Tranche Term Loan
Commitment (the “Third Tranche Term Loans”, and together with the First Tranche
Term Loan, and the Second Tranche Term Loan, collectively, the “Term Loans”, and
each, a “Term Loan”). No Third Tranche Term Loans shall be made after the
earlier of (i) the end of the Third Tranche Availability Period, and (ii) the
date that Third Tranche Term Loans have been funded.

Borrowers shall use the proceeds of the Term Loans (i) to repay existing
outstanding Indebtedness of Borrower Representative owing to Perceptive Credit
Holdings II, LP, and (ii) for working capital and general corporate purposes.
Once repaid, the Term Loans may not be reborrowed.

(b)    Repayment. Commencing on the Amortization Date, and continuing thereafter
on each Payment Date through the Term Loan Maturity Date, Borrowers shall make
consecutive monthly payments of equal principal and interest, which would fully
amortize the principal amount of the Term Loans and accrued interest thereon by
the Term Loan Maturity Date, provided that if the Applicable Rate is adjusted or
the Amortization Date is extended in accordance with its terms, the amortization
schedule and the required monthly installment shall be recalculated based on the
adjusted Applicable Rate and/or the adjusted number of Payment Dates through the
Term Loan Maturity Date. Any and all unpaid Obligations, including principal and
accrued and unpaid interest in respect of the Term Loans, the fees pursuant to
the Fee Letter and any other fees and other sums due hereunder, if any, shall be
due and payable in full on the Term Loan Maturity Date. The Term Loans may only
be prepaid in accordance with Sections 2.2(c) or (d).

(c)    Mandatory Prepayment Upon an Acceleration. If the Loans are accelerated
in accordance with the terms hereof following the occurrence and during the
continuation of an Event of Default, Borrowers shall immediately pay to Lenders,
an amount equal to the sum of:

(i)    all outstanding principal plus accrued and unpaid interest thereon, plus

(ii)    all amounts then due in accordance with the Fee Letter, plus

(iii)    all other sums, if any, that shall have become due and payable,
including interest at the Default Rate with respect to any past due amounts.

(d)    Permitted Prepayment of Loans. Borrowers shall have the option to prepay
all, but not less than all, of the Loans, provided Borrowers provide written
notice to Administrative Agent of its election to prepay the Loans at least
fifteen (15) days prior to such prepayment (it being understood and agreed that
any such prepayment may be made conditional upon the occurrence of a “change of
control” or a refinancing of the Obligations), and pay, on the date of such
prepayment, to Lenders, ratably, an amount equal to the sum of:

(i)    all outstanding principal plus accrued and unpaid interest thereon, plus

(ii)    all amounts then due in accordance with the Fee Letter, plus

(iii)    all other sums, if any, that shall have become due and payable,
including interest at the Default Rate with respect to any past due amounts.

2.3    Payment of Interest.

(a)    Interest Rate. Subject to Section 2.3(b), the outstanding principal
amount of the Loans shall accrue interest from and after its Funding Date, at
the Applicable Rate, and Borrowers shall pay such interest monthly in arrears on
each Payment Date commencing on July 1, 2020.

(b)    Default Rate. Immediately upon the occurrence and during the continuation
of an Event of Default, Obligations shall bear interest at a rate per annum
which is five percentage points (5.0%) above the rate that is otherwise
applicable thereto (the “Default Rate”). Fees and expenses which are required to
be paid by Borrowers pursuant to the Loan Documents (including, without
limitation, Lender Expenses) but are not paid when

 

2

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

due shall bear interest until paid at a rate equal to the highest rate
applicable to the Obligations. Payment or acceptance of the increased interest
rate provided in this Section 2.3(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 pursuant to the Loan Documents. Each
Borrower agrees that interest at the Default Rate is a reasonable calculation of
Lenders’ lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an Event of Default.

(c)    Payment; Interest Computation. Interest is payable monthly in arrears on
the Payment Date of the following 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 3:00 p.m. Eastern 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 Loan shall be included and the date of
payment shall be excluded. Changes to the Applicable Rate based on changes to
the Prime Rate, shall be effective as of the date, and to the extent, of such
change.

(d)    Maximum Interest. Notwithstanding any provision in this Agreement or any
other Loan Document, it is the parties’ intent not to contract for, charge or
receive interest at a rate that is greater than the maximum rate permissible by
law that a court of competent jurisdiction shall deem applicable hereto (the
“Maximum Rate”). If a court of competent jurisdiction shall finally determine
that a Borrower has actually paid to or for the benefit of Lenders an amount of
interest in excess of the amount that would have been payable if all of the
Obligations had at all times borne interest at the Maximum Rate, then such
excess interest actually paid by Borrowers shall be applied as follows: first,
to the payment of principal outstanding in respect of the Loans; second, after
all principal is repaid, to the payment of accrued interest, third, to the
payment of Lender Expenses and any other Obligations; and fourth, after all
Obligations are repaid, the excess (if any) shall be refunded to Borrowers or
paid to whomsoever may be legally entitled thereto, provided that amounts
payable to Lenders, shall be paid ratably.

2.4    Fees and Charges. Borrowers shall pay to Administrative Agent, for the
ratable benefit of Lenders:

(a)    Fees. The fees and charges as and when due in accordance with the Fee
Letter; and

(b)    Expenses. All Lender Expenses incurred through and after the Closing
Date, when due (or, if no stated due date, within two (2) Business Days after
demand by Administrative Agent).

2.5    Payments; Application of Payments; Automatic Payment Authorization;
Withholding.

(a)    All payments to be made by Borrowers under any Loan Document, including
payments of principal and interest and all fees, charges, expenses, indemnities
and reimbursements, shall be made in immediately available funds in Dollars,
without setoff, recoupment or counterclaim, before 3:00 p.m. Eastern Time on the
date when due. Payments of principal and/or interest received after 3:00 p.m.
Eastern 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)    No Borrower shall have a right to specify the order or the loan accounts
to which a Lender shall allocate or apply any payments made by a Borrower to or
for the benefit of such Lender or otherwise received by such Lender under this
Agreement when any such allocation or application is not expressly specified
elsewhere in this Agreement.

(c)    Administrative Agent, on behalf of Lenders, may initiate debit entries to
any Deposit Accounts as authorized on the Automatic Payment Authorization for
principal and interest payments or any other Obligations when due. These debits
shall not constitute a set-off. If the ACH payment arrangement is terminated for
any reason, Borrowers shall make all payments due hereunder at the applicable
address specified in Section 10, or as otherwise notified by Administrative
Agent in writing.

(d)    Borrowers, Administrative Agent, Collateral Trustee and each Lender
hereby agree to the terms and conditions set forth on Schedule 3 hereto.

2.6    Promissory Notes. Borrowers agree that: (a) upon written notice by or on
behalf of any Lender to Borrowers that a promissory note or other evidence of
indebtedness is requested by such Lender to evidence the Loans

 

3

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

and other Obligations owing or payable to, or to be made by, such Lender,
Borrowers shall promptly (and in any event within three (3) Business Days of any
such request) execute and deliver to such Lender an appropriate promissory note,
in substantially the form attached hereto as Exhibit G, and (b) upon any
Lender’s written request, and in any event within three (3) Business Days of any
such request, the Borrowers shall execute and deliver to such Lender new notes
and/or divide the notes in exchange for then existing notes in such smaller
amounts or denominations as such Lender shall specify in its sole and absolute
discretion; provided, that the aggregate principal amount of such new notes
shall not exceed the aggregate principal amount of the applicable Loans made by
such Lender; provided, further, that such promissory notes that are to be
replaced shall then be deemed no longer outstanding hereunder and replaced by
such new notes and returned to the Borrowers within a reasonable period of time
after such Lender’s receipt of the replacement notes. Regardless whether or not
any such promissory notes are issued, this Agreement shall evidence the Loans
and other Obligations owing or payable by Borrowers to each Lender.

3.    CONDITIONS OF LOANS

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

(a)    duly executed signatures to this Agreement;

(b)    duly executed signatures to the Fee Letter;

(c)    a certificate of each Loan Party, duly executed by a Responsible Officer,
certifying and attaching (i) the Operating Documents, (ii) resolutions duly
approved by the Board, (iii) any resolutions, consent or waiver duly approved by
the requisite holders of each Loan Party’s Equity Interests, if applicable (or
certifying that no such resolutions, consent or waiver is required), and (iv) a
schedule of incumbency;

(d)    a payoff letter with respect to Indebtedness outstanding as of the
Closing Date to Perceptive Credit Holdings II, LP, together with all documents
reasonably required in connection with the payoff and release of security
interests;

(e)    the Perfection Certificate of Borrower Representative, together with the
duly executed signature thereto;

(f)    a legal opinion of counsel to the Loan Parties;

(g)    the original stock certificates representing any Shares, if any, together
with a stock power or other appropriate instrument of transfer, duly executed by
the holder of record of such Shares and in blank; and

(h)    payment of the fees in accordance with the Fee Letter and Lender Expenses
then due as specified in Section 2.4(a), subject to application of the deposit
in accordance with the Fee Letter.

3.2    Conditions Precedent to all Loans. Each Lender’s obligations to make each
Loan is subject to the following conditions precedent:

(a)    except for the Term Loan made on the Closing Date, timely receipt of an
executed Loan Request by Administrative Agent;

(b)    the representations and warranties in this Agreement and the other Loan
Documents shall be true, accurate, and complete in all material respects on the
date of the Loan Request and on the Funding Date of each Loan; 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
instead be true, accurate and complete in all material respects as of such date;

 

4

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

(c)    no Default or Event of Default shall have occurred and be continuing or
result from the Loan; and

(d)    since the Closing Date, there has not been (i) any event or circumstance
that has occurred and is continuing that could reasonably be expected to have a
Material Adverse Effect, or (ii) any material adverse deviation by Borrowers
from the most recent business plan of Borrowers presented to and accepted by
Administrative Agent, as determined by Administrative Agent in Administrative
Agent’s reasonable discretion, provided however, that clause (ii) shall not
apply to the Second Tranche Term Loan if the Second Tranche Milestone is met.

3.3    Covenant to Deliver.

(a)    Loan Parties agree to deliver each item required to be delivered under
this Agreement as a condition precedent to any Loan. Loan Parties expressly
agree that a Loan made prior to the receipt of any such item shall not
constitute a waiver by Administrative Agent of a Borrower’s obligation to
deliver such item, and the making of any Loan in the absence of a required item
shall be in Administrative Agent’s sole discretion.

(b)    Loan Parties agree to deliver the items set forth on Schedule 2 hereto
within the timeframe set forth therein (or by such other date as Administrative
Agent may approve in writing), in each case, in form and substance reasonably
acceptable to Administrative Agent.

3.4    Procedures for Borrowing. To obtain a Loan, other than with respect to
the initial Loans, Borrower Representative shall deliver a completed Loan
Request to Administrative Agent (which may be delivered by email) no later than
3:00 p.m. Eastern Time, ten (10) Business Days prior to the date such Loan is
requested to be made. On the Funding Date, each applicable Lender shall fund the
applicable Loan in the manner requested by the Loan Request, provided that each
of the conditions precedent to such Loan is satisfied.

4.    CREATION OF SECURITY INTEREST

4.1    Grant of Security Interest. Each Loan Party hereby grants to Collateral
Trustee, for the ratable benefit of Lenders, to secure the payment and
performance in full of all of the Obligations, a continuing security interest
in, and pledges to Collateral Trustee, the Collateral, wherever located, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof. If this Agreement is terminated, Collateral Trustee’s Lien in the
Collateral shall continue until the Obligations (other than contingent
indemnification obligations as to which no claim has been asserted or is known
to exist) are repaid in full in cash.

4.2    Priority of Security Interest. Each Loan Party 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). If a Loan Party shall acquire a commercial
tort claim with a potential recovery in excess of $500,000, such Loan Party
shall promptly notify Administrative Agent in writing and deliver such other
information and documents as Administrative Agent may reasonably require to take
any further action necessary or advisable to perfect Collateral Trustee’s Lien
in such commercial tort claim. If a Loan Party shall acquire any instrument with
a value in excess of $500,000, such Loan Party shall promptly notify
Administrative Agent and deliver the same in original together with an allonge
or other appropriate instrument of transfer and any necessary endorsement, all
in form reasonably satisfactory to Collateral Trustee.

4.3    Authorization to File Financing Statements. Each Loan Party hereby
authorizes Collateral Trustee or its designee (or the Administrative Agent, on
behalf of the Collateral Trustee) to file at any time financing statements,
continuation statements and amendments thereto with all appropriate
jurisdictions to perfect or protect Collateral Trustee’s interest or rights
hereunder.

4.4    Pledge of Collateral. Each Loan Party hereby pledges, assigns and grants
to Collateral Trustee a security interest in the Shares, together with all
proceeds and substitutions thereof, all cash, stock and other moneys and
property paid thereon, all rights to subscribe for securities declared or
granted in connection therewith, and all other cash and noncash proceeds of the
foregoing, as security for the performance of the Obligations. On the Closing
Date or to the extent any Shares pledged hereunder from time to time are or
become certificated and such Shares either (i) represent Equity Interests of a
Subsidiary or (ii) have a value in excess of $500,000, and in each case, the
extent the same constitute Collateral, such certificates shall be delivered to
Collateral Trustee, accompanied by a stock power

 

5

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

or other appropriate instrument of assignment duly executed in blank. To the
extent required by the terms and conditions governing the Equity Interests in
which a Loan Party has an interest, such Loan Party shall cause the books of
each Person whose Equity Interests are part of the Collateral and any transfer
agent to reflect the pledge of the Equity Interests. Upon the occurrence and
during the continuation of an Event of Default hereunder, Collateral Trustee may
effect the transfer of any securities included in the Collateral (including but
not limited to the Equity Interests) into the name of Collateral Trustee and
cause new certificates representing such securities to be issued in the name of
Collateral Trustee or its transferee. Each Loan Party will execute and deliver
such documents, and take or cause to be taken such actions, as Administrative
Agent may reasonably request to perfect or continue the perfection of Collateral
Trustee’s security interest in the Equity Interests. Each Loan Party shall be
entitled to exercise any voting rights with respect to the Equity Interests in
which it has an interest and to give consents, waivers and ratifications in
respect thereof, unless following an Event of Default, Collateral Trustee shall
have given notice to Borrower Representative suspending such rights, provided
that: no such notice shall be required if a Loan Party has commenced an
Insolvency Proceeding and, in any event, no vote shall be cast or consent,
waiver or ratification given or action taken which would be inconsistent with
any of the terms of this Agreement or which would constitute or create any
violation of any of such terms. All such rights to vote and give consents,
waivers and ratifications shall terminate upon the occurrence and during the
continuation of an Event of Default and the notification by Collateral Trustee
to Borrower Representative of the exercise of remedies in accordance with the
terms hereof. Notwithstanding anything to the contrary contained herein or in
any other Loan Document, no actions under applicable foreign law to perfect or
create any security interest over the Shares or any property or other assets of
any Foreign Subsidiary shall be required with respect to any Foreign Subsidiary
not required to become a Borrower or Guarantor hereunder in accordance with
Section 6.11(b).

5.    REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants as follows:

5.1    Due Organization, Authorization; Power and Authority.

(a)    Each Loan Party and each of its Subsidiaries are duly existing and in
good standing as a Registered Organization in their respective jurisdictions of
formation and are qualified and licensed to do business and are in good standing
in any other jurisdiction in which the conduct of their respective business or
ownership of property require that they be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Effect. In
connection with this Agreement, Borrower Representative has delivered to
Administrative Agent a completed certificate signed by Borrower Representative
entitled “Perfection Certificate”. Except to the extent Borrower Representative
has provided notice of a legal name change in accordance with Section 7.2,
(i) each Loan Party’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; (ii) each Loan Party is an
organization of the type and is organized in the jurisdiction set forth in the
Perfection Certificate; (iii) the Perfection Certificate accurately sets forth
each Loan Party’s organizational identification number or accurately states that
such Loan Party has none; (iv) the Perfection Certificate accurately sets forth
each Loan Party’s place of business, or, if more than one, its chief executive
office as well as such Loan Party’s mailing address (if different than its chief
executive office); (v) except as set forth in the Perfection Certificate, each
Loan Party (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 (vi) all other
information set forth on the Perfection Certificate pertaining to each Loan
Party and each of its Subsidiaries is accurate and complete in all material
respects (it being understood and agreed that each Loan Party may from time to
time update certain information in the Perfection Certificate after the Closing
Date to the extent the change does not arise from an action, event or
circumstance restricted by one or more specific provisions in this Agreement.

