EXHIBIT 10.3
 
LOAN AND SECURITY AGREEMENT
 
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of June 27, 2012
(the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability
company with an office located at 133 North Fairfax Street, Alexandria, Virginia
22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”),
the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time
to time including Oxford in its capacity as a Lender and HORIZON TECHNOLOGY
FINANCE CORPORATION, a Delaware corporation with an office located at 312
Farmington Avenue, Farmington, Connecticut  06032 (each a “Lender” and
collectively, the “Lenders”), and CELSION CORPORATION, a Delaware corporation
with offices located at 997 Lenox Drive, Suite 100, Lawrenceville, New
Jersey  08648 (“Borrower”), provides the terms on which the Lenders shall lend
to Borrower and Borrower shall repay the Lenders.  The parties agree as follows:
 
1.           ACCOUNTING AND OTHER TERMS
 
1.1           Accounting terms not defined in this Agreement shall be construed
in accordance with GAAP.  Calculations and determinations must be made in
accordance with GAAP.  Capitalized terms not otherwise defined in this Agreement
shall have the meanings set forth in Section 13.  All other terms contained in
this Agreement, unless otherwise indicated, shall have the meaning provided by
the Code to the extent such terms are defined therein.  All references to
“Dollars” or “$” are United States Dollars, unless otherwise noted.
 
2.           LOANS AND TERMS OF PAYMENT
 
2.1           Promise to Pay.  Borrower hereby unconditionally promises to pay
each Lender, the outstanding principal amount of all Term Loans advanced to
Borrower by such Lender and accrued and unpaid interest thereon and any other
amounts due hereunder as and when due in accordance with this Agreement.
 
2.2           Term Loans.
 
(a)           Availability.  (i) Subject to the terms and conditions of this
Agreement, the Lenders agree, severally and not jointly, to make term loans to
Borrower on the Effective Date in an aggregate amount of Five Million Dollars
($5,000,000.00) according to each Lender’s Term A Loan Commitment as set forth
on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a
“Term A Loan”, and collectively as the “Term A Loans”).  After repayment, no
Term A Loan may be re-borrowed.
 
(ii)           Subject to the terms and conditions of this Agreement, the
Lenders agree, severally and not jointly, during the Second Draw Period, to make
term loans to Borrower in an aggregate amount up to Five Million Dollars
($5,000,000.00) according to each Lender’s Term B Loan Commitment as set forth
on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a
“Term B Loan”, and collectively as the “Term B Loans”; each Term A Loan or
Term B Loan is hereinafter referred to singly as a “Term Loan” and the Term A
Loans and the Term B Loans are hereinafter referred to collectively as the “Term
Loans”).  After repayment, no Term B Loan may be re-borrowed.
 
(b)           Repayment.  Borrower shall make monthly payments of interest only
commencing on the first (1st) Payment Date following the Funding Date of each
Term Loan, and continuing on the Payment Date of each successive month
thereafter through and including the Payment Date immediately preceding the
Amortization Date.  Borrower agrees to pay, on the Funding Date of each Term
Loan, any initial partial monthly interest payment otherwise due for the period
between the Funding Date of such Term Loan and the first Payment Date
thereof.  Commencing on the Amortization Date, and continuing on the Payment
Date of each month thereafter, Borrower shall make consecutive equal monthly
payments of principal and interest, in arrears, to each Lender, as calculated by
Collateral Agent (which calculations shall be deemed correct absent manifest
error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective
rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule
equal to thirty (30) months with respect to the Term A Loans and the Term B
Loans.  All unpaid principal and accrued and unpaid interest with respect to
each Term Loan is due and payable in full on the Maturity Date.  Each Term Loan
may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).
 
 
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(c)           Mandatory Prepayments.  If the Term Loans are accelerated
following the occurrence of an Event of Default, Borrower shall immediately pay
to Lenders, payable to each Lender in accordance with its respective Pro Rata
Share, an amount equal to the sum of: (i) all outstanding principal of the Term
Loans plus accrued and unpaid interest thereon through the prepayment date,
(ii) the Prepayment Fee, plus (iii) all other Obligations that are due and
payable, including Lenders’ Expenses and interest at the Default Rate with
respect to any past due amounts.
 
(d)           Permitted Prepayment of Term Loans.  Borrower shall have the
option to prepay all, but not less than all, of the Term Loans advanced by the
Lenders under this Agreement, provided Borrower (i) provides written notice to
Collateral Agent of its election to prepay the Term Loans at least ten (10) days
prior to such prepayment (or such shorter period as the Lenders may agree), and
(ii) pays to the Lenders on the date of such prepayment, payable to each Lender
in accordance with its respective Pro Rata Share, an amount equal to the sum of
(A) all outstanding principal of the Term Loans plus accrued and unpaid interest
thereon through the prepayment date, (B) the Prepayment Fee, plus (C) all other
Obligations that are due and payable, including Lenders’ Expenses and interest
at the Default Rate with respect to any past due amounts.
 
2.3           Payment of Interest on the Credit Extensions.
 
(a)           Interest Rate.  Subject to Section 2.3(b), the principal amount
outstanding under the Term Loans shall accrue interest at a fixed per annum rate
(which rate shall be fixed for the duration of the applicable Term Loan) equal
to the Basic Rate, determined by Collateral Agent on the Funding Date of the
applicable Term Loan, which interest shall be payable monthly in arrears in
accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term
Loan commencing on, and including, the Funding Date of such Term Loan, and shall
accrue on the principal amount outstanding under such Term Loan through and
including the day on which such Term Loan is paid in full.
 
(b)           Default Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall accrue interest at a fixed
per annum rate equal to the rate that is otherwise applicable thereto plus five
percentage points (5.00%) (the “Default Rate”).  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 of Collateral
Agent.
 
(c)           360-Day Year.  Interest shall be computed on the basis of a three
hundred sixty (360) day year consisting of twelve (12) months of thirty (30)
days.
 
(d)           Debit of Accounts.  Collateral Agent and each Lender may debit (or
ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes the Lenders under the Loan Documents when
due.  Any such debits (or ACH activity) shall not constitute a set-off.
 
(e)           Payments.  Except as otherwise expressly provided herein, all
payments by Borrower under the Loan Documents shall be made to the respective
Lender to which such payments are owed, at such Lender’s office in immediately
available funds on the date specified herein. Unless otherwise provided,
interest is payable monthly on the Payment Date of each month.  Payments of
principal and/or interest received after 12:00 noon 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 is due the next Business
Day and additional fees or interest, as applicable, shall continue to accrue
until paid. All payments to be made by Borrower hereunder or under any other
Loan Document, including payments of principal and interest, and all fees,
expenses, indemnities and reimbursements, shall be made without set-off,
recoupment or counterclaim, in lawful money of the United States and in
immediately available funds.
 
 
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2.4           Secured Promissory Notes.  The Term Loans shall be evidenced by a
Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each
a “Secured Promissory Note”), and shall be repayable as set forth in this
Agreement.  Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the Funding Date of any Term Loan or at the time of receipt of
any payment of principal on such Lender’s Secured Promissory Note, an
appropriate notation on such Lender’s Secured Promissory Note Record reflecting
the making of such Term Loan or (as the case may be) the receipt of such
payment.  The outstanding amount of each Term Loan set forth on such Lender’s
Secured Promissory Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record, or
any error in so recording, any such amount on such Lender’s Secured Promissory
Note Record shall not limit or otherwise affect the obligations of Borrower
under any Secured Promissory Note or any other Loan Document to make payments of
principal of or interest on any Secured Promissory Note when due.  Upon receipt
of an affidavit of an officer of a Lender as to the loss, theft, destruction, or
mutilation of its Secured Promissory Note, Borrower shall issue, in lieu
thereof, a replacement Secured Promissory Note in the same principal amount
thereof and of like tenor.
 
2.5           Fees.  Borrower shall pay to Collateral Agent:
 
(a)           Facility Fee.  A fully earned, non-refundable facility fee of
Fifty Thousand Dollars ($50,000.00) to be shared between the Lenders pursuant to
their respective Commitment Percentages, receipt of Twenty Five Thousand Dollars
($25,000.00) of which Collateral Agent hereby acknowledges; the remaining Twenty
Five Thousand Dollars ($25,000.00) of the facility fee shall be due and payable
on the Funding Date of the Term A Loan;
 
(b)           Prepayment Fee.  The Prepayment Fee, when due hereunder, to be
shared between the Lenders in accordance with their respective Pro Rata Shares;
and
 
(c)           Lenders’ Expenses.  All Lenders’ Expenses (including reasonable
attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.
 
2.6           Withholding.  Payments received by the Lenders from Borrower
hereunder will be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any governmental authority
(including any interest, additions to tax or penalties applicable
thereto).  Specifically, however, if at any time any Governmental Authority,
applicable law, regulation or international agreement requires Borrower to make
any withholding or deduction from any such payment or other sum payable
hereunder to the Lenders, Borrower hereby covenants and agrees that the amount
due from Borrower with respect to such payment or other sum payable hereunder
will be increased to the extent necessary to ensure that, after the making of
such required withholding or deduction, each Lender receives a net sum equal to
the sum which it would have received had no withholding or deduction been
required and Borrower shall pay the full amount withheld or deducted to the
relevant Governmental Authority.  Borrower will, upon request, furnish the
Lenders with proof reasonably satisfactory to the Lenders indicating that
Borrower has made such withholding payment; provided, however, that Borrower
need not make any withholding payment if the amount or validity of such
withholding payment is contested in good faith by appropriate and timely
proceedings and as to which payment in full is bonded or reserved against by
Borrower.  The agreements and obligations of Borrower contained in this
Section 2.6 shall survive the termination of this Agreement.
 
3.           CONDITIONS OF LOANS
 
3.1           Conditions Precedent to Initial Credit Extension.  Each Lender’s
obligation to make a Term A Loan is subject to the condition precedent that
Collateral Agent and each Lender shall consent to or shall have received, in
form and substance satisfactory to Collateral Agent and each Lender, such
documents, and completion of such other matters, as Collateral Agent and each
Lender may reasonably deem necessary or appropriate, including, without
limitation:
 
(a)           original Loan Documents, each duly executed by Borrower and each
Subsidiary, as applicable;
 
 
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(b)           duly executed original Control Agreements with respect to any
Collateral Accounts maintained by Borrower or any of its Subsidiaries other than
the Excluded Accounts;
 
(c)           duly executed original Secured Promissory Notes in favor of each
Lender according to its Term A Loan Commitment Percentage;
 
(d)           the Operating Documents and good standing certificates of Borrower
and its Subsidiaries certified by the Secretary of State (or equivalent agency)
of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation
and each jurisdiction in which Borrower and each Subsidiary is qualified to
conduct business, each as of a date no earlier than thirty (30) days prior to
the Effective Date;
 
(e)           a completed Perfection Certificate for Borrower and each of its
Subsidiaries;
 
(f)           the Annual Projections, for the current calendar year;
 
(g)           duly executed original officer’s certificate for Borrower and each
Subsidiary that is a party to the Loan Documents, in a form acceptable to
Collateral Agent and the Lenders;
 
(h)           certified copies, dated as of date no earlier than thirty (30)
days prior to the Effective Date, of financing statement searches, as Collateral
Agent shall request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;
 
(i)           a landlord’s consent executed in favor of Collateral Agent in
respect of all of Borrower’s and each Subsidiaries’ leased locations;
 
(j)           a bailee waiver executed in favor of Collateral Agent in respect
of each third party bailee where Borrower or any Subsidiary maintains Collateral
having a book value in excess of One Hundred Thousand Dollars ($100,000.00);
 
(k)           a duly executed legal opinion of counsel to Borrower dated as of
the Effective Date;
 
(l)           evidence satisfactory to Collateral Agent and the Lenders that the
insurance policies required by Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of Collateral Agent, for the ratable
benefit of the Lenders; and
 
(m)           payment of the fees and Lenders’ Expenses then due as specified in
Section 2.5 hereof.
 
3.2           Conditions Precedent to all Credit Extensions.  The obligation of
each Lender to make each Credit Extension, including the initial Credit
Extension, is subject to the following conditions precedent:
 
(a)           receipt by Collateral Agent of an executed Disbursement Letter in
the form of Exhibit B attached hereto;
 
(b)           the representations and warranties in Section 5 hereof shall be
true, accurate and complete in all material respects on the date of the
Disbursement Letter and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the Credit
Extension.  Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties in Section 5 hereof are true,
accurate and complete in all material respects; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date;
 
 
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(c)           in such Lender’s sole reasonable discretion, there has not been
any Material Adverse Change or any material adverse deviation by Borrower from
the Annual Projections of Borrower presented to and accepted by Collateral Agent
and each Lender;
 
(d)           to the extent not delivered at the Effective Date, duly executed
original Secured Promissory Notes and Warrants, in number, form and content
acceptable to each Lender, and in favor of each Lender according to its
Commitment Percentage, with respect to each Credit Extension made by such Lender
after the Effective Date; and
 
(e)           payment of the fees and Lenders’ Expenses then due as specified in
Section 2.5 hereof.
 
