Exhibit 10.1

LOAN AND SECURITY AGREEMENT

Effective Date: dated as of May 2, 2008

by and among

OXFORD FINANCE CORPORATION,

a Delaware corporation

133 North Fairfax Street

Alexandria, VA 22314

as a Lender

and

SILICON VALLEY BANK,

a California bank

2400 Hanover Street

Palo Alto, California 94304

as a Lender

and

MAP PHARMACEUTICALS, INC.,

a Delaware corporation

2400 Bayshore Parkway, Suite 200

Mountain View, California 94043

as a Borrower

Commitment Amount (Oxford): $13.7 million

Commitment Amount (Silicon): $6.3 million

Commitment Termination Date: May 2, 2008

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THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is made by and among MAP
PHARMACEUTICALS, INC., a Delaware corporation (“Borrower”); OXFORD FINANCE
CORPORATION, a Delaware corporation (“Oxford”) and SILICON VALLEY BANK, a
California bank (“Silicon” and collectively with Oxford, “Lenders”). Lenders and
Borrower hereby agree as follows:

AGREEMENT

1. Definitions and Construction.

1.1 Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:

“Account Control Agreement” means an agreement acceptable to Lenders which
perfects via control Lenders’ security interest in Borrower’s deposit accounts
and/or accounts holding securities, provided the current forms of Account
Control Agreements entered into in connection with Horizon Facility with Wells
Fargo Bank National Association, Silicon Valley Bank and Capital Advisors are in
form acceptable to Lenders except to the extent they don’t reference the Lenders
as secured parties and this Loan Agreement.

“Affiliate” means any Person that owns or controls directly or indirectly ten
percent (10%) or more of the stock of another entity, any Person that controls
or is controlled by or is under common control with such Persons or any
Affiliate of such Persons and each of such Person’s officers, directors, joint
venturers or partners.

“Agreement” means this certain Loan and Security Agreement by and among Borrower
and Lenders dated as of the date on the cover page hereto (as it may from time
to time be amended or supplemented in writing and signed by the Borrower and
Lenders).

“Bermuda Subsidiary” mean Borrower’s Subsidiary, Systemic Pulmonary Delivery
Ltd.

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

“Borrower’s Home State” means California.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banking institutions are authorized or required to close in Virginia or
Borrower’s Home State.

“Claim” has the meaning given such term in Section 10.3(a) of this Agreement.

“Code” means the Uniform Commercial Code as adopted and in effect in the State
of California, as amended from time to time; provided that if by reason of
mandatory provisions of law, the creation and/or perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than California, the term “Code” shall also mean the Uniform Commercial Code as
in effect from time to time in such jurisdiction for purposes of the provisions
hereof relating to such creation, perfection or effect of perfection or
non-perfection.

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“Collateral” has the meaning given such term in Section 4.1 of this Agreement.

“Commitment Amount” means collectively, Commitment Amount (Oxford) and
Commitment Amount (Silicon).

“Commitment Amount (Oxford)” and “Commitment Amount (Silicon)” each have the
respective meanings as set forth on the cover page of this Agreement.

“Commitment Fee” has the meaning given to such term in Section 2.6(a) of this
Agreement.

“Commitment Termination Date” has the meaning set forth on the cover page of
this Agreement.

“Default” means any event which with the passing of time or the giving of notice
or both would become an Event of Default hereunder.

“Default Rate” means the per annum rate of interest equal to four percent
(4%) over the Loan Rate, but such rate shall in no event be more than the
highest rate permitted by applicable law to be charged on commercial loans in a
default situation.

“Disclosure Schedule” means Exhibit A attached hereto.

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

“Effective Date” has the meaning set forth on the cover page of this Agreement.

“Environmental Law” means any foreign, federal, state or local law, statute,
common law duty, rule, regulation, ordinance and code, together with any
administrative order, directed duty, request, license, authorization and permit
of, and agreement with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal
Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances
Control Act and the Emergency Planning and Community Right-to-Know Act.

“Equity Securities” of any Person means (a) all common stock, preferred stock,
participations, shares, partnership interests, membership interests or other
equity interests in and of such Person (regardless of how designated and whether
or not voting or non-voting) and (b) all warrants, options and other rights to
acquire any of the foregoing.

“ERISA” has the meaning given to such term in Section 7.12 of this Agreement.

“Event of Default” has the meaning given to such term in Section 8 of this
Agreement.

 

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“Existing Lender Equipment Facility” means the Loan and Security Agreement dated
as of September 19, 2006 by and among Lenders and Borrower, as it may be amended
from time to time.

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the earlier
of (a) the Maturity Date or (b) the acceleration of such Loan, equal to the
original principal amount of such Loan multiplied by five percent (5%). In the
case of Loan A (Oxford) the Final Payment is $685,000, and in the case of Loan A
(Silicon) the Final Payment is $315,000.

“Foreign Subsidiary” means any Subsidiary not organized under the laws of the
United States or any state or territory thereof or the District of Columbia.

“Funding Certificate” means a certificate executed by a Responsible Officer of
Borrower substantially in the form of Exhibit B or such other form as Lenders
may agree to accept.

“Funding Date” means any date on which a Loan is made to or on account of
Borrower under this Agreement.

“GAAP” means generally accepted accounting principles as in effect in the United
States of America from time to time, consistently applied.

“Good Faith Deposit” has the meaning given to such term in Section 2.6(a) of
this Agreement.

“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” means (a) any federal, state, county, municipal or
foreign government, or political subdivision thereof, (b) any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, (c) any court or administrative tribunal, or
(d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.

“Hazardous Materials” means all those substances which are regulated by, or
which may form the basis of liability under, any Environmental Law, including
all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.

“Horizon Facility” means the Venture Loan and Security Agreement dated as of
September 14, 2006, as amended, by and among Horizon, Silicon Valley Bank,
Oxford Finance Corporation and Borrower.

“Horizon” means Horizon Technology Funding Company LLC.

 

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“Indebtedness” means, with respect to Borrower or any Subsidiary, the aggregate
amount of, without duplication, (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (excluding trade payables aged
less than one hundred eighty (180) days), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a Lien on
any asset of such Person, whether or not such obligation or liability is
assumed, (f) all obligations or liabilities of others guaranteed by such Person,
and (g) any other obligations or liabilities which are required by GAAP to be
shown as debt on the balance sheet of such Person. Unless otherwise indicated,
the term “Indebtedness” shall include all Indebtedness of Borrower and any
Subsidiary.

“Indemnified Person” has the meaning given such term in Section 10.3 of this
Agreement.

“Intellectual Property” means all of Borrower’s right, title and interest in and
to patents, patent rights (and applications and registrations therefor),
trademarks and service marks (and applications and registrations therefor),
inventions, copyrights, mask works (and applications and registrations
therefor), trade names, trade styles, software and computer programs, source
code, object code, trade secrets, methods, processes, know how, drawings,
specifications, descriptions, and all memoranda, notes, and records with respect
to any research and development, all whether now owned or subsequently acquired
or developed by Borrower and whether in tangible or intangible form or contained
on magnetic media readable by machine together with all such magnetic media (but
not including embedded computer programs and supporting information included
within the definition of “goods” under the Code).

“Investment” means the purchase or acquisition of any capital stock, equity
interest, or any obligations or other securities of, or any interest in, any
Person, or the extension of any advance, loan, extension of credit or capital
contribution to, or any other investment in, or deposit with, any Person.

“Landlord Agreement” means an agreement substantially in the form provided by
Lenders to Borrower or such other form as Lenders may agree to accept.

“Lender” means individually, each of the Lenders, and “Lenders” has the meaning
given in the preamble to this Agreement.

“Lenders’ Expenses” means all reasonable costs or expenses (including reasonable
attorneys’ fees and expenses) incurred in connection with the preparation,
negotiation, documentation, administration and funding of the Loan Documents;
and Lenders’ reasonable attorneys’ fees, costs and expenses for one common
counsel incurred in amending, modifying, enforcing or defending the Loan
Documents (including fees and expenses of appeal or review), including the
exercise of any rights or remedies afforded hereunder or under applicable law,
whether or not suit is brought, whether before or after bankruptcy or
insolvency, including without limitation all fees and costs incurred by Lenders
in connection with Lenders’ enforcement of their rights in a bankruptcy or
insolvency proceeding filed by or against Borrower or Collateral.

 

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“Lien” means any voluntary or involuntary security interest, pledge, bailment,
lease, mortgage, hypothecation, conditional sales and title retention agreement,
encumbrance or other lien with respect to any Property in favor of any Person.

“Loan A” and “Loans” mean collectively, Loan A (Silicon) and Loan A (Oxford).

“Loan A (Silicon)” means the first advance of credit to Borrower under this
Agreement in the Commitment Amount (Silicon).

“Loan A (Oxford)” means the first advance of credit to Borrower under this
Agreement in the Commitment Amount (Oxford).

“Loan Documents” means, collectively, this Agreement, the Notes, any Landlord
Agreement, any Account Control Agreement and all other documents, instruments
and agreements entered into in connection with this Agreement, all as amended or
extended from time to time.

“Loan Rate” means 9.95%. The Loan Rate will be fixed for the term of the Loan.

“Material Subsidiary” has the meaning given such term in Section 6.13 of this
Agreement.

“Maturity Date” means, with respect to each Loan, October 1, 2011, or if
earlier, the date of acceleration of such Loan following an Event of Default or
the date of prepayment, whichever is applicable.

“Milestone” means Borrower has received, and publicly reported it received,
positive data from a phase 3 trial of at least one of its two lead product
candidates.

“Note” means each promissory note executed in connection with a Loan in
substantially the form of Exhibit C attached hereto, and, collectively, “Notes”
means all such promissory notes.

“Obligations” means all debt, principal, interest, fees, charges, expenses and
attorneys’ fees and costs and other amounts, obligations, covenants, and duties
owing by Borrower to Lenders of any kind and description pursuant to or
evidenced by the Loan Documents, and whether or not for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, including all Lenders’ Expenses.

“Officer’s Certificate” means a certificate executed by a Responsible Officer
substantially in the form of Exhibit E or such other form as Lenders may agree
to accept.

“Oxford” has the meaning given to such term in the preamble to this Agreement.

“Payment Date” has the meaning given such term in Section 2.2(a) of this
Agreement.