(b)    The execution, delivery and performance by each Loan Party of the Loan
Documents to which it is a party have been duly authorized, and do not
(i) conflict with such Loan Party’s Operating Documents or other organizational
documents, (ii) contravene, conflict with, constitute a default under or violate
any material Requirement of Law, (iii) contravene, conflict or violate any
applicable material order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority by which such Loan Party or any of its
Subsidiaries or any of their property or assets may be bound or affected,
(iv) require any action by, filing, registration, or qualification with, or
Governmental Approval from, any Governmental Authority (except such Governmental
Approvals which have already been obtained and are in full force and effect), or
(v) conflict with, contravene, constitute a default or breach under, or result
in or permit the termination or acceleration of, any material agreement by which
such Loan Party is bound. No Loan Party is 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.

 

6

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

5.2    Collateral.

(a)    Each Loan Party 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.

(b)    Except for the Collateral Accounts described in the Perfection
Certificate or in a notice timely delivered pursuant to Section 6.6, no Loan
Party has any Collateral Accounts at or with any bank, broker or other financial
institution, and each Loan Party has taken such actions as are necessary to give
Collateral Trustee a perfected security interest therein as required pursuant to
the terms of Section 6.6(b). The Accounts (if any) are bona fide, existing
obligations of the Account Debtors.

(c)    The Collateral is located only at the locations identified in the
Perfection Certificate and other Permitted Locations. 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 disclosed in writing
pursuant to Section 6.12.

(d)    Each Loan Party is the sole owner of the Intellectual Property which it
owns or purports to own except for (i) licenses constituting “Permitted
Transfers”, (ii) open-source software, (iii) over-the-counter software that is
commercially available to the public, (iv) material Intellectual Property
licensed to such Loan Party and noted on the Perfection Certificate or as
disclosed pursuant to Section 6.7(b), and (v) immaterial Intellectual Property
licensed to such Loan Party. Each Patent (other than patent applications) which
it owns or purports to own and which is material to such Loan Party’s business
is valid and enforceable, and no part of the Intellectual Property which a Loan
Party owns or purports to own and which is material to the Loan Parties’
business has been judged invalid or unenforceable, in whole or in part. To the
best of each Loan Party’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 could not reasonably be expected to have a Material Adverse
Effect. Except as noted on the Perfection Certificate or as disclosed pursuant
to Section 6.7(b), no Loan Party is a party to, nor is it bound by, any
Restricted License. No Subsidiary which is not a Loan Party owns any
Intellectual Property, which, if not owned by Loan Parties and their
Subsidiaries would reasonably be expected to have a Material Adverse Effect.

5.3    Accounts; Material Agreements. The Accounts (if any) of the Loan Parties
are bona fide existing obligations. The property or services giving rise to such
Accounts have been delivered or rendered.    The licenses and agreements to
which any Loan Party or any of its Subsidiaries is a party is in good standing
and in full force and effect and no Loan Party is in material breach with
respect thereto, except to the extent of any such licenses and agreements, the
failure of which to maintain, could reasonably be expected to have a Material
Adverse Effect.

5.4    Litigation and Proceedings. Except as set forth in the Perfection
Certificate or as disclosed in writing pursuant to Section 6.2, there are no
actions, suits, litigations or proceedings, at law or in equity, pending, or, to
the knowledge of any Responsible Officer, threatened in writing, by or against
any Loan Party or any of its Subsidiaries, officers or directors involving more
than, individually or in the aggregate for all related proceedings, $500,000 or
in which any adverse decision has had or could reasonably be expected to have
any Material Adverse Effect.

5.5    Financial Statements; Financial Condition. All consolidated and
consolidating (if applicable) financial statements for the Loan Parties and each
of their Subsidiaries delivered to Administrative Agent fairly present in all
material respects the consolidated and consolidating financial condition and
results of operations of the Loan Parties and each of their Subsidiaries as of
the respective dates and for the respective periods then ended, and there are no
material liabilities (including any contingent liabilities) which are not
reflected in such financial statements. There has not been any material
deterioration in (i) the consolidated financial condition of the Loan Parties
and their Subsidiaries taken as a whole, or (ii) the Collateral, in each case,
since the date of the most recent financial statements submitted to
Administrative Agent, as determined by Administrative Agent acting in its
reasonable discretion.

5.6    Solvency. The fair salable value of the assets (including goodwill minus
disposition costs) of the Loan Parties and their Subsidiaries, on a consolidated
basis, exceeds the fair value of liabilities of the Loan Parties’ and their
Subsidiaries, on a consolidated basis; no Loan Party is left with unreasonably
small capital after the transactions in this Agreement; and the Loan Parties and
their Subsidiaries, on a consolidated basis, are able to pay their debts
(including trade debts) as they mature.

 

7

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

5.7    Consents; Approvals. Each Loan Party and each of its Subsidiaries have
obtained all third party consents, approvals, waivers, made all declarations or
filings with, given all notices to, and obtained all consents, licenses, permits
or other approvals from all Governmental Authorities that are necessary (i) to
enter into the Loan Documents and consummate the transactions contemplated
thereby, and (ii) to continue their respective businesses as currently
conducted, except (with respect to this clause (ii)) where failure to do so
could not reasonably be expected to result in a Material Adverse Effect.

5.8    Subsidiaries; Investments. No Loan Party has any Subsidiaries, except as
noted on the Perfection Certificate or as disclosed to Administrative Agent
pursuant to Section 6.11 below. No Loan Party owns any stock, partnership, or
other ownership interest or other Equity Interests except for Permitted
Investments.

5.9    Tax Returns and Payments. Each Loan Party and each of its Subsidiaries
have timely filed all required tax returns and reports (or appropriate
extensions therefor), and such Loan Party and each of its Subsidiaries has
timely paid all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by such Loan Party or such Subsidiary, as applicable,
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 Twenty-Five Thousand Dollars ($25,000). No Loan Party is aware
of any claims or adjustments proposed for any prior tax years of such Loan Party
or any of its Subsidiaries which could result in a material amount of additional
taxes becoming due and payable by such Loan Party or Subsidiary.

5.10    Shares. Such Loan Party has full power and authority to create a first
lien on the Shares and no disability or contractual obligation exists that would
prohibit such Loan Party from pledging the Shares pursuant to this Agreement.
There are no subscriptions, warrants, rights of first refusal or other
restrictions on transfer relative to, or options exercisable with respect to the
Shares of Borrower Representative or any other wholly-owned Subsidiary. The
Shares have been and will be duly authorized and validly issued, and are fully
paid and non-assessable.    As of the date hereof, the Shares are not the
subject of any present or threatened suit, action, arbitration, administrative
or other proceeding, and such Loan Party knows of no reasonable grounds for the
institution of any such proceedings.

5.11    Compliance with Laws.

(a)    No Loan Party or Subsidiary of a Loan Party is an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company”, as such terms are defined in the Investment Company Act of
1940 as amended.

(b)    No Loan Party or Subsidiary of a Loan Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
security” as such terms are defined in Regulation U of the Federal Reserve Board
as now and from time to time hereafter in effect (such securities being referred
to herein as “Margin Stock”). None of the proceeds of the Loans or other
extensions of credit under this Agreement have been (or will be) used, directly
or indirectly, for the purpose of purchasing or carrying any Margin Stock, for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any Margin Stock or for any other purpose which
might cause any of the Loans or other extensions of credit under this Agreement
to be considered a “purpose credit” within the meaning of Regulation T, U or X
of the Federal Reserve Board.

(c)    No Loan Party has taken or permitted to be taken any action which might
cause any Loan Document to which it is a party to violate any regulation of the
Federal Reserve Board. Neither the making of the Loans hereunder nor Borrowers’
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. No Loan Party, nor any of its
Subsidiaries, nor any Affiliate of any Loan Party or of any Subsidiary, nor any
present holder of Equity Interests of any of the foregoing (i) is a Person
described or designated in the Specially Designated Nationals and Blocked
Persons

 

8

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

List of the Office of Foreign Assets Control of the United States Department of
Treasury (“OFAC”) or in Section 1 of the Anti-Terrorism Order or similar
sanctions laws of any other Governmental Authority including of any other
applicable jurisdiction, (ii) is a citizen or resident of any country that is
subject to embargo or trade sanctions enforced by OFAC, (iii) is, or will
become, a Person whose property or interest in property is blocked or subject to
blocking pursuant to Section 1 of the Anti-Terrorism Order, or (iv) engages in
any dealings or transactions, or is otherwise associated, with any such Person.

(d)    Each Loan Party and its Subsidiaries are in compliance, in all material
respects, with the USA Patriot Act. No part of the proceeds from the Loans made
hereunder has been (or will be) used, directly or indirectly, for any payments
to any governmental official or employee, political party, official of a
political party, candidate for political office, or anyone else acting in an
official capacity, in order to obtain, retain or direct business or obtain any
improper advantage, in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended.

(e)    No Reportable Event or Prohibited Transaction, as defined in ERISA has
occurred or is reasonably expected to occur, and no Loan Party has failed to
meet the minimum funding requirements of ERISA. No Loan Party has violated any
applicable environmental laws in any material respect, maintains any properties
or assets which have been designated in any manner pursuant to any environmental
protection statute as a hazardous materials disposal site, or has received any
notice, summons, citation or directive from the Environmental Protection Agency
or any other similar Governmental Authority.

5.12    Products. A complete and accurate list of the material Products, is set
forth on the Perfection Certificate, as updated from time to time pursuant to
the Compliance Certificate. The Loan Parties and each of its Subsidiaries hold
all required material Governmental Approvals, a list of which is set forth on
the Perfection Certificate, and all material Governmental Approvals are in full
force and effect. There are no proceedings in progress, pending or, to such Loan
Party’s knowledge, threatened, that may result in revocation, cancellation,
suspension, rescission or any adverse modification of any of any Governmental
Approval nor, to the best of the knowledge, information and belief of such Loan
Party, after due inquiry, are there any facts upon which proceedings could
reasonably be based. Without limitation of the foregoing:

(a)    With respect to any Product being tested or manufactured, each Loan Party
and each of its Subsidiary has received, and such Product is the subject of, all
material Governmental Approvals needed in connection with the testing or
manufacture of such Product as such testing is currently being conducted by or
on behalf of a Loan Party or any of its Subsidiaries, and neither any Loan Party
nor any of its Subsidiaries has received any notice from any applicable
Governmental Authority, that such Governmental Authority is conducting an
investigation or review of (i) any Loan Party’s or any of its Subsidiary’s
manufacturing facilities and processes for such Product which have disclosed any
material deficiencies or violations of any Requirement of Law or the
Governmental Approvals related to the manufacture of such Product, or (ii) any
such Governmental Approval or that any such Governmental Approval has been
revoked or withdrawn, nor has any such Governmental Authority issued any order
or recommendation stating that the development, testing and/or manufacturing of
such Product should cease, in each case, which could reasonably be expected to
have a Material Adverse Effect.

(b)    With respect to any Product marketed or sold by a Loan Party or any of
its Subsidiaries, such Loan Party or such Subsidiary, as applicable, has
received, and such Product is the subject of, all material Governmental
Approvals needed in connection with the marketing and sales of such Product as
currently being marketed or sold, and no Loan Party nor any of its Subsidiary
has received any notice from any applicable Governmental Authority, that such
Governmental Authority is conducting an investigation or review of any such
material Governmental Approval or approval or that any such Governmental
Approval has been revoked or withdrawn, nor has any such Governmental Authority
issued any order or recommendation stating that such marketing or sales of such
Product cease or that such Product be withdrawn from the marketplace, in each
case, which could reasonably be expected to have a Material Adverse Effect;

(c)    There have been no adverse clinical test results in connection with a
Product which have or could reasonably be expected to have a Material Adverse
Effect; and

(d)    There have been no Product recalls or voluntary Product withdrawals from
any market, in each case, which could reasonably be expected to have a Material
Adverse Effect.

 

9

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

5.13    Full Disclosure. No written representation, warranty or other statement
of a Loan Party or any of its Subsidiaries in any certificate or written
statement by or on behalf of a Loan Party or any of its Subsidiaries in
connection with this Agreement, as of the date such representation, warranty, or
other statement was made, taken together with all such written certificates and
written statements given, 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 materially misleading in light of the
circumstances under which they were made (it being recognized that the
projections and forecasts provided by any Loan Party in good faith and based
upon reasonable assumptions are not viewed as facts and that actual results
during the period or periods covered by such projections and forecasts may
differ from the projected or forecasted results).

6.    AFFIRMATIVE COVENANTS

Each Loan Party shall, and shall cause each other Loan Party to, do all of the
following:

6.1    Government Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
could reasonably be expected to have a Material Adverse Effect; comply, and
cause each Subsidiary to comply, with all laws, ordinances and regulations to
which it is subject except where a failure to do so could not reasonably be
expected to have a Material Adverse Effect; obtain all of the material
Governmental Approvals required in connection with such Loan Party’s business
(in each case, the failure of which to obtain, could reasonably be expected to
have a Material Adverse Effect) and for the performance by each Loan Party of
its obligations under the Loan Documents to which it is a party and the grant of
a security interest in accordance therewith, and comply with all terms and
conditions with respect to such Governmental Approvals.

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

(a)    Monthly Financial Statements. Within thirty (30) days after the last day
of each month, a company prepared consolidated and consolidating (if applicable)
balance sheet, income statement and statement of cash flows covering the Loan
Parties and each of their Subsidiaries’ operations for such month, in form
reasonably acceptable to Administrative Agent, certified by a Responsible
Officer as having been prepared in accordance with GAAP, consistently applied,
except for the absence of footnotes, and subject to normal year-end adjustments.

(b)    Compliance Certificates. Together with the monthly financial statements,
a duly completed Compliance Certificate signed by a Responsible Officer.

(c)    Annual Operating Budget and Financial Projections. Within sixty (60) days
after the end of each fiscal year of Parent (and within five (5) days of any
material modification thereto), an annual operating budget in the same form as
presented to the Parent’s Board for the upcoming fiscal year of Parent, together
with any related business forecasts used in the preparation thereof.

(d)    Annual Audited Financial Statements. As soon as available, but no later
than ninety (90) days after the last day of Parent’s fiscal year, or, if
earlier, within five (5) days of filing with the Securities and Exchange
Commission, audited consolidated financial statements prepared in accordance
with GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Administrative Agent (it being understood and agreed
that Ernst & Young LLP is acceptable to Administrative Agent).

(e)    Other Statements. Within five (5) days of delivery, copies of all
statements, reports and notices generally made available to all stockholders or
to any holders of Subordinated Debt.

(f)    SEC Filings. Within five (5) days of filing, copies of all periodic and
other reports, proxy statements and other materials filed by Parent with the
Securities and Exchange Commission.

(g)    Legal Action Notice. A prompt report of any legal actions pending or
threatened in writing against any Loan Party or any of its Subsidiaries that
could result in damages or costs to any Loan Party or any of its Subsidiaries,
individually or in the aggregate for all related proceedings, of $500,000 or
more, or of any Loan Party or any of its Subsidiaries taking or threatening
legal action against any third person with respect to a claim of $500,000 or
more, and with respect to any pending action or threatened action, a prompt
report of any material development with respect thereto.

 

10

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

(h)    Intellectual Property Report. Together with the Compliance Certificate
delivered at the end of each calendar quarter, a report in form reasonably
acceptable to Administrative Agent, listing any applications or registrations
that any Loan Party or any of its Subsidiaries has made or filed in respect of
any Patents, Copyrights or Trademarks and the status of any outstanding
applications or registrations, as well as any material change in any Loan Party
or any of its Subsidiaries’ Intellectual Property.

(i)    Aging Reports; Other Reports and Information. Together with the monthly
financial reports, reports as to the following, in form reasonably acceptable to
Administrative Agent: accounts payable aging and any other information related
to the financial or business condition of any Loan Party as and when reasonably
requested by Administrative Agent.