3.3           Covenant to Deliver.  Borrower agrees to deliver to Collateral
Agent and the Lenders each item required to be delivered to Collateral Agent
under this Agreement as a condition precedent to any Credit Extension.  Borrower
expressly agrees that a Credit Extension made prior to the receipt by Collateral
Agent or any Lender of any such item shall not constitute a waiver by Collateral
Agent or any Lender of Borrower’s obligation to deliver such item, and any such
Credit Extension in the absence of a required item shall be made in each
Lender’s sole discretion.
 
3.4           Procedures for Borrowing.  Subject to the prior satisfaction of
all other applicable conditions to the making of a Term Loan set forth in this
Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which
notice shall be irrevocable) by electronic mail, facsimile, or telephone by
12:00 noon Eastern time three (3) Business Days prior to the date the Term Loan
is to be made (or such shorter period as the Lenders may agree).  Together with
any such electronic, facsimile or telephonic notification, Borrower shall
deliver to the Lenders by electronic mail or facsimile a completed Disbursement
Letter executed by a Responsible Officer or his or her designee.  The Lenders
may rely on any telephone notice given by a person whom a Lender reasonably
believes is a Responsible Officer or designee.  On the Funding Date, each Lender
shall credit and/or transfer (as applicable) to the Designated Deposit Account,
an amount equal to its Term Loan Commitment.
 
4.            CREATION OF SECURITY INTEREST
 
4.1           Grant of Security Interest.  Borrower hereby grants Collateral
Agent, for the ratable benefit of the Lenders, and to each Lender, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Collateral Agent, for the ratable benefit of the
Lenders, and to each Lender, the Collateral, wherever located, whether now owned
or hereafter acquired or arising, and all proceeds and products
thereof.  Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
priority perfected security interest in the Collateral, subject only to
Permitted Liens that are permitted by the terms of this Agreement, or by
operation of law, to have priority to Collateral Agent’s and the Lenders’
Liens.  If Borrower shall acquire a commercial tort claim (as defined in the
Code) in excess of Twenty Five Thousand Dollars ($25,000.00), Borrower shall
promptly notify Collateral Agent in a writing signed by Borrower, as the case
may be, of the general details thereof (and further details as may be required
by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of
the Lenders, and to each Lender, in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such writing
to be in form and substance reasonably satisfactory to Collateral Agent and the
Lenders.
 
If this Agreement is terminated, Collateral Agent’s and the Lenders’ Liens in
the Collateral shall continue until the Obligations (other than inchoate
indemnity obligations) are repaid in full in cash.  Upon payment in full in cash
of the Obligations (other than inchoate indemnity obligations) and at such time
as the Lenders’ obligation to make Credit Extensions has terminated, Collateral
Agent and each Lender shall, at the sole cost and expense of Borrower, release
its Liens in the Collateral and all rights therein shall revert to Borrower.  In
addition, upon the sale or other disposition of any Collateral permitted in
accordance with this Agreement for which Borrower desires a security interest
release from Collateral Agent and the Lenders, such a release may be obtained
from Collateral Agent and the Lenders, at the sole cost and expense, and upon
the prior written request, of Borrower.
 
 
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4.2           Authorization to File Financing Statements.  Borrower hereby
authorizes Collateral Agent and each Lender to file financing statements or take
any other action required to perfect Collateral Agent’s and the Lenders’
security interests in the Collateral, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Collateral Agent’s and the
Lenders’ interest or rights under the Loan Documents, including a notice that
any disposition of the Collateral, except to the extent permitted by the terms
of this Agreement, by Borrower, or any other Person, shall be deemed to violate
the rights of Collateral Agent and the Lenders’ under the Code.
 
5.             REPRESENTATIONS AND WARRANTIES
 
Borrower represents and warrants to Collateral Agent and the Lenders as follows
at all times:
 
5.1           Due Organization, Authorization: Power and Authority.  Borrower
and each of its Subsidiaries is duly existing and in good standing as a
Registered Organization in its jurisdictions of organization or formation and
Borrower and each of its Subsidiaries is qualified and licensed to do business
and is in good standing in any jurisdiction in which the conduct of its
businesses or its ownership of property requires that it  be qualified except
where the failure to do so could not reasonably be expected to have a Material
Adverse Change.  In connection with this Agreement, Borrower and each of its
Subsidiaries has delivered to Collateral Agent a completed perfection
certificate signed by an officer of Borrower or such Subsidiary (each a
“Perfection Certificate” and collectively, the “Perfection
Certificates”).  Borrower represents and warrants that, except to the extent
another provision of this Agreement expressly permits a different reporting
treatment with respect to any of the following, (a) Borrower and each of its
Subsidiaries’ exact legal name is that which is indicated on its respective
Perfection Certificate and on the signature page of each Loan Document to which
it is a party; (b) Borrower and each of its Subsidiaries is an organization of
the type and is organized in the jurisdiction set forth on its respective
Perfection Certificate; (c) each Perfection Certificate accurately sets forth
each of Borrower’s and its Subsidiaries’ organizational identification number or
accurately states that Borrower or such Subsidiary has none; (d) each Perfection
Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place
of business, or, if more than one, its chief executive office as well as
Borrower’s and each of its Subsidiaries’ mailing address (if different than its
chief executive office); (e) Borrower and each of its Subsidiaries (and each of
its respective predecessors) have not, in the past five (5) years, changed its
jurisdiction of organization, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificates pertaining to Borrower and
each of its Subsidiaries, is accurate and complete in all material respects (it
being understood and agreed that Borrower and each of its Subsidiaries may from
time to time update certain information in the Perfection Certificates
(including the information set forth in clause (d) above) after the Effective
Date to the extent permitted by one or more specific provisions in this
Agreement); such updated Perfection Certificates subject to the review and
approval of Collateral Agent.  If Borrower or any of its Subsidiaries is not now
a Registered Organization but later becomes one, Borrower shall notify
Collateral Agent of such occurrence and provide Collateral Agent with such
Person’s organizational identification number within five (5) Business Days of
receiving such organizational identification number.
 
The execution, delivery and performance by Borrower and each of its Subsidiaries
of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational
documents, including its respective Operating Documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law applicable thereto, (iii) contravene, conflict or violate any applicable
order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or such Subsidiary, 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 are being obtained pursuant
to Section 6.1(b), or (v) constitute an event of default under any material
agreement by which Borrower or any of such Subsidiaries, or their respective
properties, is bound.  Neither Borrower nor any of its Subsidiaries is in
default under any agreement to which it is a party or by which it or any of its
assets is bound in which such default could reasonably be expected to have a
Material Adverse Change.
 
 
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5.2           Collateral.
 
(a)           Borrower and each its Subsidiaries have good title to, have rights
in, and the power to transfer each item of the Collateral upon which it purports
to grant a Lien under the Loan Documents, free and clear of any and all Liens
except Permitted Liens, and neither Borrower nor any of its Subsidiaries have
any Deposit Accounts, Securities Accounts, Commodity Accounts or other
investment accounts other than the Collateral Accounts, the Excluded Accounts or
the other investment accounts, if any, described in the Perfection Certificates
delivered to Collateral Agent in connection herewith with respect of which
Borrower or such Subsidiary has given Collateral Agent notice and taken such
actions as are necessary to give Collateral Agent a perfected security interest
therein, other than with respect to the Excluded Accounts.
 
(b)           On the Effective Date, and except as disclosed on the Perfection
Certificate (i) the Collateral is not in the possession of any third party
bailee (such as a warehouse), and (ii)  no such third party bailee possesses
components of the Collateral in excess of Two Hundred Fifty Thousand Dollars
($250,000.00).  None of the components of the Collateral shall be maintained at
locations other than as disclosed in the Perfection Certificates on the
Effective Date or as permitted pursuant to Section 6.11.
 
(c)           All Inventory is in all material respects of good and marketable
quality, free from material defects.
 
(d)           Borrower and each of its Subsidiaries is the sole owner of the
Intellectual Property material to its business that each respectively purports
to own, free and clear of all Liens other than Permitted Liens.  Except as noted
on the Perfection Certificates, neither Borrower nor any of its Subsidiaries is
a party to, nor is bound by, any material license or other material agreement
with respect to which Borrower or such Subsidiary is the licensee that
(i) prohibits or otherwise restricts Borrower or its Subsidiaries from granting
a security interest in Borrower’s or such Subsidiaries’ interest in such
material license or material agreement or any other property, or (ii) for which
a default under or termination of could interfere with Collateral Agent’s or any
Lender’s right to sell any Collateral.  Borrower shall provide written notice to
Collateral Agent and each Lender within ten (10) days of Borrower or any of its
Subsidiaries entering into or becoming bound by any license or agreement with
respect to which Borrower or any Subsidiary is the licensee (other than
over-the-counter software that is commercially available to the
public).  Borrower shall, and shall cause its Subsidiaries to, take such
commercially reasonable steps as Collateral Agent and any Lender requests to
obtain the consent of, or waiver by, any Person whose consent or waiver is
necessary for (i) all licenses or agreements with respect to which Borrower or
any Subsidiary is the licensee to be deemed “Collateral” and for Collateral
Agent and each Lender to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future, and
(ii) Collateral Agent and each Lender shall have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with
Collateral Agent’s and such Lender’s rights and remedies under this Agreement
and the other Loan Documents.
 
5.3           Litigation.  Except as disclosed (i) on the Perfection
Certificates, or (ii) in accordance with Section 6.9 hereof, there are no
actions, suits, investigations, or proceedings pending or, to the knowledge of
the Responsible Officers, threatened in writing by or against Borrower or any of
its Subsidiaries involving more than Two Hundred Fifty Thousand Dollars
($250,000.00).
 
5.4           No Material Deterioration in Financial Condition; Financial
Statements.  All consolidated financial statements for Borrower and its
Subsidiaries, delivered to Collateral Agent fairly present, in conformity with
GAAP, in all material respects the consolidated financial condition of Borrower
and its Borrower’s Subsidiaries, and the consolidated results of operations of
Borrower and its Subsidiaries.  There has not been any material deterioration in
the consolidated financial condition of Borrower and its Subsidiaries since the
date of the most recent financial statements submitted to any Lender.
 
5.5           Solvency.  Borrower and each of its Subsidiaries is Solvent.
 
5.6           Regulatory Compliance.  Neither Borrower nor any of its
Subsidiaries is an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act of 1940, as
amended.  Neither Borrower nor any of its Subsidiaries is engaged as one of its
important activities in extending credit for margin stock (under Regulations X,
T and U of the Federal Reserve Board of Governors).  Borrower and each of its
Subsidiaries has complied in all material respects with the Federal Fair Labor
Standards Act.  Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding
Company Act of 2005.  Neither Borrower nor any of its Subsidiaries has violated
any laws, ordinances or rules, the violation of which could reasonably be
expected to have a Material Adverse Change.  Neither Borrower’s nor any of its
Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary
or, to Borrower’s knowledge, by previous Persons, in disposing, producing,
storing, treating, or transporting any hazardous substance other than in
material compliance with applicable laws.  Borrower and each of its Subsidiaries
has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as
currently conducted.
 
 
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None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person.  None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law.
 
5.7           Investments.  Neither Borrower nor any of its Subsidiaries owns
any stock, shares, partnership interests or other equity securities except for
Permitted Investments.
 
5.8           Tax Returns and Payments; Pension Contributions.  Borrower and
each of its Subsidiaries has timely filed all required tax returns and reports,
and Borrower and each of its Subsidiaries, has timely paid all foreign, federal,
state, and local taxes, assessments, deposits and contributions owed by Borrower
and such Subsidiaries, in all jurisdictions in which Borrower or any such
Subsidiary is subject to taxes, including the United States, unless such taxes
are being contested in accordance with the following sentence.  Borrower and
each of its Subsidiaries, may defer payment of any contested taxes, provided
that Borrower or such Subsidiary, (a) in good faith contests its obligation to
pay the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Collateral Agent in writing of the commencement of, and
any material development in, the proceedings, and (c) posts bonds or takes any
other steps required to prevent the Governmental Authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien.”  Neither Borrower nor any of its Subsidiaries is aware
of any claims or adjustments proposed for any of Borrower’s or such
Subsidiaries’, prior tax years which could result in additional taxes becoming
due and payable by Borrower or its Subsidiaries.  Borrower and each of its
Subsidiaries have paid all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms, and
neither Borrower nor any of its Subsidiaries have, withdrawn from participation
in, and have not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any liability of Borrower or its
Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other Governmental
Authority.  Notwithstanding anything to the contrary contained in this
Agreement, Borrower shall not be in breach of this Section 5.8 unless the
aggregate amount of taxes covered by tax returns and reports that have not been
timely filed or the aggregate amount of taxes that have not been timely paid in
either case exceeds Fifteen Thousand Dollars ($15,000.00).
 