 

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“Permitted Indebtedness” means and includes:

(a) Indebtedness of Borrower to Lenders;

(b) Indebtedness of Borrower secured by Liens permitted under clause (e) of the
definition of Permitted Liens;

(c) Indebtedness arising from the endorsement of instruments in the ordinary
course of business;

(d) Indebtedness existing on the date hereof and set forth on the Disclosure
Schedule, provided the Horizon Facility is repaid in its entirety with the
proceeds of the Loans;

(e) other Indebtedness in an aggregate amount not exceeding Five Hundred
Thousand Dollars ($500,000) at any time outstanding; and

(f) Subordinated Debt.

“Permitted Investments” means and includes any of the following Investments as
to which Lenders have a perfected security interest:

(a) Deposits and deposit accounts with commercial banks organized under the laws
of the United States or a state thereof to the extent: (i) the deposit accounts
of each such institution are insured by the Federal Deposit Insurance
Corporation up to the legal limit; and (ii) each such institution has an
aggregate capital and surplus of not less than One Hundred Million Dollars
($100,000,000);

(b) Investments in marketable obligations issued or fully guaranteed by the
United States and maturing not more than one (1) year from the date of purchase;

(c) Investments in open market commercial paper rated at least “A1” or “P1” or
higher by a national credit rating agency and maturing not more than one
(1) year from the purchase thereof;

(d) Investments allowed under the MAP Pharmaceuticals, Inc. Investment Policy
and Guidelines dated January 22, 2008, as provided to Lenders, and any
subsequent guidelines approved by the Audit Committee of Borrower’s Board of
Directors;

(e) Investments pursuant to or arising under currency agreements or interest
rate agreements entered into in the ordinary course of business;

(f) (i) if a Subsidiary has provided Lenders with a secured guaranty pursuant to
Section 6.13, Investments in such Subsidiaries, and (ii) for all other
Subsidiaries which have not provided Lenders with a secured guaranty pursuant to
Section 6.13, cash Investments in such Subsidiaries in an aggregate amount for
all such Subsidiaries not to exceed Five Hundred Thousand Dollars ($500,000) per
fiscal year;

(g) Equity Securities received in connection with licensing transactions in the
ordinary course of business; and

 

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(h) Other Investments aggregating not in excess of Seven Hundred Fifty Thousand
Dollars ($750,000) at any time.

“Permitted Liens” means and includes:

(a) the Lien created by this Agreement;

(b) Liens in favor of any of the Lenders, including without limitation Liens
securing the Existing Lender Equipment Facility;

(c) Liens for fees, taxes, levies, imposts, duties or other governmental charges
of any kind which are not yet delinquent or which are being contested in good
faith by appropriate proceedings which suspend the collection thereof (provided
that such appropriate proceedings do not involve any substantial danger of the
sale, forfeiture or loss of any material item of the Collateral which in the
aggregate is material to Borrower and that Borrower has adequately bonded such
Lien or reserves sufficient to discharge such Lien have been provided on the
books of Borrower);

(d) Liens identified on the Disclosure Schedule, provided the Horizon Facility
is repaid in its entirety with the proceeds of the Loans;

(e) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
similar Liens arising in the ordinary course of business and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings (provided that such appropriate
proceedings do not involve any substantial danger of the sale, forfeiture or
loss of any material item of Collateral or Collateral which in the aggregate is
material to Borrower and that Borrower has adequately bonded such Lien or
reserves sufficient to discharge such Lien have been provided on the books of
Borrower);

(f) Liens upon any equipment or other personal property (other than the
equipment and personal property that secures the Existing Lender Equipment
Facility) acquired by Borrower in an aggregate amount not to exceed Seven
Hundred Fifty Thousand Dollars ($750,000), to secure (i) the purchase price of
such equipment or other personal property, or (ii) lease obligations or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that (A) such Liens are
confined solely to the equipment or other personal property so acquired and the
amount secured does not exceed the acquisition price thereof, and (B) no such
Lien shall be created, incurred, assumed or suffered to exist in favor of
Borrower’s officers, directors or shareholders holding five percent (5%) or more
of Borrower’s Equity Securities; and

(g) licenses or assignments of components of Intellectual Property in connection
with joint ventures or corporate collaborations entered into in the ordinary
course of business.

“Person” means and includes any individual, any partnership, any corporation,
any business trust, any joint stock company, any limited liability company, any
unincorporated association or any other entity and any domestic or foreign
national, state or local government, any political subdivision thereof, and any
department, agency, authority or bureau of any of the foregoing.

 

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“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, whether tangible or intangible.

“Rights of Payment” has the meaning given to such term in Section 4.1(g) of this
Agreement.

“Responsible Officer” has the meaning given to such term in Section 6.3 of this
Agreement.

“Scheduled Payments” has the meaning given to such term in Section 2.2(a) of
this Agreement.

“Silicon” has the meaning given to such term in the preamble to this Agreement.

“Solvent” has the meaning given such term in Section 5.11 of this Agreement.

“Subordinated Debt” is (a) Indebtedness incurred by Borrower subordinated to
Borrower’s Indebtedness owed to Lenders and which is reflected in a written
agreement in a manner and form reasonably acceptable to Lenders and approved by
Lenders in writing, and (b) to the extent the terms of subordination do not
change adversely to Lenders, refinancings, refundings, renewals, amendments or
extensions of any of the foregoing.

“Subsidiary” means any corporation or other entity of which a majority of the
outstanding Equity Securities entitled to vote for the election of directors or
other governing body (otherwise than as the result of a default) is owned by
Borrower directly or indirectly through any Subsidiary.

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus (a) any amounts attributable to (i) goodwill,
(ii) intangible items including unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, (iii) notes, accounts receivable and other
obligations owing to Borrower from its officers or other Affiliates, and
(iv) reserves not already deducted from assets, and (b) Total Liabilities, plus
(c) Subordinated Debt.

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

“Third Party Equipment” has the meaning given such term in Section 4.8 of this
Agreement.

“Transfer” has the meaning given such term in Section 7.4 of this Agreement.

 

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1.2 Construction. References in this Agreement to “Articles,” “Sections,”
“Exhibits,” “Schedules” and “Annexes” are to recitals, articles, sections,
exhibits, schedules and annexes herein and hereto unless otherwise indicated.
References in this Agreement and each of the other Loan Documents to any
document, instrument or agreement shall include (a) all exhibits, schedules,
annexes and other attachments thereto, (b) all documents, instruments or
agreements issued or executed in replacement thereof, and (c) such document,
instrument or agreement, or replacement or predecessor thereto, as amended,
modified and supplemented from time to time and in effect at any given time. The
words “hereof,” “herein” and “hereunder” and words of similar import when used
in this Agreement or any other Loan Document shall refer to this Agreement or
such other Loan Document, as the case may be, as a whole and not to any
particular provision of this Agreement or such other Loan Document, as the case
may be. The words “include” and “including” and words of similar import when
used in this Agreement or any other Loan Document shall not be construed to be
limiting or exclusive. Unless otherwise indicated in this Agreement or any other
Loan Document, all accounting terms used in this Agreement or any other Loan
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP, and all
terms describing Collateral shall be construed in accordance with the Code. The
terms and information set forth on the cover page of this Agreement are
incorporated into this Agreement.

2. Loans; Repayment.

2.1 Commitment.

(a) The Commitment Amount. Subject to the terms and conditions of this Agreement
and relying upon the representations and warranties herein set forth as and when
made or deemed to be made, Oxford agrees to lend to Borrower prior to the
Commitment Termination Date, Loan A (Oxford). Subject to the terms and
conditions of this Agreement and relying upon the representations and warranties
herein set forth as and when made or deemed to be made, Silicon agrees to lend
to Borrower prior to the Commitment Termination Date, Loan A (Silicon).

(b) The Loans and the Notes. The obligation of Borrower to repay the unpaid
principal amount of and interest on each Loan made under this Agreement shall be
evidenced by a single promissory note in favor of such Lender in the form of
Exhibit C-1 and C-2 attached hereto, duly completed, executed and delivered to
such Lender dated on or about the Funding Date for such Loan and made payable to
such Lender. Borrower hereby authorizes each Lender to record on its Note or on
its internal computerized records, the principal amount of such Loan and of each
payment of principal received by such Lender on account of such Loan, which
recordance, in the absence of manifest error, shall be conclusive as to the
outstanding principal balance of such Loan; provided that, the failure to make
such recordation with respect to any Loan or payment shall not limit or
otherwise affect the obligations of the Borrower under this Agreement, the Notes
or the other Loan Documents.

 

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(c) Use of Proceeds. The proceeds of the Loans shall be used to repay the
Horizon Facility provided the existing loans made by Oxford and Silicon under
the Horizon Facility shall not be subject to the prepayment penalty therein, and
the remaining proceeds of the Loans shall be used solely for working capital or
general corporate purposes of Borrower.

(d) Termination of Commitment to Lend. Notwithstanding anything in the Loan
Documents, Lenders’ obligation to lend the undisbursed portion of the Commitment
Amount to Borrower hereunder shall terminate on the earlier of (i) at each
Lender’s sole election, the occurrence of any Event of Default hereunder, and
(ii) the Commitment Termination Date.

2.2 Payments.

(a) Scheduled Payments. Borrower shall make payments of accrued interest only on
the outstanding principal amount of Loan A (Oxford) and Loan A (Silicon) on the
Payment Dates specified in the Note applicable to such Loan through and
including January 1, 2009. Thereafter, Borrower shall make thirty-three
(33) level payments of principal plus accrued interest on the outstanding
principal amount of each Loan on each subsequent Payment Date as set forth in
the Note applicable to such Loan (collectively, the “Scheduled Payments”).
Borrower shall make such Scheduled Payments commencing on the date set forth in
the Note applicable to such Loan and continuing thereafter on the first Business
Day of each calendar month (each a “Payment Date”) through the Maturity Date. In
any event, all unpaid principal and accrued interest shall be due and payable in
full on the Maturity Date. The Loans may not be prepaid except as provided in
Section 2.3 hereof, whether such prepayment is voluntary, mandatory or upon any
sale, assignment or transfer of the Loans by Borrower to any third party,
whether or not such sale, assignment or transfer is permitted hereunder, and
such prepayment shall require payment, in addition to other amounts owing, of
the full Final Payment and the fee listed in Section 2.3(b)(ii). Payments shall
be made as set forth in Section 2.4(a).

(b) Interim Payment. Unless the Funding Date for a Loan is the first day of a
calendar month, Borrower shall pay the per diem interest (accruing at the Loan
Rate from such Funding Date through the last day of that month) payable with
respect to such Loan on the first Business Day of the next calendar month.