(j)    Board Materials. At the same time and in the same manner as it gives to
the members of Parent’s Board, any committee or subcommittee thereof, or any
advisory board, copies of all materials that Parent provides to its Board, such
committee or subcommittee or advisory board, as applicable, in connection with
meetings thereof, including any reports with respect to Loan Parties’ operations
or performance, provided, however, the foregoing may be subject to such
exclusions and redactions as necessary in order to (A) preserve the
confidentiality of highly sensitive proprietary information, (B) prevent a
conflict of interest between a Loan Party and a Secured Party, or (C) prevent
impairment of the attorney client privilege with respect to pending or
threatened litigation.

(k)    Bank Account Statements. Together with the monthly financial statements
delivered in accordance with subsection (a) above (to the extent not delivered
to Administrative Agent pursuant to any applicable Account Control Agreement), a
copy of the most recent account statement, with transaction detail, for each
Deposit Account or Securities Account of a Loan Party or any of its
Subsidiaries, or within three (3) Business Days, following Administrative
Agent’s request, evidence satisfactory to Administrative Agent of the balance
maintained in any such Deposit Account or Securities Account.

(l)    Product Related. Within five (5) Business Days of receipt, copies of all
material correspondence, reports, documents and other filings with any
Governmental Authority that could reasonably be expected to have a material
adverse effect on any Governmental Approvals required for the manufacturing,
marketing, testing or sale of Products or which could have a Material Adverse
Effect.

Notwithstanding the foregoing, no consolidating financial statements, reports or
projections shall be required in respect of any Immaterial Subsidiary in
accordance with the foregoing, and instead, Borrower Representative shall
deliver such reports, projections or other financial information with respect to
any Immaterial Subsidiary (including without limitation reports as to cash
balance or revenue by legal entity) as Administrative Agent may reasonably
request from time to time.

6.3    Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between a Loan Party and its
Account Debtors shall follow such Loan Party’s customary practices as they exist
at the Closing Date, subject to reasonable extensions thereof. Borrower
Representative shall promptly notify Administrative Agent of all returns,
recoveries, disputes and claims that involve more than $500,000.

6.4    Taxes; Pensions. Timely file, and cause each of its Subsidiaries to
timely file, all required tax returns and reports 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 such Loan Party and each
of its Subsidiaries, except for deferred payment of any taxes contested pursuant
to the terms of Section 5.9, and shall deliver to Administrative Agent, 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, and cause each Subsidiary to keep, its business and the Collateral
insured for risks and in amounts standard for companies in the Loan Parties’
industry and location and as Administrative Agent may reasonably request.
Insurance policies shall be in a form, with financially sound and reputable
insurance companies that are not Affiliates of any Loan Party, and in amounts
that are reasonably satisfactory to Administrative Agent.

 

11

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

(b)    Ensure that proceeds payable under any property policy with respect to
Collateral are, at Administrative Agent’s option, payable to Collateral Trustee,
for the ratable benefit of Lenders, on account of the Obligations. To that end,
all property policies shall within the time set forth in Schedule 2 and at all
times thereafter, have a lender’s loss payable endorsement showing Collateral
Trustee as lender loss payable, all liability policies shall show, or have
endorsements showing, Collateral Trustee as an additional insured, in each case,
in form reasonably satisfactory to Administrative Agent and as set forth on
Exhibit E.

(c)    Notwithstanding the foregoing, (i) so long as the casualty event would
not reasonably be expected to result in a Material Adverse Effect and no Event
of Default has occurred and is continuing, the Loan Parties shall have the
option of applying the net cash proceeds of any casualty policy toward the
replacement or repair of destroyed or damaged property, or otherwise in the
Ordinary Course of Business; provided that any such replaced or repaired
property (A) shall be of equal or like value as the replaced or repaired
Collateral; (B) shall be Collateral in which Collateral Trustee has been granted
a first priority security interest and (C) such proceeds shall be applied within
270 days following the receipt thereof and (ii) if the conditions set forth in
clause (i) are not met, all such net cash proceeds shall, at the option of
Administrative Agent, be payable to Collateral Trustee, for the ratable benefit
of Lenders, on account of the Obligations; provided that it is understood and
agreed that notwithstanding anything to the contrary contained herein or in any
other Loan Document, in no event shall any prepayment premium or similar penalty
apply to any prepayment required in accordance with the foregoing.

(d)    At Administrative Agent’s request, Borrower Representative 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 Collateral Trustee, that it will give Collateral
Trustee thirty (30) days prior written notice before any such policy or policies
shall be canceled (or ten (10) days’ notice for cancellation for non-payment of
premiums).

(e)    Subject to Section 9.4, if any Loan Party fails to obtain insurance as
required under this Section 6.5 or to pay any amount or furnish any required
proof of payment upon Administrative Agent’s request, and to the extent
practicable, in consultation with Borrowers, Collateral Trustee 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 as Administrative Agent
deems prudent or may direct.

6.6    Deposit and Securities Accounts.

(a)    Maintain Collateral Accounts only at the banks and other financial
institutions identified in the Perfection Certificate or as disclosed pursuant
to a notice timely delivered pursuant to subsection (b) below. Borrowers shall
further maintain an ACH payment structure in favor of Administrative Agent,
satisfactory to Administrative Agent.

(b)    Provide Administrative Agent fifteen (15) Business Days prior written
notice before establishing any Collateral Account at or with any bank, broker or
other financial institution, and upon opening such account, provide
Administrative Agent with a written notice identifying the name, address of each
bank or other institution, the name in which the account is held, a description
of the purpose of the account, and the complete account number therefor. For
each Collateral Account that any Loan Party at any time maintains, Loan Parties
shall cause the applicable bank, broker or financial institution at or with
which any Collateral Account is maintained to execute and deliver an Account
Control Agreement or other appropriate instrument with respect to such
Collateral Account to perfect Collateral Trustee’s Lien in such Collateral
Account in accordance with the terms hereunder, provided that the foregoing
requirement to maintain Account Control Agreements shall not apply to any
Excluded Account.

6.7    Intellectual Property.

(a)    Protect, defend and maintain the validity and enforceability of its
Intellectual Property material to its business; promptly advise Administrative
Agent 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 material to its business; not suffer any material claim of
infringement that could reasonably be expected to have a Material

 

12

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

Adverse Effect unless such claim is dismissed within thirty (30) days from
initiation thereof or Borrower Representative has demonstrated to Administrative
Agent’s satisfaction that such proceedings are without merit and adequate
reserves have been taken; and, except for Permitted Transfers, not allow any
Intellectual Property material to the Loan Parties’ business to be abandoned,
forfeited or dedicated to the public without Administrative Agent’s written
consent.

(b)    Provide written notice to Administrative Agent as soon as practicable
prior to any Loan Party entering or becoming bound by any Restricted License,
and with respect to any Restricted Licenses entered into after the Closing Date,
use commercially reasonable efforts to obtain, or cause any applicable Loan
Party to obtain, the consent of, or waiver in form reasonably satisfactory to
Administrative Agent from any person whose consent or waiver is necessary for
any Restricted License to be assigned or otherwise Transferred in connection
with a sale of all or substantially all assets of the Loan Parties or Change in
Control.

6.8    Litigation Cooperation. From the Closing Date and continuing through the
termination of this Agreement, make available to any Secured Party on reasonable
terms and reasonable advanced notice, without expense to such Secured Party, as
applicable, each Loan Party and its officers employees and agents and each Loan
Party’s books and records, to the extent that such Secured Party may deem them
reasonably necessary to prosecute or defend any lawsuit or proceeding to which
such Secured Party is a party to the extent such lawsuit or proceeding arises
out of a Claim asserted by a third party against a Secured Party in connection
with the transactions contemplated by the Loan Documents or the Collateral.

6.9    Access to Collateral; Books and Records. Allow Administrative Agent,
Collateral Trustee, or its respective agents, to inspect the Collateral and
audit and copy such Loan Party’s Books in accordance with Section 6.13. 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 Administrative Agent
shall determine is necessary. The foregoing inspections and audits shall be at
Borrowers’ expense.

6.10    Financial Covenant – Minimum Liquidity. At all times prior to the
Amortization Date, as the same may be extended in accordance with its terms,
maintain Liquidity in an amount not less than five (5) times Monthly Burn.

6.11    Joinder of Subsidiaries.

(a)    Except to the extent joinder as a Loan Party is not required pursuant to
the terms of subsection (b) below, no later than fifteen (15) days after such
time as a Loan Party forms any direct or indirect Subsidiary or acquires any
direct or indirect Subsidiary after the Closing Date, or at any time upon
request of Administrative Agent with respect to any Subsidiary whether existing
as of the Closing Date or thereafter created or acquired: (a) promptly, and in
any event within five (5) days of creation, acquisition or request, as
applicable, provide written notice to Administrative Agent together with
certified copies of the Operating Documents for such Subsidiary, and (b) within
ten (10) days following the formation or creation thereof (as such time may be
extended in the Administrative Agent’s discretion): (i) take all such action as
may be reasonably required by Administrative Agent to cause the applicable
Subsidiary to either: (A) provide a joinder to this Agreement pursuant to which
such Subsidiary becomes a Loan Party hereunder, or (B) guarantee the Obligations
and grant a security interest in and to the collateral of such Subsidiary
(substantially as described on Exhibit B), in each case together with such
Account Control Agreements and other documents, instruments and agreements
reasonably requested by Administrative Agent, all in form and substance
reasonably satisfactory to Administrative Agent (including being sufficient to
grant Collateral Trustee a first priority Lien, subject to Permitted Liens in
and to the assets of such Subsidiary), and (ii) and to pledge all of the direct
or beneficial Equity Interests in such Subsidiary. Any document, agreement, or
instrument executed or issued pursuant to this Section 6.11 shall be a Loan
Document.

(b)    Borrowers shall not permit Foreign Subsidiaries which are not Loan
Parties, in the aggregate, to maintain (i) cash and other assets with an
aggregate value for all such Foreign Subsidiaries in excess of 5.0% of
consolidated assets of Borrowers and their Subsidiaries, (ii) revenue in excess
of 5.0% of consolidated revenues of Borrowers and their Subsidiaries for any
twelve month period then ended, or (iii) any Intellectual Property which is
material to the business of Borrowers as a whole, or (iv) any contracts which
are material to the business of Borrowers and their Subsidiaries, as a whole,
without causing one or more of such Foreign Subsidiaries to enter into

 

13

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

a joinder or guaranty in form satisfactory to Administrative Agent with respect
to the Obligations as Administrative Agent may request within fifteen days (or
such other period as Administrative Agent may agree in writing), such that
compliance with clauses (i) through (iv) shall be restored.

6.12    Property Locations.

(a)    Provide to Administrative Agent at least ten (10) days’ prior written
notice before adding or changing any Material Location.

(b)    Except to the extent required pursuant to Schedule 2 hereto, with respect
to each Material Location, at Administrative Agent’s request the applicable Loan
Party shall use its commercially reasonable efforts to cause the applicable
landlord or bailee to execute and deliver a Collateral Access Agreement for such
location, including an acknowledgment from each of the third parties that it is
holding or will hold such property, subject to Collateral Trustee’s security
interest.

6.13    Management Rights. Any representative of Administrative Agent shall have
the right to meet with management and officers of Borrowers to discuss books of
account and records of Borrowers upon reasonable prior written notice to
Borrower Representative and during normal business hours. In addition,
Administrative Agent shall be entitled at reasonable intervals, upon reasonable
prior written notice, to consult and advise with the management and officers of
Borrowers concerning significant business issues affecting Borrowers. The
parties intend that the foregoing rights granted to Administrative Agent shall
constitute “management rights” within the meaning of 29 C.F.R.
Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or
participation by Administrative Agent with respect to any business issues shall
not be deemed to give Administrative Agent, nor be deemed an exercise by
Administrative Agent of, control over Borrowers’ management or policies, and
Borrowers shall have no obligation to act upon or follow any such advice or
recommendation.

6.14    Right to Invest. In connection with any Qualified Financings consummated
after the Closing Date, Designated Holders shall have the right, in their
respective discretion to participate in any such Qualified Financing, provided
that with respect to any public offering of Parent, Parent agrees to use
commercially reasonable efforts to provide Designated Holders with the
opportunity to invest in each Qualified Financing if it is lawful to do so (or
if the Qualified Financing is an underwritten public offering pursuant to a
registration statement under the Securities Act of 1933, as amended, to use
commercially reasonable efforts to cause the underwriters for such offering to
offer Designated Holders an allocation of securities in such offering), on the
same terms, conditions and pricing afforded to other investors participating in
such Qualified Financing; provided that the maximum aggregate investment amount
by Designated Holders for all participations in Qualified Financings pursuant to
this Section 6.14 shall be $5,000,000; provided further, that, if in connection
with such offering, (i) the aggregate bona fide commitments to purchase
allocations are less than an amount which would provide the Designated Holders,
on a pro rata basis, an aggregate investment of $5,000,000, or (ii) demand in
connection with such offering otherwise exceeds the size of any such offering,
the allocation of Designated Holders shall be reduced accordingly on a pro rata
basis. Parent shall provide written notice to Administrative Agent not later
than the date upon which potential investors are notified of a Qualified
Financing, and if a Designated Holder desires to exercise its right to
participate in such Qualified Financing, Designated Holder shall cooperate to
consummate its investment in such closing promptly upon receipt of documentation
with respect thereto. Parent shall not take any action to avoid or seek to avoid
the observance or performance of any of the obligations pursuant to this
Section 6.14, but will at all times in good faith assist in the carrying out the
same and take all such action as may be necessary or appropriate, but only to
the extent permitted by law, to protect the rights of Designated Holders
hereunder against impairment.

6.15    Further Assurances. Subject to the terms hereof and the other Loan
Documents, execute any further instruments and take further action as
Administrative Agent or Collateral Trustee reasonably request to perfect or
continue Collateral Trustee’s Lien in the Collateral or to effect the purposes
of this Agreement.

7.    NEGATIVE COVENANTS

No Loan Party shall, or shall cause or permit any of its Subsidiaries to, do any
of the following:

7.1    Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose
of (collectively, “Transfer”) all or any part of its business or property,
except for Permitted Transfers.

 

14

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

7.2    Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in any business other than the businesses currently engaged in by
such Person, as applicable, or reasonably related thereto; (b) cease doing
business, or liquidate or dissolve, except for a liquidation or dissolution by a
Loan Party or Subsidiary other than Borrower Representative or Parent as long as
(i) no Event of Default has occurred and is continuing as of the effective date
of such liquidation or dissolution, and (ii) in case of a liquidation or
dissolution of a Borrower or other Loan Party, all assets thereof shall have
been transferred to a Borrower or Loan Party, respectively; (c) permit or suffer
a Change in Control; or (d) without at least ten (10) days prior written notice
to Administrative Agent (i) change its jurisdiction of organization, (ii) change
its organizational structure or type, (iii) change its legal name, or
(iv) change its organizational number (if any) assigned by its jurisdiction of
organization.

7.3    Mergers or Acquisitions. Merge or consolidate with any other Person
(except if concurrently with, and as a condition to the effectiveness of, the
closing of such merger or consolidation, the Obligations shall be repaid in
full, in cash), or acquire all or substantially all of the capital stock or
property of another Person or business line of another Person (including,
without limitation, by the formation of any Subsidiary) other than in connection
with any Permitted Investment, provided that a Subsidiary may merge or
consolidate into another Subsidiary or into a Loan Party that in any such merger
or consolidation involving a Loan Party, such Loan Party shall be the surviving
entity.

7.4    Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
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, except for Permitted Liens, or otherwise permit any Collateral not
to be subject to the first priority security interest granted herein, except in
connection with Permitted Liens, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Collateral Trustee)
with any Person which directly or indirectly prohibits or has the effect of
prohibiting any Loan Party or Subsidiary from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of such Loan Party’s
or Subsidiary’s Intellectual Property, except in connection with licenses of
Intellectual Property constituting a Permitted Transfer with respect to the
Intellectual Property subject to such license.