5.9           Use of Proceeds.  Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements in accordance with the provisions of this Agreement, and not for
personal, family, household or agricultural purposes.
 
5.10         Full Disclosure.  No written representation, warranty or other
statement of Borrower or any of its Subsidiaries in any certificate or written
statement given to Collateral Agent or any Lender, as of the date such
representation, warranty, or other statement was made, taken together with all
such written certificates and written statements given to Collateral Agent or
any Lender, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
 
 
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5.11          Definition of “Knowledge.”  For purposes of the Loan Documents,
whenever a representation or warranty is made to Borrower’s knowledge or
awareness, to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of the Responsible Officers.
 
6.           AFFIRMATIVE COVENANTS
 
Borrower shall, and shall cause each of its Subsidiaries to, do all of the
following:
 
6.1           Government Compliance.
 
(a)           Maintain its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of organization and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to have a Material Adverse Change.  Comply with all laws,
ordinances and regulations to which Borrower or any of its Subsidiaries is
subject, the noncompliance with which could reasonably be expected to have a
Material Adverse Change.
 
(b)           Obtain and keep in full force and effect, all of the Governmental
Approvals necessary for the performance by Borrower and its Subsidiaries of
their respective businesses and obligations under the Loan Documents and the
grant of a security interest to Collateral Agent for the ratable benefit of the
Lenders, in all of the Collateral.  Borrower shall promptly provide copies to
Collateral Agent of any material Governmental Approvals obtained by Borrower or
any of its Subsidiaries.
 
6.2           Financial Statements, Reports, Certificates.
 
(a)           Deliver to each Lender:
 
(i)           as soon as available, but no later than thirty (30) days after the
last day of each month, a company prepared consolidated and consolidating
balance sheet, income statement and cash flow statement covering the
consolidated operations of Borrower and its Subsidiaries for such month
certified by a Responsible Officer and in a form reasonably acceptable to
Collateral Agent;
 
(ii)           as soon as available, but no later than one hundred twenty (120)
days after the last day of Borrower’s fiscal year or within five (5) days of
filing with the SEC, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
acceptable to Collateral Agent in its reasonable discretion;
 
(iii)           (y) no later than January 31 of each year, Borrower’s draft
annual financial projections for the entire current fiscal year as presented to
Borrower’s Board of Directors, which such annual financial projections shall be
set forth in a quarter-by-quarter format and (z) as soon as available after
approval thereof by Borrower’s Board of Directors, but no later than February 28
of each fiscal year, Borrower’s annual financial projections for the entire
current fiscal year as approved by Borrower’s Board of Directors, which such
annual financial projections shall be set forth in a month-by-month format (such
annual financial projections as originally delivered to Collateral Agent and the
Lenders are referred to herein as the “Annual Projections”; provided that, any
revisions of the Annual Projections approved by Borrower’s Board of Directors
shall be delivered to Collateral Agent and the Lenders no later than seven (7)
days after such approval and the term “Annual Projections” shall include such
revisions);
 
(iv)           within five (5) days of delivery, copies of all statements,
reports and notices made available to Borrower’s security holders or holders of
Subordinated Debt;
 
(v)           in the event that Borrower becomes subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended, within five
(5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission,
 
 
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(vi)           prompt notice of any amendments of or other changes to the
Operating Documents of Borrower or any of its Subsidiaries, together with any
copies reflecting such amendments or changes with respect thereto;
 
(vii)           (x) prompt notice of (A) any material change in the composition
of the Intellectual Property, and (B) any event that could reasonably be
expected to materially and adversely affect the value of the Intellectual
Property; and (y) within thirty (30) days after the end of each month, notice of
the registration of any copyright, including any subsequent ownership right of
Borrower or any of its Subsidiaries in or to any copyright, patent or trademark,
including a copy of any such registration;
 
(viii)           as soon as available, but no later than thirty (30) days after
the last day of each month, copies of the month-end account statements for each
Collateral Account maintained by Borrower or its Subsidiaries, which statements
may be provided to Collateral Agent and each Lender by Borrower or directly from
the applicable institution(s), and
 
(ix)           other financial information as reasonably requested by Collateral
Agent or any Lender.
 
Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
internet at Borrower’s website address.
 
(b)           Concurrently with the delivery of the financial statements
specified in Section 6.2(a)(i) above but no later than thirty (30) days after
the last day of each month, deliver to each Lender, a duly completed Compliance
Certificate signed by a Responsible Officer.
 
(c)           Keep proper books of record and account in accordance with GAAP in
all material respects, in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and
activities.  Borrower shall, and shall cause each of its Subsidiaries to, allow,
at the sole cost of Borrower, Collateral Agent or any Lender, during regular
business hours upon reasonable prior notice (provided that no notice shall be
required when an Event of Default has occurred and is continuing), to visit and
inspect any of its properties, to examine and make abstracts or copies from any
of its books and records, and to conduct a collateral audit and analysis of its
operations and the Collateral.  Such audits shall be conducted no more often
than twice every year unless (and more frequently if) an Event of Default has
occurred and is continuing.
 
6.3           Inventory; Returns.  Keep all Inventory, material to Borrower’s
business, in good and marketable condition, free from material defects.  Returns
and allowances between Borrower, or any of its Subsidiaries, and their
respective Account Debtors shall follow Borrower’s, or such Subsidiary’s,
customary practices as they exist at the Effective Date.  Borrower must promptly
notify Collateral Agent and the Lenders of all returns, recoveries, disputes and
claims that involve more than Two Hundred Fifty Thousand Dollars ($250,000.00)
individually or in the aggregate in any calendar year.
 
6.4           Taxes; Pensions.  Timely file and require each of its Subsidiaries
to timely file, all required tax returns and reports and timely pay, and require
each of its Subsidiaries to timely file, all foreign, federal, state, and local
taxes, assessments, deposits and contributions owed by Borrower or its
Subsidiaries, except for deferred payment of any taxes contested permitted under
Section 5.8 hereof, and shall deliver to Lenders, 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 the terms of such plans.  Notwithstanding anything to the
contrary contained in this Agreement, Borrower shall not be in breach of this
Section 6.4 unless the aggregate amount of taxes covered by tax returns and
reports that have not been timely filed or the aggregate amount of taxes that
have not been timely paid in either case exceeds Fifteen Thousand Dollars
($15,000.00).
 
 
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6.5           Insurance.  Keep Borrower’s and its Subsidiaries’ business and the
Collateral insured for risks and in amounts standard for companies in Borrower’s
and its Subsidiaries’ industry and location and as Collateral Agent may
reasonably request.  Insurance policies shall be in a form, with companies, and
in amounts that are reasonably satisfactory to Collateral Agent and
Lenders.  All property policies shall have a lender’s loss payable endorsement
showing Collateral Agent as lender loss payee and waive subrogation against
Collateral Agent, and all liability policies shall show, or have endorsements
showing, Collateral Agent, as additional insured.  The Collateral Agent shall be
named as lender loss payee and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral, and each provider of
any such insurance shall agree, by endorsement upon the policy or policies
issued by it or by independent instruments furnished to the Collateral Agent,
that it will give the Collateral Agent thirty (30) days prior written notice
before any such policy or policies shall be materially altered or canceled.  At
Collateral Agent’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments.  Proceeds payable under any policy shall,
at Collateral Agent’s option, be payable to Collateral Agent, for the ratable
benefit of the Lenders, on account of the Obligations.  Notwithstanding the
foregoing, (a) so long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
up to Two Hundred Fifty Thousand Dollars ($250,000.00) with respect to any loss,
but not exceeding Five Hundred Thousand Dollars ($500,000.00), in the aggregate
for all losses under all casualty policies in any one year, toward the
replacement or repair of destroyed or damaged property; provided that any such
replaced or repaired property (i) shall be of equal or like value as the
replaced or repaired Collateral or otherwise useful in the Borrower’s business,
and (ii) shall be deemed Collateral in which Collateral Agent has been granted a
first priority security interest, subject only to Permitted Liens, and (b) after
the occurrence and during the continuance of an Event of Default, all proceeds
payable under such casualty policy shall, at the option of Collateral Agent, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account
of the Obligations.  If Borrower or any of its Subsidiaries fails to obtain
insurance as required under this Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons, Collateral Agent and/or any Lender
may make, at Borrower’s expense, all or part of such payment or obtain such
insurance policies required in this Section 6.5, and take any action under the
policies Collateral Agent or such Lender deems prudent.
 
6.6           Operating Accounts.
 
(a)           Maintain all of Borrower’s and its Subsidiaries’ Collateral
Accounts in accounts which are subject to a Control Agreement in favor of
Collateral Agent, other than the Excluded Accounts.
 
(b)           Borrower shall provide Collateral Agent five (5) days’ prior
written notice before Borrower or any of its Subsidiaries establishes any
Collateral Account at or with any Person other than Silicon Valley Bank or
UBS.  In addition, for each Collateral Account that Borrower or any of its
Subsidiaries, at any time maintains, Borrower or such Subsidiary shall cause the
applicable bank or financial institution at or with which such Collateral
Account is maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account to perfect
Collateral Agent’s and the Lenders’ Liens in such Collateral Account in
accordance with the terms hereunder prior to the establishment of such
Collateral Account, which Control Agreement may not be terminated without prior
written consent of Collateral Agent.  The provisions of the previous sentence
shall not apply to the Excluded Accounts.
 
(c)           Neither Borrower nor any of its Subsidiaries shall maintain any
Collateral Accounts except Collateral Accounts maintained in accordance with
Sections 6.6(a) and (b).
 
6.7           Protection of Intellectual Property Rights.  Borrower and each of
its Subsidiaries shall: (a) use commercially reasonable efforts to protect,
defend and maintain the validity and enforceability of its Intellectual Property
that is material to Borrower’s business; (b) promptly advise Collateral Agent in
writing of material infringement by a third party of its Intellectual Property;
and (c) not allow any Intellectual Property material to Borrower’s business to
be abandoned, forfeited or dedicated to the public without Collateral Agent’s
prior written consent.
 
6.8           Litigation Cooperation.  Commencing on the Effective Date and
continuing through the termination of this Agreement, make available to
Collateral Agent and the Lenders, without expense to Collateral Agent or the
Lenders, Borrower and each of Borrower’s officers, employees and agents and
Borrower’s Books, to the extent that Collateral Agent or any Lender may
reasonably deem them necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Collateral Agent or any Lender with respect
to any Collateral or relating to Borrower.
 
 
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6.9          Notices of Litigation and Default.  Borrower will give prompt
written notice to Collateral Agent and the Lenders of any litigation or
governmental proceedings pending or threatened (in writing) against Borrower or
any of its Subsidiaries, which could reasonably be expected to result in damages
or costs to Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand
Dollars ($250,000.00) or more or which could reasonably be expected to have a
Material Adverse Change.  Without limiting or contradicting any other more
specific provision of this Agreement, promptly (and in any event within three
(3) Business Days) upon Borrower becoming aware of the existence of any Event of
Default or event which, with the giving of notice or passage of time, or both,
would constitute an Event of Default, Borrower shall give written notice to
Collateral Agent and the Lenders of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default.
 
6.10        Intentionally Omitted.
 
6.11        Landlord Waivers; Bailee Waivers.  In the event that Borrower or any
of its Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will first
receive the written consent of Collateral Agent and, in the event that the
Collateral at any new location is valued in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) in the aggregate, such bailee or landlord, as applicable,
must execute and deliver a bailee waiver or landlord waiver, as applicable, in
form and substance reasonably satisfactory to Collateral Agent prior to the
addition of any new offices or business locations, or any such storage with or
delivery to any such bailee, as the case may be.
 