(c) Payment of Interest. Borrower shall pay interest on each Loan at a per annum
rate of interest equal to the Loan Rate. All computations of interest (including
interest at the Default Rate, if applicable) shall be based on a 360-day year of
twelve 30-day months. Notwithstanding any other provision hereof, the amount of
interest payable hereunder shall not in any event exceed the maximum amount
permitted by the law applicable to interest charged on commercial loans.

(d) Final Payment. On the Maturity Date with respect to each Loan, Borrower
shall pay, in addition to any unpaid Scheduled Payment, accrued and unpaid
interest and all other amounts due on such date with respect to such Loan, an
amount equal to the Final Payment.

(e) Application of Payments. All payments received by Lenders prior to an Event
of Default shall be applied as follows: (1) first, to Lenders’ Expenses then due
and owing; and (2) second to all Scheduled Payments and Final Payments then due
and owing (provided, however, if such payments are not sufficient to pay the
whole amount then due, such payments shall be applied first to unpaid interest
at the Loan Rate, then to the remaining amount then due). After an Event of
Default, all payments and application of proceeds shall be made as set forth in
Section 9.7.

 

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(f) Late Payment Fee. Borrower shall pay to Lenders a late payment fee equal to
two percent (2%) of any Scheduled Payment not paid within five (5) days of when
due, provided, however any single late payment fee shall not exceed $5,000.

(g) Default Rate. Borrower shall pay interest at a per annum rate equal to the
Default Rate on any amounts required to be paid by Borrower under this Agreement
or the other Loan Documents (including Scheduled Payments), payable with respect
to any Loan, accrued and unpaid interest, and any fees or other amounts, in each
case, which remain unpaid after such amounts are due. If an Event of Default has
occurred and the Obligations have been accelerated (whether automatically or by
Lenders’ election), Borrower shall pay interest on the aggregate, outstanding
accelerated balance hereunder from the date of the Event of Default until all
Events of Default are cured, at a per annum rate equal to the Default Rate.

2.3 Prepayments.

(a) Mandatory Prepayment Upon an Acceleration. If the Loans are accelerated
following the occurrence of an Event of Default pursuant to Section 9.1(a)
hereof, then Borrower, in addition to any other amounts which may be due and
owing hereunder with respect to the Loans, shall immediately pay to the Lenders
the amount set forth in Section 2.3(b) below, as if the Borrower had opted to
prepay on the date of such acceleration.

(b) Voluntary Prepayment of Loans. Upon ten (10) Business Days’ prior written
notice to Lenders, Borrower may, at its option, at any time, prepay all of the
Loans by paying to Lenders an amount equal to (i) any accrued and unpaid
interest on the outstanding principal balance of the Loans; (ii) for each Loan,
an amount equal to (A) if such Loan is prepaid within twenty-four (24) months
from the Funding Date thereof, five (5%) percent of the then outstanding
principal balance of such Loan or (B) if such Loan is prepaid more than
twenty-four (24) months from the Funding Date thereof, three (3%) percent of the
then outstanding principal balance of such Loan, as applicable; (iii) the
outstanding principal balance of such Loan; (iv) the Final Payment for each
Loan; and (v) all other sums, if any, that shall have become due and payable
hereunder to Lenders.

2.4 Other Payment Terms.

(a) Place and Manner. Borrower shall make all payments due to Lenders in lawful
money of the United States. All payments of principal, interest, fees and other
amounts payable by Borrower hereunder shall be made, in immediately available
funds, not later than 1:00 p.m. Virginia time, on the date on which such payment
is due. Silicon may debit any of Borrower’s deposit accounts, for all principal
and interest payments, Final Payments or any other amounts Borrower owes any
Lender when due.

(b) Date. Whenever any payment is due hereunder on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees, as
the case may be.

 

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2.5 Procedure for Making the Loans.

(a) Notice. Borrower shall notify Lenders as of the closing of the date on which
Borrower desires Lenders to make any Loan and at least two (2) Business Days in
advance of the desired Funding Date, unless Lenders elect at their sole
discretion to allow the Funding Date to be within two (2) Business Days of
Borrower’s notice. Borrower’s execution and delivery to each Lender of a Note
shall be Borrower’s agreement to the terms and calculations thereunder with
respect to the Loans. Lenders’ obligation to make any Loan shall be expressly
subject to the satisfaction of the conditions set forth in Section 3.

(b) Loan Rate Calculation. Prior to the Funding Date, Lenders shall establish
the Loan Rate with respect to the Loans, which shall be set forth in the Notes
to be executed by Borrower with respect to the Loans and shall be conclusive in
the absence of a manifest error.

(c) Disbursement. Lenders shall disburse the proceeds of each Loan by wire
transfer to (i) pay deductions as set forth in the Funding Certificate for such
Loan and (ii) the remainder to Borrower at the account specified in the Funding
Certificate for such Loan.

2.6 Legal and Closing Expenses; and Commitment Fee.

(a) Commitment Fee. Borrower has delivered to Lenders a commitment fee in the
amount of Seventy Five Thousand Dollars ($75,000) (the “Commitment Fee”). The
Commitment Fee shall be retained by Lenders and be deemed fully earned upon the
date of this Agreement.

(b) Legal, Due Diligence and Documentation Expenses. Borrower shall pay to
Lenders concurrently with its execution and delivery of this Agreement Lenders’
legal, due diligence and documentation expenses in connection with the
negotiation and documentation of this Agreement and the Loan Documents, which
amount shall not exceed Twelve Thousand Dollars ($12,000).

3. Conditions of Loan.

3.1 Conditions Precedent to Closing. At the time of the execution and delivery
of this Agreement, Lenders shall have received, in form and substance reasonably
satisfactory to Lenders, all of the following (unless Lenders have agreed to
waive such condition or document, in which case such condition or document shall
be a condition precedent to the making of any Loan and shall be deemed added to
Section 3.2):

(a) Loan Agreement. This Agreement duly executed by Borrower and Lenders.

(b) Secretary’s Certificate. A certificate of the secretary or assistant
secretary of Borrower with copies of the following documents attached: (i) the
certificate of incorporation and bylaws of Borrower certified by Borrower as
being complete and in full force and effect on the date thereof, (ii) incumbency
and representative signatures, and (iii) resolutions authorizing the execution
and delivery of this Agreement and the other Loan Documents.

 

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(c) Good Standing Certificates. A good standing certificate from Borrower’s
jurisdiction of organization and the state in which Borrower’s principal place
of business is located, each dated as of a recent date.

(d) Certificate of Insurance. Evidence of the insurance coverage required by
Section 6.8 of this Agreement.

(e) Consents. All necessary consents of shareholders and other third parties
with respect to the execution, delivery and performance of this Agreement and
the other Loan Documents.

(f) Legal Opinion. A legal opinion of from Borrower’s counsel covering the
matters set forth in Exhibit D hereto.

(g) Account Control Agreements. Account Control Agreements for all of Borrower’s
deposit accounts and accounts holding securities located in the United States
duly executed by all of the parties thereto, but such Account Control Agreement
shall be delivered post-closing pursuant to Section 7.13.

(h) Perfection Certificate. The Perfection Certificate duly executed by
Borrower.

(i) Other Documents. Such other documents and completion of such other matters,
as Lenders may reasonably deem necessary or appropriate.

3.2 Conditions Precedent to Making a Loan. The obligation of Lenders to make the
Loans is further subject to the following conditions:

(a) No Default. No Default or Event of Default shall have occurred and be
continuing.

(b) Payoff letter. Borrower shall have provided a payoff letter from Horizon as
to the Horizon Facility.

(c) Landlord Agreements. Upon request from Lenders, Borrower shall have provided
Lenders with a Landlord Agreement for each location where Borrower’s books and
records and the Collateral is located (unless Borrower is the fee owner
thereof), provided, however, Lenders acknowledge they have already received a
Landlord Agreement from (i) ARE-2425/2400/2450 Garcia Bayshore, LLC for 2400
Bayshore Parkway, Mountain View, CA, and (ii) Xemplar Pharmaceuticals, LLC, for
200 Riggenback Rd., Fall River, MA 02720. Borrower’s requirement as to delivery
of a Landlord Agreement for 14677 North 74th Street, Scottsdale, AZ 85260 shall
be governed by Section 7.15.

(d) Note. Borrower shall have duly executed and delivered to each Lender a Note
in the amount of such Lender’s Loan.

 

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(e) UCC Financing Statements. Lenders shall have received such documents,
instruments and agreements, including UCC financing statements or amendments to
such financing statements, as Lenders shall reasonably request to evidence the
perfection and priority of the security interests granted to Lenders pursuant to
Section 4. Borrower authorizes Lenders to file any UCC or PPSA financing
statements, continuations of or amendments to such financing statements it deems
necessary to perfect their security interest in the Collateral.

(f) Funding Certificate. Borrower shall have duly executed and delivered to
Lenders a Funding Certificate for the Loans.

(g) Other Documents. Such other documents and completion of such other matters,
as Lenders may reasonably deem necessary or appropriate.

3.3 Covenant to Deliver. Borrower agrees (not as a condition but as a covenant)
to deliver to Lenders each item required to be delivered to Lenders as a
condition to the Loans, if the Loans are advanced. Borrower expressly agrees
that the extension of the Loans prior to the receipt by Lenders of any such item
shall not constitute a waiver by Lenders of Borrower’s obligation to deliver
such item, and any such extension in the absence of a required item shall be in
Lenders’ sole discretion.