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

7.7    Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any Equity Interests;
provided that (i) Parent may convert any of its convertible Equity Interests
(including warrants) into other Equity Interests issued by Parent pursuant to
the terms of such convertible securities or otherwise in exchange thereof,
(ii) Parent may convert Subordinated Debt issued by Parent into Equity Interests
issued by Parent pursuant to the terms of such Subordinated Debt and to the
extent permitted under the terms of the applicable subordination or
intercreditor agreement; (iii) Parent or any Subsidiary thereof may pay
dividends solely in Equity Interests of Parent or such Subsidiary, as
applicable; (iv) Parent may make cash payments in lieu of fractional shares;
(v) Parent may repurchase the Equity Interests issued by Parent pursuant to
stock repurchase agreements approved by Parent’s Board so long as an Event of
Default does not exist at the time of such repurchase and would not exist
immediately after giving effect to such repurchase, provided that the aggregate
amount of all such repurchases does not exceed $500,000 per fiscal year;
(vi) Parent may pay dividends, make any distributions or payments or redeem any
Equity Interests in an aggregate amount not to exceed $500,000 per fiscal year
so long as an Event of Default does not exist at such time and would not exist
immediately after giving effect to any such distribution, payment or redemption;
and (vii) a Subsidiary may pay dividends or make distributions to the holders of
its Equity Interests in accordance with the terms of its Operating Documents; or
(b) directly or indirectly make any Investment (including, without limitation,
by the formation of any Subsidiary), other than Permitted Investments.

7.8    Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of a Loan Party, except for
(a) transactions on fair and reasonable terms that are no less favorable to such
Person than would be obtained in an arm’s length transaction with a
non-affiliated Person; (b) bona fide rounds of Subordinated Debt or equity
financing for capital raising purposes, (c) reasonable and customary director,
officer and employee compensation and other customary benefits including
retirement, health, stock option and other benefit plans and indemnification
arrangements approved by Parent’s Board, (d) transactions among Loan Parties not
otherwise restricted under the Loan Documents, and (e) transactions otherwise
contemplated to be entered into among a Loan Party or Subsidiary and an
Affiliate and permitted under this Agreement.

 

15

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

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

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 Loan for that purpose; take
any action or fail to take any action (or suffer any other Person to do so), to
the extent the same would cause the representations set forth in Section 5.11(c)
to be untrue; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a Material
Adverse Effect; 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 material liability of a Loan Party or
any of its Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency.

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. Any Loan Party fails to pay any Obligations after such
Obligations are due and payable, provided, however no Event of Default shall
occur on account of a failure to pay due solely to an administrative or
operational error of Administrative Agent or of a Borrower’s depository in
connection with the debit of a required payment if such Borrower maintained a
balance sufficient to satisfy the required payment in the Collateral Account
designated for payment in the ACH Authorization and Borrowers make the required
payment within three (3) Business Days following the earlier of (i) Borrower’s
knowledge of such failure to pay, or (ii) notice of failure to pay is duly given
to Borrower Representative.

8.2    Covenant Default.

(a)    A Loan Party fails or neglects to perform any obligation in
Section 3.3(b), Section 4.2, Sections 6.2, 6.4, 6.5, 6.6, 6.8 or 6.10, or
violates any covenant in Section 7; or

(b)    A Loan Party 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 fifteen (15) days after
the occurrence thereof.

8.3    Material Adverse Effect. Following the Closing Date, an event or
circumstance has occurred which could reasonably be expected to have a Material
Adverse Effect.

8.4    Attachment; Levy; Restraint on Business.

(a)    (i) The service of process seeking to attach, by trustee or similar
process, any material funds of a Loan Party or of any of its Subsidiaries, or
(ii) a notice of Lien or levy is filed against the material assets of any Loan
Party or any of its Subsidiaries by any Governmental Authority, and the same
under clauses (i) and (ii) hereof are not, within twenty (20) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); provided, however, no Loans shall be made during any twenty
(20) day cure period; or

(b)    (i) Any material portion of the assets of a Loan Party or any of its
Subsidiaries is attached, seized, levied on, or comes into possession of a
trustee or receiver, or (ii) any court order enjoins, restrains, or prevents a
Loan Party or any of its Subsidiaries from conducting all or any material part
of its business, and, in case such court

 

16

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

order applies to other businesses in the same geographic location, in the same
or similar line of business or otherwise to similarly situated businesses
generally, such court order is not vacated or modified to avoid such restriction
on the operation of the business within twenty (20) days following the entry
thereof.

8.5    Insolvency. (a) A Loan Party or any of its Subsidiaries, as a whole, is
unable to pay its debts (including trade debts) as they become due or otherwise
becomes insolvent, the realizable value of the Loan Parties’ assets is less than
the aggregate sum of its liabilities, or the Loan Parties; (b) a Loan Party or
any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency
Proceeding is begun against a Loan Party or any of its Subsidiaries and is not
dismissed or stayed within thirty (30) days (but no Loans shall be made while
any of the conditions described in this Section 8.5 exist and/or until any
Insolvency Proceeding is dismissed).

8.6    Other Agreements. There is, under any agreement to which a Loan Party or
any of its Subsidiaries is a party with a third party or parties, (a) any
default (after giving effect to any applicable cure or grace periods) 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 $500,000 (except if such third party is restricted from
accelerating the maturity of such Indebtedness, including pursuant to the terms
of a subordination or similar agreement entered into with respect to the
Obligations); or (b) any breach or default by a Loan Party or a Subsidiary of
such Loan Party, the result of which could reasonably be expected to have a
Material Adverse Effect.

8.7    Judgments; Penalties. (a) To the extent not otherwise covered by third
party insurance as to which liability has been accepted (subject to customary
reservation of rights) by the applicable insurance carrier, 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 $500,000 shall be rendered
against a Loan Party or any of its Subsidiaries by any Governmental Authority,
or (b) one or more fines, penalties or final judgments, orders or decrees for
the payment of money which could reasonably be expected to result in a Material
Adverse Effect, and, in each case, the same are not, within twenty (20) days
after the entry, assessment or issuance thereof, vacated, or after execution
thereof, stayed or bonded pending appeal, (provided that no Loans will be made
prior to the vacation, stay, or bonding of such fine, penalty, judgment, order
or decree).

8.8    Misrepresentations. Any Loan Party or any Person acting for such Loan
Party makes any representation, warranty, or other statement now or later in
this Agreement, any Loan Document or in any writing delivered to Administrative
Agent, Collateral Trustee or any Lender or to induce Administrative Agent,
Collateral Trustee or any Lender 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. Any Subordination Agreement governing any Subordinated
Debt shall for any reason be revoked or invalidated or otherwise cease to be in
full force and effect, any party thereto (other than a Secured Party) shall be
in breach thereof or contest in any manner the validity or enforceability
thereof or deny that it has any further obligation thereunder, or the
Obligations shall for any reason not have the priority contemplated by this
Agreement.

8.10    Governmental Approval. Any Governmental Approval shall have been
revoked, rescinded, suspended, modified in an adverse manner or not renewed for
a full term, and such revocation, rescission, suspension, modification or
non-renewal has, or could reasonably be expected to have, a Material Adverse
Effect.

8.11    Guaranty. Any guaranty of any Obligations terminates or ceases for any
reason to be in full force and effect, except if the same is released or
terminated in accordance with its terms.

9.    COLLATERAL TRUSTEE’S RIGHTS AND REMEDIES

9.1    Acceleration. Upon the occurrence and during the continuation of an Event
of Default, Administrative Agent, is entitled, without notice or demand, to
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 Administrative Agent), and to stop advancing money or
extending credit for any Borrower’s benefit under this Agreement (and each
Lender’s Commitment shall be deemed terminated as long as an Event of Default
has occurred and is continuing).

 

17

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

9.2    Remedies. Upon the occurrence and during the continuation of an Event of
Default, Collateral Trustee is entitled, solely at the direction of
Administrative Agent, subject to the terms of the Collateral Trust Agreement,
without notice or demand, to do any or all of the following, to the extent not
prohibited by applicable law:

(a)    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
Administrative Agent may determine is advisable, and notify any Person owing a
Loan Party money of Collateral Trustee’s security interest in such funds;

(b)    make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral;

(c)    ratably apply to the Obligations any amount held by Collateral Trustee
owing to or for the credit or the account of a Loan Party;

(d)    ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral;

(e)    deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any Account Control Agreement or similar
agreements providing control of any Collateral;

(f)    demand and receive possession of any Loan Party’s Books; and

(g)    exercise all rights and remedies available to Collateral Trustee 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).

Loan Parties shall assemble the Collateral if Collateral Trustee requests and
make it available as Collateral Trustee designates. Collateral Trustee may enter
premises where the Collateral is located, take and maintain possession of any
part of the Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all expenses
incurred. Each Loan Party grants Collateral Trustee a license to enter and
occupy any of its premises, without charge, to exercise any of Collateral
Trustee’s rights or remedies. Collateral Trustee is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge, a
Loan Party’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
Collateral Trustee’s exercise of its rights under this Section, a Loan Party’s
rights under all licenses and all franchise agreements inure to Collateral
Trustee’s benefit. If, after the acceleration of the Obligations, a Loan Party
receives proceeds of Collateral, such Loan Party shall to deliver such proceeds
to Collateral Trustee, for the ratable benefit of Lenders, to be applied to the
Obligations.

9.3    Power of Attorney. Each Loan Party hereby irrevocably appoints Collateral
Trustee (and any of Collateral Trustee’s partners, managers, officers, agents or
employees) as its lawful attorney-in-fact, with full power of substitution,
exercisable upon the occurrence and during the continuation of an Event of
Default, to: (a) send requests for verification of Accounts or notify Account
Debtors of Collateral Trustee’s security interest and Liens in the Collateral;
(b) endorse such Loan Party’s name on any checks or other forms of payment or
security; (c) sign such Loan Party’s name on any invoice or bill of lading for
any Account or drafts against Account Debtors schedules and assignments of
Accounts, verifications of Accounts, and notices to Account Debtors; (d) settle
and adjust disputes and claims about the Accounts directly with Account Debtors,
for amounts and on terms Administrative Agent or Collateral Trustee determine
reasonable; (e) make, settle, and adjust all claims under such Loan Party’s
insurance policies; (f) 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;
(g) transfer the Collateral into the name of Collateral Trustee or a third party
as the Code permits; and (h) dispose of the Collateral. Each Loan Party further
hereby appoints Collateral Trustee (and any of Collateral Trustee’s partners,
managers, officers, agents or employees) as its lawful attorney-in-fact, with
full power of substitution, regardless of whether or

 

18

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

not an Event of Default has occurred or is continuing to: (i) sign such Loan
Party’s name on any documents and other Security Instruments necessary to
perfect or continue the perfection of, or maintain the priority of, Collateral
Trustee’s security interest in the Collateral, (ii) take all such actions which
such Loan Party is required, but fails to do under the covenants and provisions
of the Loan Documents; (iii) take any and all such actions as Collateral Trustee
may reasonably determine to be necessary or advisable for the purpose of
maintaining, preserving or protecting the Collateral or any of the rights,
remedies, powers or privileges of Collateral Trustee under this Agreement or the
other Loan Documents. Collateral Trustee’s foregoing appointment as each Loan
Party’s attorney in fact, and all of Collateral Trustee’s rights and powers,
coupled with an interest, are irrevocable until all Obligations (other than
contingent indemnification obligations as to which no claim has been asserted or
is known to exist) have been fully repaid, in cash, and otherwise fully
performed and all commitments to make Loans hereunder have been terminated.

9.4    Protective Payments. If a Loan Party 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 may be required to preserve the Collateral, Collateral Trustee may
obtain such insurance or make such payment, and all amounts so paid by
Collateral Trustee are Lender Expenses and immediately due and payable, bearing
interest at the then highest rate applicable to the Obligations, and secured by
the Collateral. Collateral Trustee will make reasonable efforts to provide
Borrower Representative with notice of Collateral Trustee obtaining such
insurance at the time it is obtained or within a reasonable time thereafter. No
payments by Collateral Trustee are deemed an agreement to make similar payments
in the future or Collateral Trustee’s waiver of any Event of Default.

9.5    Application of Payments and Proceeds Upon Default. If an Event of Default
has occurred and is continuing, Collateral Trustee shall have the right to apply
in any order any funds in its possession, whether payments, proceeds realized as
the result of any collection of Accounts or other disposition of the Collateral,
or otherwise, to the Obligations, for the ratable benefit of Lenders. Collateral
Trustee shall pay any surplus to Borrowers by credit to the Deposit Account
designated by Borrowers or as directed by a court of competent jurisdiction.
Borrowers shall remain liable to Collateral Trustee and Lenders for any
deficiency. If Collateral Trustee, as directed by Administrative Agent in
Administrative Agent’s good faith business judgment, directly or indirectly,
enters into a deferred payment or other credit transaction with any purchaser at
any sale of Collateral, Collateral Trustee may, at the direction of
Administrative Agent, either reduce the Obligations by the principal amount of
the purchase price or defer the reduction of the Obligations until the actual
receipt by Collateral Trustee of cash or immediately available funds therefor.

9.6    Collateral Trustee’s Liability for Collateral. So long as Collateral
Trustee complies with reasonable secured lender practices regarding the
safekeeping of the Collateral in the possession or under the control of
Collateral Trustee, Collateral Trustee shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person. Loan Parties bear all risk
of loss, damage or destruction of the Collateral.

9.7    No Waiver; Remedies Cumulative. Any failure by Administrative Agent,
Collateral Trustee or any Lender, at any time or times, to require strict
performance by each Loan Party of any provision of this Agreement or any other
Loan Document shall not waive, affect, or diminish any right of Administrative
Agent, Collateral Trustee or any Lender thereafter to demand strict performance
and compliance herewith or therewith. Collateral Trustee’s rights and remedies
under this Agreement and the other Loan Documents are cumulative. Collateral
Trustee has all rights and remedies provided under the Code, by law, or in
equity. Collateral Trustee or any Lender’s exercise of one right or remedy is
not an election and shall not preclude Collateral Trustee or any Lender from
exercising any other remedy under this Agreement or other remedy available at
law or in equity, and any waiver of any Event of Default is not a continuing
waiver. Any delay in exercising any remedy is not a waiver, election, or
acquiescence.

9.8    Demand Waiver. Each Loan Party waives presentment, demand, notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments or chattel
paper.

9.9    Shares. Each Loan Party recognizes that Collateral Trustee may be unable
to effect a public sale of any or all the Shares, by reason of certain
prohibitions contained in federal securities laws and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for

 

19

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

investment and not with a view to the distribution or resale thereof. Each Loan
Party acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. Collateral Trustee
shall be under no obligation to delay a sale of any of the Shares for the period
of time necessary to permit the issuer thereof to register such securities for
public sale under federal securities laws or under applicable state securities
laws, even if such issuer would agree to do so.

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: (a) 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; (b) upon confirmation of receipt, when sent by
electronic mail transmission; (c) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, or email address indicated below.
Administrative Agent, Collateral Trustee, Lenders and Loan Parties may change
their respective mailing or electronic mail addresses by giving the other party
written notice thereof in accordance with the terms of this Section 10.

 

If to Loan Parties:   

MOLECULAR TEMPLATES OPCO, INC.

9301 Amberglen Blvd, Suite 100

Austin, TX 78729

Attention: Adam Cutler, CFO Treasurer, and Secretary

Email: adam.cutler@mtem.com

With a copy, not constituting notice, to:   

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.

Chrysler Center

666 Third Avenue

New York, NY 10017

Attn: Joseph Price

Email: JWPrice@mintz.com

 

20

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

If to Collateral Trustee:   

ANKURA TRUST COMPANY, LLC

140 Sherman Street, Fourth Floor

Fairfield, CT 06824

Attention: Lisa Price

Email: Lisa.Price@ankura.com

If to Administrative Agent or Lenders:   

K2 HEALTHVENTURES LLC

855 Boylston Street, 10th Floor

Boston, MA 02116

 

For Loan Requests, monthly reporting, Compliance Certificates, and other regular
reporting deliverables:

Attention: Finance

Email: finance@k2hv.com; parag@k2hv.com; austin@k2hv.com; derek@k2hv.com

 

For all other notices:

Attention: Legal Notices

Email: legal@k2hv.com

With a copy to (but not constituting notice, and excluding Loan Requests and
regular reporting):   

COOLEY LLP

3175 Hanover Street

Palo Alto, CA 94304-1150

Attention: Cynthia Bai

Email: cbai@cooley.com

11.    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

Except as otherwise expressly provided in any of the Loan Documents, this
Agreement and the other Loan Documents shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of law. Each party hereto hereby submits to the exclusive
jurisdiction of the State and Federal courts in New York County, City of New
York, New York; provided, however, that nothing in this Agreement shall be
deemed to operate to preclude Collateral Trustee 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 Administrative Agent, Collateral Trustee or any Lender. Each
party hereto expressly submits and consents in advance to such jurisdiction in
any action or suit commenced in any such court, and each party hereto 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. Each party hereto
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 such
party at the address set forth in, or subsequently provided by such party in
accordance with, Section 10 and that service so made shall be deemed completed
upon the earlier to occur of such party’s actual receipt thereof or three
(3) Business Days after deposit in the U.S. mails, proper postage prepaid. Each
party hereto hereby expressly waives any claim to assert that the laws of any
other jurisdiction govern this Agreement.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS 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 THE PARTIES TO ENTER INTO THIS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR ANYWHERE
ELSE, EACH PARTY HERETO AGREES THAT IT SHALL NOT SEEK FROM ANY OTHER PARTY UNDER
ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES. EACH PARTY HERETO HAS REVIEWED THIS WAIVER
WITH ITS COUNSEL.