6.12        Creation/Acquisition of Subsidiaries.  In the event Borrower, or any
of its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide
prior written notice to Collateral Agent and each Lender of the creation or
acquisition of such new Subsidiary and take all such action as may be reasonably
required by Collateral Agent or any Lender to cause each such Subsidiary to
become a co-Borrower hereunder or to guarantee the Obligations of Borrower under
the Loan Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant
and pledge to Collateral Agent, for the ratable benefit of the Lenders, a
perfected security interest in the stock, units or other evidence of ownership
of each such newly created Subsidiary; provided, however, that solely in the
circumstance in which Borrower or any Subsidiary creates or acquires a Foreign
Subsidiary in an acquisition permitted hereunder or otherwise approved by the
Required Lenders, (i) such Foreign Subsidiary shall not be required to guarantee
the Obligations of Borrower under the Loan Documents and grant a continuing
pledge and security interest in and to the assets of such Foreign Subsidiary,
and (ii) Borrower shall not be required to grant and pledge to Collateral Agent,
or the Lenders, a perfected security interest in more than sixty-five percent
(65%) of the stock, units or other evidence of ownership of such Foreign
Subsidiary, if Borrower demonstrates to the reasonable satisfaction of
Collateral Agent that such Foreign Subsidiary providing such guarantee or pledge
and security interest or Borrower providing a perfected security interest in
more than sixty-five percent (65%) of the stock, units or other evidence of
ownership would create a present and existing adverse tax consequence to
Borrower under the U.S. Internal Revenue Code.
 
6.13       Further Assurances.
 
(a)           Execute any further instruments and take further action as
Collateral Agent or any Lender reasonably requests to perfect or continue
Collateral Agent’s and the Lenders’ Liens in the Collateral or to effect the
purposes of this Agreement.
 
(b)           Deliver to Collateral Agent and Lenders, within five (5) days
after the same are sent or received, 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 of the
Governmental Approvals material to Borrower’s business or otherwise could
reasonably be expected to have a Material Adverse Change.
 
 
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7.            NEGATIVE COVENANTS
 
Borrower shall not, and shall not permit any of its Subsidiaries to, do any of
the following without the prior written consent of the Required Lenders:
 
7.1           Dispositions.  Convey, sell, lease, transfer, assign, dispose of
or otherwise make cash payments consisting of (collectively, “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for Transfers (a) consisting of cash payments to trade
creditors in the ordinary course of business; (b) of Inventory in the ordinary
course of business; (c) of worn-out or obsolete Equipment; (d) in connection
with Permitted Liens, Permitted Investments and Permitted Licenses; (e)
Transfers in addition to those specifically enumerated above, to the extent the
same are specifically reflected in the Annual Projections; and (f) other
Transfers of property having a fair market value not in excess of One Hundred
Thousand Dollars ($100,000.00) per fiscal year.
 
7.2           Changes in Business, Management, Ownership, or Business
Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses engaged in by Borrower as of the Effective
Date or reasonably related thereto; (b) liquidate or dissolve, provided that any
Subsidiary may liquidate or dissolve into Borrower; or (c) (i) any Key Person
shall cease to be actively engaged in the management of Borrower unless a
replacement for such Key Person is approved by Borrower’s Board of Directors and
engaged by Borrower within one hundred eighty (180) days of such change (it
being understood, for the avoidance of doubt, that the appointment of an interim
replacement for such Key Person shall satisfy the foregoing), or (ii) enter into
any transaction or series of related transactions in which the stockholders of
Borrower who were not stockholders immediately prior to the first such
transaction own more than forty nine percent (49%) of the voting stock of
Borrower immediately after giving effect to such transaction or related series
of such transactions (other than by the sale of Borrower’s equity securities in
a public offering, a private placement of public equity or to venture capital
investors so long as Borrower identifies to Collateral Agent the venture capital
investors prior to the closing of the transaction).  Borrower shall not, without
at least fifteen (15) days’ (or such shorter period to which the Lenders shall
consent) prior written notice to Collateral Agent: (A) add any new offices or
business locations, including warehouses (unless such new offices or business
locations contain less than Two Hundred Fifty Thousand Dollars ($250,000.00) in
assets or property of Borrower or any of its Subsidiaries); (B) change its
jurisdiction of organization, (C) change its organizational structure or type,
(D) change its legal name, or (E) change any organizational number (if any)
assigned by its jurisdiction of organization.
 
7.3           Mergers or Acquisitions.  Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person; provided that a Subsidiary
may merge or consolidate into another Subsidiary (provided such surviving
Subsidiary is a “co-Borrower” hereunder or has provided a secured Guaranty of
Borrower’s Obligations hereunder) or with (or into) Borrower provided Borrower
is the surviving legal entity, and as long as no Event of Default is occurring
prior thereto or arises as a result therefrom.  Without limiting the foregoing,
Borrower shall not, without Collateral Agent’s prior written consent, enter into
any binding contractual arrangement with any Person to attempt to facilitate a
merger or acquisition of Borrower, unless (i) no Event of Default exists when
such agreement is entered into by Borrower, (ii) such agreement does not give
such Person the right to claim any fee, payment or damages in excess of One
Hundred Thousand Dollars ($100,000.00) from any parties, other than from
Borrower or Borrower’s investors, in connection with a sale of Borrower’s stock
or assets pursuant to or resulting from an assignment for the benefit of
creditors, an asset turnover to Borrower’s creditors (including, without
limitation, Collateral Agent and/or the Lenders), foreclosure, bankruptcy or
similar liquidation, and (iii) Borrower notifies Collateral Agent in advance of
entering into such an agreement.
 
7.4           Indebtedness.  Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
 
7.5           Encumbrance.  Create, incur, allow, or suffer any Lien on any of
its property, or assign or convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit any Collateral not to be subject to the first
priority security interest granted herein (except for Permitted Liens that are
permitted by the terms of this Agreement, or by operation of law, to have
priority over Collateral Agent’s and the Lenders’ Liens), or enter into any
agreement, document, instrument or other arrangement (except with or in favor of
Collateral Agent, for the ratable benefit of the Lenders) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower, or
any of its Subsidiaries, from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or such
Subsidiary’s Intellectual Property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Liens” herein.
 
 
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7.6           Maintenance of Collateral Accounts.  Maintain any Collateral
Account except pursuant to the terms of Section 6.6 hereof.
 
7.7           Distributions; Investments. (a) Pay any dividends or make any
distribution or payment in respect of or redeem, retire or purchase any capital
stock other than (i) other than dividends payable solely in capital stock; (ii)
repurchases pursuant to the terms of employee stock purchase plans, employee
restricted stock agreements, stockholder rights plans, director or consultant
stock option plans, or similar plans, provided such repurchases do not exceed
One Hundred Thousand Dollars ($100,000.00) in the aggregate per fiscal year);
and (iii) dividends, distributions or payments by any Subsidiary to Borrower; or
(b) directly or indirectly make any Investment other than Permitted Investments,
or permit any of its Subsidiaries to do so.
 
7.8           Transactions with Affiliates.  Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower or
any of its Subsidiaries, except for (a) transactions that are in the ordinary
course of Borrower’s or such Subsidiary’s business, upon fair and reasonable
terms that are no less favorable to Borrower or such Subsidiary than would be
obtained in an arm’s length transaction with a non affiliated Person, (b)
Subordinated Debt or equity investments by Borrower’s investors in Borrower or
its Subsidiaries, and (c) transactions permitted by Sections 7.1, 7.3, or 7.7.
 
7.9           Subordinated Debt.  (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or
(b) amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or adversely affect the subordination thereof
to Obligations owed to the Lenders.
 
7.10         Compliance.  Become an “investment company” or a company controlled
by an “investment company”, under the Investment Company Act of 1940, as
amended, or undertake as one of its important activities extending credit to
purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to 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 Change, or permit any of its Subsidiaries to do so;
withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower
or any of its Subsidiaries, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other Governmental Authority.
 
7.11         Compliance with Anti-Terrorism Laws.  Collateral Agent hereby
notifies Borrower and each of its Subsidiaries that pursuant to the requirements
of Anti-Terrorism Laws, and Collateral Agent’s policies and practices,
Collateral Agent is required to obtain, verify and record certain information
and documentation that identifies Borrower and each of its Subsidiaries and
their principals, which information includes the name and address of Borrower
and each of its Subsidiaries and their principals and such other information
that will allow Collateral Agent to identify such party in accordance with
Anti-Terrorism Laws.  Neither Borrower nor any of its Subsidiaries shall, nor
shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or
indirectly, knowingly enter into any documents, instruments, agreements or
contracts with any Person listed on the OFAC Lists.  Borrower and each of its
Subsidiaries shall immediately notify Collateral Agent if Borrower or such
Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of
Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo
contendere to, (c) is indicted on, or (d) is arraigned and held over on charges
involving money laundering or predicate crimes to money laundering.  Neither
Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its
Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any
business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224 or any
similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.
 
 
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8.            EVENTS OF DEFAULT
 
Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:
 
8.1           Payment Default.  Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any
other Obligations within three (3) Business Days after such Obligations are due
and payable (which three (3) Business Day grace period shall not apply to
payments due on the Maturity Date or the date of acceleration pursuant to
Section 9.1 (a) hereof).  During the cure period, the failure to cure the
payment default is not an Event of Default (but no Credit Extension will be made
during the cure period);
 
8.2           Covenant Default.
 
(a)           Borrower or any of its Subsidiaries fails or neglects to perform
any obligation in Sections 6.2 (Financial Statements, Reports, Certificates),
6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.12
(Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower
violates any covenant in Section 7; or
 
(b)           Borrower, or any of its Subsidiaries, fails or neglects to
perform, keep, or observe any other term, provision, condition, covenant or
agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure the default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to cure the default shall not be deemed an
Event of Default (but no Credit Extensions shall be made during such cure
period).  Grace periods provided under this Section shall not apply, among other
things, to financial covenants or any other covenants set forth in subsection
(a) above;
 
8.3           Material Adverse Change.  A Material Adverse Change occurs;
 
8.4           Attachment; Levy; Restraint on Business.
 
(a)           (i) The service of process seeking to attach, by trustee or
similar process, any funds of Borrower or any of its Subsidiaries or of any
entity under control of Borrower or its Subsidiaries on deposit with any Lender
or any Lender’s Affiliate or any bank or other institution at which Borrower or
any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of
lien, levy, or assessment is filed against Borrower or any of its Subsidiaries
or their respective assets by any government agency, and the same under
subclauses (i) and (ii) hereof are not, within ten (10) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); provided, however, no Credit Extensions shall be made during any
ten (10) day cure period; and
 
(b)           (i) any material portion of Borrower’s or any of its Subsidiaries’
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or
any of its Subsidiaries from conducting any part of its business;
 
8.5           Insolvency.  (a) Borrower or any of its Subsidiaries is or becomes
Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of
its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no
Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent
and/or until any Insolvency Proceeding is dismissed);
 
 
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8.6           Other Agreements.  There is a default in any agreement to which
Borrower or any of its Subsidiaries is a party with a third party or parties
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of Two
Hundred Thousand Dollars ($250,000.00) or that could reasonably be expected to
have a Material Adverse Change;
 
8.7           Judgments.  One or more judgments, orders, or decrees for the
payment of money in an amount, individually or in the aggregate, of at least Two
Hundred Thousand Dollars ($250,000.00) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a period of ten (10) days after the
entry thereof (provided that no Credit Extensions will be made prior to the
satisfaction, vacation, or stay of such judgment, order or decree);
 
8.8           Misrepresentations.  Borrower or any of its Subsidiaries or any
Person acting for Borrower or any of its Subsidiaries makes any representation,
warranty, or other statement now or later in this Agreement, any Loan Document
or in any writing delivered to Collateral Agent and/or Lenders or to induce
Collateral Agent and/or the Lenders to enter this Agreement or any Loan
Document, and such representation, warranty, or other statement is incorrect in
any material respect when made;
 
8.9           Subordinated Debt.  A default or breach occurs under any agreement
between Borrower or any of its Subsidiaries and any creditor of Borrower or any
of its Subsidiaries that signed a subordination, intercreditor, or other similar
agreement with Collateral Agent or the Lenders, or any creditor that has signed
such an agreement with Collateral Agent or the Lenders breaches any terms of
such agreement;
 
8.10         Guaranty.  (a) Any Guaranty terminates or ceases for any reason to
be in full force and effect except as permitted under the Loan Documents; (b)
any Guarantor does not perform any obligation or covenant under any Guaranty;
(c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs
with respect to any Guarantor, or (d) the death, liquidation, winding up, or
termination of existence of any Guarantor except as permitted hereunder;
 
8.11         Governmental Approvals.  Any Governmental Approval shall have been
revoked, rescinded, suspended, modified in an adverse manner, or not renewed in
the ordinary course for a full term and such revocation, rescission, suspension,
modification or non-renewal has resulted in or could reasonably be expected to
result in a Material Adverse Change; or
 
8.12         Lien Priority.  Any Lien created hereunder or by any other Loan
Document shall at any time fail to constitute a valid and perfected Lien on any
of the Collateral purported to be secured thereby, subject to no prior or equal
Lien, other than Permitted Liens which are permitted to have priority in
accordance with the terms of this Agreement, or by operation of law.
 