4. Creation of Security Interest.

4.1 Grant of Security Interest. Borrower grants to each Lender for the ratable
benefit of the Lenders, a valid, first priority (subject to Permitted Liens),
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt, full and complete payment of any
and all Obligations and in order to secure prompt, full and complete performance
by Borrower of each of its covenants and duties under each of the Loan
Documents. The “Collateral” shall mean and include all right, title, interest,
claims and demands of Borrower in and to all personal property of Borrower,
including without limitation, all of the following:

(a) All goods (and embedded computer programs and supporting information
included within the definition of “goods” under the Code) and equipment now
owned or hereafter acquired, including, without limitation, all laboratory
equipment, computer equipment, office equipment, machinery, fixtures, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located;

(b) All inventory now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower’s books relating to any of the foregoing;

 

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(c) All contract rights and general intangibles (except to the extent included
within the definition of Intellectual Property), now owned or hereafter
acquired, including, without limitation, goodwill, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, software, computer programs, computer disks, computer
tapes, literature, reports, catalogs, design rights, income tax refunds, payment
intangibles, commercial tort claims, payments of insurance and rights to payment
of any kind;

(d) All now existing and hereafter arising accounts, contract rights, royalties,
license rights, license fees and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower (subject, in each case, to the
contractual rights of third parties to require funds received by Borrower to be
expended in a particular manner), whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower’s books
relating to any of the foregoing;

(e) All documents, cash, deposit accounts, letters of credit (whether or not the
letter of credit is evidenced by a writing), certificates of deposit,
instruments, promissory notes, chattel paper (whether tangible or electronic)
and investment property, including, without limitation, all securities, whether
certificated or uncertificated, security entitlements, securities accounts,
commodity contracts and commodity accounts, and all financial assets held in any
securities account or otherwise, wherever located, now owned or hereafter
acquired and Borrower’s books relating to the foregoing;

(f) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof, including,
without limitation, insurance, condemnation, requisition or similar payments and
proceeds of the sale or licensing of Intellectual Property to the extent such
proceeds no longer constitute Intellectual Property; but

(g) Notwithstanding the foregoing, the Collateral shall not include any
Intellectual Property; provided, however, that the Collateral shall include all
accounts receivables, accounts, and general intangibles that consist of rights
to payment and proceeds from the sale, licensing or disposition of all or any
part, or rights in, the foregoing (the “Rights to Payment”).

Borrower acknowledges and agrees that the security interests granted to each
Lender is for the ratable benefit of all Lenders and, as a result, (i) any
Lender entering into any Account Control Agreement does so on behalf of all
Lenders, and all Lenders shall be perfected via control and any such Account
Control Agreement shall secure all Obligations hereunder, and (ii) any Lender
that maintains a deposit account of Borrower perfects the security interest of
all Lenders via control of such deposit account under the Code and such deposit
account shall secure all Obligations hereunder.

4.2 Commercial Tort Claims. If Borrower shall at any time acquire a commercial
tort claim, as defined in the Code, Borrower shall immediately notify Lenders in
writing signed by the applicable Borrower of the brief details thereof and grant
to Lenders 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 satisfactory to Lenders.

 

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4.3 Duration of Security Interest. Lenders’ security interest in the Collateral
shall continue until the payment in full and the satisfaction of all Obligations
and termination of Lenders’ commitment to fund the Loans, whereupon such
security interest shall terminate. Lenders shall, at Borrower’s sole cost and
expense, execute such further documents and take such further actions as may be
reasonably necessary to make effective the release contemplated by this
Section 4.3, including duly executing and delivering termination statements for
filing in all relevant jurisdictions under the Code.

4.4 Location and Possession of Collateral. The tangible Collateral is and shall
remain in the possession of Borrower at the location listed on the cover page
hereof or as set forth in the Disclosure Schedule or Perfection Certificate,
except for inventory and work in process that is in movement in the ordinary
course of business. Borrower shall remain in full possession, enjoyment and
control of the tangible Collateral (except only as may be otherwise required by
Lenders for perfection of their security interest therein or as otherwise set
forth in the Disclosure Schedule or Perfection Certificate or the movement of
inventory and work in process in the ordinary course of business) and so long as
no Event of Default has occurred, shall be entitled to manage, operate and use
the same and each part thereof with the rights and franchises appertaining
thereto; provided that the possession, enjoyment, control and use of the
Collateral shall at all time be subject to the observance and performance of the
terms of this Agreement.

4.5 Delivery of Additional Documentation Required. Borrower shall from time to
time execute and deliver to Lenders, at the request of Lenders, all financing
statements and other documents Lenders may reasonably request, in form
satisfactory to Lenders, to perfect and continue Lenders’ perfected security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.

4.6 Right to Inspect. Lenders (through any of their officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower’s usual business hours, to inspect Borrower’s financial books
and financial records and to make copies thereof and to inspect, test, and
appraise the Collateral in order to verify Borrower’s financial condition or the
amount, condition of, or any other matter relating to, the Collateral. Such
inspections shall be conducted no more than once every twelve (12) months at
Borrower’s expense, unless an Event of Default has occurred and is continuing.

4.7 Protection of Intellectual Property. Borrower shall make all commercially
reasonable efforts to (i) protect, defend and maintain the validity and
enforceability of its Intellectual Property and promptly advise Lenders in
writing of material infringements, and (ii) not knowingly allow any Intellectual
Property material to Borrower’s business to be abandoned, forfeited or dedicated
to the public without Lenders’ prior written consent, unless (1) approved by
Borrower’s Chief Scientific Officer and (2) such Intellectual Property is no
longer used or useful in the Borrower’s business.

4.8 Lien Subordination. Lenders agree that the Liens granted to them hereunder
in equipment and other personal property acquired by Borrower after the date
hereof (“Third Party Equipment”) shall be subordinate to the Liens of future
lenders providing equipment financing and equipment lessors for Third Party
Equipment; provided that such Liens are

 

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confined solely to the equipment so financed and the proceeds thereof and are
Permitted Liens. Notwithstanding the foregoing, the Obligations hereunder shall
not be subordinate in right of payment to any obligations to other equipment
lenders or equipment lessors and Lenders’ rights and remedies hereunder shall
not in any way be subordinate to the rights and remedies of any such lenders or
equipment lessors. So long as no Event of Default exists, Lenders agree to
execute and deliver such agreements and documents as may be reasonably requested
by Borrower from time to time which set forth the lien subordination described
in this Section 4.8 and are reasonably acceptable to Lenders. Lenders shall have
no obligation to execute any agreement or document which would impose
obligations, restrictions or lien priority on Lenders which are less favorable
to Lenders than those described in this Section 4.8.

5. Representations and Warranties. Except as set forth in the Disclosure
Schedule, Borrower represents and warrants as follows:

5.1 Organization and Qualification. Borrower is a corporation duly organized and
validly existing under the laws of its state or country of incorporation and
qualified and licensed to do business in, and is in good standing in, any state
or country in which the conduct of its business or its ownership of Property
requires that it be so qualified or in which the Collateral is located, except
for such jurisdictions as to which any failure to so qualify would not have a
material adverse effect on Borrower.

5.2 Authority. Borrower has all necessary power and authority to execute,
deliver, and perform in accordance with the terms thereof, the Loan Documents to
which it is a party. Borrower has all requisite power and authority to own and
operate its Property and to carry on its businesses as now conducted.

5.3 Conflict with Other Instruments, etc. Neither the execution and delivery of
any Loan Document to which Borrower is a party nor the consummation of the
transactions therein contemplated nor compliance with the terms, conditions and
provisions thereof will conflict with or result in a breach of any of the terms,
conditions or provisions of the certificate of incorporation, the by-laws, or
any other organizational documents of Borrower or any law or any regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or any material agreement or instrument to which Borrower is a party or by which
it or any of its Property is bound or to which it or any of its Property is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.

5.4 Authorization; Enforceability. The execution and delivery of this Agreement,
the granting of the security interest in the Collateral, the incurring of the
Loans, the execution and delivery of the other Loan Documents to which Borrower
is a party and the consummation of the transactions herein and therein
contemplated have each been duly authorized by all necessary action on the part
of Borrower. No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with, or
notice to, any Person is, was or will be necessary to (i) the valid execution
and delivery of any Loan Document to which Borrower is a party, (ii) the
performance of Borrower’s obligations under any Loan Document, or (iii) the
granting of the security interest in the Collateral, except for filings in
connection with the perfection of the security interest in any of the
Collateral. The Loan Documents have been duly executed and delivered and
constitute

 

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legal, valid and binding obligations of Borrower, enforceable in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors’ rights or by general principles of
equity.

5.5 No Prior Encumbrances. Borrower has good and marketable title to its
Collateral, free and clear of Liens except for Permitted Liens. Borrower has
good title and ownership of, or is licensed under, all of its current
Intellectual Property. Borrower has not received any communications alleging
that it has violated, or by conducting its business as proposed, would violate
any proprietary rights of any other Person. Borrower has no knowledge of any
infringement or violation by it of the intellectual property rights of any third
party and has no knowledge of any violation or infringement by a third party of
any of its Intellectual Property. The Collateral and the Intellectual Property
constitute substantially all of the assets and property of Borrower.

5.6 Name; Location of Chief Executive Office, Principal Place of Business and
Collateral. Borrower has not done business under any name other than that
specified on the signature page hereof. Borrower’s jurisdiction of organization,
chief executive office, principal place of business, and the place where it
maintains its records concerning the Collateral are presently located in the
jurisdiction and at the addresses set forth on the cover page of this Agreement.
The Collateral is presently located at the addresses set forth on the cover page
hereof or as set forth in the Disclosure Schedule.

5.7 Litigation. There are no actions or proceedings pending by or against
Borrower before any court or administrative agency in which an adverse decision
is reasonably expected to have a material adverse effect on Borrower or the
aggregate value of the Collateral. Borrower has no knowledge of any such pending
or threatened actions or proceedings.

5.8 Financial Statements. To Borrower’s knowledge, all financial statements
relating to Borrower that have been delivered by Borrower to Lenders present
fairly in all material respects Borrower’s financial condition as of the date
thereof and Borrower’s results of operations for the period then ended.

5.9 No Material Adverse Effect. No event has occurred and no condition exists
which is reasonably expected to have a material adverse effect on the financial
condition, business or operations of Borrower since December 31, 2007.

5.10 Full Disclosure. The representations, warranties and other statements made
by the Borrower in any Loan Document (including the Disclosure Schedule),
certificate or written statement furnished to Lenders, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading. There is no fact known to Borrower which materially
adversely affects its ability to perform their obligations under this Agreement.

 

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5.11 Solvency, Etc. Borrower is Solvent (as defined below) and, after the
execution and delivery of the Loan Documents and the consummation of the
transactions contemplated thereby, Borrower will be Solvent. “Solvent” means,
with respect to any Person on any date, that on such date (a) the fair value of
the property of such Person is greater than the fair value of the liabilities
(including, without limitation, contingent liabilities) of such Person, (b) the
present fair saleable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured and (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature.