 

21

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

This Section 11 shall survive the termination of this Agreement.

12.    GENERAL PROVISIONS

12.1    Termination Prior to Term Loan Maturity Date; Survival; Release of
Collateral. All covenants, representations and warranties and grants of security
interests made in this Agreement continue in full force until this Agreement has
terminated pursuant to its terms and all Obligations (other than contingent
indemnification obligations as to which no claim has been asserted or is known
to exist and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied in full, in cash and all
commitments to extend credit pursuant to this Agreement have terminated (such
date, the “Discharge Date”). So long as Borrowers have satisfied the Obligations
(other than contingent indemnification obligations as to which no claim has been
asserted or is known to exist and any other obligations which, by their terms,
are to survive the termination of this Agreement), this Agreement and any
remaining commitments to extend credit may be terminated prior to the Term Loan
Maturity Date by Borrowers, by written notice of termination to Lenders. Those
obligations that are expressly specified in this Agreement as surviving this
Agreement’s termination shall continue to survive notwithstanding this
Agreement’s termination. Promptly after the Discharge Date, Lenders shall direct
Collateral Trustee to deliver evidence of the release of Collateral.

12.2    Successors and Assigns.

(a)    Successors and Assigns Generally. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. No Loan Party may
assign this Agreement or any rights or obligations under it without Lenders’
prior written consent (which may be granted or withheld in each Lender’s
discretion).

(b)    Assignment by Lenders. Each Lender has the right, without the consent of
the Loan Parties, to sell, transfer, assign, negotiate, or grant participation
in all or any part of, or any interest in, such Lender’s obligations, rights,
and benefits under this Agreement and the other Loan Documents, provided that
without prior written consent of Borrower Representative, as long as no Event of
Default has occurred and is continuing, no Lender shall assign or grant voting
participation to a direct competitor of Borrowers or to a vulture fund or to the
extent otherwise restricted in any other Loan Document. Each such Lender shall
notify the Administrative Agent of such assignment and deliver to the
Administrative Agent a copy of any assignment and assumption agreement entered
into in connection thereto.

(c)    Register; Participant Register. Administrative Agent, acting solely for
this purpose as an agent of the Loan Parties, shall maintain at one of its
offices in the United States a register for the recordation of the names and
addresses of the Lenders, and the Commitments of, and principal amounts (and
stated interest) of the Term Loans owing to each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive absent manifest error, and the Loan Parties, Administrative Agent and
the Lenders shall treat each Person whose name is recorded in the Register
pursuant to the terms hereof as Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Loan Parties,
any Lender and the Collateral Trustee at any reasonable time and from time to
time upon reasonable prior notice. Each Lender that sells a participation shall,
acting solely for this purpose as a non-fiduciary agent of the Loan Parties,
maintain a register on which it enters the name and address of each participant
and the principal amounts (and stated interest) of each participant’s interest
in the Term Loans or other obligations under the Loan Documents (the
“Participant Register”); provided that no Lender shall have any obligation to
disclose all or any portion of the Participant Register (including the identity
of any participant or any information relating to a participant’s interest in
any commitments, loans or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such commitment, loan or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register shall be conclusive absent manifest error, and such
Lender shall treat each Person whose name is recorded in the Participant
Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt,
Administrative Agent (in its capacity as Administrative Agent) shall have no
responsibility for maintaining a Participant Register.

 

22

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

12.3    Indemnification. Each Loan Party agrees to indemnify, defend and hold
Administrative Agent, Collateral Trustee and each Lender and their respective
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Lender (each, an “Indemnified Person”) harmless
against: (i) all obligations, demands, claims, and liabilities (including such
claims, costs, expenses, damages and liabilities based on liability in tort,
including strict liability in tort) (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 Lender Expenses) in any
way suffered, incurred, or paid by such Indemnified Person as a result of,
following from, consequential to, or arising from transactions among
Administrative Agent, Collateral Trustee, Lenders and Loan Parties (including
reasonable and documented attorneys’ fees and expenses) except for Claims and/or
losses to the extent directly caused by such Indemnified Person’s gross
negligence or willful misconduct or any Claims and/or losses with respect to any
actions among Indemnified Persons in each case, for the avoidance of doubt. 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. This
Section 12.3 shall not apply with respect to Taxes other than any Taxes that
represent losses, claims, damages, etc. arising from any non-Tax claim.

12.4    Borrower Liability. If any Person is joined to this Agreement as a
Borrower, the following provisions shall apply: Each Borrower hereunder shall be
jointly and severally obligated to repay all Loans made hereunder, regardless of
which Borrower actually receives said Loan, as if each Borrower hereunder
directly received all Loans. Each Borrower waives (a) any suretyship defenses
available to it under the Code or any other applicable law, and (b) any right to
require Collateral Trustee to: (i) proceed against any Borrower or any other
person; (ii) proceed against or exhaust any security; or (iii) pursue any other
remedy. Collateral Trustee may exercise or not exercise any right or remedy it
has against any Borrower or any security it holds (including the right to
foreclose by judicial or non-judicial sale) without affecting any Borrower’s
liability. Notwithstanding any other provision of this Agreement or other
related document, each Borrower irrevocably waives all rights that it may have
at law or in equity (including, without limitation, any law subrogating Borrower
to the rights of Collateral Trustee under this Agreement) to seek contribution,
indemnification or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by such Borrower with respect to the
Obligations in connection with this Agreement or otherwise and all rights that
it might have to benefit from, or to participate in, any security for the
Obligations as a result of any payment made by a Borrower with respect to the
Obligations in connection with this Agreement or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void. If any payment is made to a Borrower
in contravention of this Section, such Borrower shall hold such payment in trust
for Lenders and such payment shall be promptly delivered to Collateral Trustee,
for the ratable benefit of Lenders, for application to the Obligations, whether
matured or unmatured.

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

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

12.7    Correction of Loan Documents. Administrative Agent may correct patent
errors and fill in any blanks in the Loan Documents consistent with the
agreement of the parties.

12.8    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 effective except, pursuant to an
agreement in writing by the parties thereto, and in case of this Agreement,
pursuant to an agreement in writing entered into by Borrowers, Administrative
Agent, the Required Lenders and Collateral Trustee, provided that Collateral
Trustee’s approval shall not be required for any amendment or supplement that
has the effect solely of (i) adding or maintaining Collateral, securing
additional Obligations that are otherwise permitted by the terms of this
Agreement to be secured by the Collateral or preserving, perfecting or
establishing the priority of the Liens thereon or the rights of Collateral
Trustee therein; (ii) curing any ambiguity, defect or inconsistency;
(iii) providing for the assumption of a Borrower’s or Guarantor’s Obligations
under any Loan Document in the case of a merger or consolidation or sale of all
or substantially all of the assets of a Borrower or Guarantor, as applicable;
(iv) making any change that would provide any additional rights or benefits to
the Administrative Agent, any Lender or Collateral Trustee or that does not
adversely affect the legal rights under this Agreement or any other Loan
Document of Collateral Trustee; or (v) to the extent the Collateral Trust
Agreement does not require Collateral Trustee’s approval to such amendment or
modification. It is agreed that any change to the definition of “Designated
Holder” or the rights

 

23

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

of a Designated Holder in Section 6.14 (and any change to this Agreement that
would modify the consent required pursuant to this sentence) shall require the
consent of the Collateral Trustee. 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, 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 among the parties about the
subject matter of the Loan Documents merge into the Loan Documents.

12.9    Counterparts; Electronic Execution of Documents. This Agreement and any
other Loan Documents, except to the extent otherwise required pursuant to the
terms thereof, 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. 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. Delivery of an executed counterpart of a
signature page of any Loan Document by electronic means including by email
delivery of a “.pdf” format data file shall be effective as delivery of an
original executed counterpart of such Loan Document.

12.10    Confidentiality; Publicity.

(a)    In handling any confidential information, Administrative Agent,
Collateral Trustee and each Lender agree to exercise the same degree of care
that it exercises for its own proprietary information, but disclosure of
information may be made: (a) to its Subsidiaries or Affiliates; (b) to
prospective transferees or purchasers of any interest in the Loans so long as
such parties are bound by confidentiality terms consistent in all material
respects with the terms hereof; (c) as required by law, regulation, subpoena, or
other order and in connection with reporting obligations applicable to
Administrative Agent, Collateral Trustee or such Lender, including pursuant to
the Exchange Act, (d) to Administrative Agent, Collateral Trustee or such
Lender’s regulators or as otherwise required in connection with any examination
or audit; (e) as Administrative Agent, Collateral Trustee or such Lender
considers reasonably appropriate in connection with the exercise of remedies
with respect to the Obligations; and (f) to third-party service providers of
Administrative Agent, Collateral Trustee or such Lender so long as such service
providers are bound by confidentiality terms not more permissive than the terms
hereof. Confidential information does not include information that is either:
(i) in the public domain or in Administrative Agent, Collateral Trustee or any
Lender’s possession when disclosed to Administrative Agent, Collateral Trustee
or such Lender, as applicable, or becomes part of the public domain (other than
as a result of its disclosure by Administrative Agent, Collateral Trustee or
such Lender in violation of this Agreement) after disclosure to Administrative
Agent, Collateral Trustee or such Lender, as applicable; or (ii) disclosed to
Administrative Agent, Collateral Trustee or such Lender by a third party, if
Administrative Agent, Collateral Trustee or such Lender, as applicable, does not
know that the third party is prohibited from disclosing the information. The
provisions of this paragraph shall survive the termination of this Agreement.

(b)    Neither party hereto shall publicize or use the other party’s name or
logo, or hyperlink to such other parties’ website, describe the relationship of
the parties or the transaction contemplated by this Agreement, in written and
oral presentations, advertising, promotional and marketing materials, client
lists, public relations materials or on its web site (together, the “Publicity
Materials”) without prior written notice to the party that is the subject of the
proposed Publicity Materials, together with a draft (or, if Publicity Materials
are not proposed to be delivered in written form, an outline of the content to
be included) so as to provide such subject party a reasonable opportunity to
review prior to publication, and each party agrees, in connection with any
Publicity Materials proposed by such party to reasonably consider requested
changes or corrections requested by the party that is the subject of such
Publicity Materials in good faith, and upon request, to provide the final form
prior to publication or other dissemination.

12.11    Borrower Representative. Each of the Borrowers hereby appoints Borrower
Representative to act as its exclusive agent for all purposes under the Loan
Documents (including, without limitation, with respect to all

 

24

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

matters related to the borrowing and repayment of any Loan). Each of the
Borrowers acknowledges and agrees that (a) Borrower Representative may execute
such documents on behalf of any Borrower as Borrower Representative deems
appropriate in its sole discretion and each Borrower shall be bound by and
obligated by all of the terms of any such document executed by Borrower
Representative on its behalf, (b) any notice or other communication delivered
hereunder to Borrower Representative shall be deemed to have been delivered to
each Borrower and (c) Administrative Agent, Collateral Trustee and any Lender
shall accept (and shall be permitted to rely on) any document or agreement
executed by Borrower Representative on behalf of Borrowers (or any of them).
Each Borrower must act through the Borrower Representative for all purposes
under this Agreement and the other Loan Documents. Notwithstanding anything
contained herein to the contrary, to the extent any provision in this Agreement
requires any Borrower to interact in any manner with Administrative Agent,
Collateral Trustee or any Lender, such Borrower shall do so through Borrower
Representative.

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

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. Except to the extent set
forth herein, 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    Appointment of Collateral Trustee. Each Lender hereby appoints
Collateral Trustee to act on behalf of Lenders as collateral agent under this
Agreement and the other Loan Documents, and to hold and enforce any and all
Liens on Collateral granted by any of the Loan Parties to secure any of the
Obligations, all in accordance with the terms of the Collateral Trust Agreement.
The provisions of this Section 12.16 are solely for the benefit of Collateral
Trustee and Lenders and no Loan Party nor any other Person shall have any rights
as a third party beneficiary of any of the provisions hereof. The Collateral
Trustee may resign or be removed or replaced, and a successor Collateral Trustee
may be appointed in accordance with the terms and subject to the conditions of
the Collateral Trust Agreement.

12.17    Appointment of Administrative Agent.

(a)    Each Lender hereby appoints Administrative Agent to act on behalf of
Lenders as administrative agent under this Agreement and the other Loan
Documents. The provisions of this Section 12.17 are solely for the benefit of
Administrative Agent and Lenders and no Loan Party nor any other Person shall
have any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, Administrative Agent
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Loan Party or any other Person.
Administrative Agent shall not have any duties or responsibilities except for
those expressly set forth in this Agreement and the other Loan Documents,
together with such powers as are reasonably related thereto. The duties of
Administrative Agent shall be mechanical and administrative in nature and
Administrative Agent shall not have, or be deemed to have, by reason of this
Agreement, any other Loan Document or otherwise a fiduciary relationship in
respect of any Lender.

(b)    If Administrative Agent shall request instructions from Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until it
shall have received instructions from the Required Lenders, and Administrative
Agent shall incur no liability to any Person by reason of so refraining.
Administrative Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other

 

25

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

Loan Document for any reason. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against Administrative Agent as a result of
Administrative Agent’s acting or refraining from acting hereunder or under any
other Loan Document in accordance with the instructions of Lenders.

(c)    Administrative Agent may perform any and all of its duties and exercise
its rights and powers hereunder by or through any one or more sub-agent s
appointed by Administrative Agent. Administrative Agent and any such sub-agent
may perform any and all of its duties and exercise its rights and powers by or
through their respective and their respective related parties. The exculpatory
provisions of this Section 12.17 shall apply to any such sub-agent and to the
related parties of such Administrative Agent and any such sub-agent. No
Administrative Agent shall be responsible for the negligence or misconduct of
any sub-agent except to the extent that a court of competent jurisdiction
determines in a final and non-appealable judgment that such Administrative Agent
acted with gross negligence or willful misconduct in the selection of such
sub-agents.

(d)    Neither Administrative Agent nor any of its Affiliates nor any of their
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Loan Documents, except for damages solely caused by
its or their own gross negligence or willful misconduct as finally determined by
a court of competent jurisdiction. Without limitation of the generality of the
foregoing, Administrative Agent: (i) may consult with legal counsel, independent
chartered accountants and other experts and consultants selected by it and shall
not be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, experts or consultants;
(ii) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with this Agreement or the other Loan Documents; (iii) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of any Loan Party or to inspect the Collateral (including
the books and records) of any Loan Party; (iv) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; and (v) shall incur
no liability under or in respect of this Agreement or the other Loan Documents
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by email, telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.

(e)    With respect to its Commitments and Loans hereunder, Administrative Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
Administrative Agent; and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated, include Administrative Agent in its individual capacity (to
the extent it holds any Obligations owing to Lenders or Commitments hereunder).
Administrative Agent and each of its Affiliates may lend money to, invest in,
and generally engage in any kind of business with, any Loan Party, any of their
Affiliates and any Person who may do business with or own securities of any Loan
Party or any such Affiliate, all as if Administrative Agent was not
Administrative Agent and without any duty to account therefor to Lenders.
Administrative Agent and its Affiliates may accept fees and other consideration
from any Loan Party for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.

(f)    Each Lender acknowledges that it has, independently and without reliance
upon Administrative Agent or any other Lender, made its own credit and financial
analysis of the Loan Parties and its own decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and without reliance
upon Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.