9.            RIGHTS AND REMEDIES
 
9.1           Rights and Remedies.
 
(a)           Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent may, and at the written direction of any Lender
shall, without notice or demand, do any or all of the following: (i) deliver
notice of the Event of Default to Borrower, (ii) by notice to Borrower declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations shall be immediately due and
payable without any action by Collateral Agent or the Lenders) or (iii) by
notice to Borrower suspend or terminate the obligations, if any, of the Lenders
to advance money or extend credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Collateral Agent and/or the
Lenders (but if an Event of Default described in Section 8.5 occurs all
obligations, if any, of the Lenders to advance money or extend credit for
Borrower’s benefit under this Agreement or under any other agreement between
Borrower and Collateral Agent and/or the Lenders shall be immediately terminated
without any action by Collateral Agent or the Lenders).
 
 
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(b)           Without limiting the rights of Collateral Agent and the Lenders
set forth in Section 9.1(a) above, upon the occurrence and during the
continuance of an Event of Default, Collateral Agent shall have the
right, without notice or demand, to do any or all of the following:
 
(i)           foreclose upon and/or sell or otherwise liquidate, the Collateral;
 
(ii)           apply to the Obligations any (a) balances and deposits of
Borrower that Collateral Agent or any Lender holds or controls, or (b) any
amount held or controlled by Collateral Agent or any Lender owing to or for the
credit or the account of Borrower; and/or
 
(iii)           commence and prosecute an Insolvency Proceeding in accordance
with applicable law or consent to Borrower commencing any Insolvency Proceeding.
 
(c)           Without limiting the rights of Collateral Agent and the Lenders
set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the
continuance of an Event of Default, Collateral Agent shall have the right,
without notice or demand, to do any or all of the following:
 
(i)           settle or adjust disputes and claims directly with Account Debtors
for amounts on terms and in any order that Collateral Agent considers advisable,
notify any Person owing Borrower money of Collateral Agent’s security interest
in such funds, and verify the amount of such account;
 
(ii)           make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral.  Borrower shall assemble the Collateral if Collateral Agent requests
and make it available in a location as Collateral Agent reasonably
designates.  Collateral Agent 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. Borrower grants
Collateral Agent a license to enter and occupy any of its premises, without
charge, to exercise any of Collateral Agent’s rights or remedies;
 
(iii)           ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, and/or advertise for sale, the Collateral.  Collateral Agent is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights,
mask works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any similar property as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Collateral Agent’s exercise of its rights
under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under
all licenses and all franchise agreements inure to Collateral Agent, for the
benefit of the Lenders;
 
(iv)           place a “hold” on any account maintained with Collateral Agent or
the Lenders and/or deliver a notice of exclusive control, any entitlement order,
or other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;
 
(v)           demand and receive possession of Borrower’s Books;
 
(vi)           appoint a receiver to seize, manage and realize any of the
Collateral, and such receiver shall have any right and authority as any
competent court will grant or authorize in accordance with any applicable law,
including any power or authority to manage the business of Borrower or any of
its Subsidiaries; and
 
(vii)           subject to clauses 9.1(a) and (b), exercise all rights and
remedies available to Collateral Agent and each Lender 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).
 
 
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Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent
Circumstance.  As used in the immediately preceding sentence, “Exigent
Circumstance” means any event or circumstance that, in the reasonable judgment
of Collateral Agent, imminently threatens the ability of Collateral Agent to
realize upon all or any material portion of the Collateral, such as, without
limitation, fraudulent removal, concealment, or abscondment thereof, destruction
or material waste thereof, or failure of Borrower or any of its Subsidiaries
after reasonable demand to maintain or reinstate adequate casualty insurance
coverage, or which, in the judgment of Collateral Agent, could reasonably be
expected to result in a material diminution in value of the Collateral.
 
9.2           Power of Attorney.  Borrower hereby irrevocably appoints
Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence
and during the continuance of an Event of Default, to: (a) endorse Borrower’s or
any of its Subsidiaries’ name on any checks or other forms of payment or
security; (b) sign Borrower’s or any of its Subsidiaries’ name on any invoice or
bill of lading for any Account or drafts against Account Debtors; (c) settle and
adjust disputes and claims about the Accounts directly with Account Debtors, for
amounts and on terms Collateral Agent determines reasonable; (d) make, settle,
and adjust all claims under Borrower’s insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Collateral Agent or a third party as the Code or any applicable law
permits.  Borrower hereby appoints Collateral Agent as its lawful
attorney-in-fact to sign Borrower’s or any of its Subsidiaries’ name on any
documents necessary to perfect or continue the perfection of Collateral Agent’s
security interest in the Collateral regardless of whether an Event of Default
has occurred until all Obligations (other than inchoate indemnity obligations)
have been satisfied in full and Collateral Agent and the Lenders are under no
further obligation to make Credit Extensions hereunder.  Collateral Agent’s
foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney in
fact, and all of Collateral Agent’s rights and powers, coupled with an interest,
are irrevocable until all Obligations (other than inchoate indemnity
obligations) have been fully repaid and performed and Collateral Agent’s and the
Lenders’ obligation to provide Credit Extensions terminates.
 
9.3           Protective Payments.  If Borrower or any of its Subsidiaries fail
to obtain the insurance called for by Section 6.5 or fails to pay any premium
thereon or fails to pay any other amount which Borrower or any of its
Subsidiaries is obligated to pay under this Agreement or any other Loan
Document, Collateral Agent may obtain such insurance or make such payment, and
all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately
due and payable, bearing interest at the Default Rate, and secured by the
Collateral.  Collateral Agent will make reasonable efforts to provide Borrower
with notice of Collateral Agent obtaining such insurance or making such payment
at the time it is obtained or paid or within a reasonable time thereafter.  No
such payments by Collateral Agent are deemed an agreement to make similar
payments in the future or Collateral Agent’s waiver of any Event of Default.
 
9.4           Application of Payments and Proceeds.  Notwithstanding anything to
the contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Collateral Agent from or on behalf of Borrower or any of its
Subsidiaries of all or any part of the Obligations, and, as between Borrower on
the one hand and Collateral Agent and Lenders on the other, Collateral Agent
shall have the continuing and exclusive right to apply and to reapply any and
all payments received against the Obligations in such manner as Collateral Agent
may deem advisable notwithstanding any previous application by Collateral Agent,
and (b) the proceeds of any sale of, or other realization upon all or any part
of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to
accrued and unpaid interest on the Obligations (including any interest which,
but for the provisions of the United States Bankruptcy Code, would have accrued
on such amounts); third, to the principal amount of the Obligations outstanding;
and fourth, to any other indebtedness or obligations of Borrower owing to
Collateral Agent or any Lender under the Loan Documents.  Any balance remaining
shall be delivered to Borrower or to whoever may be lawfully entitled to receive
such balance or as a court of competent jurisdiction may direct.  In carrying
out the foregoing, (x) amounts received shall be applied in the numerical order
provided until exhausted prior to the application to the next succeeding
category, and (y) each of the Persons entitled to receive a payment in any
particular category shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant thereto for such category.  Any
reference in this Agreement to an allocation between or sharing by the Lenders
of any right, interest or obligation “ratably,” “proportionally” or in similar
terms shall refer to Pro Rata Share unless expressly provided
otherwise.  Collateral Agent, or if applicable, each Lender, shall promptly
remit to the other Lenders such sums as may be necessary to ensure the ratable
repayment of each Lender’s portion of any Term Loan and the ratable distribution
of interest, fees and reimbursements paid or made by Borrower.  Notwithstanding
the foregoing, a Lender receiving a scheduled payment shall not be responsible
for determining whether the other Lenders also received their scheduled payment
on such date; provided, however, if it is later determined that a Lender
received more than its ratable share of scheduled payments made on any date or
dates, then such Lender shall remit to Collateral Agent or other Lenders such
sums as may be necessary to ensure the ratable payment of such scheduled
payments, as instructed by Collateral Agent.  If any payment or distribution of
any kind or character, whether in cash, properties or securities, shall be
received by a Lender in excess of its ratable share, then the portion of such
payment or distribution in excess of such Lender’s ratable share shall be
received by such Lender in trust for and shall be promptly paid over to the
other Lender for application to the payments of amounts due on the other
Lenders’ claims.  To the extent any payment for the account of Borrower is
required to be returned as a voidable transfer or otherwise, the Lenders shall
contribute to one another as is necessary to ensure that such return of payment
is on a pro rata basis.  If any Lender shall obtain possession of any
Collateral, it shall hold such Collateral for itself and as agent and bailee for
Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s
security interest therein.
 
 
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9.5           Liability for Collateral.  So long as Collateral Agent and the
Lenders comply with reasonable banking practices regarding the safekeeping of
the Collateral in the possession or under the control of Collateral Agent and
the Lenders, Collateral Agent and the Lenders 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.  Borrower bears
all risk of loss, damage or destruction of the Collateral.
 
9.6           No Waiver; Remedies Cumulative.  Failure by Collateral Agent or
any Lender, at any time or times, to require strict performance by Borrower of
any provision of this Agreement or any other Loan Document shall not waive,
affect, or diminish any right of Collateral Agent or any Lender thereafter to
demand strict performance and compliance herewith or therewith.  No waiver
hereunder shall be effective unless signed by Collateral Agent and the Required
Lenders and then is only effective for the specific instance and purpose for
which it is given.  The rights and remedies of Collateral Agent and the Lenders
under this Agreement and the other Loan Documents are cumulative.  Collateral
Agent and the Lenders have all rights and remedies provided under the Code, any
applicable law, by law, or in equity.  The exercise by Collateral Agent or any
Lender of one right or remedy is not an election, and Collateral Agent’s or any
Lender’s waiver of any Event of Default is not a continuing waiver.  Collateral
Agent’s or any Lender’s delay in exercising any remedy is not a waiver,
election, or acquiescence.
 
9.7           Demand Waiver.  Borrower waives, to the fullest extent permitted
by law, demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Collateral Agent or any Lender on which Borrower or any
Subsidiary is liable.
 
10.           NOTICES
 
All notices, consents, requests, approvals, demands, or other communication
(collectively, “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
transmission, when sent by facsimile 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, facsimile number,
or email address indicated below.  Any of Collateral Agent, Lender or Borrower
may change its mailing address or facsimile number by giving the other party
written notice thereof in accordance with the terms of this Section 10.
 

 
If to Borrower:
 
CELSION CORPORATION
997 Lenox Drive, Suite 100
Lawrenceville, New Jersey  08648
Attn: Chief Executive Officer
Fax:  (609) 896-2200
Email: mtardugno@celsion.com

 
 
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with a copy (which shall not constitute notice) to:
 
O’Melveny & Myers LLP
2765 Sand Hill Road
Menlo Park, CA 94025
Attn: Samuel Zucker
Fax:  (650) 473-2601
Email:szucker@omm.com
         
If to Collateral Agent:
 
OXFORD FINANCE LLC
133 North Fairfax Street
Alexandria, Virginia 22314
Attention: Legal Department
Fax: (703) 519-5225
Email: LegalDepartment@oxfordfinance.com
         
with a copy to
 
HORIZON TECHNOLOGY FINANCE CORPORATION
312 Farmington Avenue
Farmington, Connecticut  06032
Attn:  Legal Department
Fax:  (860) 676-8655
Email: jay@horizontechfinance.com
         
with a copy (which shall not constitute notice) to:
 
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, California 92121-2133
Attn: Troy Zander
Fax: (858) 638-5086
troy.zander@dlapiper.com
       

11.           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
 
New York law governs the Loan Documents without regard to principles of
conflicts of law.  Borrower, Lenders and Collateral Agent each submit to the
exclusive jurisdiction of the State and Federal courts in the City of New York,
Borough of Manhattan.  NOTWITHSTANDING THE FOREGOING, COLLATERAL AGENT AND THE
LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT
AND THE LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.1) DEEM
NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE
COLLATERAL AGENT’S AND THE LENDERS’ RIGHTS AGAINST BORROWER OR ITS
PROPERTY.  Borrower expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court, and Borrower
hereby waives any objection that it may have based upon lack of personal
jurisdiction, improper venue, or forum non conveniens and hereby consents to the
granting of such legal or equitable relief as is deemed appropriate by such
court.  Borrower hereby waives personal service of the summons, complaints, and
other process issued in such action or suit and agrees that service of such
summons, complaints, and other process may be made by registered or certified
mail addressed to Borrower at the address set forth in, or subsequently provided
by Borrower in accordance with, Section 10 of this Agreement and that service so
made shall be deemed completed upon the earlier to occur of Borrower’s actual
receipt thereof or three (3) days after deposit in the U.S. mails, first class,
registered or certified mail return receipt requested, proper postage prepaid.
 