5.12 Subsidiaries. Borrower has no Subsidiaries, except as listed on the
Disclosure Schedule.

5.13 Catastrophic Events; Labor Disputes. Neither Borrower nor any of its
properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that is reasonably expected to have a material adverse
effect on the financial condition, business or operations of Borrower. There are
no disputes presently subject to grievance procedure, arbitration or litigation
under any of the collective bargaining agreements, employment contracts or
employee welfare or incentive plans to which Borrower is a party, and there are
no strikes, lockouts, work stoppages or slowdowns, or, to the knowledge of
Borrower, jurisdictional disputes or organizing ability occurring or threatened
which is reasonably expected to have a material adverse effect on the financial
condition, business or operations of Borrower.

5.14 Officers, Employees and Consultants.

(a) No Present Intention to Terminate. To the knowledge of Borrower, no officer
of Borrower, and no employee or consultant of Borrower whose termination, either
individually or in the aggregate, is reasonably expected to have a material
adverse effect on the financial condition, business or operations of Borrower,
has any present intention of terminating his or her employment or consulting
relationship with Borrower.

6. Affirmative Covenants. Borrower, until the full and complete payment of the
Obligations covenants and agrees that:

6.1 Good Standing. Borrower shall maintain its corporate existence and its good
standing in its jurisdiction of incorporation and maintain qualification in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have a material adverse effect on the financial condition, operations or
business of Borrower. Borrower shall maintain in force all licenses, approvals
and agreements, the loss of which could reasonably be expected to have a
material adverse effect on their financial condition, operations or business.

6.2 Government Compliance. Borrower shall comply with all statutes, laws,
ordinances and government rules and regulations to which it is subject,
noncompliance with which could reasonably be expected to materially adversely
affect the financial condition, operations or business of Borrower.

 

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6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to each
Lender: (a) within thirty (30) days after the end of each month, company
prepared internal drafts of its balance sheet, income statement and cash flow
statement covering Borrower’s operations during such period, represented by
Borrower’s president, treasurer or chief financial officer (each, a “Responsible
Officer”) to be true and correct to his/her knowledge; (b) within two hundred
forty (240) days after the end of Borrower’s fiscal year, audited financial
statements of Borrower prepared in accordance with GAAP, together with an
unqualified opinion on such financial statements of a nationally recognized or
other independent public accounting firm reasonably acceptable to Lenders; and
(c) within thirty (30) days after the end of Borrower’s fiscal year or the date
of Borrower’s board of directors’ adoption, Borrower’s operating budget and plan
for the next fiscal year; and (d) such other financial information as Lenders
may reasonably request from time to time. Borrower shall deliver to Lenders
(i) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission or a link thereto on Borrower’s or
another website on the Internet; (ii) promptly upon receipt of notice thereof, a
report of any material legal actions pending or threatened against Borrower or
the commencement of any action, proceeding or governmental investigation
involving the Borrower is commenced that is reasonably expected to result in
damages or costs to Borrower of Five Hundred Dollars ($500,000) or more; and
(iii) such other financial information as Lenders may reasonably request from
time to time.

6.4 Certificates of Compliance. Each time financial statements are furnished
pursuant to Section 6.3 above, Borrower shall deliver to each Lender an
Officer’s Certificate signed by a Responsible Officer in the form of, and
certifying to the matters set forth in Exhibit E hereto.

6.5 Notice of Defaults. As soon as possible, and in any event within five
(5) days after Borrower’s discovery of a Default or an Event of Default,
Borrower shall provide Lenders with an Officer’s Certificate setting forth the
facts relating to or giving rise to such Default or Event of Default and the
action which Borrower proposes to take with respect thereto.

6.6 Taxes. Borrower shall make due and timely payment or deposit of all federal,
state, and local taxes, assessments, or contributions required of it by law or
imposed upon any Property belonging to it, and will execute and deliver to
Lenders, on demand, appropriate certificates attesting to the payment or deposit
thereof; and Borrower will make timely payment or deposit of all tax payments
and withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes applicable to the Borrower, and will, upon request, furnish Lenders
with proof satisfactory to Lenders indicating that Borrower has made such
payments or deposits; provided that Borrower need not make any payment if the
amount or validity of such payment is contested in good faith by appropriate
proceedings which suspend the collection thereof (provided that such proceedings
do not involve any substantial danger of the sale, forfeiture or loss of any
material item of the Collateral which in the aggregate is material to Borrower
and that Borrower has adequately bonded such amounts or reserves sufficient to
discharge such amounts have been provided on the books of Borrower).

6.7 Use; Maintenance. Borrower shall keep and maintain all items of equipment
and other similar types of personal property that form any significant portion
or portions of the Collateral in good operating condition and repair and shall
make all necessary replacements

 

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thereof and renewals thereto so that the value and operating efficiency thereof
shall at all times be maintained and preserved, except as shall be consistent
with commercially reasonable and sound business practices. Borrower shall not
permit any such material item of the Collateral to become a fixture to real
estate or an accession to other personal property, without the prior written
consent of Lenders. Borrower shall not permit any such material item of the
Collateral to be operated or maintained in violation of any applicable law,
statute, rule or regulation. With respect to items of leased equipment (to the
extent Lenders have any security interest in any residual Borrower’s interest in
such equipment under the lease), Borrower shall keep, maintain, repair, replace
and operate such leased equipment in accordance with the terms of the applicable
lease.

6.8 Insurance. Borrower shall keep its business and the Collateral insured for
risks and in amounts, as is customary for companies in Borrower’s industry and
at Borrower’s stage of development. Insurance policies shall be in a form, with
companies, and in amounts that are reasonably satisfactory to Lenders. All
property policies shall have a lender’s loss payable endorsement showing Lenders
as an additional loss payee and all liability policies shall show Lenders as an
additional insured and all policies shall provide that the insurer must give
Lenders at least twenty (20) days notice before canceling its policy. At any
Lender’s request, Borrower shall deliver certified copies of policies and
evidence of all premium payments. Proceeds payable under any policy shall, at
Lenders’ option, be payable to Lenders on account of the Obligations, but unless
an Event of Default shall have occurred and be continuing, such payment to
Lenders shall not cause any prepayment penalty to become due under Section 2.3.
Notwithstanding the foregoing, 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, toward the replacement or repair of destroyed or damaged
property; provided that (i) any such replaced or repaired property (a) shall be
of equal or like value as the replaced or repaired Collateral and (b) shall be
deemed Collateral in which Lenders have been granted a first priority security
interest and (ii) after the occurrence and during the continuation of an Event
of Default all proceeds payable under such casualty policy shall, at the option
of Lenders, be payable to Lenders, on account of the Obligations. If Borrower
fails to obtain insurance as required under Section 6.8 or to pay any amount or
furnish any required proof of payment to third persons and Lenders, Lenders may
make all or part of such payment or obtain such insurance policies required in
Section 6.8, and take any action under the policies Lenders deem prudent. On or
prior to the first Funding Date and prior to each policy renewal, Borrower shall
furnish to Lenders certificates of insurance or other evidence satisfactory to
Lenders that insurance complying with all of the above requirements is in
effect.

6.9 Security Interest. Assuming the proper filing of one or more financing
statement(s) identifying the Collateral with the proper state and/or local
authorities, the security interests in the Collateral granted to Lenders
pursuant to this Agreement (i) constitute and will continue to constitute first
priority security interests (except to the extent any Permitted Liens may have a
superior priority to Lenders’ Lien under this Agreement) and (ii) are and will
continue to be superior and prior to the rights of all other creditors of
Borrower (except to the extent of such Permitted Liens).

 

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6.10 Further Assurances. At any time and from time to time, Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Lenders to make effective the purposes of this
Agreement, including without limitation, the continued perfection and priority
of each Lender’s security interest in the Collateral.

6.11 Intentionally omitted.

6.12 Primary Accounts. Borrower shall at all times maintain its primary
operating accounts with Silicon.

6.13 Guaranties/Pledge/Security Interest. Borrower shall cause all Domestic
Subsidiaries, having total assets equal to or greater than Five Hundred Thousand
Dollars ($500,000) (each a “Domestic Material Subsidiary”) to execute and
deliver to Lenders, Lenders’ standard unconditional secured guaranty and
Borrower shall assign, pledge and grant to Lenders, and covenant and agree that
Lenders shall have a perfected and continuing security interest in any assets of
the type which is Collateral of such Subsidiary (including sixty five percent
(65%) of the outstanding shares it directly owns in all Foreign Subsidiaries,
and one hundred percent (100%) of the outstanding shares it owns in all other
Domestic Material Subsidiaries). Borrower shall cause all Foreign Subsidiaries,
having total assets equal to or greater than One Million Dollars ($1,000,000)
(each a “Foreign Material Subsidiary”) to execute and deliver to Lenders,
Lenders’ standard unconditional secured guaranty and Borrower shall assign,
pledge and grant to Lenders, and covenant and agree that Lenders shall have a
perfected and continuing security interest in any assets of the type which is
Collateral of such Subsidiary (including sixty five percent (65%) of the
outstanding shares it directly owns in all Foreign Subsidiaries, and one hundred
percent (100%) of the outstanding shares it owns in all other Domestic Material
Subsidiaries). Upon the Bermuda Subsidiary having any assets with an aggregate
value equal to or greater than Two Hundred Fifty Thousand Dollars ($250,000)
(other than Intellectual Property), Borrower shall provide Lenders with a pledge
of 65% of the outstanding shares of the Bermuda Subsidiary and the Bermuda
Subsidiary’s acknowledgment and agreement to Section 7.14 of this Agreement in
form reasonably satisfactory to Lenders.

7. Negative Covenants. Borrower, until the full and complete payment of the
Obligations, covenants and agrees that, without the prior written consent of
Lenders, it shall not:

7.1 Chief Executive Office. Change its name, jurisdiction of incorporation,
chief executive office, principal place of business or any of the items set
forth in Section 1 of the Disclosure Schedule without thirty (30) days prior
written notice to Lender.

7.2 Collateral Control. Subject to its rights under Sections 4.4 and 7.4, remove
any items of the Collateral from Borrower’s facilities located at the address
set forth on the cover page hereof or as set forth on the Disclosure Schedule or
as set forth in the Perfection Certificate or the movement of inventory and work
in process in the ordinary course of business.

7.3 Liens. Create, incur, assume or suffer to exist any Lien of any kind upon
any of Borrower’s Property, whether now owned or hereafter acquired, except
Permitted Liens.