(g)    Each Lender agrees to indemnify Administrative Agent (to the extent not
reimbursed by Loan Parties and without limiting the obligations of Loan Parties
hereunder), ratably according to its respective Pro Rata Share, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against
Administrative Agent in any way relating to or arising out of this Agreement or
any other Loan Document or any action taken or omitted by Administrative Agent
in connection therewith; provided, however, that no Lender shall

 

26

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

be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from Administrative Agent’s gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction. Without limiting the
foregoing, each Lender agrees to reimburse Administrative Agent promptly upon
demand for its ratable share of any out-of-pocket expenses (including reasonable
and documented counsel fees) incurred by Administrative Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and each other Loan Document, to the extent that Administrative Agent is not
reimbursed for such expenses by the Loan Parties.

(h)    Administrative Agent may resign at any time by giving not less than
thirty (30) days’ prior written notice thereof to Lenders, Collateral Trustee
and Borrower Representative. Upon any such resignation, Lenders shall have the
right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by Lenders and shall have
accepted such appointment within thirty (30) days after Administrative Agent’s
giving notice of resignation, then Administrative Agent may, on behalf of
Lenders, appoint a successor Administrative Agent, which shall be a Lender, if a
Lender is willing to accept such appointment, or otherwise shall be a commercial
bank or financial institution or a subsidiary of a commercial bank or financial
institution if such commercial bank or financial institution has combined
capital of at least $300,000,000. If no successor Administrative Agent has been
appointed pursuant to the foregoing, by the 30th day after the date such notice
of resignation was given by the resigning Administrative Agent, such resignation
shall become effective and Lenders shall thereafter perform all the duties of
Administrative Agent hereunder until such time, if any, as Lenders appoint a
successor Administrative Agent as provided above. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall succeed to and become vested
with all the rights, powers, privileges and duties of the resigning
Administrative Agent. Upon the earlier of the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent or the
effective date of the resigning Administrative Agent’s resignation, the
resigning Administrative Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity, expense reimbursement or other rights in favor of such resigning
Administrative Agent shall continue. After any resigning Administrative Agent’s
resignation hereunder, the provisions of this Section 12.17 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
Notwithstanding the foregoing, as long as K2 HealthVentures LLC is a Lender
pursuant to this Agreement, K2 HealthVentures LLC shall not resign as
Administrative Agent unless a successor Administrative Agent is appointed
concurrently with such resignation, which successor Administrative Agent shall
have the wherewithal to perform, and shall succeed to and become vested with all
the rights, powers, privileges and duties of the resigning Administrative Agent
under this Agreement and the other Loan Documents.

(i)    In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence and during
the continuation of any Event of Default, with the prior written consent of
Administrative Agent, each Lender and each holder of any Obligation is hereby
authorized at any time or from time to time, without notice to any Loan Party or
to any other Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all balances held by it at any of its
offices for the account of any Loan Party or any Subsidiary of a Loan Party
(regardless of whether such balances are then due to such Loan Party or such
Subsidiary) and any other properties or assets any time held or owing by that
Lender or that holder to or for the credit or for the account of any Loan Party
or any Subsidiary of a Loan Party against and on account of any of the
Obligations which are not paid when due. Any Lender or holder of any Obligation
exercising a right to set off or otherwise receiving any payment on account of
the Obligations in excess of its Pro Rata Share thereof in accordance with the
terms of this Agreement relating to the priority of the repayment of the
Obligations shall purchase for cash (and the other Lenders or holders shall
sell) such participations in each such other Lender’s or holder’s Pro Rata Share
of the Obligations as would be necessary to cause such Lender to share the
amount so set off or otherwise received with each other Lender or holder in
accordance with their respective Pro Rata Shares and in accordance with the
terms of this Agreement relating to the priority of the repayment of the
Obligations. Each Loan Party agrees, to the fullest extent permitted by law,
that (i) any Lender or holder may exercise its right to set off with respect to
amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such amount so set off to other Lenders and holders and
(ii) any Lender or holders so purchasing a participation in the Loans made or
other Obligations held by other Lenders or holders may exercise all rights of
set-off, bankers’ Lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender or holder were a direct holder of the
Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the set-off amount or
payment otherwise received is thereafter recovered from Lender that has
exercised the right of set-off, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.

 

27

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

(j)    Nothing in this Agreement or the other Loan Documents shall be deemed to
require Administrative Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that Borrowers may have against any Lender as a result
of any default by such Lender hereunder. To the extent that Administrative Agent
advances funds to Borrowers on behalf of any Lender and is not reimbursed
therefor on the same Business Day as such advance is made, Administrative Agent
shall be entitled to retain for its account all interest accrued on such advance
until reimbursed by the applicable Lender.

(k)    If Administrative Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Administrative Agent from Borrowers and such related payment is not received
thereby, then Administrative Agent will be entitled to recover such amount from
such Lender on demand without set-off, counterclaim or deduction of any kind.

(l)    If Administrative Agent determines at any time that any amount received
thereby under this Agreement shall be returned to Borrowers or paid to any other
Person pursuant to any insolvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement or any other Loan Document,
Administrative Agent will not be required to distribute any portion thereof to
any Lender. In addition, each Lender will repay to Administrative Agent on
demand any portion of such amount that Administrative Agent has distributed to
such Lender, together with interest at such rate, if any, as Administrative
Agent is required to pay to Borrowers or such other Person, without set-off,
counterclaim or deduction of any kind.

(m)    Administrative Agent will use reasonable efforts to provide Lenders with
any written notice of Event of Default received by Administrative Agent from, or
delivered by Administrative Agent to, any Loan Party; provided, however, that
Administrative Agent shall not be liable to any Lender for any failure to do so,
except to the extent that such failure is attributable solely to Administrative
Agent’s gross negligence or willful misconduct as finally determined by a court
of competent jurisdiction.

(n)    Anything in this Agreement or any other Loan Document to the contrary
notwithstanding, each Lender hereby agrees with each other Lender and with
Administrative Agent that no Lender shall take any action to protect or enforce
its rights arising out of this Agreement or any other Loan Document (including
exercising any rights of set-off) without first obtaining the prior written
consent of the Required Lenders, it being the intent of Lenders that any such
action to protect or enforce rights under this Agreement and the other Loan
Documents shall be taken in concert and at the direction or with the consent of
Administrative Agent at the request of Required Lenders.

13.    GUARANTY

13.1    Guaranty. Each Guarantor, including Parent, who has executed this
Agreement as of the date hereof, together with each Loan Party who accedes to
this Agreement as a Guarantor after the date hereof pursuant to Section 6.11
hereby, jointly and severally, unconditionally and irrevocably, guarantees the
prompt and complete payment and performance by Borrowers and the other Loan
Parties when due (whether at the stated maturity, by acceleration or otherwise)
of the Obligations. In furtherance of the foregoing, and without limiting the
generality thereof, each Guarantor agrees as follows:

(a)    each Guarantor’s liability hereunder shall be the immediate, direct, and
primary obligation of such Guarantor and shall not be contingent upon any
exercise or enforcement of any remedy of Collateral Trustee, Administrative
Agent or Lender or that any of them may have against a Borrower, or any other
Guarantor or other Person liable in respect of the Obligations, or all or any
portion of the Collateral; and

(b)    Administrative Agent, on behalf of Lenders, may enforce this guaranty
notwithstanding the existence of any dispute between any Secured Party and any
Loan Party with respect to the existence of any Event of Default.

13.2    Maximum Liability. Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor shall in no
event exceed the amount which can be guaranteed by such Guarantor under
applicable federal, state provincial or territorial laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 13.5).

 

28

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

13.3    Termination. The guaranty pursuant to this Section 13 shall remain in
full force and effect until the date the Obligations have been paid in full in
cash, and all commitments to extend credit have been terminated.

13.4    Unconditional Nature of Guaranty. No payment made by a Borrower,
Guarantor, any other guarantor or any other Person or received or collected by
any Secured Party from a Borrower, Guarantor, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise affect
the liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the
Obligations or any payment received or collected from such Guarantor in respect
of the Obligations), remain liable for the Obligations up to the maximum
liability of such Guarantor hereunder until the date the Obligations are paid in
full in cash.

13.5    Right of Contribution

(a)    If in connection with any payment made by any Guarantor hereunder any
rights of contribution arise in favor of such Guarantor against one or more
other Guarantors, such rights of contribution shall be subject to the terms and
conditions of Section 13.6. The provisions of this Section 13.5 shall in no
respect limit the obligations and liabilities of any Guarantor pursuant to the
Loan Documents, and each Guarantor shall remain liable for the full amount
guaranteed by such Guarantor hereunder.

(b)    Notwithstanding any payment made by any Guarantor hereunder or any
set-off or application of funds of any Guarantor by any Secured Party, no
Guarantor shall be entitled to be subrogated to any of the rights of any Secured
Party against any Loan Party or any collateral security or guarantee or right of
offset held by any Secured Party for the payment of the Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement from
any Loan Party in respect of payments made by such Guarantor hereunder, in each
case, until the Termination Date. If any amount shall be paid to any Guarantor
on account of such subrogation rights at any time prior to the Termination Date,
such amount shall be held by such Guarantor in trust for the ratable benefit of
the Secured Parties, shall be segregated from other funds of such Guarantor, and
shall, forthwith upon receipt by such Guarantor, be turned over to
Administrative Agent in the exact form received by such Guarantor (duly indorsed
by such Guarantor to Administrative Agent, if required), to be applied to the
Obligations, irrespective of the occurrence or the continuance of any Event of
Default.

13.6    Amendments, etc. with respect to the Obligations. Each Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of
rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Obligations made by any Secured
Party may be rescinded and any of the Obligations continued, and the
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
any Secured Party, and this Agreement, the other Loan Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, in accordance with
their respective terms, and any collateral security, guarantee or right of
offset at any time held by any Secured Party for the payment of the Obligations
may be sold, exchanged, waived, surrendered or released. No Secured Party shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for the guarantee pursuant to this
Section 13 or any property subject thereto.

13.7    Guarantee Absolute and Unconditional; Guarantor Waivers; Guarantor
Consent. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by any Secured Party upon the guaranty contained in this Section 13 or
acceptance of this guaranty. The Obligations shall conclusively be deemed to
have been created, contracted or incurred, or renewed,

 

29

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

extended, amended or waived, in reliance upon this guaranty. All dealings
between Borrowers, Guarantors and any Secured Party shall be conclusively
presumed to have been had or consummated in reliance upon this guaranty. Each
Guarantor further waives:

(a)    diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon any Borrower or any of the other Guarantors with
respect to the Obligations;

(b)    the defense of the statute of limitations in any action hereunder or for
the collection or performance of the Obligations;

(c)    any defense arising by reason of any lack of corporate or other authority
or any other defense of any Borrower, such Guarantor or any other Person;

(d)    any defense based upon errors or omissions by any Secured Party in the
administration of the Obligations;

(e)    any rights to set-offs and counterclaims;

(f)    any defense based upon an election of remedies (including, if available,
an election to proceed by nonjudicial foreclosure) which destroys or impairs the
subrogation rights of such Guarantor or the right of such Guarantor to proceed
against any Borrower or any other obligor of the Obligations for reimbursement;
and

(g)    without limiting the generality of the foregoing, to the fullest extent
permitted by law, any defenses or benefits that may be derived from or afforded
by applicable law that limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Agreement.

Each Guarantor understands and agrees that the guarantee contained in this
Section 13 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (i) the validity or enforceability of
this Agreement or any other Loan Document, any of the Obligations or any other
collateral security therefor or guaranty or right of offset with respect thereto
at any time or from time to time held by any Secured Party, (ii) any defense,
set-off or counterclaim (other than a defense of payment or performance) which
may at any time be available to or be asserted by any Borrower or any other
Person against any Secured Party, or (iii) any other circumstance whatsoever
(with or without notice to or knowledge of any Loan Party) which constitutes, or
might be construed to constitute, an equitable or legal discharge of any
Borrower for the Obligations, or of such Guarantor under this guaranty, in
bankruptcy or in any other instance, (iv) any Insolvency Proceeding with respect
to any Loan Party or any other Person, (v) any amalgamation, merger,
acquisition, consolidation or change in structure of any Loan Party or any other
Person, or any sale, lease, transfer or other disposition of any or all of the
assets or Equity Interests of any Loan Party or any other Person, (vi) any
assignment or other transfer, in whole or in part, of Secured Parties’ interests
in and rights under this Agreement or the other Loan Documents, including the
right to receive payment of the Obligations, or any assignment or other
transfer, in whole or in part, of any Secured Party’s interests in and to any of
the Collateral, (vii) any Secured Party’s vote, claim, distribution, election,
acceptance, action or inaction in any Insolvency Proceeding related to any of
the Obligations, and (viii) any other guaranty, whether by such Guarantor or any
other Person, of all or any part of the Obligations or any other indebtedness,
obligations or liabilities of any Guarantor to Secured Parties. When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder against
any Guarantor, Secured Parties may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as it may have
against any Loan Party or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto. Any
failure by any Secured Party to make any such demand, to pursue such other
rights or remedies or to collect any payments from any Loan Party or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of any Loan Party or any other
Person or any such collateral security, guarantee or right of offset, shall not
relieve any Guarantor of any obligation or liability hereunder, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of any Secured Party against any Guarantor. For the purposes
hereof “demand” shall include the commencement and continuance of any legal
proceedings.

13.8    Modifications of Obligations. Each Guarantor further unconditionally
consents and agrees that, without notice to or further assent from any
Guarantor: (a) the principal amount of the Obligations may be increased or
decreased and additional indebtedness or obligations of a Borrower or any other
Persons under the Loan Documents may be incurred, by one or more amendments,
modifications, renewals or extensions of any Loan Document or otherwise; (b) the
time, manner, place or terms of any payment under any Loan Document may be
extended or changed, including by an increase or decrease in the interest rate
on any Obligation or any fee or other amount payable under such Loan Document,
by an amendment, modification or renewal of any Loan Document or otherwise;
(c) the

 

30

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

time for a Borrower’s (or any other Loan Party’s) performance of or compliance
with any term, covenant or agreement on its part to be performed or observed
under any Loan Document may be extended, or such performance or compliance
waived, or failure in or departure from such performance or compliance consented
to, all in such manner and upon such terms as the applicable Secured Party may
deem proper; (d) in addition to the Collateral, Secured Parties may take and
hold other security (legal or equitable) of any kind, at any time, as collateral
for the Obligations, and may, from time to time, in whole or in part, exchange,
sell, surrender, release, subordinate, modify, waive, rescind, compromise or
extend such security and may permit or consent to any such action or the result
of any such action, and may apply such security and direct the order or manner
of sale thereof; (e) Secured Parties may discharge or release, in whole or in
part, any other Guarantor or any other Loan Party or other Person liable for the
payment and performance of all or any part of the Obligations, and may permit or
consent to any such action or any result of such action, and shall not be
obligated to demand or enforce payment upon any of the Collateral, nor shall any
Secured Party be liable to any Guarantor for any failure to collect or enforce
payment or performance of the Obligations from any Person or to realize upon the
Collateral, and (f) Secured Parties may request and accept other guaranties of
the Obligations and any other indebtedness, obligations or liabilities of a
Borrower or any other Loan Party to any Secured Party and may, from time to
time, in whole or in part, surrender, release, subordinate, modify, waive,
rescind, compromise or extend any such guaranty and may permit or consent to any
such action or the result of any such action; in each case (a) through (f), as
the applicable Secured Parties may deem advisable, and without impairing,
abridging, releasing or affecting this Agreement.

13.9    Reinstatement. The guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of a Loan Party, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, a
Loan Party or any substantial part of its property, or otherwise, all as though
such payments had not been made.

13.10    No Waiver by Course of Conduct; Cumulative Remedies. No Secured Party
shall by any act (except in writing in accordance with Section 12.9), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default, as
applicable. No failure to exercise, nor any delay in exercising, on the part of
any Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which any Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

13.11    Enforcement Expenses; Indemnification. Each Guarantor agrees to pay or
reimburse Secured Parties for all its costs and expenses incurred in collecting
against such Guarantor under this guaranty or otherwise enforcing or preserving
any rights under this Agreement and the other Loan Documents to which such
Guarantor is a party, including, without limitation, the reasonable and
documented fees and disbursements of counsel.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

31

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

[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]

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

 

BORROWER: MOLECULAR TEMPLATES OPCO, INC. By  

/s/ Eric E. Poma

Name:  

Eric E. Poma

Title:  

Chief Executive Officer

GUARANTOR: MOLECULAR TEMPLATES, INC. By  

/s/ Eric E. Poma

Name:  

Eric E. Poma

Title:  

Chief Executive Officer

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

[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]

 

COLLATERAL TRUSTEE: ANKURA TRUST COMPANY, LLC By  

/s/ Lisa J. Price

Name:  

Lisa J. Price

Title:  

Managing Director

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

[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]

 

ADMINISTRATIVE AGENT: K2 HEALTHVENTURES LLC By  

/s/ Parag Shah

Name:  

Parag Shah

Title:  

Chief Executive Officer

LENDER: K2 HEALTHVENTURES LLC By  

/s/ Parag Shah

Name:  

Parag Shah

Title:  

Chief Executive Officer

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

EXHIBIT A

DEFINITIONS

As used in this Agreement, the following capitalized terms have the following
meanings:

“Account” means 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 a Loan Party.

“Account Control Agreement” means any control agreement entered into among the
depository institution at which a Loan Party maintains a Deposit Account or the
securities intermediary or commodity intermediary at which a Loan Party
maintains a Securities Account or a Commodity Account, one or more Loan Parties,
and Collateral Trustee pursuant to which Collateral Trustee, for the benefit of
Lenders, obtains control (within the meaning of the Code) over such Deposit
Account, Securities Account, or Commodity Account.

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

“Administrative Agent” has the meaning set forth in the preamble.

“Affiliate” means, with respect to any Person, each other Person that owns or
controls, directly or indirectly, more than 10% of the Equity Interests of 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.

“Agreement” has the meaning set forth in the preamble.

“Amortization Date” means July 1, 2022, provided that if (i) no Event of Default
has occurred and is continuing, and (ii) the Second Tranche Term Loan shall have
been fully funded in accordance with its terms, the Amortization Date shall be
July 1, 2023.

“Anti-Terrorism Order” means Executive Order No. 13,224 as of September 24,
2001, Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49,079 (2001), as
amended.

“Applicable Rate” means a variable annual rate equal to the greater of (i)
8.45%, and (ii) the sum of (A) the Prime Rate, plus (B) 5.20%.

“Automatic Payment Authorization” means the Automatic Payment Authorization in
substantially the form of Exhibit F.

“Board” means, with respect to any Person, the board of directors, board of
managers, managers or other similar bodies or authorities performing similar
governing functions for such Person.

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

“Borrower” and “Borrowers” has the meaning set forth in the preamble.

“Borrower Representative” has the meaning set forth in the preamble.

“Business Day” means any day that is not a Saturday, Sunday or a day on which
commercial banks in the State of New York are required or permitted to be
closed.

 

A-1

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

“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.; (c) certificates of deposit issued by
any bank with assets of at least $500,000,000 maturing no more than one year
from the date of investment therein; and (d) money market funds at least
ninety-five percent (95%) of the assets of which constitute Cash Equivalents of
the kinds described in clauses (a) through (c) of this definition.

“Change in Control” means any of the following (or any combination of the
following) whether arising from any single transaction event or series of
related transactions or events that, individually or in the aggregate, result
in: (a) the holders of Parent’s Equity Interests who were holders of Equity
Interest as of the Closing Date, ceasing to own at least fifty-one percent (51%)
of the Voting Stock of Parent; (b) any “person” or “group” (within the meaning
of Section 13(d) and 14(d)(2) of the Exchange Act) becoming the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of a sufficient number of Equity Interests of Parent ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the members of the Board of Parent, who did not
have such power before such transaction; (c) the Transfer of all or
substantially all assets of Borrowers; or (d) Parent ceasing to own and control,
free and clear of any Liens (other than Permitted Liens), directly or
indirectly, all of the Equity Interests in Borrower Representative or failing to
have the power to direct or cause the direction of the management and policies
of Borrower Representative.

“Claims” has the meaning set forth in Section 12.3.

“Closing Date” has the meaning set forth in the preamble.

“Code” means the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of New York; 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, Collateral Trustee’s Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the State of New
York, 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.

“Collaboration Agreement” means (i) the Takeda Collaboration Agreements,
(ii) that certain Master Collaboration Agreement, dated as of November 18, 2019,
between the Parent and Vertex Pharmaceuticals Incorporated (which shall include
without limitation that certain Share Purchase Agreement, dated as of
November 18, 2019, between the Parent and Vertex Pharmaceuticals Incorporated),
and (iii) any collaboration or similar agreement with a pharmaceutical or
biotechnology company.

“Collateral” means any and all properties, rights and assets of each Loan Party
described on Exhibit B, and any collateral securing the Obligations pursuant to
any Guaranty or pursuant to any other Loan Document.

“Collateral Access Agreement” means an agreement with respect to a Loan Party’s
leased location or bailee location, in each case in form and substance
reasonably satisfactory to Administrative Agent.

“Collateral Account” means any Deposit Account, Securities Account, or Commodity
Account of a Loan Party, in each case, other than any Excluded Account.

“Collateral Trust Agreement” means that certain Collateral Trust Agreement,
dated as of the Closing Date, by and among Collateral Trustee and Lenders, as
amended, restated, amended and restated, supplemented or modified from time to
time.

“Collateral Trustee” has the meaning set forth in the preamble.

 

A-2

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

“Commitment” means, as to any Lender, the aggregate principal amount of Loans
committed to be made by such Lender, as set forth on Schedule 1 hereto.

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

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

“Consolidated Change in Cash and Cash Equivalents” means for any period, an
amount equal to (i) Liquidity as of the last day of such period, less
(ii) Liquidity as of the first day of such period, less (iii) any net cash
proceeds received by Loan Parties from the issuance of Equity Interests or
Indebtedness or other financing activities, one-time grants, or business
development (including, without limitation, upfront or milestone payments)
received during such period. For the avoidance of doubt, amounts received by
Loan Parties as cost reimbursement for clinical trial expenses by strategic
partners or recurring grant revenue shall not be subtracted pursuant to clause
(iii) above.

“Contingent Obligation” means, 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. 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.

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

“Default” means any circumstance, event or condition that, with the giving of
any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” has the meaning set forth in Section 2.3(b).

“Deposit Account” means any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made, and includes any checking
account, savings account or certificate of deposit.

“Designated Holder” means a Lender or any Affiliate designated by a Lender with
respect to any exercise of a right to invest pursuant hereto, provided that the
Designated Holder for K2 HealthVentures LLC and any successor, transferee or
assignee thereof as Lender, which is an Affiliate of K2 HealthVentures LLC,
shall be K2 HealthVentures Equity Trust LLC.

“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.

“Engineered Toxin Body Asset” means a unique genetically engineered version of
Shiga-like Toxin A subunit fused to antibody domains or fragments that are
specific to a human therapeutic target and being studied in one or more
potential labeled indications.

“Equipment” means 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.

 

A-3

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

“Equity Interests” means, with respect to any Person, any of the shares of
capital stock of (or other ownership, membership or profit interests in) such
Person, any of the warrants, options or other rights for the purchase or
acquisition from such Person of shares of capital stock of (or other ownership,
membership or profit interests in) such Person, any of the securities
convertible into or exchangeable for shares of capital stock of (or other
ownership, membership or profit interests in) such Person or warrants, rights or
options for the purchase or acquisition from such Person of such shares (or such
other interests), and any of the other ownership, membership or profit interests
in such Person (including partnership, member or trust interests therein),
whether voting or nonvoting, and whether or not such shares, warrants, options,
rights or other interests are outstanding on any date of determination.

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

“Event of Default” has the meaning set forth in Section 8.

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

“Excluded Accounts” means (i) Deposit Accounts exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of a Borrower’s employees and identified to Administrative Agent by Borrower
Representative as such on the Perfection Certificate or from time to time
pursuant to a Compliance Certificate, provided that the aggregate balance
maintained therein shall not exceed an amount equal to the aggregate amount of
such payments to be paid in the then-next payroll period, (ii) Collateral
Accounts used exclusively to maintain escrowed funds or funds held in trust for
a third Person, (iii) Collateral Accounts used exclusively to maintain cash
collateral or similar deposits subject to a Permitted Lien, and, in each case,
provided that such Collateral Account is identified as such to Administrative
Agent on the Perfection Certificate or from time to time pursuant to a
Compliance Certificate, and (iv) Collateral Accounts identified as an “Excluded
Account” on the Perfection Certificate or from time to time pursuant to a
Compliance Certificate, provided that the aggregate balance maintained therein
shall not exceed $250,000 in the aggregate.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System, or any successor thereto.

“Fee Letter” means that certain letter agreement, dated as of the date hereof,
by and among Borrowers, Administrative Agent and Lenders, as amended, restated,
amended and restated, supplemented, or otherwise modified from time to time.

“First Tranche Term Loan Commitment” means, as to any Lender, the aggregate
principal amount of First Tranche Term Loans committed to be made by such
Lender, as set forth on Schedule 1 hereto.

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

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

“GAAP” means 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,
which are applicable to the circumstances as of the date of determination,
provided, however, that if there occurs after the Closing Date any change in
GAAP that affects in any respect the calculation of any covenant or threshold in
this Agreement, Lenders and Borrower Representative shall negotiate in good
faith amendments to the provisions of this Agreement that relate to the
calculation of such covenant or threshold with the intent of having the
respective positions of Lender and Borrowers after such change in GAAP conform
as nearly as possible to their respective positions as of the Closing Date, and,
until any such amendments have been agreed upon, such covenants and thresholds
shall be calculated as if no such change in GAAP has occurred.

 

A-4

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

“General Intangibles” means all “general intangibles” as defined in the Code in
effect on the Closing Date 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” means 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, including for the testing, manufacturing, marketing and
sales of its Product.

“Governmental Authority” means 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.

“Guarantor” has the meaning set forth in the preamble.

“Guaranty” means any guarantee of all or any part of the Obligations, including
pursuant to Section 13 hereof, as the same may from time to time be amended,
restated, amended and restated, supplemented or otherwise modified from time to
time.

“Immaterial Subsidiary” means any Subsidiary not required to be joined as a Loan
Party in accordance with Section 6.11(b).

“Indebtedness” means, without duplication, (a) indebtedness for borrowed money
or the deferred price of property or services (other than accounts payable in
the Ordinary Course of Business not more than sixty (60) days past due), (b) any
reimbursement and other obligations for surety bonds and letters of credit,
(c) obligations evidenced by notes, bonds, debentures or similar instruments,
(d) capital lease obligations, and (e) Contingent Obligations, provided that
“Indebtedness” shall not include (x) accrued expenses, deferred rent, deferred
taxes, deferred compensation or customary obligations under employment
agreements, (y) obligations with respect to operating leases which have been
reclassified as capital leases due to changes in GAAP or (z) Contingent
Obligations with respect to operating leases or leases of real property in the
ordinary course of businesses. Notwithstanding the foregoing, the Indebtedness
of any Person shall include the Indebtedness of any other entity (including a
partnership in which such Person is a general partner) solely to the extent such
Person is liable therefore as a result of such Persons’ ownership interest in or
other relationship with such entity.

“Indemnified Person” has the meaning set forth in Section 12.3.

“Insolvency Proceeding” means 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 Loan Party (or, as
applicable, any of its Subsidiaries), all of such Loan Party’s or Subsidiary’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 to such Person;

 

A-5

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

(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.

“Inventory” means all “inventory” as defined in the Code in effect on the
Closing Date with such additions to such term as may hereafter be made.

“Investment” means any beneficial ownership interest in any Person (including
stock, partnership interest or other securities or Equity Interests), and any
loan, advance or capital contribution to any Person, or the acquisition of all
or substantially all of the assets or properties of another Person.

“Lender” has the meaning set forth in the preamble.

“Lender Expenses” means all reasonable and documented audit fees and expenses,
costs, and expenses (including reasonable and documented attorneys’ fees and
expenses) of Administrative Agent or Lenders for preparing, amending,
negotiating, administering, defending and enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or
Insolvency Proceedings) or otherwise incurred with respect to a Loan Party,
including all reasonable and documented costs, expenses and other amounts
required to be paid by any Lender or the Administrative Agent in accordance with
the Collateral Trust Agreement.

“Lien” means 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.

“Liquidity” means, as of any date of measurement, the sum of unrestricted cash
and Cash Equivalents and marketable securities of the Loan Parties maintained in
Collateral Accounts subject to Account Control Agreements in favor of Collateral
Trustee.

“Loan Documents” means, collectively, this Agreement and any schedules,
exhibits, certificates, notices, and any other documents related to this
Agreement, the Fee Letter, the Collateral Trust Agreement, the Automatic Payment
Authorization, the Account Control Agreements, the Collateral Access Agreements,
any Subordination Agreement, any note, or notes or guaranties executed by a Loan
Party, and any other present or future agreement by a Loan Party with or for the
benefit of Collateral Trustee or any Lender in connection with this Agreement,
all as amended, restated, amended and restated, supplemented or otherwise
modified from time to time.

“Loan Request” means a request for a Loan pursuant to this Agreement in
substantially the form attached hereto as Exhibit C.

“Loans” means, collectively, the Term Loans, and any other loan from time to
time made under this Agreement, and “Loan” means any of the foregoing.

“Margin Stock” has the meaning set forth in Section 5.11(b).

“Material Adverse Effect” means (a) a material impairment in the perfection or
priority of the Lien in the Collateral pursuant to the Loan Documents to which
the Loan Parties are a party or in the value of the Collateral; or (b) a
material adverse effect upon: (i) the business, operations, properties, assets
or financial condition of the Loan Parties as a whole; (ii) the prospect of
repayment of any part of the Obligations; or (iii) the ability to enforce any
rights or remedies with respect to any Obligations, in each case, as reasonably
determined by Administrative Agent.

“Material Location” means (i) any leased location that is the corporate
headquarter of a Loan Party, and (ii) any other leased location or bailee
location where assets having a fair market value in excess of $2,000,000 are
located.

“Maximum Rate” has the meaning set forth in Section 2.3(d) hereof.

 

A-6

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

“Monthly Burn” means, as of any date of measurement, the average monthly
Consolidated Change in Cash and Cash Equivalents and marketable securities for
the three-month period ending as of the date of measurement.

“Obligations” means all of Borrowers’ and each other Loan Party’s obligations to
pay the Loans when due, including principal, interest, fees, Lender Expenses,
the fees pursuant to the Fee Letter and any other amounts due to be paid by a
Loan Party, and each Loan Party’s obligation to perform its duties under the
Loan Documents, and any other debts, liabilities and other amounts any Loan
Party owes to any Lender at any time under the Loan Documents, including,
without limitation, interest or Lender Expenses accruing after Insolvency
Proceedings begin (whether or not allowed), and any debts, liabilities, or
obligations of any Loan Party assigned to any Lender, which shall be treated as
secured or administrative expenses in the Insolvency Proceedings to the extent
permitted by applicable law.

“OFAC” has the meaning set forth in Section 5.11(c).

“Operating Documents” means, for any Person, such Person’s formation documents,
as certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of formation, organization or incorporation on a date that is no
earlier than thirty (30) days prior to the Closing 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 operating
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, restatements and modifications thereto.

“Ordinary Course of Business” means, in respect of any transaction involving any
Person, the ordinary course of such Person’s business as conducted by any such
Person in accordance with (a) the usual and customary customs and practices in
the kind of business in which such Person is engaged, and (b) the past practice
and operations of such Person, and in each case, undertaken by such Person in
good faith and not for purposes of evading any covenant or restriction in any
Loan Document.

“Patents” means all patents, patent applications and like protections of a
Person including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same and all
rights therein provided by international treaties or conventions.

“Payment Date” means the first calendar day of each month.

“Perfection Certificate” has the meaning set forth in Section 5.1.