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT,
AND THE LENDERS 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 EACH PARTY TO ENTER INTO THIS
AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
 
 
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12.           GENERAL PROVISIONS
 
12.1           Successors and Assigns. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party.  Borrower may not
transfer, pledge or assign this Agreement or any rights or obligations under it
without Collateral Agent’s and each Lender’s prior written consent (which may be
granted or withheld in Collateral Agent’s and each Lender’s discretion, subject
to Section 12.6).  The Lenders have the right, without the consent of or notice
to Borrower, to sell, transfer, assign, pledge, negotiate, or grant
participation in (any such sale, transfer, assignment, negotiation, or grant of
a participation, a “Lender Transfer”) all or any part of, or any interest in,
the Lenders’ obligations, rights, and benefits under this Agreement and the
other Loan Documents; provided, however, that any such Lender Transfer (other
than a transfer, pledge, sale or assignment to an Eligible Assignee) of its
obligations, rights, and benefits under this Agreement and the other Loan
Documents shall require the prior written consent of the Required Lenders (such
approved assignee, an “Approved Lender”).  Borrower and Collateral Agent shall
be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned until Collateral Agent shall have
received and accepted an effective assignment agreement in form satisfactory to
Collateral Agent executed, delivered and fully completed by the applicable
parties thereto, and shall have received such other information regarding such
Eligible Assignee or Approved Lender as Collateral Agent reasonably shall
require.  Notwithstanding anything to the contrary contained herein, so long as
no Event of Default has occurred and is continuing, no Lender Transfer (other
than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with
(x) assignments by a Lender due to a forced divestiture at the request of any
regulatory agency; or (y) upon the occurrence of a default, event of default or
similar occurrence with respect to a Lender’s own financing or securitization
transactions) shall be permitted, without Borrower’s consent, to any Person
which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower
or a vulture hedge fund, each as determined by Collateral Agent.
 
12.2           Indemnification.  Borrower agrees to indemnify, defend and hold
Collateral Agent and the Lenders and their respective directors, officers,
employees, agents, attorneys, or any other Person affiliated with or
representing Collateral Agent or the Lenders (each, an “Indemnified Person”)
harmless against:  (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”) asserted by any other Person in connection with;
related to; following; or arising from, out of or under, the transactions
contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses
incurred, or paid by Indemnified Person in connection with; related to;
following; or arising from, out of or under, the transactions contemplated by
the Loan Documents between Collateral Agent, and/or the Lenders and Borrower
(including reasonable attorneys’ fees and expenses), except for Claims and/or
losses directly caused by any Indemnified Person’s gross negligence or willful
misconduct.  Borrower hereby further indemnifies, defends and holds each
Indemnified Person harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
the fees and disbursements of counsel for such Indemnified Person) in connection
with any investigative, response, remedial, administrative or judicial matter or
proceeding, whether or not such Indemnified Person shall be designated a party
thereto and including any such proceeding initiated by or on behalf of Borrower,
and the reasonable expenses of investigation by engineers, environmental
consultants and similar technical personnel and any commission, fee or
compensation claimed by any broker (other than any broker retained by Collateral
Agent or Lenders) asserting any right to payment for the transactions
contemplated hereby which may be imposed on, incurred by or asserted against
such Indemnified Person as a result of or in connection with the transactions
contemplated hereby and the use or intended use of the proceeds of the loan
proceeds except for liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements directly
caused by such Indemnified Person’s gross negligence or willful misconduct.
 
12.3           Time of Essence.  Time is of the essence for the performance of
all Obligations in this Agreement.
 
12.4           Severability of Provisions.  Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
 
 
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12.5           Correction of Loan Documents.  Collateral Agent and the Lenders
may correct patent errors and fill in any blanks in this Agreement and the other
Loan Documents consistent with the agreement of the parties so long as
Collateral Agent provides Borrower with written notice of such correction and
allows Borrower at least ten (10) days to object to such correction.  In the
event of such objection, such correction shall not be made except by an
amendment signed by Collateral Agent, the Lenders and Borrower.
 
12.6           Amendments in Writing; Integration.  (a) No amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, no approval or consent thereunder, or any consent to any
departure by Borrower or any of its Subsidiaries therefrom, shall in any event
be effective unless the same shall be in writing and signed by Borrower,
Collateral Agent and the Required Lenders provided that:
 
(i)           no such amendment, waiver or other modification that would have
the effect of increasing or reducing a Lender’s Term Loan Commitment or
Commitment Percentage shall be effective as to such Lender without such Lender’s
written consent;
 
(ii)           no such amendment, waiver or modification that would affect the
rights and duties of Collateral Agent shall be effective without Collateral
Agent’s written consent or signature;
 
(iii)           no such amendment, waiver or other modification shall, unless
signed by all the Lenders directly affected thereby, (A) reduce the principal
of, rate of interest on or any fees with respect to any Term Loan or forgive any
principal, interest (other than default interest) or fees (other than late
charges) with respect to any Term Loan (B) postpone the date fixed for, or
waive, any payment of principal of any Term Loan or of interest on any Term Loan
(other than default interest) or any fees provided for hereunder (other than
late charges or for any termination of any commitment); (C) change the
definition of the term “Required Lenders” or the percentage of Lenders which
shall be required for the Lenders to take any action hereunder; (D) release all
or substantially all of any material portion of the Collateral, authorize
Borrower to sell or otherwise dispose of all or substantially all or any
material portion of the Collateral or release any Guarantor of all or any
portion of the Obligations or its guaranty obligations with respect thereto,
except, in each case with respect to this clause (D), as otherwise may be
expressly permitted under this Agreement or the other Loan Documents (including
in connection with any disposition permitted hereunder); (E) amend, waive or
otherwise modify this Section 12.6 or the definitions of the terms used in this
Section 12.6 insofar as the definitions affect the substance of this
Section 12.6; (F) consent to the assignment, delegation or other transfer by
Borrower of any of its rights and obligations under any Loan Document or release
Borrower of its payment obligations under any Loan Document, except, in each
case with respect to this clause (F), pursuant to a merger or consolidation
permitted pursuant to this Agreement; (G) amend any of the provisions of
Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan
Commitment, Commitment Percentage or that provide for the Lenders to receive
their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral
hereunder; or (H) subordinate the Liens granted in favor of Collateral Agent
securing the Obligations.  It is hereby understood and agreed that all Lenders
shall be deemed directly affected by an amendment, waiver or other modification
of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H)
of the preceding sentence;
 
(iv)           the provisions of the foregoing clauses (i), (ii) and (iii) are
subject to the provisions of any interlender or agency agreement among the
Lenders and Collateral Agent pursuant to which any Lender may agree to give its
consent in connection with any amendment, waiver or modification of the Loan
Documents only in the event of the unanimous agreement of all Lenders.
 
(b)           Other than as expressly provided for in Section 12.6(a)(i)-(iii),
Collateral Agent may, if requested by the Required Lenders, from time to
time designate covenants in this Agreement less restrictive by notification to a
representative of Borrower.
 
(c)           This Agreement and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or
agreements.  All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Agreement
and the Loan Documents merge into this Agreement and the Loan Documents.
 
 
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12.7           Counterparts.  This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Agreement.
 
12.8           Survival.  All covenants, representations and warranties made in
this Agreement continue in full force and effect until this Agreement has
terminated pursuant to its terms and all Obligations (other than inchoate
indemnity obligations and any other obligations which, by their terms, are to
survive the termination of this Agreement) have been satisfied.  The obligation
of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as
well as the confidentiality provisions in Section 12.9 below, shall survive
until the statute of limitations with respect to such claim or cause of action
shall have run.
 
12.9           Confidentiality.  In handling any confidential information of
Borrower, the Lenders and Collateral Agent shall exercise the same degree of
care that it exercises for their own proprietary information, but disclosure of
information may be made: (a) subject to the terms and conditions of this
Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or
in connection with a Lender’s own financing or securitization transactions and
upon the occurrence of a default, event of default or similar occurrence with
respect to such financing or securitization transaction; (b) to prospective
transferees (other than those identified in (a) above) or purchasers of any
interest in the Credit Extensions (provided, however, (x) such prospective
transferees are permitted transferees hereunder, and (y) the Lenders and
Collateral Agent shall, except upon the occurrence and during the continuance of
an Event of Default, obtain such prospective transferee’s or purchaser’s
agreement to the terms of this provision or to similar confidentiality terms);
(c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or
Collateral Agent’s regulators or as otherwise required in connection with an
examination or audit; (e) as Collateral Agent reasonably considers necessary in
exercising remedies under the Loan Documents; and (f) to third party service
providers of the Lenders and/or Collateral Agent so long as such service
providers have executed a confidentiality agreement with the Lenders and
Collateral Agent with terms no less restrictive than those contained herein.
Confidential information does not include information that either: (i) is in the
public domain or in the Lenders’ and/or Collateral Agent’s possession when
disclosed to the Lenders and/or Collateral Agent, or becomes part of the public
domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is
disclosed to the Lenders and/or Collateral Agent by a third party, if the
Lenders and/or Collateral Agent does not know that the third party is prohibited
from disclosing the information.  Collateral Agent and the Lenders may use
confidential information for any purpose, including, without limitation, for the
development of client databases, reporting purposes, and market analysis, so
long as Collateral Agent or the Lenders do not disclose Borrower’s identity or
the identity of any person associated with Borrower unless otherwise expressly
permitted by this Agreement.  The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.  The agreements
provided under this Section 12.9 supersede all prior agreements, understanding,
representations, warranties, and negotiations between the parties about the
subject matter of this Section 12.9.
 
12.10           Right of Set Off.  Borrower hereby grants to Collateral Agent
and to each Lender, a lien, security interest and right of set off as security
for all Obligations to Collateral Agent and each Lender hereunder, whether now
existing or hereafter arising upon and against all deposits, credits, collateral
and property, now or hereafter in the possession, custody, safekeeping or
control of Collateral Agent or the Lenders or any entity under the control of
Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in
transit to any of them.  At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Collateral Agent
or the Lenders may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations.  ANY AND ALL
RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
 
12.11           Cooperation of Borrower.  If necessary, Borrower agrees to
(i) execute any documents (including new Secured Promissory Notes) reasonably
required to effectuate and acknowledge each assignment of a Term Loan Commitment
or Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s
management available to meet with Collateral Agent and prospective participants
and assignees of Term Loan Commitments or Credit Extensions (which meetings
shall be conducted upon reasonable prior notice, during normal business hours
and no more often than twice every twelve months; in each case, unless an Event
of Default has occurred and is continuing), and (iii) assist Collateral Agent or
the Lenders in the preparation of information relating to the financial affairs
of Borrower as any prospective participant or assignee of a Term Loan Commitment
or Term Loan reasonably may request. Subject to the provisions of Section 12.9,
Borrower authorizes each Lender to disclose to any prospective participant or
assignee of a Term Loan Commitment, any and all information in such Lender’s
possession concerning Borrower and its financial affairs which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement,
or which has been delivered to such Lender by or on behalf of Borrower in
connection with such Lender’s credit evaluation of Borrower prior to entering
into this Agreement.
 
 
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13.           DEFINITIONS
 
13.1           Definitions.  As used in this Agreement, the following terms have
the following meanings:
 
“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.
 
“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.
 
“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.
 
“Agreement” is defined in the preamble hereof.
 
“Amortization Date” is (i) with respect to a Term A Loan, May 1, 2013 (or,
August 1, 2013, if Borrower achieves the Term B Loan Funding Milestone), and
(ii) with respect to the Term B Loan, August 1, 2013.
 
“Annual Projections” is defined in Section 6.2(a).
 
“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the
laws administered by OFAC.
 
“Approved Fund” is any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.
 
“Approved Lender” is defined in Section 12.1.
 
“Basic Rate” is, with respect to a Term Loan, the per annum rate of interest
(based on a year of three hundred sixty (360) days) equal to the greater of
(i) eleven and three quarters percent (11.75%) and (ii) the sum of (a) the three
(3) month U.S. LIBOR rate reported in the Wall Street Journal three (3) Business
Days prior to the Funding Date of such Term Loan (which shall not be less than
forty-seven hundredths percent (0.47%)), plus (b) eleven and twenty-eight
hundredths percent (11.28%).
 
“Blocked Person” is any Person:  (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.
 
 
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“Borrower” is defined in the preamble hereof.
 
“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records
including ledgers, federal, and state tax returns, records regarding Borrower’s
or its Subsidiaries’ assets or liabilities, the Collateral, business operations
or financial condition, and all computer programs or storage or any equipment
containing such information.
 