 

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7.4 Other Dispositions of Collateral. Convey, sell, lease or otherwise dispose
of all or any part of the Collateral to any Person outside the ordinary course
of business (collectively, a “Transfer”), except for: (i) Transfers of inventory
in the ordinary course of business; (ii) Transfers of worn-out or obsolete
equipment; (iii) Transfers permitted under subclause (f) of the definition of
Permitted Liens with respect to Collateral; or (iv) Transfers of the equipment
to Borrower’s contract manufacturers.

7.5 Distributions. (i) Pay any dividends or make any distributions on its Equity
Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for
value any of its Equity Securities (other than purchases of capital stock in
connection with the exercise of stock options or stock appreciation rights by
way of cashless exercise or in connection with the satisfaction of withholding
tax obligations); (iii) return any capital to any holder of its Equity
Securities as such; (iv) make any distribution of assets, Equity Securities,
obligations or securities to any holder of its Equity Securities as such; or
(v) repurchases pursuant to the terms of employee stock purchase plans, employee
restricted stock purchase agreements or similar arrangements; or (vi) set apart
any sum for any such purpose; provided, however, Borrower may pay dividends
payable solely in common stock.

7.6 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any Person, or acquire, or permit any
of its Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement, and (ii) such transaction would not result in a decrease of more than
twenty-five percent (25%) of Tangible Net Worth. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.

7.7 Change in Ownership. (a) Engage in or permit any of its Subsidiaries to
engage in any business other than the businesses currently engaged in by
Borrower or reasonably related thereto, or (b) prior to the Milestone less than
two of the directors on Borrower’s Board of Directors are a partner, member or
principal of a Private Investor or an affiliated fund of a Private Investor.
“Private Investor” means one of Borrower’s current investors who previously
invested in one or more Borrower’s private equity rounds who has designated a
director that currently is a member of Borrower’s Board of Directors.

7.8 Transactions With Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for the
following transactions which Borrower is permitted to do: (i) transactions that
are in the ordinary course of Borrowers business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person, (ii) sale of Borrowers capital stock,
and (iii) bridge and other loans made to Borrower so long as such Indebtedness
is Subordinated Debt.

7.9 Indebtedness Payments. (a) Other than (1) amounts due or permitted to be
prepaid under this Agreement or (2) after the Milestone has occurred, Permitted
Indebtedness under clauses (b) and (e) of the definition of Permitted
Indebtedness: (i) prepay, redeem, purchase, defease or otherwise satisfy in any
manner prior to the scheduled repayment thereof any lease obligations or
Indebtedness for borrowed money or, (ii) amend, modify or otherwise change the
terms of any Indebtedness for borrowed money or lease obligations so as to
accelerate the scheduled repayment thereof, or (b) Repay any notes to officers,
directors or shareholders.

 

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7.10 Indebtedness. Create, incur, assume or permit to exist any Indebtedness
except Permitted Indebtedness.

7.11 Investments. Make any Investment except for Permitted Investments.
Notwithstanding the foregoing or the definition of “Permitted Investments” or
Borrower’s Investment Policy and Guidelines, Permitted Investments shall not
include, and Borrower and each Subsidiary is prohibited from purchasing,
purchasing participations in, entering into any type of swap or other derivative
transaction, or otherwise holding or engaging in any ownership interest in any
type of debt instrument or 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.”

7.12 Compliance. Become an “investment company” or a company controlled by an
“investment company” under the Investment Company Act of 1940 or undertake as
one of its important abilities extending credit to purchase or carry margin
stock, or use the proceeds of any Loan for that purpose; fail to meet the
minimum funding requirements of the Employment Retirement Income Security Act of
1974, and its regulations, as amended from time to time (“ERISA”), permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower’s business or operations or could reasonably be
expected to cause a material adverse change, or permit any Subsidiary to do so.

7.13 Maintenance of Accounts. (i) Maintain any deposit account or account
holding securities owned by Borrower except accounts with respect to which
Lenders are able to take such actions as they deem necessary to obtain a
perfected security interest in such accounts through one or more Account Control
Agreements, provided however, that (a) Borrower shall use best efforts to obtain
an Account Control Agreement covering a deposit account and checking account
with JP Morgan CHASE Bank within 90 days after the date of this Agreement and
until such Account Control Agreement is obtained, the maximum aggregate amount
deposited or maintained in all such accounts shall at no time exceed $400,000,
and if Borrower is not able to obtain an Account Control Agreement for such
accounts within 90 days after the date of this Agreement, Borrower shall
promptly close such accounts, (b) this clause (i) (including sub-clause (a))
shall not apply to a pledged account in which the maximum aggregate amount
deposited or maintained in such pledged account at no time exceeds $500,000
established at JP Morgan CHASE Bank to support existing letters of credit, and
(c) Borrower shall have 45 days after the date of this Agreement to provide
Lenders with Account Control Agreements executed by the Capital Advisors,
Silicon Valley Bank and Well Fargo Bank National Association and until such
Account Control Agreements are delivered, Borrower shall maintain the net
proceeds of the Loans (as set forth in the Funding Certificate) on deposit with
one or more interest-bearing accounts maintained by Silicon, it being
acknowledged that Borrower may withdraw funds as necessary for working capital
needs; or (ii) grant or allow any other Person (other than a Lender) to perfect
a security interest in, or enter into any agreements with any Persons (other
than a Lender) accomplishing perfection via control as to, any of its deposit
accounts or accounts holding securities.

 

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7.14 Negative Pledge Regarding Intellectual Property. Create, incur, assume or
suffer to exist any Lien of any kind upon any Intellectual Property or Transfer
any Intellectual Property, whether now owned or hereafter acquired, except for
licenses of components of Borrower’s Intellectual Property in connection with
joint ventures and corporate collaborations in the ordinary course of business,
and except for Transfers of Intellectual Property no longer used or useful in
the Borrower’s business as approved by Borrower’s Chief Scientific Officer.
Notwithstanding anything to the contrary contained herein, Borrower shall not
Transfer any Intellectual Property to any Subsidiary (whether a Domestic
Subsidiary or a Foreign Subsidiary), unless prior to such Transfer, such
Subsidiary has executed and delivered to Lenders, Lenders’ standard
unconditional secured guaranty whereby Lenders have a perfected and continuing
security interest in any assets of the type which is Collateral of such
Subsidiary and such Subsidiary has agreed to (i) restrict its additional
permitted indebtedness and (ii) a negative pledge to such Subsidiary’s
Intellectual Property substantially similar to this Section 7.14, all to
Lender’s satisfaction. Borrower agrees that its Bermuda Subsidiary shall not
create, incur, assume or suffer to exist any Lien of any kind upon any the
Bermuda Subsidiary’s Intellectual Property or Transfer any of its Intellectual
Property (except Transfers to Borrower), whether now owned or hereafter
acquired, except for licenses of components of its Intellectual Property in
connection with joint ventures and corporate collaborations in the ordinary
course of business, and except for Transfers of Intellectual Property no longer
used or useful in the Borrower’s business as approved by Borrower’s Chief
Scientific Officer.

7.15 Arizona Landlord Agreement. Borrower shall use best commercial efforts to
deliver to Lenders a Landlord Agreement for 14677 North 74th Street, Scottsdale,
AZ 85260 (the “Arizona Location”) on or before 90 days after the date of this
Agreement; provided, however, in the event that Borrower cannot deliver such
Landlord Agreement within this timeframe, then it will not be an Event of
Default hereunder if Borrower has opened a new pledged account with Silicon
which has, until the earlier of the Milestone or Borrower obtaining a Landlord
Agreement for the Arizona Location, funds in an amount of at least the aggregate
value of the Collateral at the Arizona Location.

8. Events of Default. Any one or more of the following events shall constitute
an “Event of Default” by Borrower under this Agreement:

8.1 Failure to Pay. Borrower fails to pay when due and payable or when declared
due and payable in accordance with the Loan Documents: (i) any Scheduled Payment
on the relevant Payment Date or on the relevant Maturity Date or any Final
Payment on the relevant Maturity Date within two (2) Business days after such
payment is due, or (ii) any other portion of the Obligations within five
(5) days after receipt of written notice from Lenders that such payment is due.

8.2 Certain Covenant Defaults. Borrower fails to perform any obligation under
Section 6.8 or violates any of the covenants contained in Section 7 of this
Agreement.

 

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8.3 Other Covenant Defaults. If Borrower fails or neglect to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement (other than as set forth in Sections 8.1, 8.2 or 8.4
through 8.13), in any of the other Loan Documents and Borrower has failed to
cure such default within thirty (30) days of the occurrence of such default.
During this thirty (30) day period, the failure to cure the default is not an
Event of Default.

8.4 Investor Abandonment. Any Lender determines in its good faith judgment, that
(i) Borrower will not be able to satisfy the Obligations as they become due and
payable, and (ii) none of Borrower’s principal investors (defined as each
investor that has designated a member of Borrower’s Board of Directors) intends
to fund such amounts as may be necessary to enable Borrower to satisfy the
Obligations as they become due and payable.

8.5 Seizure of Assets, Etc. Any material portion of Borrower’s assets are
attached, seized, subjected to a writ or distress warrant, or are levied upon,
or come into the possession of any trustee, receiver or Person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower’s assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof; provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower.

8.6 Service of Process. The service of process upon any Lender seeking to attach
by a trustee or other process any funds of Borrower on deposit or otherwise held
by any Lender, or the delivery upon any Lender of a notice of foreclosure by any
Person seeking to attach or foreclose on any funds of Borrower on deposit or
otherwise held by any Lender, or the delivery of a notice of foreclosure or
exclusive control to any entity holding or maintaining Borrower’s deposit
accounts or accounts holding securities by any Person seeking to foreclose or
attach any such accounts or securities. These are not Events of Default if
stayed or if a bond is posted pending contest by Borrower.

8.7 Default on Indebtedness. One or more defaults shall exist under any
agreement of Borrower with any third party or parties which consists of the
failure to pay any Indebtedness at maturity or which results in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
Indebtedness in an aggregate amount in excess of Five Hundred Thousand Dollars
($500,000), or there exists an Event of Default (as defined in the Existing
Lender Equipment Facility) under the Existing Lender Equipment Facility.

8.8 Judgments. If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least Five Hundred Thousand Dollars
($500,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days or more.

 

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8.9 Misrepresentations. If, taken as a whole, any material misrepresentation or
material misstatement exists now or hereafter in any warranty, representation,
statement, certification, or report made to Lenders by Borrower or any officer,
employee, agent, or director of Borrower.

8.10 Unenforceable Loan Document. If any Loan Document shall in any material
respect cease to be, or Borrower shall assert that any Loan Document is not, a
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms.

8.11 Involuntary Insolvency Proceeding. If a proceeding shall have been
instituted in a court having jurisdiction in the premises seeking a decree or
order for relief in respect of Borrower in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee (or similar official) of Borrower or for any substantial part of its
Property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
forty-five (45) consecutive days or such court shall enter a decree or order
granting the relief sought in such proceeding.

8.12 Voluntary Insolvency Proceeding. If Borrower shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian (or
other similar official) of Borrower or for any substantial part of its Property,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action in furtherance of any of the foregoing.

8.13 Governmental Approvals. Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal has, or could reasonably be expected to have, a
material adverse effect on Borrower.

 

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9. Lenders’ Rights and Remedies.

9.1 Rights and Remedies. Upon the occurrence of any Event of Default, Lenders
shall not have any further obligation to advance money or extend credit to or
for the benefit of Borrower. In addition, upon the occurrence of an Event of
Default, Lenders shall have the rights, options, duties and remedies of a
secured party as permitted by law and, in addition to and without limitation of
the foregoing, Lenders may, at their election, without notice of election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:

(a) Acceleration of Obligations. Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, including
(i) any accrued and unpaid interest, (ii) the amounts which would have otherwise
come due under Section 2.3(b)(ii) if the Loans had been voluntarily prepaid,
(iii) the Final Payments, (iv) the unpaid principal balance of the Loans and
(v) all other sums, if any, that shall have become due and payable hereunder,
immediately due and payable (provided that upon the occurrence of an Event of
Default described in Section 8.11 or 8.12 all Obligations shall become
immediately due and payable without any action by Lenders);

(b) Protection of Collateral. Make such payments and do such acts as Lenders
consider necessary or reasonable to protect Lenders’ security interest in the
Collateral. Borrower agrees to assemble the Collateral if Lenders so require and
to make the Collateral available to Lenders as Lenders may designate. Borrower
authorizes Lenders and their designees to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any Lien which in
Lenders’ determination appears or is claimed to be prior or superior to its
security interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower’s owned premises, Borrower hereby grants Lenders a
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Lenders’ rights or remedies provided herein, at law, in equity, or otherwise;

(c) Preparation of Collateral for Sale. Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Lenders and their agents and any purchasers
at or after foreclosure are hereby granted a non-exclusive, irrevocable,
perpetual, fully paid, royalty-free license or other right, solely pursuant to
the provisions of this Section 9.1, to use, without charge, Borrower’s
Intellectual Property, including without limitation, labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any Property of a similar nature, now
or at any time hereafter owned or acquired by Borrower or in which Borrower now
or at any time hereafter has any rights; provided that such license shall only
be exercisable in connection with the disposition of the Collateral upon
Lenders’ exercise of its remedies hereunder;

(d) Sale of Collateral. Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower’s premises) as Lenders
determine are commercially reasonable; and

 

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(e) Purchase of Collateral. Credit bid and purchase all or any portion of the
Collateral at any public sale.

Any deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Borrower.

9.2 Set Off Right. Lenders may set off and apply to the Obligations any and all
indebtedness at any time owing to or for the credit or the account of Borrower
or any other assets of Borrower in Lenders’ possession or control.

9.3 Effect of Sale. Upon the occurrence of an Event of Default, to the extent
permitted by law, Borrower covenants that it will not at any time insist upon or
plead, or in any manner whatsoever claim or take any benefit or advantage of,
any stay or extension law now or at any time hereafter in force, nor claim, take
nor insist upon any benefit or advantage of or from any law now or hereafter in
force providing for the valuation or appraisement of the Collateral or any part
thereof prior to any sale or sales thereof to be made pursuant to any provision
herein contained, or to the decree, judgment or order of any court of competent
jurisdiction; nor, after such sale or sales, claim or exercise any right under
any statute now or hereafter made or enacted by any state or otherwise to redeem
the property so sold or any part thereof, and, to the full extent legally
permitted, except as to rights expressly provided herein, hereby expressly
waives for itself and on behalf of each and every Person, except decree or
judgment creditors of Borrower, acquiring any interest in or title to the
Collateral or any part thereof subsequent to the date of this Agreement, all
benefit and advantage of any such law or laws, and covenants that it will not
invoke or utilize any such law or laws or otherwise hinder, delay or impede the
execution of any power herein granted and delegated to Lenders, but will suffer
and permit the execution of every such power as though no such power, law or
laws had been made or enacted. Any sale, whether under any power of sale hereby
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
Borrower in and to the Property sold, and shall be a perpetual bar, both at law
and in equity, against Borrower, its successors and assigns, and against any and
all Persons claiming the Property sold or any part thereof under, by or through
Borrower, its successors or assigns.

9.4 Power of Attorney in Respect of the Collateral. Borrower does hereby
irrevocably appoint each of the Lenders (which appointment is coupled with an
interest), the true and lawful attorney in fact of Borrower with full power of
substitution, for it and in its name to file any notices of security interests,
financing statements and continuations and amendments thereof pursuant to the
Code or federal law, as may be necessary to perfect, or to continue the
perfection of Lenders’ security interests in the Collateral. Borrower does
hereby irrevocably appoint each of the Lenders (which appointment is coupled
with an interest) on the occurrence of an Event of Default, the true and lawful
attorney in fact of Borrower with full power of substitution, for it and in its
name: (a) to ask, demand, collect, receive, receipt for, sue for, compound and
give acquittance for any and all rents, issues, profits, avails, distributions,
income, payment draws and other sums in which a security interest is granted
under Section 4 with full power to settle, adjust or compromise any claim
thereunder as fully as if Lenders were Borrower themselves; (b) to receive
payment of and to endorse the name of Borrower to any items of Collateral
(including checks, drafts and other orders for the payment of money) that

 

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come into Lenders’ possession or under Lenders’ control; (c) to make all
demands, consents and waivers, or take any other action with respect to, the
Collateral; (d) in Lenders’ discretion to file any claim or take any other
action or proceedings, either in its own name or in the name of Borrower or
otherwise, which Lenders may reasonably deem necessary or appropriate to protect
and preserve the right, title and interest of Lenders in and to the Collateral;
(e) endorse Borrower’s name on any checks or other forms of payment or security;
(f) sign Borrower’s name on any invoice or bill of lading for any account or
drafts against account debtors; (g) make, settle, and adjust all claims under
Borrower’s insurance policies; (h) settle and adjust disputes and claims about
the accounts directly with account debtors, for amounts and on terms Lenders
determine reasonable; (i) transfer the Collateral into the name of Lenders or a
third party as the Code permits; and (j) to otherwise act with respect thereto
as though Lenders were the outright owner of the Collateral.

9.5 Lenders’ Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Lenders may do any or all of the following:
(a) make payment of the same or any part thereof; or (b) obtain and maintain
insurance policies of the type discussed in Section 6.8 of this Agreement, and
take any action with respect to such policies as Lenders deem prudent. Any
amounts paid or deposited by Lenders shall constitute Lenders’ Expenses, shall
be immediately due and payable, shall bear interest at the Default Rate and
shall be secured by the Collateral. Any payments made by Lenders shall not
constitute an agreement by Lenders to make similar payments in the future or a
waiver by Lenders of any Event of Default under this Agreement. Borrower shall
pay all reasonable fees and expenses, including without limitation, Lenders’
Expenses, incurred by Lenders in the enforcement or attempt to enforce any of
the Obligations hereunder not performed when due.

9.6 Remedies Cumulative. Lenders’ rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Lenders shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Lenders of one right or remedy shall
be deemed an election, and no waiver by Lenders of any Event of Default on
Borrower’s part shall be deemed a continuing waiver. No delay by Lenders shall
constitute a waiver, election, or acquiescence by it.

9.7 Application of Collateral Proceeds. The proceeds and/or avails of the
Collateral, or any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Lenders, at the time
of or received by Lenders after the occurrence of an Event of Default hereunder)
shall be paid to and applied as follows:

(a) First, to the payment of out-of-pocket costs and expenses, including all
amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or remedies,
and of all proper fees, expenses, liability and advances, including reasonable
legal expenses and attorneys’ fees, incurred or made hereunder by Lenders,
including, without limitation, Lenders’ Expenses;

(b) Second, to the payment to Lenders of the amount then owing or unpaid on the
Loans for any accrued and unpaid interest, the amounts which would have
otherwise come due under Section 2.3(b)(ii), the Final Payments, the principal
balance of the Loans, and all other

 

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Obligations with respect to the Loans (provided, however, if such proceeds shall
be insufficient to pay in full the whole amount so due, owing or unpaid upon the
Loans, then to the unpaid interest thereon, then to the amounts which would have
otherwise come due under Section 2.3(b)(ii) if the Loans had been voluntarily
prepaid, then to the Final Payments, then to the principal balance of the Loans,
and then to the payment of other amounts then payable to Lenders under any of
the Loan Documents); and

(c) Third, to the payment of the surplus, if any, to Borrower, its successors
and assigns, or to the Person lawfully entitled to receive the same.

9.8 Reinstatement of Rights. If Lenders shall have proceeded to enforce any
right under this Agreement or any other Loan Document by foreclosure, sale,
entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent jurisdiction),
Lenders shall be restored to their former position and rights hereunder with
respect to the Collateral subject to the security interest created under this
Agreement.

10. Waivers; Indemnification.

10.1 Demand; Protest. Borrower waives demand, protest, notice of protest, 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 at any time
held by Lenders on which Borrower may in any way be liable.

10.2 Lenders’ Liability for Collateral. So long as Lenders comply with their
obligations, if any, under the Code, Lenders shall not in any way or manner be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss
or damage thereto occurring or arising in any manner or fashion from any cause
other than Lenders’ gross negligence or willful misconduct; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person whomsoever. All risk of loss, damage
or destruction of the Collateral shall be borne by Borrower.

10.3 Indemnification and Waiver. Whether or not the transactions contemplated
hereby shall be consummated:

(a) General Indemnity. Borrower agrees upon demand to pay or reimburse Lenders
for all liabilities, obligations and out-of-pocket expenses, including Lenders’
Expenses and reasonable fees and expenses of one common counsel for Lenders from
time to time arising in connection with the enforcement or collection of sums
due under the Loan Documents, and in connection with any amendment or
modification of the Loan Documents or any “work-out” in connection with the Loan
Documents. Borrower shall indemnify, reimburse and hold Lenders, and each of its
respective successors, assigns, agents, attorneys, officers, directors,
shareholders, servants, agents and employees (each an “Indemnified Person”)
harmless from and against all liabilities, losses, damages, actions, suits,
demands, claims of any kind and nature (including claims relating to
environmental discharge, cleanup or compliance), all costs and expenses

 

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whatsoever to the extent they may be incurred or suffered by such Indemnified
Person in connection therewith (including reasonable attorneys’ fees and
expenses), fines, penalties (and other charges of any applicable Governmental
Authority), licensing fees relating to any item of Collateral, damage to or loss
of use of property (including consequential or special damages to third parties
or damages to Borrower’s property), or bodily injury to or death of any person
(including any agent or employee of Borrower) (each, a “Claim”), directly or
indirectly relating to or arising out of the use of the proceeds of the Loans or
otherwise, the falsity of any representation or warranty of Borrower or
Borrower’s failure to comply with the terms of this Agreement or any other Loan
Document. The foregoing indemnity shall cover, without limitation, (i) any Claim
in connection with a design or other defect (latent or patent) in any item of
equipment or product included in the Collateral, (ii) any Claim for infringement
of any patent, copyright, trademark or other intellectual property right,
(iii) any Claim resulting from the presence on or under or the escape, seepage,
leakage, spillage, discharge, emission or release of any Hazardous Materials on
the premises owned, occupied or leased by Borrower, including any Claims
asserted or arising under any Environmental Law, (iv) any Claim for negligence
or strict or absolute liability in tort, or (v) any Claim asserted as to or
arising under any Account Control Agreement or any Landlord Agreement; provided,
however, Borrower shall not indemnify any Indemnified Person for any liability
to the extent incurred as a result of an Indemnified Person’s gross negligence
or willful misconduct. Such indemnities shall continue in full force and effect,
notwithstanding the expiration or termination of this Agreement. Upon Lender’s
written demand, Borrower shall assume and diligently conduct, at its sole cost
and expense, the entire defense of such Lender, each of its partners, and each
of its respective, Agents, employees, directors, officers, shareholders,
successors and assigns against any indemnified Claim described in this
Section 10.3(a). Borrower shall not settle or compromise any Claim against or
involving any Lender without first obtaining such Lender’s written consent
thereto, which consent shall not be unreasonably withheld.

(b) Intentionally omitted.

(c) Survival; Defense. The obligations in this Section 10.3 shall survive
payment of all other Obligations pursuant to Section 12.8. At the election of
any Indemnified Person, Borrower shall defend such Indemnified Person using
legal counsel satisfactory to such Indemnified Person in such Person’s
reasonable discretion, at the sole cost and expense of Borrower. All amounts
owing under this Section 10.3 shall be paid within thirty (30) days after
written demand.

 

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11. Notices. Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by certified mail, postage
prepaid, return receipt requested, by prepaid nationally recognized overnight
courier, or by facsimile to Borrower or to Lenders, as the case may be, at their
respective addresses set forth below:

 

If to Borrower:   

MAP Pharmaceuticals, Inc.

2400 Bayshore Parkway, Suite 200

Mountain View, California 94043

Attention: Tim Nelson, President and CEO

Fax: (650) 386-3101

Ph:

If to Oxford :   

Oxford Finance Corporation

133 North Fairfax Street

Alexandria, VA 22314

Attention: Timothy A. Lex

Fax: (703) 519-5225

Ph: (703) 519-6017

If to Silicon:   

Silicon Valley Bank

2400 Hanover Street

Palo Alto, California 94304

Attention: Mercy Figuracion Forde, Sr. Relationship Manager

Fax: (650) 320-0016

Ph: (650) 320-1126

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

12. General Provisions.

12.1 Successors and Assigns. This Agreement and the Loan Documents shall bind
and inure to the benefit of the respective successors and permitted assigns of
each of the parties; provided, however, neither this Agreement nor any rights
hereunder may be assigned by Borrower without Lenders’ prior written consent,
which consent may be granted or withheld in any Lenders sole discretion. Prior
to an Event of Default, each of Lenders has the right, with the consent of
Borrower (which shall not be unreasonably withheld), to sell, transfer,
negotiate, assign, or grant participation of all or any part of, or any interest
in, its obligations, rights, and benefits under this Agreement and the other
Loan Documents; provided that each of Lenders has the right, without Borrower’s
consent, to sell or assign all or any part of, or any interest in, its
obligations, rights, and benefits under this Agreement and the other Loan
Documents in connection with (i) any sale of such Lender, or (ii) any assignment
of a material part of its assets, or (iii) if otherwise required by law (as by
way of example only, a portfolio divestment

 

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required by regulators). While an Event of Default exists, each of Lenders has
the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in, its
obligations, rights, and benefits under this Agreement and the other Loan
Documents. Lenders may disclose the Loan Documents and any other financial or
other information relating to Borrower or any Subsidiary to any potential
participant or assignee of any of the Loans; provided that such participant or
assignee agrees to protect the confidentiality of such documents and information
using the same measures that it uses to protect its own confidential
information.

12.2 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.

12.3 Severability of Provisions. Each provision of this Agreement shall be
several from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

12.4 Entire Agreement; Construction; Amendments and Waivers.

(a) Entire Agreement. This Agreement and each of the other Loan Documents dated
as of the date hereof, taken together, constitute and contain the entire
agreement between Borrower and Lenders and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof. Borrower acknowledges that it is not relying on any representation or
agreement made by Lenders, or any employee, attorney or agent thereof, other
than the specific agreements set forth in this Agreement and the Loan Documents.

(b) Construction. This Agreement is the result of negotiations between and has
been reviewed by Borrower and Lenders executing this Agreement as of the date
hereof and their respective counsel. Accordingly, this Agreement shall be deemed
to be the product of the parties hereto, and no ambiguity shall be construed in
favor of or against Borrower or Lenders. Borrower and Lenders agree that they
intend the literal words of this Agreement and the other Loan Documents and that
no parol evidence shall be necessary or appropriate to establish Borrower’s or
Lenders’ actual intentions.

(c) Amendments and Waivers. Any and all discharges or waivers of, or consents to
any departures from any provision of this Agreement or of any of the other Loan
Documents shall not be effective without the written consent of Lenders. Any and
all amendments and modifications of this Agreement or of any of the other Loan
Documents shall not be effective without the written consent of Lenders and
Borrower. Any waiver or consent with respect to any provision of the Loan
Documents shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Borrower in any case
shall entitle Borrower to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, waiver or consent affected in
accordance with this Section 12.4 shall be binding upon Lenders and Borrower.

 

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12.5 Reliance by Lenders. All covenants, agreements, representations and
warranties made herein by Borrower shall be deemed to be material to and to have
been relied upon by Lenders, notwithstanding any investigation by Lenders.

12.6 No Set-Offs by Borrower. All sums payable by Borrower pursuant to this
Agreement or any of the other Loan Documents shall be payable without notice or
demand and shall be payable in United States Dollars without set-off or
reduction of any manner whatsoever.

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, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.

12.8 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations or
commitment to fund remain outstanding. The obligations of Borrower to indemnify
Lenders with respect to the expenses, damages, losses, costs and liabilities
described in Section 10.3 shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Lenders
have run.

13. Relationship of Parties. Borrower and Lenders acknowledge, understand and
agree that the relationship between Borrower, on the one hand, and Lenders, on
the other, is, and at all time shall remain solely that of a borrower and
lender. Lenders shall not under any circumstances be construed to be a partner
or a joint venturer of Borrower or any of its Affiliates; nor shall Lenders
under any circumstances be deemed to be in a relationship of confidence or trust
or a fiduciary relationship with Borrower or any of its Affiliates, or to owe
any fiduciary duty to Borrower or any of its Affiliates. Lenders do not
undertake or assume any responsibility or duty to Borrower or any of its
Affiliates to select, review, inspect, supervise, pass judgment upon or
otherwise inform Borrower or any of its Affiliates of any matter in connection
with its or their Property, any Collateral held by Lenders or the operations of
Borrower or any of its Affiliates. Borrower and each of its Affiliates shall
rely entirely on their own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment or supply of information
undertaken or assumed by Lenders in connection with such matters is solely for
the protection of Lenders and neither Borrower nor any Affiliate is entitled to
rely thereon.

14. Confidentiality. All information (other than periodic reports filed by
Borrower with the Securities and Exchange Commission) disclosed by Borrower to
Lenders in writing or through inspection pursuant to this Agreement that is
marked confidential shall be considered confidential. Lenders agree to use the
same degree of care to safeguard and prevent disclosure of such confidential
information as Lenders use with their own confidential information, but in any
event no less than a reasonable degree of care. Lenders shall not disclose such
information to any third party (other than to Lenders’ partners, attorneys,
governmental regulators, or auditors, or to Lenders’ subsidiaries and affiliates
and prospective transferees and purchasers of the Loans, all subject to the same
confidentiality obligation set forth herein or as required by law, regulation,
subpoena or other order to be disclosed) and shall use such information only for
purposes of evaluation of its investment in Borrower and the exercise of
Lenders’ rights and the

 

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enforcement of its remedies under this Agreement and the other Loan Documents.
The obligations of confidentiality shall not apply to any information that
(a) was known to the public prior to disclosure by Borrower under this
Agreement, (b) becomes known to the public through no fault of Lenders, (c) is
disclosed to Lenders by a third party having a legal right to make such
disclosure, or (d) is independently developed by Lenders. Notwithstanding the
foregoing, Lenders’ agreement of confidentiality shall not apply if Lenders have
acquired indefeasible title to any Collateral or in connection with any
enforcement or exercise of Lenders’ rights and remedies under this Agreement
following an Event of Default, including the enforcement of Lenders’ security
interest in the Collateral.

15. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF BORROWER
AND LENDERS HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND 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.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same

 

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manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in
this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

[Remainder 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 date first above written.

 

BORROWER: MAP PHARMACEUTICALS, INC. By:   /s/   Timothy S. Nelson Name:  
Timothy S. Nelson Title:   President and Chief Executive Officer LENDERS: OXFORD
FINANCE CORPORATION By:   /s/   Timothy A. Lex Name:   T. A. Lex Title:   COO
SILICON VALLEY BANK By:   /s/   Mercy Forde Name:   Mercy Forde Title:   SPM

 

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