“Permitted Indebtedness” means:

(a)    each Loan Party’s Indebtedness under this Agreement and the other Loan
Documents;

(b)    Indebtedness existing on the Closing Date and shown on the Perfection
Certificate, provided that (i) to the extent the amount of such type of
Indebtedness is limited pursuant to a clause of this defined term, amounts
existing on the Closing Date or any permitted refinancing thereof shall count
towards such limit, (ii) to the extent such Indebtedness is required to be
repaid on the Closing Date, in accordance with a payoff letter delivered as a
condition to closing, such Indebtedness shall not constitute Permitted
Indebtedness after such repayment, and (iii) to the extent any such Indebtedness
is required to be made subject to the terms of a Subordination Agreement as of
the Closing Date or thereafter, pursuant to the terms of this Agreement, such
Indebtedness shall be permitted only to the extent the applicable Subordination
Agreement is in effect;

(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;

 

A-7

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

(f)    Indebtedness secured by Liens permitted under clause (c) of the
definition of “Permitted Liens” hereunder;

(g)    Indebtedness among Loan Parties and Indebtedness constituting a Permitted
Investment;

(h)    workers’ compensation claims, payment obligations in connection with
health, disability or other types of social security benefits, unemployment or
other insurance obligations, reclamation and statutory obligations, bid, appeal,
surety or similar bonds, in each case incurred in the ordinary course of
business;

(i)    Indebtedness under hedging and swap obligations or agreements so long as
the purpose of any such agreement is a bona fide hedging activing and not for
speculative purposes;

(j)    Indebtedness in respect of netting services, overdraft protections and
other like services;

(k)    Indebtedness in connection with the financing of insurance premiums, in
the ordinary course of business, in respect of premiums payable on insurance
policies;

(l)    Indebtedness not otherwise permitted pursuant to this defined term, in an
aggregate amount outstanding not to exceed $500,000; and

(m)    extensions, refinancings, modifications, amendments and restatements of
any items of Permitted Indebtedness described above, provided that the principal
amount thereof is not increased (other than as a result of accrued or
capitalized interest or fees) or the terms thereof are not modified to impose
more burdensome terms upon a Borrower or any of its Subsidiaries, as the case
may be.

“Permitted Investments” means:

(a)    Investments (including, without limitation, Subsidiaries) existing on the
Closing Date and shown on the Perfection Certificate;

(b)    (i) Investments consisting of cash or Cash Equivalents, and (ii) any
Investments permitted by Parent’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved in writing by Lenders (it being understood and agreed that any
such investment policy as in effect as of the date hereof is satisfactory to
Lenders);

(c)    Investments consisting of repurchases of Parent’s Equity Interests from
former employees, officers and directors of Parent to the extent permitted under
Section 7.7;

(d)    Investments (i) among Loan Parties or by a Subsidiary that is not a Loan
Party in a Loan Party, (ii) consisting of the ownership of Equity Interests of
Subsidiaries, (iii) among Subsidiaries which are not Loan Parties, and (iv) by
Loan Parties in Subsidiaries which are not Loan Parties in an aggregate amount
per fiscal year not to exceed $500,000;

(e)    Investments not to exceed $500,000 outstanding in the aggregate at any
time consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the Ordinary Course of Business, and (ii) loans
not involving the net transfer of cash proceeds to employees, officers or
directors relating to the purchase of Equity Interests of Parent pursuant to
employee stock purchase plans or other similar agreements approved by Parent’s
Board;

(f)    Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers, suppliers or clients and in
settlement of delinquent obligations of, and other disputes with, customers,
suppliers or clients;

(g)    Investments consisting of Deposit Accounts;

 

A-8

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

(h)    Investments consisting of accounts receivable or notes receivable arising
from the sales of goods or services;

(i)    Investments arising due to hedging or swap agreements so long as the
purpose of such agreements is a bona fide hedging activity and not for
speculative purposes;

(j)    Investments consisting of pre-paid expenses, negotiable instruments held
for collection or deposit, security deposits with utilities, landlords and other
like Persons, and deposits in connection with workers’ compensation and similar
deposits, in each case made in the Ordinary Course of Business;

(k)    Investments not otherwise permitted pursuant to this defined term, in an
aggregate amount not to exceed $1,000,000 per fiscal year; and

(l)    Investments consisting of accounts 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 subsection (h) shall not
apply to Investments of a Loan Party in any Subsidiary.

“Permitted Liens” means:

(a)    Liens arising under this Agreement and the other Loan Documents,
including any renewals, extensions and refinancings of the underlying
obligations with respect thereto to the extent otherwise permitted hereunder;

(b)    Liens existing on the Closing Date and shown on the Perfection
Certificate, provided that (i) to the extent the amount of Indebtedness secured
by such type of Lien is limited pursuant to a clause of this defined term,
amounts existing on the Closing Date or any permitted refinancing thereof shall
count towards such limit, (ii) to the extent the Indebtedness secured by such a
Lien is required to be repaid on the Closing Date, in accordance with a payoff
letter delivered as a condition to closing, such Lien shall not constitute
Permitted Lien after the repayment of the associated Indebtedness, and (iii) to
the extent any such Lien is required to be made subject to the terms of a
Subordination Agreement as of the Closing Date or thereafter, pursuant to the
terms of this Agreement, such Lien shall be permitted only to the extent the
applicable Subordination Agreement is in effect;

(c)    purchase money Liens (i) on Equipment acquired or held by a Loan Party or
Subsidiary thereof incurred for financing the acquisition of the Equipment, or
(ii) existing on Equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the Equipment, in each case,
securing no more than $500,000 in the aggregate amount outstanding;

(d)    Liens for taxes, fees, assessments or other government charges or levies,
either (i) not yet delinquent or (ii) being contested in good faith and for
which such Loan Party or Subsidiary maintains adequate reserves on its books;

(e)    leases or subleases of real property granted in the Ordinary Course of
Business of such Person, and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the Ordinary Course of Business of such Person;

(f)    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 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;

(g)    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);

 

A-9

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

(h)    deposits or pledges of cash to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, surety and appeal bonds and
other obligations of a like nature arising in the Ordinary Course of Business,
in an aggregate amount not exceeding $500,000 at any time;

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

(j)    Liens in favor of other financial institutions arising in connection with
a Deposit Account or Securities Account of a Loan Party or Subsidiary thereof
held at such institutions, provided that Collateral Trustee has a perfected
security interest in such Deposit Account, or the securities maintained therein
and Collateral Trustee has received an Account Control Agreement with respect
thereto to the extent required pursuant to Section 6.6 of this Agreement;

(k)    servitudes, easements, rights of way, restrictions and other similar
encumbrances on real property imposed by applicable laws and encumbrances
consisting of zoning or building restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title thereto which, in the
aggregate, are not material, and which do not in any case materially detract
from the value of the property subject thereto or interfere with the ordinary
conduct of the business of any of the Loan Parties;

(l)    licenses of Intellectual Property which constitute a Permitted Transfer;
and

(m)    Liens in connection with (i) Permitted Transfers and (ii) Indebtedness
permitted by clause (m) of the definition of Permitted Indebtedness;

(n)    Liens arising from precautionary financing statement filings regarding
leases;

(o)    Liens arising from licenses described in clause (b) of the defined term
“Permitted Transfers”, and Liens arising pursuant to the terms of a
Collaboration Agreement or related documents on Intellectual Property or other
assets developed pursuant thereto, or on a Loan Party or Subsidiary’s rights
pursuant thereto;

(p)    other Liens which secure obligations in an aggregate amount not to exceed
$100,000 at any time outstanding; and

(q)    Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described herein, but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase (other than in
connection with the capitalization of interest, fees or expenses).

“Permitted Locations” means, collectively, the following locations where
Collateral may be located from time to time: (a) locations identified in the
Perfection Certificate and (b) locations with respect to which Borrowers have
complied with the requirements of Section 6.12.

“Permitted Transfers” means

(a)    sales of Inventory by a Loan Party or any of its Subsidiaries in the
Ordinary Course of Business;

(b)    (i) non-exclusive licenses and similar arrangements for the use of
Intellectual Property of a Loan Party or any of 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 with respect to
territory only as to specific geographical regions outside of the United States
or exclusive globally with respect to specific indications or targets or assets,
and (ii) licenses or sublicenses of Intellectual Property or other assets
developed pursuant to a Collaboration Agreement in accordance with the terms of
such Collaboration Agreement;

 

A-10

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

(c)    dispositions of worn-out, obsolete or surplus Equipment in the Ordinary
Course of Business that is, in the reasonable judgment of such Loan Party or
Subsidiary, no longer economically practicable to maintain or useful;

(d)    Transfers of receivables in the Ordinary Course of Businesses in
connection with the compromise, settlement or collection thereof;

(e)    Transfers consisting of the granting of Permitted Liens and the making of
Permitted Investments;

(f)    the use or transfer of money or Cash Equivalents for the payment of
expenses in the Ordinary Course of Business and in a manner that is not
prohibited by the Loan Documents;

(g)    of Accounts in connection with the compromise, settlement or collection
thereof;

(h)    resulting from casualty events, subject to Section 6.5;

(i)    abandoning applications or registrations of Intellectual Property as
determined by a Loan Party in its good faith business judgment, and subject to
compliance with Section 6.7 hereof;

(j)    the sale of all or substantially all of the EVO product or business line
in an arms’ length transaction;

(k)    the lapse or abandonment of immaterial Intellectual Property, including,
but not limited to Intellectual Property acquired in connection with prior
transactions; and

(l)    Transfers not otherwise permitted hereunder so long as the fair market
value of any such Transfers does not exceed $500,000 in the aggregate in any
fiscal year of Parent.

“Person” means 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.

“Prime Rate” means, at any time, the rate of interest noted in The Wall Street
Journal, Money Rates section, as the “Prime Rate”. In the event that The Wall
Street Journal quotes more than one rate, or a range of rates, as the Prime
Rate, then the Prime Rate shall mean the average of the quoted rates. In the
event that The Wall Street Journal ceases to publish a Prime Rate, then the
Prime Rate shall be the average of the three (3) largest U.S. money center
commercial banks, as determined by Lenders.

“Pro Rata Share” means, with respect to any Lender and as of any date of
determination, the percentage obtained by dividing (i) the aggregate Commitments
of such Lender by (ii) the aggregate Commitments of all Lenders provided, that
to the extent any Commitment has expired or been terminated, with respect to
such Commitment, the applicable outstanding balance of the Loans made pursuant
to such Commitment held by such Lender and all the Lenders, respectively, shall
be used in lieu of the amount of such Commitment, provided further, that with
respect to all matters relating to a particular Loan, the Commitment or
outstanding balance of the applicable Loan, shall be used in lieu of the
aggregate Commitment or outstanding balance of all Loans in the foregoing
calculation. “Ratable” and related terms shall mean, determined by reference to
such Lender’s Pro Rata Share.

“Products” means any products manufactured, sold, developed, tested or marketed
by a Loan Party or any of its Subsidiaries.

“Qualified Financing” means any offering of common stock, convertible preferred
stock or other equity securities (or instruments exercisable for, or convertible
into, shares of common stock, convertible preferred stock or other equity
securities) of Parent consummated after the Closing Date that is broadly
marketed or offered to multiple investors.

 

A-11

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

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

“Required Lenders” means, as of any date of determination, Lenders holding more
than 50% of the sum of aggregate principal amount of all Loans outstanding and
the aggregate amount of all unfunded commitments to make Loans, at such date of
determination.

“Requirement of Law” means 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” means with respect to any Person, any of the Chief
Executive Officer, President or Chief Financial Officer of such Person. Unless
the context otherwise requires, each reference to a Responsible Officer herein
shall be a reference to a Responsible Officer of Parent.

“Restricted License” means any material in-bound license or other similar
material agreement (other than ordinary course customer contracts, off the shelf
software licenses, licenses that are commercially available to the public, and
open source licenses) pursuant to which a Loan Party or Subsidiary is a licensee
with respect to the licensing of Intellectual Property material to a Loan
Party’s business (a) that validly prohibits or otherwise restricts such Loan
Party or Subsidiary from granting a security interest in its interest in such
license or agreement or in any other property, or (b) for which a default under,
or termination of which, could reasonably be expected to interfere with
Collateral Trustee’s right to sell any Collateral, provided that a license or
other such agreement that permits the assignment of the applicable Loan Party’s
rights thereunder in connection with a sale of all or substantially all the
assets of such Loan Party shall not constitute a “Restricted License”.

“Second Tranche Availability Period” means the period commencing on the later of
March 1, 2021 and the date the Second Tranche Milestone is met and ending
June 30, 2021.

“Second Tranche Milestone” means that Borrower Representative shall have
provided reasonably sufficient positive evidence and/or data to the
Administrative Agent to demonstrate advancement of its pipeline via active
clinical studies (e.g., reasonable continuing enrollment, planning for next
phase if prior phase has been successfully completed, IND has been recently
accepted with Phase I initiation in progress, or clinical advancement in the
same or closely related indication), to the point at which Borrowers have at
least three different Engineered Toxin Body Assets (at least two of which are
wholly-owned) in active clinical studies, which written evidence is in form and
content reasonably acceptable to Administrative Agent and has been provided to
and reviewed and approved by Administrative Agent in its reasonable discretion.

“Second Tranche Term Loan” has the meaning set forth in Section 2.2(a).

“Second Tranche Term Loan Commitment” means, as to any Lender, the aggregate
principal amount of Second Tranche Term Loans committed to be made by such
Lender, as set forth on Schedule 1 hereto.

“Secured Party” means any of Administrative Agent, Collateral Trustee or any
Lender.

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

“Security Instrument” means any security agreement, assignment, pledge
agreement, financing or other similar statement or notice, continuation
statement, other agreement or instrument, or any amendment or supplement to any
thereof, creating, governing or providing for, evidencing or perfecting any
security interest or Lien.

“Shares” means all of the issued and outstanding Equity Interests owned or held
of record by a Loan Party or other Loan Party in each of its Subsidiaries.

 

A-12

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

“Subordinated Debt” means Indebtedness on terms and to holders reasonably
satisfactory to Administrative Agent and incurred by a Loan Party that is
subordinated in writing to all of the Obligations, pursuant to a Subordination
Agreement.

“Subordination Agreement” means any subordination agreement in form and
substance reasonably satisfactory to Administrative Agent entered into from time
to time with respect to Subordinated Debt.

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company or joint venture in which (i) any general partnership
interest or (ii) more than fifty percent (50%) of the stock, limited liability
company interest, joint venture interest or other Equity Interest which by the
terms thereof has the ordinary voting power to elect the Board of that Person,
at the time as of which any determination is being made, is owned or controlled
by such Person, directly or indirectly. Unless the context otherwise requires,
each reference to a Subsidiary herein shall be a reference to a Subsidiary of
Parent.

“Takeda Collaboration Agreements” means those certain Multi-Target Collaboration
and License Agreement, dated as of June 23, 2017; Research Collaboration and
Option Agreement, dated as of October 31, 2016; and Development Collaboration
and Exclusive License Agreement, dated as of September 18, 2018, each between
Borrower’s Representative and Millennium Pharmaceuticals, Inc., as amended,
restated, amended and restated, and/or otherwise supplemented or modified from
time to time.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Term Loan” and “Term Loans” each, have the meaning set forth in Section 2.2
hereof.

“Termination Date” means the date that the Obligations (other than contingent
indemnification obligations not then due and owing) shall have been paid in full
in cash, and any commitment of a Lender to extend credit to a Borrower shall
have been terminated.

“Term Loan Maturity Date” means June 1, 2024.

“Third Tranche Availability Period” means the period commencing on the date the
Second Tranche Term Loan is fully funded and ending December 31, 2021.

“Third Tranche Term Loan” has the meaning set forth in Section 2.2(a).

“Third Tranche Term Loan Commitment” means, as to any Lender, the aggregate
principal amount of Third Tranche Term Loans which may be made by such Lender,
as set forth on Schedule 1 hereto.

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

“Transfer” means defined in Section 7.1.

“Voting Stock” means, with respect to any Person, all classes of Equity
Interests issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors or
managers (or Persons performing similar functions) of such Person, even though
the right so to vote has been suspended by the happening of such a contingency.

 

A-13

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

EXHIBIT B

COLLATERAL DESCRIPTION

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

EXHIBIT C

LOAN REQUEST

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

EXHIBIT D

COMPLIANCE CERTIFICATE

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

EXHIBIT E

REQUIREMENTS FOR INSURANCE DOCUMENTATION

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

EXHIBIT F

AUTOMATIC PAYMENT AUTHORIZATION

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

EXHIBIT G

FORM OF

SECURED PROMISSORY NOTE