“Business Day” is any day that is not a Saturday, Sunday, other day on which
commercial banks in New York are authorized or required by law to close, or a
day on which Collateral Agent is closed.
 
“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., and (c) certificates of deposit
maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control
Agreement in favor of Collateral Agent.  For the avoidance of doubt, the direct
purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities,
or purchasing participations in, or entering into any type of swap or other
derivative transaction, or otherwise holding or engaging in any ownership
interest in any type of Auction Rate Security by Borrower or any of its
Subsidiaries shall be conclusively determined by the Lenders as an ineligible
Cash Equivalent, and any such transaction shall expressly violate each other
provision of this Agreement governing Permitted Investments.  Notwithstanding
the foregoing, Cash Equivalents does not include and Borrower, and each of its
Subsidiaries, are prohibited from purchasing, purchasing participations in,
entering into any type of swap or other equivalent derivative transaction, or
otherwise holding or engaging in any ownership interest in any type of debt
instrument, including, without limitation, any corporate or municipal bonds with
a long-term nominal maturity for which the interest rate is reset through a
dutch auction and more commonly referred to as an auction rate security (each,
an “Auction Rate Security”).
 
“Claims” are defined in Section 12.2.
 
“Code” is 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 Agent’s and the Lenders’ Liens 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.
 
“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.
 
“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account; other than Excluded Accounts.
 
“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders, and any
successor permitted hereunder.
 
“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to
time.
 
“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.
 
 
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“Communication” is defined in Section 10.
 
“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit C.
 
“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business.  The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.
 
“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower or any of its Subsidiaries maintains a Deposit
Account or the securities intermediary or commodity intermediary at which
Borrower or any of its Subsidiaries maintains a Securities Account or a
Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant
to which Collateral Agent obtains control (within the meaning of the Code) for
the benefit of the Lenders over such Deposit Account, Securities Account, or
Commodity Account.
 
“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.
 
“Credit Extension” is any Term Loan or any other extension of credit under the
Loan Documents by Collateral Agent or Lenders for Borrower’s benefit.
 
“Data Monitoring Committee” is the Data Monitoring Committee of Borrower, a
committee of three (3) industry recognized experts in oncology drug development,
independent, and appointed to monitor the HEAT study per charter, which meets
periodically to review and report on the safety and efficacy of the HEAT study
clinical data.
 
“Default Rate” is defined in Section 2.3(b).
 
“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.
 
“Designated Deposit Account” is Borrower’s deposit account, account number
3300658266, maintained with Silicon Valley Bank.
 
“Disbursement Letter” is that certain form attached hereto as Exhibit B.
 
“Dollars,” “dollars” and “$” each mean lawful money of the United States.
 
“Effective Date” is defined in the preamble of this Agreement.
 
 
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“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund and (iv) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933, as amended) and which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which either (A) has a rating of BBB or higher from Standard & Poor’s
Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc.
at the date that it becomes a Lender or (B) has total assets in excess of Five
Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through
(iv), which, through its applicable lending office, is capable of lending to
Borrower without the imposition of any withholding or similar taxes; provided
that notwithstanding the foregoing, “Eligible Assignee” shall not include,
unless an Event of Default has occurred and is continuing, (i) Borrower or any
of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower
or a vulture hedge fund, each as determined by Collateral
Agent.  Notwithstanding the foregoing, (x) in connection with assignments by a
Lender due to a forced divestiture at the request of any regulatory agency, the
restrictions set forth herein shall not apply and Eligible Assignee shall mean
any Person or party and (y) in connection with a Lender’s own financing or
securitization transactions, the restrictions set forth herein shall not apply
and Eligible Assignee shall mean any Person or party providing such financing or
formed to undertake such securitization transaction and any transferee of such
Person or party upon the occurrence of a default, event of default or similar
occurrence with respect to such financing or securitization transaction;
provided that no such sale, transfer, pledge or assignment under this clause (y)
shall release such Lender from any of its obligations hereunder or substitute
any such Person or party for such Lender as a party hereto until Collateral
Agent shall have received and accepted an effective assignment agreement from
such Person or party in form satisfactory to Collateral Agent executed,
delivered and fully completed by the applicable parties thereto, and shall have
received such other information regarding such Eligible Assignee as Collateral
Agent reasonably shall require.
 
“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.
 
“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations.
 
“Event of Default” is defined in Section 8.
 
“Excluded Accounts” are Deposit Accounts exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of
Borrower’s, or any of its Subsidiaries’, employees, and identified to Collateral
Agent by Borrower as such in the Perfection Certificates; provided that, at no
time shall Borrower maintain in any such Deposit Accounts an amount in excess of
the equivalent of two (2) payroll periods.
 
“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any territory thereof.
 
“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.
 
“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession in the
United States, which are applicable to the circumstances as of the date of
determination.
 
“General Intangibles” are all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
 
 
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“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.
 
“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
 
“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.
 
“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.
 
“HCC” is Hepatocellular Carcinoma.
 
“HEAT” is the HCC Study of RFA and ThermoDox.
 
“Hisun Agreement” is that certain Technology Development Agreement among
Borrower, Zhejian Hisun Pharmaceutical Co. Ltd. and Hisun Pharmaceutical USA
Inc., dated as of May 7, 2012.
 
“Hisun Consulting Fees” are the fees due Hisun under Section 2.2.3 of the Hisun
Agreement.
 
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.
 
“Indemnified Person” is defined in Section 12.2.
 
“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
 
“Insolvent” means not Solvent.
 
“Intellectual Property” means all of Borrower’s or any 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 Borrower;
 
(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.
 
 
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“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of any Person’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
 
“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance, payment
or capital contribution to any Person.
 
“Key Person” is each of Borrower’s (i) Chief Executive Officer, who is Michael
H. Tardugno as of the Effective Date, (ii) Chief Financial Officer, who is Greg
Weaver as of the Effective Date and (iii) Chief Medical Officer, who is Nicholas
Borys as of the Effective Date.
 
“Lender” is any one of the Lenders.
 
“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee
that becomes a party to this Agreement pursuant to Section 12.1.
 
“Lenders’ Expenses” are all documented, reasonable audit fees and expenses,
costs, and expenses (including reasonable attorneys’ fees and expenses, as well
as appraisal fees, fees incurred on account of lien searches, inspection fees,
and filing fees) 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 by
Collateral Agent and/or the Lenders in connection with the Loan Documents.
 
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest, or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.
 
“Loan Documents” are, collectively, this Agreement, the Secured Promissory
Notes, the Warrants, the Perfection Certificates, each Compliance Certificate,
each Disbursement Letter, the Post Closing Letter, any subordination agreements,
any note, or notes or guaranties executed by Borrower or any other Person, and
any other present or future agreement entered into by Borrower, any Guarantor or
any other Person for the benefit of the Lenders and Collateral Agent in
connection with this Agreement, all as amended, restated, or otherwise modified.
 
“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Collateral Agent’s and the Lenders’ Liens in the Collateral or in
the value of such Collateral; (b) a material adverse change in the business,
operations or condition (financial or otherwise) of Borrower or any Subsidiary;
or (c) a material impairment of the prospect of repayment of any portion of the
Obligations.
 
“Maturity Date” is, for each Term Loan, the date which is twenty-nine (29)
months after the Amortization Date with respect to such Term Loan.
 
“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Prepayment Fee, and other amounts
Borrower owes the Lenders now or later, in connection with, related to,
following, or arising from, out of or under, this Agreement or, the other Loan
Documents (other than the Warrants), or otherwise, and including interest
accruing after Insolvency Proceedings begin (whether or not allowed) and debts,
liabilities, or obligations of Borrower assigned to the Lenders and/or
Collateral Agent, and the performance of Borrower’s duties under the Loan
Documents (other than the Warrants).
 
“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.
 
“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.
 
 
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“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.
 
“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
 
“Payment Date” is the first (1st) calendar day of each calendar month,
commencing on August 1, 2012.
 
“Perfection Certificate” and “Perfection Certificates” is defined in
Section 5.1.
 
“Permitted Indebtedness” is:
 
(a)           Borrower’s Indebtedness to the Lenders and Collateral Agent under
this Agreement and the other Loan Documents;
 
(b)           Indebtedness existing on the Effective Date and disclosed on the
Perfection Certificate(s);
 
(c)           Subordinated Debt;
 
(d)           unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
 
(e)           Indebtedness consisting of capitalized lease obligations and
purchase money Indebtedness, in each case incurred by Borrower or any of its
Subsidiaries to finance the acquisition, repair, improvement or construction of
fixed or capital assets of such person, provided that (i) the aggregate
outstanding principal amount of all such Indebtedness does not exceed Five
Hundred Thousand Dollars ($500,000.00) per fiscal year and (ii) the principal
amount of such Indebtedness does not exceed the lower of the cost or fair market
value of the property so acquired or built or of such repairs or improvements
financed with such Indebtedness (each measured at the time of such acquisition,
repair, improvement or construction is made);
 
(f)           Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of Borrower’s business;
 
(g)           Indebtedness of Borrower to any Subsidiary and of any Subsidiary
to  Borrower; provided any such Subsidiary is a co-Borrower or secured Guarantor
hereunder;
 
(h)           Indebtedness consisting of Permitted Investments;
 
(i)           Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, however, that such Indebtedness (x)
is extinguished within three (3) Business Days of incurrence; and (y) does not
exceed Five Thousand Dollars ($5,000.00) at any time during the term hereof;
 
(j)           unsecured Indebtedness under swap or hedge agreements that are
designed to protect against fluctuations in interest rates, foreign currency
exchange rates or commodity prices, in each case not entered into for
speculative purposes; not to exceed One Hundred Thousand Dollars ($100,000.00)
during the term hereof;
 
(k)           unsecured Indebtedness under the Hisun Agreement, other than the
Hisun Consulting Fees (which Hisun Consulting Fees may not be paid during the
term of this Agreement without the prior written consent of the Lenders);
 
 
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(l)           unsecured Indebtedness in an aggregate principal amount not to
exceed One Hundred Thousand Dollars ($100,000.00) at any time during the term
hereof; and
 
(m)           extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (l) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose materially more burdensome terms upon Borrower, or
its Subsidiary, as the case may be.
 
“Permitted Investments” are:
 
(a)           Investments disclosed on the Perfection Certificate(s) and
existing on the Effective Date;
 
(b)           (i) Investments consisting of cash and Cash Equivalents, and
(ii) any Investments permitted by Borrower’s investment policy, as amended from
time to time, provided that such investment policy (and any such amendment
thereto) has been approved in writing by Collateral Agent;
 
(c)           Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;
 
(d)           Investments consisting of (x) Collateral Accounts in which
Collateral Agent has a perfected security interest; and (y) Excluded Accounts;
 
(e)           Investments in connection with Transfers permitted by Section 7.1;
 
(f)           Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower’s Board of
Directors; not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the
aggregate for (i) and (ii) in any fiscal year;
 
(g)           Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
 
(h)           Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (h)
shall not apply to Investments of Borrower in any Subsidiary;
 
(i)           non-cash Investments in joint ventures or strategic alliances in
the ordinary course of Borrower’s business consisting of the non-exclusive
licensing of technology, the development of technology or the providing of
technical support;
 
(j)           intercompany Investments by Borrower in any Subsidiary and by any
Subsidiary in Borrower; provided any such Subsidiary is a co-Borrower or secured
Guarantor hereunder;
 
(k)           Investments consisting of swap agreements permitted under the
definition of Permitted Indebtedness;
 
(l)           Investments consisting of consideration received in connection
with a Transfer made in compliance with Section 7.1; and
 
(m)           Investments in an aggregate amount (valued at cost) not to exceed
One Hundred Thousand Dollars ($100,000.00) at any time during the term hereof.
 
 
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“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public, and (B) non-exclusive and exclusive
licenses for the use of the Intellectual Property of Borrower or any of its
Subsidiaries entered into in the ordinary course of business, provided, that,
with respect to each such license described in clause (B), (i) no Event of
Default has occurred or is continuing at the time of such license; (ii) the
license constitutes an arms-length transaction, the terms of which, on their
face, do not provide for a sale or assignment of any Intellectual Property and
do not restrict the ability of Borrower or any of its Subsidiaries, as
applicable, to pledge, grant a security interest in or lien on, or assign or
otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive
license, (x) Borrower delivers twenty (20) days’ prior written notice and a
brief summary of the terms of the proposed license to Collateral Agent and the
Lenders and delivers to Collateral Agent and the Lenders copies of the final
executed licensing documents in connection with the exclusive license promptly
upon consummation thereof, (y) any such license is made in connection with a
bona fide corporate collaboration or partnership, and is approved by Borrower’s
(or the applicable Subsidiary’s) board of directors, and (z) any such license
could not result in a legal transfer of title of the licensed property but may
be exclusive in respects other than territory and may be exclusive as to
territory only as to discrete geographical areas outside of the United States;
and (iv) all upfront payments, royalties, milestone payments or other proceeds
arising from the licensing agreement that are payable to Borrower or any of its
Subsidiaries are paid to a Deposit Account that is governed by a Control
Agreement.
 
“Permitted Liens” are:
 
(a)           Liens existing on the Effective Date and disclosed on the
Perfection Certificates or  arising under this Agreement and the other Loan
Documents;
 
(b)           Liens for taxes, fees, assessments or other government charges or
levies, either (i) not due and payable or (ii) being contested in good faith and
for which Borrower maintains adequate reserves on its Books, provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
 
(c)           liens securing Indebtedness permitted under clause (e) of the
definition of “Permitted Indebtedness,” provided that (i) such liens exist prior
to the acquisition of, or attach substantially simultaneous with, or within
twenty (20) days after the, acquisition, lease, repair, improvement or
construction of, such property financed or leased by such Indebtedness and
(ii) such liens do not extend to any property of Borrower other than the
property (and proceeds thereof) acquired, leased or built, or the improvements
or repairs, financed by such Indebtedness;
 
(d)           Liens of carriers, warehousemen, suppliers, or other Persons that
are possessory in nature arising in the ordinary course of business so long as
such Liens attach only to Inventory, securing liabilities in the aggregate
amount not to exceed Twenty Five Thousand Dollars ($25,000.00), and which are
not delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
 
(e)           Liens to secure payment of workers’ compensation, employment
insurance, old-age pensions, social security and other like obligations incurred
in the ordinary course of business (other than Liens imposed by ERISA);
 
(f)           leases or subleases of real property granted in the ordinary
course of Borrower’s business (or, if referring to another Person, in the
ordinary course of such Person’s business), and leases, subleases, non-exclusive
licenses or sublicenses of personal property (other than Intellectual Property)
granted in the ordinary course of Borrower’s business (or, if referring to
another Person, in the ordinary course of such Person’s business), if the
leases, subleases, licenses and sublicenses do not prohibit granting Collateral
Agent or any Lender a security interest therein;
 
(g)           banker’s liens, rights of setoff and Liens in favor of financial
institutions incurred in the ordinary course of business arising in connection
with Borrower’s deposit accounts or securities accounts held at such
institutions solely to secure payment of fees and similar costs and expenses and
provided such accounts are maintained in compliance with Section 6.6(b) hereof;
 
 
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(h)           Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;
 
(i)           Liens consisting of Permitted Licenses;
 
(j)           deposits to secure the performance of bids, tenders, trade
contracts (other than for borrowed money), leases, government contracts,
statutory obligations, surety, stay, customs and appeal bonds, performance and
return of money bonds and other obligations of a like nature incurred in the
ordinary course of business; securing liabilities in the aggregate amount not to
exceed Fifty Thousand Dollars ($50,000.00)
 
(k)           easements, rights-of-way, restrictions (including zoning
restrictions), covenants, licenses, encroachments, protrusions and other similar
charges or encumbrances or minor title deficiencies incurred in the ordinary
course of business that, in the aggregate, are not substantial in amount and
that do not in any case materially detract from the value of the real property
subject thereto or materially interfere with the ordinary conduct of the
business of Borrower and its Subsidiaries;
 
(l)           deposits made in the ordinary course of business to secure
liability for premiums to insurance carriers; provided any such Lien is limited
to the insurance proceeds and secures liability in the aggregate amount not to
exceed One Hundred Thousand Dollars )$100,000.00);
 
(m)           Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods in the ordinary course of business;
 
(n)           Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods in the ordinary course
of business in accordance with the past practices;
 
(o)           the filing of UCC Financing Statements solely as a precautionary
measure in connection with operating leases or consignment of goods; in each
case, arising in the ordinary course of business; and
 
(p)           Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (j), 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.
 
“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
 
“Positive Data” is the release from the Data Monitoring Committee of study data
from the HEAT Phase III trial in HCC, demonstrating clinical benefit with a
thirty-three percent (33.00%) or greater improvement in Progression Free
Survival with a p-value of less than or equal to five hundredths (0.05); or a
DMC Recommendation to unblind the HEAT Phase III trial data based on equivalent
or better clinical efficacy (ie overall survival improvement); in both cases,
with publication of the results to the public markets (whether in the form of a
press release or in an 8-K filing with the SEC).
 
“Post Closing Letter” is that certain Post Closing Letter dated as of the
Effective Date by and between Collateral Agent and Borrower.
 
“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior
to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration
or otherwise, an additional fee payable to the Lenders in amount equal to:
 
(i)           for a prepayment made on or after the Funding Date of such Term
Loan through and including the first anniversary of the Funding Date of such
Term Loan, three percent (3.00%) of the principal amount of such Term Loan
prepaid;
 
 
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(ii)           for a prepayment made after the date which is after the first
anniversary of the Funding Date of such Term Loan through and including the
second anniversary of the Funding Date of such Term Loan, two percent (2.00%) of
the principal amount of the Term Loans prepaid; or
 
(iii)           for a prepayment made after the date which is after the second
anniversary of the Funding Date of such Term Loan and prior to the Maturity
Date, one percent (1.00%) of the principal amount of the Term Loans prepaid.
 
“Pro Rata Share” is, as of any date of determination, with respect to each
Lender, a percentage (expressed as a decimal, rounded to the ninth decimal
place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term
Loans.
 
“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.
 
“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their respective Term Loans, Lenders
holding one hundred percent (100%) of the aggregate outstanding principal
balance of the Term Loans, or (ii) at any time from and after any Original
Lender has assigned or transferred any interest in its Term Loans, Lenders
holding, sixty-six percent (66%) or more of the aggregate outstanding principal
balance of the Term Loans, plus, in respect of this clause (ii), (A) each
Original Lender that has not assigned or transferred any portion of its
respective Term Loan, (B) each assignee of an Original Lender provided such
assignee was assigned or transferred and continues to hold one hundred percent
(100%) of the assigning Original Lender’s interest in the Term Loans and (C) any
Person or party providing financing to an Original Lender or formed to undertake
a securitization transaction with respect to an Original Lender and any
transferee of such Person or party upon the occurrence of a default, event of
default or similar occurrence with respect to such financing or securitization
transaction (in each case in respect of clauses (A), (B) and (C) of this clause
(ii), whether or not such Lender is included within the Lenders holding
sixty-six percent (66%) of the Terms Loans; provided, however, that
notwithstanding the foregoing, for purposes of Section 9.1(b) hereof, “Required
Lenders” means (i) for so long as all Original Lenders retain one hundred
percent (100%) of their interests in their respective Term Loans, Lenders
holding one hundred percent (100%) of the aggregate outstanding principal
balance of the Term Loans, or (ii) at any time from and after any Original
Lender has assigned or transferred any interest in its Term Loans, Lenders
holding, sixty-six percent (66%) or more of the aggregate outstanding principal
balance of the Term Loans, plus, in respect of this clause (ii), each Original
Lender that has not assigned or transferred any portion of its respective Term
Loan (in each case in respect of this clause (ii), whether or not such Original
Lender is included within the Lenders holding sixty-six percent (66%) of the
Term Loans).  For purposes of this definition only, a Lender shall be deemed to
include itself, and any Lender that is an Affiliate or Approved Fund of such
Lender.
 
“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
 
“Responsible Officer” is any of the President, Chief Executive Officer, or Chief
Financial Officer of Borrower acting alone.
 
“Second Draw Period” is the period commencing on the date of the occurrence of
the Term B Loan Funding Milestone and ending on the earlier of (i) March 31,
2013 and (ii) the occurrence of an Event of Default (which has not been cured or
waived); provided, however, that the Second Draw Period shall not commence if on
the date of the occurrence of the Term B Loan Funding Milestone an Event of
Default has occurred and is continuing.
 
“Secured Promissory Note” is defined in Section 2.4.
 
 
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“Secured Promissory Note Record” is a record maintained by each Lender with
respect to the outstanding Obligations owed by Borrower to Lender and credits
made thereto.
 
“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.
 
“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement to
conduct its business as presently conducted; and such Person is able to pay its
debts (including trade debts) as they mature.
 
“Subordinated Debt” is indebtedness incurred by Borrower or any of its
Subsidiaries subordinated to all Indebtedness of Borrower and/or its
Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance reasonably satisfactory to
Collateral Agent and the Lenders entered into between Collateral Agent,
Borrower, and/or any of its Subsidiaries, and the other creditor), on terms
reasonably acceptable to Collateral Agent and the Lenders.
 
“Subsidiary” is, with respect to any Person, any Person of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled, directly or indirectly,
by such Person or one or more of Affiliates of such Person.
 
“Term A Loan” is defined in Section 2.2(a)(i) hereof.
 
“Term B Loan” is defined in Section 2.2(a)(ii) hereof.
 
“Term B Loan Funding Milestone” is Borrower’s receipt, and delivery to
Collateral Agent and the Lenders, of Positive Data, in form and content
reasonably acceptable to the Lenders.
 
“Term Loan” is defined in Section 2.2(a)(ii) hereof.
 
“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make
a Term Loan, up to the principal amount shown on Schedule 1.1.  “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.
 
“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.
 
“Transfer” is defined in Section 7.1.
 
“Warrants” are those certain Warrants to Purchase Stock dated as of the
Effective Date, or any date thereafter, issued by Borrower in favor of each
Lender or such Lender’s Affiliates; each in form and content acceptable to each
respective Lender (or such Affiliates) in its reasonable discretion.
 

 

[Balance of Page Intentionally Left Blank]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.
 
BORROWER:
         
CELSION CORPORATION
               
By                                                                                 
                                                              
   
Name:                                                            
                                                                               
   
Title:                                                                            
   
               
COLLATERAL AGENT AND LENDER:
         
OXFORD FINANCE LLC
           
By                                                                                                                                                                                                                                          
   
Name:                                                                                                                                                                                                                                          
   
Title:                                                                                                                                                                                                                                    
               
LENDER:
         
HORIZON TECHNOLOGY FINANCE CORPORATION
           
By:                                                                                                                                                 
   
          Robert D. Pomeroy, Jr.
   
Title: Chief Executive Officer
   

 
[Signature Page to Loan and Security Agreement]
 
 
 

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SECURED PROMISSORY NOTE
(Term A Loan)
 

$2,500,000.00  Dated:  June 27, 2012

 
FOR VALUE RECEIVED, the undersigned, CELSION CORPORATION, a Delaware corporation
with offices located at 997 Lenox Drive, Suite 100, Lawrenceville, New
Jersey  08648 (“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD
FINANCE LLC][HORIZON TECHNOLOGY FINANCE CORPORATION] (“Lender”) the principal
amount of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00) or such
lesser amount as shall equal the outstanding principal balance of the Term A
Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal
amount of such Term A Loan, at the rates and in accordance with the terms of the
Loan and Security Agreement dated June 27, 2012 by and among Borrower, Lender,
Oxford Finance LLC, as Collateral Agent, and the other Lenders from time to time
party thereto (as amended, restated, supplemented or otherwise modified from
time to time, the “Loan Agreement”).  If not sooner paid, the entire principal
amount and all accrued and unpaid interest hereunder shall be due and payable on
the Maturity Date as set forth in the Loan Agreement.  Any capitalized term not
otherwise defined herein shall have the meaning attributed to such term in the
Loan Agreement.
 
Principal, interest and all other amounts due with respect to the Term A Loan,
are payable in lawful money of the United States of America to Lender as set
forth in the Loan Agreement and this Secured Promissory Note (this “Note”).  The
principal amount of this Note and the interest rate applicable thereto, and all
payments made with respect thereto, shall be recorded by Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Note.
 
The Loan Agreement, among other things, (a) provides for the making of a secured
Term A Loan by Lender to Borrower, and (b) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
 
This Note may not be prepaid except as set forth in Section 2.2 (c) and
Section 2.2(d) of the Loan Agreement.
 
This Note and the obligation of Borrower to repay the unpaid principal amount of
the Term A Loan, interest on the Term A Loan and all other amounts due Lender
under the Loan Agreement is secured under the Loan Agreement.
 
Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.
 
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower’s obligations hereunder not
performed when due.
 
This Note shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New York.
 
The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Lender or its agent.  Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation.  Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.
 

 
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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized on the date hereof.
 

   
BORROWER:
         
CELSION CORPORATION
               
By                                                                                  
   
Name:                                                                            
   
Title: