Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of August 2, 2019
(the “Effective Date”) between SILICON VALLEY BANK, a California corporation
(“Bank”), and OMEROS CORPORATION, a Washington corporation (“Borrower”),
provides the terms on which Bank shall lend to Borrower and Borrower shall repay
Bank.  The parties agree as follows:

1             ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP.  Calculations and determinations must be made following GAAP; provided
that if at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and either
Borrower or Bank shall so request, Borrower and Bank shall negotiate in good
faith to amend such ratio or requirement to preserve the original intent thereof
in light of such change in GAAP; provided further, that until so amended, (a)
such ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and (b) Borrower shall provide Bank with financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in
GAAP.  Notwithstanding the foregoing, all financial covenant and other financial
calculations shall be computed with respect to Borrower only, and not on a
consolidated basis.  Capitalized terms not otherwise defined in this Agreement
shall have the meanings set forth in Section 13.  All other terms contained in
this Agreement, unless otherwise indicated, shall have the meaning provided by
the Code to the extent such terms are defined therein.

2             LOAN AND TERMS OF PAYMENT

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

2.2          Revolving Line.

(a)          Availability.  Subject to the terms and conditions of this
Agreement and to deduction of Reserves, Bank shall make Advances not exceeding
the Availability Amount.  Amounts borrowed under the Revolving Line may be
repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to
the applicable terms and conditions precedent herein.

(b)          Termination; Repayment.  The Revolving Line terminates on the
Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.

2.3          Letters of Credit Sublimit.

(a)          As part of the Revolving Line, Bank shall issue or have issued
Letters of Credit denominated in Dollars or a Foreign Currency for Borrower’s
account.  The aggregate Dollar Equivalent of the face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) may not exceed the lesser of (i) One Million Dollars
($1,000,000.00), minus (A) the sum of all amounts used for Cash Management
Services, and minus (B) the FX Reduction Amount, or (ii) (A) the lesser of the
Revolving Line or the Borrowing Base, minus (B) the sum of all outstanding
principal amounts of any Advances (including any amount used for Cash Management
Services), and minus (C) the FX Reduction Amount.

(b)          If, on the Revolving Line Maturity Date (or the effective date of
any termination of this Agreement), there are any outstanding Letters of Credit,
then on such date Borrower shall provide to Bank cash collateral in an amount
equal to at least one hundred percent (100.0%) for Letters of Credit denominated
in Dollars or at least one hundred ten percent (110.0%) for Letters of Credit
denominated in a Foreign Currency, in each case of the aggregate Dollar
Equivalent of the face amount of all such Letters of Credit plus all interest,
fees, and costs due or estimated by Bank to become due in connection therewith,
to secure all of the Obligations relating to such Letters

 

of Credit.  All Letters of Credit shall be in form and substance acceptable to
Bank in its sole discretion and shall be subject to the terms and conditions of
Bank’s standard Application and Letter of Credit Agreement (the “Letter of
Credit Application”).  Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.  Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guaranteed by Bank and opened for Borrower’s account or
by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s
account, and Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto (excluding Bank’s gross
negligence or willful misconduct in connection therewith).

(c)          The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, such Letters of Credit, and the Letter of Credit Application.

(d)          Borrower may request that Bank issue a Letter of Credit payable in
a Foreign Currency.  If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar
Equivalent of the amount thereof (plus fees and charges in connection therewith
such as wire, cable, SWIFT or similar charges).

(e)          To guard against fluctuations in currency exchange rates, upon the
issuance of any Letter of Credit payable in a Foreign Currency, Bank shall
create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an
amount equal to ten percent (10.0%) of the face amount of such Letter of
Credit.  The amount of the Letter of Credit Reserve may be adjusted by Bank from
time to time to account for fluctuations in the exchange rate.  The availability
of funds under the Revolving Line shall be reduced by the amount of such Letter
of Credit Reserve for as long as such Letter of Credit remains outstanding.

2.4          Foreign Exchange Sublimit. As part of the Revolving Line, Borrower
may enter into foreign exchange contracts with Bank under which Borrower commits
to purchase from or sell to Bank a specific amount of Foreign Currency (each, a
“FX Contract”) on a specified date (the “Settlement Date”).  FX Contracts shall
have a Settlement Date of at least one (1) FX Business Day after the contract
date.  The aggregate FX Reduction Amount at any one time may not exceed the
lesser of (a) One Million Dollars ($1,000,000.00), minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the aggregate Dollar
Equivalent of the face amount of any outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) or
(b) the lesser of the Revolving Line or the Borrowing Base, minus (i) the sum of
all principal amounts of any Advances (including any amounts used for Cash
Management Services), and minus (ii) the aggregate Dollar Equivalent of the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve).  The amount otherwise
available for Credit Extensions under the Revolving Line shall be reduced by the
FX Reduction Amount.  Any amounts needed to fully reimburse Bank for any amounts
not paid by Borrower in connection with FX Contracts will be treated as Advances
under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.

2.5          Cash Management Services Sublimit.  Borrower may use the Revolving
Line in an aggregate amount not to exceed the lesser of (a) One Million Dollars
($1,000,000.00), minus (i) the aggregate Dollar Equivalent of the face amount of
any outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), and minus (ii) the FX Reduction Amount
for Bank’s cash management services, which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash
Management Services”), or (b) the lesser of the Revolving Line or the Borrowing
Base, minus (i) the sum of all principal amounts of any Advances, minus (ii) the
aggregate Dollar Equivalent of the face amount of any outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), and minus (iii) the FX Reduction Amount.  Any amounts Bank pays
on behalf of Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.

2.6          Overadvances.  If, at any time, the sum of (a) the outstanding
principal amount of any Advances (including any amounts used for Cash Management
Services), plus (b) the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve), plus (c) the FX

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Reduction Amount exceeds the lesser of either the Revolving Line or the
Borrowing Base, Borrower shall immediately pay to Bank in cash the amount of
such excess (such excess, the “Overadvance”).  Without limiting Borrower’s
obligation to repay Bank any Overadvance, Borrower agrees to pay Bank interest
on the outstanding amount of any Overadvance, on demand, at a per annum rate
equal to the rate that is otherwise applicable to Advances plus four percent
(4.0%).

2.7          Payment of Interest on the Credit Extensions.

(a)          Interest Rate.  Subject to Section 2.7(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to the greater of (i) five and one-half of one percent (5.50%)
and (ii) the Prime Rate, which interest, in each case, shall be payable monthly
in accordance with Section 2.7(d) below.

(b)          Default Rate.  Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is four percent (4.0%) above the rate that is otherwise
applicable thereto (the “Default Rate”).  Fees and expenses which are required
to be paid by Borrower pursuant to the Loan Documents (including, without
limitation, Bank Expenses) but are not paid when due shall bear interest until
paid at a rate equal to the highest rate applicable to the Obligations.  Payment
or acceptance of the increased interest rate provided in this Section 2.7(b) is
not a permitted alternative to timely payment and shall not constitute a waiver
of any Event of Default or otherwise prejudice or limit any rights or remedies
of Bank.

(c)          Adjustment to Interest Rate.  Changes to the interest rate of any
Credit Extension based on changes to the Prime Rate shall be effective on the
effective date of any change to the Prime Rate and to the extent of any such
change.

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

2.8          Fees.  Borrower shall pay to Bank:

(a)          Commitment Fee.  A fully earned, non-refundable commitment fee of
One Hundred Fifty Thousand Dollars ($150,000.00), on the Effective Date;

(b)          Anniversary Fees.

(i)           2020 Anniversary Fee.  A fully-earned, non-refundable anniversary
fee of One Hundred Fifty Thousand Dollars ($150,000.00) (the “2020 Anniversary
Fee”), which shall be earned as of the Effective Date and payable on the
earliest to occur of (i) the one (1) year anniversary of the Effective Date,
(ii) the Revolving Line Maturity Date, (iii) the occurrence of an Event of
Default, and (iv) the termination of this Agreement;

(ii)          2021 Anniversary Fee. A fully-earned, non-refundable anniversary
fee of One Hundred Fifty Thousand Dollars ($150,000.00) (the “2021 Anniversary
Fee”), which shall be earned as of the Effective Date and payable on the
earliest to occur of (i) the two (2) year anniversary of the Effective Date,
(ii) the Revolving Line Maturity Date, (iii) the occurrence of an Event of
Default, and (iv) the termination of this Agreement;

(c)          Letter of Credit Fee.  Bank’s customary fees and expenses for the
issuance or renewal of Letters of Credit, upon the issuance of such Letter of
Credit, each anniversary of the issuance during the term of such Letter of
Credit, and upon the renewal of such Letter of Credit by Bank;

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(d)          Termination Fee.  Upon termination of this Agreement or the
termination of the Revolving Line for any reason prior to the Revolving Line
Maturity Date, in addition to the payment of any other amounts then-owing, a
termination fee in an amount equal to two percent (2.0%) of the Revolving Line
(the “Termination Fee”) provided that no Termination Fee shall be charged if the
credit facility hereunder is replaced with either a new facility from Bank or
any of its Affiliates or a new syndicated facility in which Bank or any of its
Affiliates acts as agent thereunder; and

(e)          Bank Expenses.  All Bank Expenses (including reasonable attorneys’
fees and expenses for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, when due (or, if no stated due date, upon
demand by Bank).

Unless otherwise provided in this Agreement or in a separate writing by Bank,
Borrower shall not be entitled to any credit, rebate, or repayment of any fees
earned by Bank pursuant to this Agreement notwithstanding any termination of
this Agreement or the suspension or termination of Bank’s obligation to make
loans and advances hereunder.  Bank may deduct amounts owing by Borrower under
the clauses of this Section 2.8 pursuant to the terms of Section 2.9(c).  Bank
shall provide Borrower written notice of deductions made from the Designated
Deposit Account pursuant to the terms of the clauses of this Section 2.8.

2.9          Payments; Application of Payments; Debit of Accounts.

(a)          All payments to be made by Borrower under any Loan Document shall
be made in immediately available funds in Dollars, without setoff or
counterclaim, before 12:00 p.m. Pacific time on the date when due.  Payments of
principal and/or interest received after 12:00 p.m. Pacific time are considered
received at the opening of business on the next Business Day.  When a payment is
due on a day that is not a Business Day, the payment shall be due the next
Business Day, and additional fees or interest, as applicable, shall continue to
accrue until paid.

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

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

2.10        Withholding.

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

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(b)          If any assignee of Bank’s rights under Section 12.2 of this
Agreement is not a “United States Person” as defined in Section 7701(a)(30) of
the Internal Revenue Code of 1986, as amended from time to time (such assignee,
a “Non-U.S. Lender”), such Non-U.S. Lender shall, upon becoming party to this
Agreement, to the extent that such Non-U.S. Lender is entitled to an exemption
from U.S. withholding tax on interest, deliver to Borrower a complete and
properly executed IRS Form W-8BEN, W-8ECI or W-8IMY, as appropriate, or any
successor form prescribed by the IRS, certifying that such Non-U.S. Lender is
entitled to such exemption from U.S. withholding tax on
interest.  Notwithstanding Section 2.10(a) above, Borrower shall not be required
to pay any additional amount to any Non-U.S. Lender under Section 2.10(a) if
such Non-U.S. Lender fails or is unable to deliver the forms, certificates or
other evidence described in the preceding sentence, unless such non-U.S.
Lender’s failure or inability to deliver such forms is the result of any change
in any applicable law, treaty or governmental rule, or any change in the
interpretation thereof after such Non-U.S. Lender became a party to this
Agreement.

3             CONDITIONS OF LOANS

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

(a)          duly executed signatures to the Loan Documents;

(b)          the Operating Documents and a long-form good standing certificate
of Borrower certified by the Secretary of State (or equivalent agency) of
Washington and each other state in which Borrower is qualified to do business,
each as of a date no earlier than thirty (30) days prior to the Effective Date;

(c)          a secretary’s corporate borrowing certificate of Borrower with
respect to Borrower’s Operating Documents, incumbency, specimen signatures and
resolutions authorizing the execution and delivery of this Agreement and the
other Loan Documents to which it is a party;

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

(e)          duly executed Subordination Agreement, together with a copy of the
Vulcan Agreement;

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

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

(h)          a legal opinion (authority and enforceability) of Borrower’s
counsel dated as of the Effective Date together with the duly executed signature
thereto;

(i)           With respect to the initial Advance, the completion of the Initial
Audit;

(j)           with respect to the initial Advance, a completed Borrowing Base
Report (and any schedules related thereto and including any other information
requested by Bank with respect to Borrower’s Accounts); and

(k)          payment of the fees and Bank Expenses then due as specified in
Section 2.8 hereof.

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

(a)          timely receipt of the Credit Extension request and any materials
and documents required by Section 3.4;

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

(c)          Bank determines to its reasonable satisfaction that there has not
been any material impairment in the general affairs, management, results of
operation, financial condition or the prospect of repayment of the Obligations.

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

3.4          Procedures for Borrowing.  Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance (other than Advances
under Sections 2.3 or 2.5) set forth in this Agreement, to obtain an Advance,
Borrower (via an individual duly authorized by an Administrator) shall notify
Bank (which notice shall be irrevocable) by electronic mail by 12:00 p.m.
Pacific time on the Funding Date of the Advance.  Such notice shall be made by
Borrower through Bank’s online banking program, provided, however, if Borrower
is not utilizing Bank’s online banking program, then such notice shall be in a
written format acceptable to Bank that is executed by an Authorized
Signer.  Bank shall have received satisfactory evidence that the Board has
approved that such Authorized Signer may provide such notices and request
Advances.  In connection with any such notification, Borrower must promptly
deliver to Bank by electronic mail or through Bank’s online banking program such
reports and information, including without limitation, a Borrowing Base Report,
sales journals, cash receipts journals, accounts receivable aging reports, as
Bank may request in its reasonable discretion.  Bank shall credit proceeds of an
Advance to the Designated Deposit Account.  Bank may make Advances under this
Agreement based on instructions from an Authorized Signer or without
instructions if the Advances are necessary to meet Obligations which have become
due.

4             CREATION OF SECURITY INTEREST

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

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

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations, and any other
obligations which by their terms, are to survive the termination of this
Agreement and any Obligations under Bank Services Agreements that are cash
collateralized in accordance with Section 4.1 hereof) are repaid in full in
cash.  Upon payment in full in cash of the Obligations (other than inchoate
indemnity obligations, and any other obligations which by their terms, are to
survive the termination of this Agreement and any Obligations under Bank
Services Agreements that are cash collateralized in accordance with Section 4.1
hereof) and at such time as Bank’s obligation to make Credit Extensions has
terminated, Bank shall, at the sole cost

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and expense of Borrower, release its Liens in the Collateral and all rights
therein shall revert to Borrower.  Following the termination of this Agreement
and the release of Bank’s Liens as set forth in this Section 4.1, Bank
authorizes Borrower to file or record all UCC termination statements and any
other documents necessary to evidence the termination of Bank’s Lien.  In the
event (x) all Obligations (other than inchoate indemnity obligations), except
for Bank Services, are satisfied in full, and (y) this Agreement is terminated,
Bank shall terminate the security interest granted herein upon Borrower
providing cash collateral acceptable to Bank in its good faith business judgment
for Bank Services, if any.  In the event such Bank Services consist of
outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in
an amount equal to (x) if such Letters of Credit are denominated in Dollars,
then at least one hundred percent (100.0%); and (y) if such Letters of Credit
are denominated in a Foreign Currency, then at least one hundred ten percent
(110.0%), of the Dollar Equivalent of the face amount of all such Letters of
Credit plus all interest, fees, and costs due or to become due in connection
therewith (as estimated by Bank in its business judgment), to secure all of the
Obligations relating  to such  Letters of Credit.

4.2          Priority of Security Interest.  Borrower represents, warrants, and
covenants that the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the Collateral
(subject only to Permitted Liens that are permitted pursuant to the terms of
this Agreement to have superior priority to Bank’s Lien under this
Agreement).  If Borrower shall acquire a commercial tort claim in excess of Five
Hundred Thousand Dollars ($500,000.00), Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.

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

5             REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

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

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law, (iii)
contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except

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such Governmental Approvals which have already been obtained and are in full
force and effect), or (v) conflict with, contravene, constitute a default or
breach under, or result in or permit the termination or acceleration of, any
material agreement by which Borrower is bound.  Borrower is not in default under
any agreement to which it is a party or by which it is bound in which the
default could reasonably be expected to have a material adverse effect on
Borrower’s business.

5.2          Collateral.  Borrower has good title to, rights in, and the power
to transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens.  Borrower
has no Collateral Accounts at or with any bank or financial institution other
than Bank or Bank’s Affiliates except for the Collateral Accounts described in
the Perfection Certificate delivered to Bank in connection herewith and which
Borrower has taken such actions as are necessary to give Bank a perfected
security interest therein, pursuant to the terms of Section 6.8(b).  The
Accounts are bona fide, existing obligations of the Account Debtors.

No Collateral with value in excess of Five Hundred Thousand Dollars
($500,000.00) is in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate.  None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2
(provided that the Perfection Certificate shall be deemed to be updated to
reflect the incorporation of any information disclosed by Borrower to Bank in
writing pursuant to Section 7.2 hereof).

All Product Inventory is in all material respects of good and marketable
quality, free from material defects, except for ordinary course expiration of
Product Inventory and/or defective or rejected Product lots, the volume and
frequency of which is consistent with Borrower’s historical experience and
normal industry practice.

Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) licenses permitted herein, (b) over-the-counter
software and database access that is commercially available to the public, and
(c) material Intellectual Property licensed to Borrower or licenses of material
Intellectual Property granted by Borrower, in each case noted on the most recent
Perfection Certificate delivered to Bank pursuant to the terms hereof.  Each
Patent which it owns or purports to own and which is material to Borrower’s
business is valid and enforceable, and no part of the Intellectual Property
which Borrower owns or purports to own and which is material to Borrower’s
business has been judged invalid or unenforceable, in whole or in part.  To the
best of Borrower’s knowledge, no claim has been made that any part of the
Intellectual Property violates the rights of any third party except to the
extent such claim would not reasonably be expected to have a material adverse
effect on Borrower’s business.

Except as noted on the most recent Perfection Certificate delivered to Bank
pursuant to the terms hereof, Borrower is not a party to, nor is it bound by,
any Restricted License.

5.3          Accounts Receivable.

(a)          For each Account with respect to which Advances are requested, on
the date each Advance is requested and made, such Account shall be an Eligible
Account.

(b)          All statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all respects what they
purport to be.  All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
laws and governmental rules and regulations.  Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are Eligible Accounts in any Borrowing Base Report.  To the best of Borrower’s
knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Eligible Accounts are genuine, and all such
documents, instruments and agreements are legally enforceable in accordance with
their terms.

5.4          Litigation.   Except as disclosed in the Perfection Certificate,
there are no actions or proceedings pending or, to the knowledge of any
Responsible Officer, threatened in writing by or against Borrower or any of its
Subsidiaries involving more than, individually or in the aggregate, Five Hundred
Thousand Dollars ($500,000.00).

8

 

5.5          Financial Statements; Financial Condition. All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower’s consolidated financial
condition and Borrower’s consolidated results of operations.  There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

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

5.7          Regulatory Compliance.  Borrower is not an “investment company” or
a company “controlled” by an “investment company” under the Investment Company
Act of 1940, as amended.  Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of
the Federal Reserve Board of Governors).  Borrower (a) has complied in all
material respects with all Requirements of Law, and (b) has not violated any
Requirements of Law the violation of which could reasonably be expected to have
a material adverse effect on its business.  None of Borrower’s or any of its
Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance in a
manner that would violate any Requirements of Law, the violation of which could
reasonably be expected to have a material adverse effect on its
business.  Borrower and each of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Governmental Authorities that are necessary to
continue their respective businesses as currently conducted.

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

5.9          Tax Returns and Payments; Pension Contributions.  Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except (a) to the extent such taxes are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, so long as such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made therefor,
or (b) if such taxes, assessments, deposits and contributions do not,
individually or in the aggregate, exceed Two Hundred Fifty Thousand Dollars
($250,000.00).

To the extent Borrower defers payment of any contested taxes, Borrower shall (i)
notify Bank in writing of the commencement of, and any material development in,
the proceedings, and (ii) post bonds or take any other steps required to prevent
the Governmental Authority levying such contested taxes from obtaining a Lien
upon any of the Collateral that is other than a “Permitted Lien.”  Borrower is
unaware of any claims or adjustments proposed for any of Borrower’s prior tax
years which could result in additional taxes becoming due and payable by
Borrower in excess of Two Hundred Fifty Thousand Dollars
($250,000.00).  Borrower has paid all amounts necessary to fund all present
pension, profit sharing and deferred compensation plans in accordance with their
terms, and Borrower has not withdrawn from participation in, and has not
permitted partial or complete termination of, or permitted the occurrence of any
other event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.

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

5.11        Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).

9

 

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

6             AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1          Government Compliance.

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

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

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

(a)          a Borrowing Base Report (and any schedules related thereto and
including any other information requested by Bank with respect to Borrower’s
Accounts) (i) (A) at all times when a Streamline Period is not in effect or (B)
when an Advance is requested and at all times when an Advance is outstanding,
within seven (7) days after the end of each month and (ii) (A) at all times when
a Streamline Period is not in effect or (B) when an Advance is not outstanding,
within forty-five (45) days of the end of each quarter;

(b)          at all times when an Advance is outstanding, within thirty (30)
days after the end of each month, (i) month-end accounts receivable aging, aged
by invoice date, (ii) month-end accounts payable aging, aged by invoice date,
(iii) month-end reconciliations of accounts receivable aging (aged by invoice
date), and (iv) monthly sell-through reports; provided that, at all times when
an Advance is not outstanding, within forty-five (45) days after the end of each
quarter (i) quarter-end accounts receivable aging, aged by invoice date, (ii)
quarter-end accounts payable aging, aged by invoice date, (iii) quarter-end
reconciliations of accounts receivable aging (aged by invoice date), and (iv)
quarter-end sell-through reports;

(c)          no later than forty-five (45) days after the last day of each of
the first three (3) fiscal quarters, a company prepared consolidated balance
sheet and income statement covering Borrower’s consolidated operations for such
quarter certified by a Responsible Officer and in a form acceptable to Bank (the
“Quarterly Financial Statements”).  For the avoidance of doubt, the delivery and
certification requirements of this Section 6.1(c) shall be deemed satisfactory
by Borrower’s filing of a quarterly report on Form 10-Q for the applicable
quarter;

(d)          at all times when an Advance is outstanding, within thirty (30)
days after the last day of each month, a duly completed Compliance Certificate
signed by a Responsible Officer, certifying that as of the end of such month,
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth such other information as Bank may reasonably
request, including, without limitation, a statement that at the end of such
month there were no checks held more than fifteen (15) days; provided that, at
all times when an Advance is not outstanding, such Compliance Certificates will
be due within forty-five (45) days after the last day of each quarter;

(e)          within ninety (90) days following the end of each fiscal year of
Borrower, and contemporaneously with any updates or amendments thereto, (i)
annual operating budgets (including income statements, balance sheets and cash
flow statements, by quarter) of Borrower, and (ii) annual financial projections
(on a quarterly basis), in each case as provided to and approved by the Board;

10

 

(f)           as soon as available, and in any event within ninety (90) days
following the end of Borrower’s fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an opinion
on the financial statements from an independent certified public accounting firm
reasonably acceptable to Bank;

(g)          within five (5) Business Days of filing, copies of all periodic and
other reports, proxy statements and other materials filed by Borrower and/or any
Guarantor with the SEC, any Governmental Authority succeeding to any or all of
the functions of the SEC or with any national securities exchange, or
distributed to its shareholders, as the case may be.  Documents, statements or
reports required to be delivered pursuant to the terms of this Section 6.2 (to
the extent any such documents, statements or reports are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
internet at Borrower’s website address; provided, however, Borrower shall
promptly notify Bank in writing (which may be by electronic mail) of the posting
of any such documents;

(h)          within five (5) Business Days of delivery, copies of all
statements, reports and notices made available to Borrower’s security holders or
to any holders of Subordinated Debt;

(i)           prompt report of any legal actions pending or threatened in
writing against Borrower or any of its Subsidiaries that could result in damages
or costs to Borrower or any of its Subsidiaries of, individually or in the
aggregate, Five Hundred Thousand Dollars ($500,000.00) or more;

(j)           prompt written notice of any changes to the beneficial ownership
information set out in Section 14 of the Perfection Certificate.  Borrower
understands and acknowledges that Bank relies on such true, accurate and
up-to-date beneficial ownership information to meet Bank’s regulatory
obligations to obtain, verify and record information about the beneficial owners
of its legal entity customers; and

(k)          promptly, from time to time, such other information regarding
Borrower or compliance with the terms of any Loan Documents as reasonably
requested by Bank.

6.3          Accounts Receivable.

(a)          Schedules and Documents Relating to Accounts.  Borrower shall
deliver to Bank reports and schedules of collections, as provided in Section
6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to
execute and deliver the same shall not affect or limit Bank’s Lien and other
rights in all of Borrower’s Accounts, nor shall Bank’s failure to advance or
lend against a specific Account affect or limit Bank’s Lien and other rights
therein.  If requested by Bank, Borrower shall furnish Bank with copies (or, at
Bank’s request, upon an Event of Default, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts.  In addition, Borrower
shall deliver to Bank, on its request, the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary indorsements, and copies of all credit memos.

(b)          Disputes.  Borrower shall promptly notify Bank of all disputes or
claims relating to Accounts in excess of Five Hundred Thousand Dollars
($500,000.00) individually and in the aggregate.  Borrower may forgive
(completely or partially), compromise, or settle any Account for less than
payment in full, or agree to do any of the foregoing so long as (i) Borrower
does so in good faith, in a commercially reasonable manner, in the ordinary
course of business, in arm’s-length transactions, and reports the same to Bank
in the regular reports provided to Bank; (ii) no Event of Default has occurred
and is continuing; and (iii) after taking into account all such discounts,
settlements and forgiveness, the total outstanding Advances will not exceed the
lesser of the Revolving Line or the Borrowing Base.

(c)          Collection of Accounts.  Borrower shall direct Account Debtors to
deliver or transmit all proceeds of Accounts into a lockbox account, or such
other “blocked account” as may be agreed by Bank and Borrower (either such
account, the “Lockbox Account”).  Whether or not an Event of Default has
occurred and is continuing,

11

 

Borrower shall immediately deliver all payments on and proceeds of the Lockbox
Account to a Cash Collateral Account maintained at Bank (the “Cash Collateral
Account”).  Subject to Bank’s right to maintain a reserve pursuant to Section
6.3(d), all amounts received in the Cash Collateral Account shall be (i) when a
Streamline Period is not in effect, applied to immediately reduce the
Obligations under the Revolving Line (unless Bank, in its sole discretion, at
times when an Event of Default occurs and is continuing, elects not to so apply
such amounts), or (ii) when a Streamline Period is in effect, transferred on a
daily basis to Borrower’s operating account with Bank.  Borrower hereby
authorizes Bank to transfer to the Cash Collateral Account any amounts that Bank
reasonably determines are proceeds of the Accounts (provided that Bank is under
no obligation to do so and this allowance shall in no event relieve Borrower of
its obligations hereunder).

(d)          Reserves.  Notwithstanding any terms in this Agreement to the
contrary, at times when an Event of Default has occurred and is continuing, Bank
may hold any proceeds of the Accounts and any amounts in the Cash Collateral
Account that are not applied to the Obligations pursuant to Section 6.3(c) above
(including amounts otherwise required to be transferred to Borrower’s operating
account with Bank when a Streamline Period is in effect) as a reserve to be
applied to any Obligations regardless of whether such Obligations are then due
and payable.

(e)          Returns.  Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in excess of
Five Hundred Thousand Dollars ($500,000.00) individually and in the aggregate,
Borrower shall promptly (i) determine the reason for such return, (ii) issue a
credit memorandum to the Account Debtor in the appropriate amount, and (iii)
provide a copy of such credit memorandum to Bank, upon request from Bank.  In
the event any attempted return occurs after the occurrence and during the
continuance of any Event of Default, Borrower shall hold the returned saleable
Inventory in trust for Bank, and immediately notify Bank of the return of the
Inventory.

(f)           Verifications; Confirmations; Credit Quality; Notifications.  Bank
may, from time to time, (i) verify and confirm directly with the respective
Account Debtors the validity, amount and other matters relating to the Accounts,
either in the name of Borrower or Bank, and notify any Account Debtor of Bank’s
security interest in such Account after consultation and notice to Borrower
(unless an Event of Default has occurred and is continuing) and/or (ii) conduct
a credit check of any Account Debtor to approve any such Account Debtor’s
credit.

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

6.4          Remittance of Proceeds.  Except as otherwise provided in Section
6.3(c) or 6.7(c), deliver, in kind, all proceeds arising from the disposition of
any Collateral to Bank in the original form in which received by Borrower not
later than two (2) Business Days after receipt by Borrower, to be applied to the
Obligations (a) prior to an Event of Default, pursuant to the terms of Section
6.3(c) hereof, and (b) after the occurrence and during the continuance of an
Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if
no Event of Default has occurred and is continuing, Borrower shall not be
obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of Two Hundred Fifty Thousand Dollars
($250,000.00) or less (for all such transactions in any fiscal year).  Borrower
agrees that it will not commingle proceeds of Collateral with any of Borrower’s
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Bank.  Nothing in this
Section 6.4 limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.

6.5          Taxes; Pensions.  Timely file, and require each of its Subsidiaries
to timely file, all required tax returns and reports and timely pay, and require
each of its Subsidiaries to timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower and each of its
Subsidiaries, except for deferred payment of any taxes contested pursuant to the
terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.

12

 

6.6          Access to Collateral; Books and Records. At reasonable times, on
ten (10) Business Days’ notice (provided no notice is required if an Event of
Default has occurred and is continuing), Bank, or its agents, shall have the
right to inspect the Collateral and the right to audit and copy Borrower’s
Books.  The foregoing inspections and audits shall be conducted no more often
than once every twelve (12) months (or more frequently as Bank in its sole
discretion determines that conditions warrant) unless an Event of Default has
occurred and is continuing in which case such inspections and audits shall occur
as often as Bank shall determine is necessary.  The foregoing inspections and
audits shall be conducted at Borrower’s expense and the charge therefor shall be
One Thousand Dollars ($1,000.00) per person per day (or such higher amount as
shall represent Bank’s then-current standard charge for the same), plus
reasonable out-of-pocket expenses.  In the event Borrower and Bank schedule an
audit more than eight (8) days in advance, and Borrower cancels or seeks to or
reschedules the audit with less than eight (8) days written notice to Bank, then
(without limiting any of Bank’s rights or remedies) Borrower shall pay Bank a
fee of Two Thousand Dollars ($2,000.00) plus any out-of-pocket expenses incurred
by Bank to compensate Bank for the anticipated costs and expenses of the
cancellation or rescheduling.

6.7          Insurance.

(a)          Keep its business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s industry and location and as Bank
may reasonably request.  Insurance policies shall be in a form, with financially
sound and reputable insurance companies that are not Affiliates of Borrower, and
in amounts that are customary in Borrower’s industry and consistent with
companies of similar size.  All property policies covering Collateral shall have
a lender’s loss payable endorsement showing Bank as lender loss payee.  All
liability policies shall show, or have endorsements showing, Bank as an
additional insured.  Bank shall be named as lender loss payee and/or additional
insured with respect to any such insurance providing coverage in respect of any
Collateral.

(b)          Ensure that proceeds payable under any property policy as a result
of any insured loss of Collateral are, at Bank’s option, payable to Bank on
account of the Obligations.  Notwithstanding the foregoing, (i) so long as no
Event of Default has occurred and is continuing, Borrower shall have the option
of applying the proceeds of any insurance policy not to exceed Five Hundred
Thousand Dollars ($500,000.00) in the aggregate for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property (A)
shall be of equal or like value as the replaced or repaired Collateral and (B)
shall be deemed Collateral in which Bank has been granted a first priority
security interest, and (ii) after the occurrence and during the continuance of
an Event of Default, all proceeds payable under such casualty policy shall, at
the option of Bank, be payable to Bank on account of the Obligations

(c)          At Bank’s request, Borrower shall deliver certified copies of
insurance policies and evidence of all premium payments.  Each provider of any
such insurance required under this Section 6.7 shall agree, by endorsement upon
the policy or policies issued by it or by independent instruments furnished to
Bank, that it will give Bank thirty (30) days prior written notice before any
such policy or policies shall be canceled.  If Borrower fails to obtain
insurance as required under this Section 6.7 or to pay any amount or furnish any
required proof of payment to third persons and Bank, Bank may make all or part
of such payment or obtain such insurance policies required in this Section 6.7,
and take any action under the policies Bank deems prudent.

6.8          Accounts.

(a)          Maintain its primary operating and other deposit accounts, the Cash
Collateral Account and primary securities/investment accounts with Bank and
Bank’s Affiliates which accounts held in the name of Borrower shall represent at
least fifty-one percent (51.0%) of the Dollar value of Borrower’s and its
Subsidiaries’ accounts at all financial institutions.  In addition, Borrower
shall conduct all of its United States issued business credit cards with Bank
(other than the American Express Card).  Any Guarantor shall maintain its
primary depository, operating and securities/investment accounts with Bank and
Bank’s Affiliates.

(b)          In addition to and without limiting the restrictions in (a),
Borrower shall provide Bank five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Bank or Bank’s Affiliates. For each Collateral Account that Borrower
at any time maintains, Borrower shall cause the applicable bank or financial
institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral

13

 

Account to perfect Bank’s Lien in such Collateral Account in accordance with the
terms hereunder which Control Agreement may not be terminated without the prior
written consent of Bank.  The provisions of the previous sentence shall not
apply to deposit accounts exclusively used for payroll, payroll taxes, and other
employee wage and benefit payments to or for the benefit of Borrower’s employees
and identified to Bank by Borrower as such.

6.9          [Intentionally Omitted].

6.10        Protection of Intellectual Property Rights.

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

(b)          Provide written notice to Bank within ten (10) days of entering or
becoming bound by any Restricted License (other than over-the-counter software
that is commercially available to the public).

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

6.12        Online Banking.

(a)           Utilize Bank’s online banking platform for all matters requested
by Bank which shall include, without limitation (and without request by Bank for
the following matters), uploading information pertaining to Accounts and Account
Debtors, requesting approval for exceptions, requesting Credit Extensions, and
uploading financial statements and other reports required to be delivered by
this Agreement (including, without limitation, those described in Section 6.2 of
this Agreement).

(b)         Comply with the terms of Bank’s Online Banking Agreement as in
effect from time to time and ensure that all persons utilizing Bank’s online
banking platform are duly authorized to do so by an Administrator.  Bank shall
be entitled to assume the authenticity, accuracy and completeness on any
information, instruction or request for a Credit Extension submitted via Bank’s
online banking platform and to further assume that any submissions or requests
made via Bank’s online banking platform have been duly authorized by an
Administrator.

6.13        Further Assurances.  Execute any further instruments and take
further action as Bank reasonably requests to perfect or continue Bank’s Lien in
the Collateral or to effect the purposes of this Agreement.  Deliver to Bank,
within five (5) days after the same are sent or received, copies of all material
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.

6.14        Post-Closing Deliverables.  Deliver to Bank, in form and substance
reasonably satisfactory to Bank:

(a)          within sixty (60) days following the Effective Date, or such other
later date as Bank may in its sole discretion permit, a landlord’s consent in
favor of Bank for each of Borrower’s leased locations, by the respective
landlord thereof, together with the duly executed signatures thereto; provided
that Borrower shall not be required to obtain a landlord’s consent for its
location at 410 West Harrison Street, Seattle, Washington 98119, as long as
Borrower terminates the lease within one hundred eighty (180) days of the
Effective Date;

(b)          within thirty (30) days following the Effective Date, or such other
later date as Bank may in its sole discretion permit, evidence satisfactory to
Bank that the insurance policies and endorsements required by

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Section 6.7 hereof are in full force and effect, together with appropriate
evidence showing lender loss payable and/or additional insured clauses or
endorsements in favor of Bank; and

(c)          within fourteen (14) days following the Effective Date, or such
other later date as Bank may in its sole discretion permit, duly executed
signatures to the Control Agreements with U.S. Bank National Association Bank
and Morgan Stanley Smith Barney LLC.

7             NEGATIVE COVENANTS

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

7.1          Dispositions.  Convey, sell, lease, transfer, assign, or otherwise
dispose of (including, without limitation, pursuant to a Division)
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (a) of Product
Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment that is, in the reasonable judgment of Borrower, no longer
economically practicable to maintain or useful in the ordinary course of
business of Borrower; (c) consisting of Permitted Liens and/or Permitted
Investments; or (d) of non-exclusive licenses for the use of the property of
Borrower or its Subsidiaries and exclusive licenses for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business (including,
for the avoidance of doubt, commercialization, manufacturing, research and
development, marketing, distribution and similar partnerships or strategic
arrangements, each in the ordinary course of business) that could not result in
a legal transfer of title to the licensed property.

7.2          Changes in Business, Management, Control, or Business Locations.
 (a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve (other than
Omeros London Limited); (c) fail to provide notice to Bank of any Key Person
departing from or ceasing to be employed by Borrower within five (5) days after
such Key Person’s departure from Borrower; or (d) permit or suffer any Change in
Control.

Borrower shall not, without at least ten (10) days prior written notice to Bank:
(1) add any new offices or business locations, including warehouses (unless such
new offices or business locations contain less than Five Hundred Thousand
Dollars ($500,000.00) in Borrower’s assets or property) or deliver any portion
of the Collateral valued, individually or in the aggregate, in excess of Five
Hundred Thousand Dollars ($500,000.00) to a bailee at a location other than to a
bailee and at a location already disclosed in the Perfection Certificate, (2)
change its jurisdiction of organization, (3) change its organizational structure
or type, (4) change its legal name, or (5) change any organizational number (if
any) assigned by its jurisdiction of organization.  If Borrower intends to add
any new offices or business locations, including warehouses, containing
Collateral valued, individually or in the aggregate, in excess of Five Hundred
Thousand Dollars ($500,000.00), then Borrower will cause such landlord of any
such new offices or business locations, including warehouses, to execute and
deliver a landlord consent in form and substance satisfactory to Bank.  If
Borrower intends to deliver any portion of the Collateral valued, individually
or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000.00) to
a bailee, and Bank and such bailee are not already parties to a bailee agreement
governing both the Collateral and the location to which Borrower intends to
deliver the Collateral, then Borrower will cause such bailee to execute and
deliver a bailee agreement in form and substance satisfactory to Bank.

7.3          Mergers or Acquisitions.  Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person (including, without limitation, by
the formation of any Subsidiary or pursuant to a Division).  A Subsidiary may
merge or consolidate into another Subsidiary or into Borrower.

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

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

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7.6          Maintenance of Collateral Accounts.  Maintain any Collateral
Account except pursuant to the terms of Section 6.8(b) hereof.

7.7          Distributions; Investments.  (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock provided
that Borrower may (i)  convert any of its convertible securities into other
securities pursuant to the terms of such convertible securities or otherwise in
exchange thereof, (ii)  pay dividends solely in common stock; (iii) repurchase
the stock of former employees or consultants pursuant to stock repurchase
agreements so long as an Event of Default does not exist at the time of any such
repurchase and would not exist after giving effect to any such repurchase,
provided that the aggregate amount of all such repurchases does not exceed Five
Hundred Thousand Dollars ($500,000.00) per fiscal year; (iv) purchase, redeem,
retire, or otherwise acquire shares of its capital stock or other equity
interests with the proceeds received from a substantially concurrent issue of
new shares of its capital stock or other equity interests; (v) make cash
payments in lieu of the issuance of fractional shares in connection with the
exercise of warrants, options, or other securities convertible into or
exchangeable for equity interests of Borrower; (vi) distribute rights pursuant
to a shareholder rights plan or redeem such rights for no or nominal
consideration not to exceed $0.001 per right, provided that such redemption is
in accordance with the terms of such plan; and (vii) retire any shares of
capital stock of Borrower otherwise issuable upon conversion of any restricted
stock unit award to satisfy any tax obligations with respect to such restricted
stock unit awards; or (b) directly or indirectly make any Investment (including,
without limitation, by the formation of any Subsidiary) other than Permitted
Investments, or permit any of its Subsidiaries to do so.

7.8          Transactions with Affiliates.  Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person.

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

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

8             EVENTS OF DEFAULT

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

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

8.2          Covenant Default.

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(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3,
6.4, 6.5, 6.6, 6.7, 6.8, 6.10, or 6.12 or violates any covenant in Section 7; or

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

8.3          Material Adverse Change.  A Material Adverse Change occurs;

8.4          Attachment; Levy; Restraint on Business.

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

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

8.5          Insolvency.  (a) Borrower or any of its Subsidiaries is unable to
pay its debts (including trade debts) as they become due or otherwise becomes
insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of
its Subsidiaries and is not dismissed or stayed within forty-five (45) days (but
no Credit Extensions shall be made while any of the conditions described in
clause (a) exist and/or until any Insolvency Proceeding is dismissed);

8.6          Other Agreements.  There is, under any agreement to which Borrower
or any Guarantor is a party with a third party or parties, (a) any default
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount individually or in
the aggregate in excess of Five Hundred Thousand Dollars ($500,000.00) (after
giving effect to any applicable grace or cure period, if any); or (b) any breach
or default by Borrower or Guarantor, the result of which could have a material
adverse effect on Borrower’s or any Guarantor’s business (after giving effect to
any applicable grace or cure period, if any);

8.7          Judgments; Penalties.  One or more fines, penalties or final
judgments, orders or decrees for the payment of money in an amount, individually
or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000.00)
(not covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower by any
Governmental Authority, and the same are not, within ten (10) days after the
entry, assessment or issuance thereof, discharged, satisfied, or paid, or after
execution thereof, stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the satisfaction, payment, discharge, stay, or
bonding of such fine, penalty, judgment, order or decree);

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

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8.9          Subordinated Debt.  Any document, instrument, or agreement
evidencing any Subordinated Debt shall for any reason be revoked or invalidated
or otherwise cease to be in full force and effect, any Person shall be in breach
thereof or contest in any manner the validity or enforceability thereof or deny
that it has any further liability or obligation thereunder, or the Obligations
shall for any reason be subordinated or shall not have the priority contemplated
by this Agreement or any applicable subordination or intercreditor agreement;

8.10        Guaranty.  (a) Any guaranty of any Obligations terminates or ceases
for any reason to be in full force and effect; (b) any Guarantor does not
perform any obligation or covenant under any guaranty of the Obligations; (c)
any circumstance described in Sections 8.3, 8.4, 8.5, 8.6, 8.7, or 8.8 of this
Agreement occurs with respect to any Guarantor, (d) the death, liquidation,
winding up, or termination of existence of any Guarantor; or (e) (i) a material
impairment in the perfection or priority of Bank’s Lien in the collateral
provided by Guarantor or in the value of such collateral or (ii) a material
adverse change in the general affairs, management, results of operation,
condition (financial or otherwise) or the prospect of repayment of the
Obligations occurs with respect to any Guarantor; or

8.11        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 (i) causes, or could reasonably be expected to
cause, a Material Adverse Change, or (ii) materially adversely affects the legal
qualifications of Borrower or any of its Subsidiaries to hold such Governmental
Approval in any applicable jurisdiction and such revocation, rescission,
suspension, modification or non-renewal could reasonably be expected to affect
the status of or legal qualifications of Borrower or any of its Subsidiaries to
hold any Governmental Approval in any other jurisdiction.

9             BANK’S RIGHTS AND REMEDIES

9.1          Rights and Remedies.  Upon the occurrence and during the
continuance of an Event of Default, Bank may, without notice or demand, do any
or all of the following:

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

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

(c)          demand that Borrower (i) deposit cash with Bank in an amount equal
to at least (A) one hundred percent (100.0%) of the Dollar Equivalent of the
aggregate face amount of all Letters of Credit denominated in Dollars remaining
undrawn, and (B) one hundred ten percent (110.0%) of the Dollar Equivalent of
the aggregate face amount of all Letters of Credit denominated in a Foreign
Currency remaining undrawn (plus, in each case, all interest, fees, and costs
due or to become due in connection therewith (as estimated by Bank in its good
faith business judgment)), to secure all of the Obligations relating to such
Letters of Credit, as collateral security for the repayment of any future
drawings under such Letters of Credit, and Borrower shall forthwith deposit and
pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to
be paid or payable over the remaining term of any Letters of Credit;

(d)          terminate any FX Contracts;

(e)          verify the amount of, demand payment of and performance under, and
collect any Accounts and General Intangibles, settle or adjust disputes and
claims directly with Account Debtors for amounts on terms and in any order that
Bank considers advisable, and notify any Person owing Borrower money of Bank’s
security interest in such funds.  Borrower shall collect all payments in trust
for Bank and, if requested by Bank, immediately deliver the payments to Bank in
the form received from the Account Debtor, with proper endorsements for deposit;

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

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

(h)          ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section 9.1, Borrower’s rights under all
licenses and all franchise agreements inure to Bank’s benefit;

(i)           place a “hold” on any account maintained with Bank and/or deliver
a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;

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

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

9.2          Power of Attorney.  Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, exercisable following the occurrence and
continuance of an Event of Default, to:  (a) endorse Borrower’s name on any
checks, payment instruments, or other forms of payment or security; (b) sign
Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; (c) demand, collect, sue, and give releases to any
Account Debtor for monies due, settle and adjust disputes and claims about the
Accounts directly with Account Debtors, and compromise, prosecute, or defend any
action, claim, case, or proceeding about any Collateral (including filing a
claim or voting a claim in any bankruptcy case in Bank’s or Borrower’s name, as
Bank chooses); (d) make, settle, and adjust all claims under Borrower’s
insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance,
security interest, or other claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and
(f) transfer the Collateral into the name of Bank or a third party as the Code
permits.  Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower’s name on any documents necessary to perfect or continue the perfection
of Bank’s security interest in the Collateral regardless of whether an Event of
Default has occurred and is continuing until all Obligations have been satisfied
in full and the Loan Documents have been terminated.  Bank’s foregoing
appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and the Loan Documents have been terminated.

9.3          Protective Payments.  If Borrower fails to obtain the insurance
called for by Section 6.7 or fails to pay any premium thereon or fails to pay
any other amount which Borrower is obligated to pay under this Agreement or any
other Loan Document or which may be required to preserve the Collateral, Bank
may obtain such insurance or make such payment, and all amounts so paid by Bank
are Bank Expenses and immediately due and payable, bearing interest at the then
highest rate applicable to the Obligations, and secured by the Collateral.  Bank
will make reasonable efforts to provide Borrower with notice of Bank obtaining
such insurance at the time it is obtained or within a reasonable time
thereafter.  No payments by Bank are deemed an agreement to make similar
payments in the future or Bank’s waiver of any Event of Default.

9.4          Application of Payments and Proceeds.  Bank shall have the right to
apply in any order any funds in its possession, whether from Borrower account
balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations.  Bank shall pay any surplus to

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Borrower by credit to the Designated Deposit Account or to other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency.  If
Bank, directly or indirectly, enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Bank shall have the
option, exercisable at any time, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Bank of cash therefor.

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

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

9.7          Demand Waiver.  Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.

10           NOTICES

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below.  Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

If to Borrower:

Omeros Corporation

 

201 Elliott Avenue West

 

Seattle, Washington 98119

 

Attn:  Chief Executive Officer

 

Fax:  206-676-5005

 

 

with a copy to:

201 Elliott Avenue West

 

Seattle, Washington 98119

 

Attn: General Counsel

 

Fax: 206-676-5005

 

Email: generalcounsel@omeros.com

 

 

If to Bank:

Silicon Valley Bank

 

505 Howard Street, 3rd Floor

 

San Francisco, California 94105

 

Attn:    Shawn Parry

 

Email:  SParry@svb.com

 

20

 

with a copy to:

Morrison & Foerster LLP

 

200 Clarendon Street, Floor 20

 

Boston, Massachusetts  02116

 

Attn:  David A. Ephraim, Esquire

 

Email:  DEphraim@mofo.com

 

11           CHOICE OF LAW, VENUE, AND JURY TRIAL WAIVER

Except as otherwise expressly provided in any of the Loan Documents, New York
law governs the Loan Documents without regard to principles of conflicts of
law.  Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in New York, New York; provided, however, that nothing in
this Agreement shall be deemed to operate to preclude Bank from bringing suit or
taking other legal action in any other jurisdiction to realize on the Collateral
or any other security for the Obligations, or to enforce a judgment or other
court order in favor of Bank.  Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court,
and Borrower hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.  Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in,
or subsequently provided by Borrower in accordance with, Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR 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 BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

This Section 11 shall survive the termination of this Agreement.

12           GENERAL PROVISIONS

12.1        Termination Prior to Maturity Date; Survival. All covenants,
representations and warranties made in this Agreement shall continue in full
force until this Agreement has terminated pursuant to its terms and all
Obligations have been satisfied.  So long as Borrower has satisfied the
Obligations (other than inchoate indemnity obligations, and any other
obligations which, by their terms, are to survive the termination of this
Agreement, and any Obligations under Bank Services Agreements that are cash
collateralized in accordance with Section 4.1 of this Agreement), this Agreement
may be terminated prior to the Revolving Line Maturity Date by Borrower,
effective three (3) Business Days after written notice of termination is given
to Bank.  Those obligations that are expressly specified in this Agreement as
surviving this Agreement’s termination shall continue to survive notwithstanding
this Agreement’s termination.

12.2        Successors and Assigns.  This Agreement binds and is for the benefit
of the successors and permitted assigns of each party.  Borrower may not assign
this Agreement or any rights or obligations under it without Bank’s prior
written consent (which may be granted or withheld in Bank’s discretion).  Bank
has the right, without the consent of or notice to Borrower, to sell, transfer,
assign, negotiate, or grant participation in all or any part of, or any interest
in, Bank’s obligations, rights, and benefits under this Agreement and the other
Loan Documents. Notwithstanding the foregoing, prior to the occurrence of an
Event of Default, Bank shall not assign any interest in the Loan Documents to an
operating company which, in the reasonable estimation of Bank, is a direct
competitor of Borrower.

12.3        Indemnification.  Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against:  (i) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or

21

 

asserted by any other party in connection with the transactions contemplated by
the Loan Documents; and (ii) all losses or expenses (including Bank Expenses) in
any way suffered, incurred, or paid by such Indemnified Person as a result of,
following from, consequential to, or arising from transactions between Bank and
Borrower (including reasonable attorneys’ fees and expenses), except for Claims
and/or losses directly caused by such Indemnified Person’s gross negligence or
willful misconduct.

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

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

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

12.6        [Intentionally Omitted].

12.7        Amendments in Writing; Waiver; Integration.  No purported amendment
or modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought.  Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document.  Any waiver granted shall be limited to the
specific circumstance expressly described in it, and shall not apply to any
subsequent or other circumstance, whether similar or dissimilar, or give rise
to, or evidence, any obligation or commitment to grant any further waiver.  The
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into the Loan
Documents.

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

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

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

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

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

12.12      Right of Setoff.   Borrower hereby grants to Bank a Lien and a right
of setoff as security for all Obligations to Bank, whether now existing or
hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Bank (including a subsidiary of Bank) or
in transit to any of them.  At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may setoff
the same or any part thereof and apply the same to any liability or Obligation
of Borrower even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

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

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

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

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

13           DEFINITIONS

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

“2020 Anniversary Fee” is defined in Section 2.8(b)(i).

“2021 Anniversary Fee” is defined in Section 2.8(b)(ii).

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

23

 

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

“Administrator” is an individual that is named:

(a)          as an “Administrator” in the “SVB Online Services” form completed
by Borrower with the authority to determine who will be authorized to use SVB
Online Services (as defined in Bank’s Online Banking Agreement as in effect from
time to time) on behalf of Borrower; and

(b)          as an Authorized Signer of Borrower in an approval by the Board.

“Advance” or “Advances” means a revolving credit loan (or revolving credit
loans) under the Revolving Line.

“Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.  For
purposes of the definition of Eligible Accounts, Affiliate shall include a
Specified Affiliate.

“Agreement” is defined in the preamble hereof.

“American Express Card” is defined in clause (m) of the definition of Permitted
Indebtedness.

“Anniversary Fee” is each of the 2020 Anniversary Fee and the 2021 Anniversary
Fee and collectively, “Anniversary Fees”.

“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution
who is authorized to execute the Loan Documents, including making (and executing
if applicable) any Credit Extension request, on behalf of Borrower.

“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the
amount available under the Borrowing Base minus (b) the aggregate Dollar
Equivalent amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit
Reserve, minus (c) the FX Reduction Amount, minus (d) any amounts used for Cash
Management Services, minus (e) the outstanding principal balance of any
Advances, and upon the Reserve Event, minus (f) the Reserve Amount.

“Bank” is defined in the preamble hereof.

“Bank Entities” is defined in Section 12.9.

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower or any Guarantor.

“Bank Services”  are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”) and shall
include, without limitation, any Letters of Credit pursuant to Section 2.3, FX
Contracts pursuant to Section 2.4 and Cash Management Services pursuant to
Section 2.5.

“Bank Services Agreement” is defined in the definition of Bank Services.

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“Board” is Borrower’s board of directors.

“Borrower” is defined in the preamble hereof.

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

“Borrowing Base” is eighty-five percent (85.0%) of Eligible Accounts as
determined by Bank from Borrower’s most recent Borrowing Base Report (and as may
subsequently be updated by Bank based upon information received by Bank
including, without limitation, Accounts that are paid and/or billed following
the date of the Borrowing Base Report); provided, however, that Bank has the
right, after consultation with Borrower, to decrease the foregoing percentage in
its good faith business judgment to mitigate the impact of events, conditions,
contingencies, or risks which may adversely affect the Collateral or its value.

“Borrowing Base Report” is that certain report of the value of certain
Collateral in the form specified by Bank to Borrower from time to time.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s board of directors (and, if required under the terms of
such Person’s Operating Documents, stockholders) and delivered by such Person to
Bank approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying (a) such Person has the authority
to execute, deliver, and perform its obligations under each of the Loan
Documents to which it is a party, (b) that set forth as a part of or attached as
an exhibit to such certificate is a true, correct, and complete copy of the
resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents, including making (and executing if applicable) any Credit
Extension request, on behalf of such Person, together with a sample of the true
signature(s) of such Person(s), and (d) that Bank may conclusively rely on such
certificate unless and until such Person shall have delivered to Bank a further
certificate canceling or amending such prior certificate.

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

“Cash Collateral Account” is defined in Section 6.3(c).

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either S&P Global Ratings or Moody’s
Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no
more than one (1) year after issue; and (d) money market funds at least
ninety-five percent (95.0%) of the assets of which constitute Cash Equivalents
of the kinds described in clauses (a) through (c) of this definition.

“Cash Management Services” is defined in Section 2.5.

“Change in Control” means (a) at any time, any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become,
or obtain rights (whether by means of warrants, options or otherwise) to become,
the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)‑5 under the
Exchange Act), directly or indirectly, of forty-nine percent (49.0%) or more of
the ordinary voting power for the election of directors of Borrower (determined
on a fully diluted basis) other than by the sale of Borrower’s equity securities
in a public offering or to venture capital or private equity investors so long
as Borrower identifies to Bank the venture capital or private equity investors
at least seven (7) Business Days prior to the closing of the transaction and
provides to Bank a description of the material terms of the transaction; (b)
during any period of twelve (12) consecutive months, a majority of the members
of the board of directors or other equivalent governing body of Borrower cease
to be composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause

25

 

(i) above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body or (iii) whose election or
nomination to that board or other equivalent governing body was approved by
individuals referred to in clauses (i) and (ii) above constituting at the time
of such election or nomination at least a majority of that board or equivalent
governing body; or (c) at any time, Borrower shall cease to own and control, of
record and beneficially, directly or indirectly, one hundred percent (100.0%) of
each class of outstanding capital stock of each Subsidiary of Borrower free and
clear of all Liens (except Liens created by this Agreement).

“Claims” is defined in Section 12.3.

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

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

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

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

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

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

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

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

“Credit Extension” is any Advance, any Overadvance, Letter of Credit, FX
Contract, amount utilized for Cash Management Services, or any other extension
of credit by Bank for Borrower’s benefit.

“Currency” is coined money and such other banknotes or other paper money as are
authorized by law and circulate as a medium of exchange.

26

 

“Default Rate” is defined in Section 2.7(b).

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

“Designated Deposit Account” is the account number ending 984 (last three
digits) maintained by Borrower with Bank (provided, however, if no such account
number is included, then the Designated Deposit Account shall be any deposit
account of Borrower maintained with Bank as chosen by Bank).

“Division” means, in reference to any Person which is an entity, the division of
such Person into two (2) or more separate Persons, with the dividing Person
either continuing or terminating its existence as part of such division,
including, without limitation, as contemplated under Section 18-217 of the
Delaware Limited Liability Company Act for limited liability companies formed
under Delaware law, or any analogous action taken pursuant to any other
applicable law with respect to any corporation, limited liability company,
partnership or other entity.

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

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

“Effective Date” is defined in the preamble hereof.

“Eligible Accounts” means Accounts owing to Borrower which arise in the ordinary
course of Borrower’s business that meet all Borrower’s representations and
warranties in Section 5.3, that have been, at the option of Bank, confirmed in
accordance with Section 6.3(f) of this Agreement, and are due and owing from
Account Debtors deemed creditworthy by Bank in its good faith business
judgment.  Bank reserves the right at any time after the Effective Date, upon
consultation with Borrower, to adjust any of the criteria set forth below and to
establish new criteria in its good faith business judgment.  Unless Bank
otherwise agrees in writing, Eligible Accounts shall not include:

(a)          Accounts (i) for which the Account Debtor is Borrower’s Affiliate,
officer, employee, or agent, or (ii) that are intercompany Accounts;

(b)          Accounts that the Account Debtor has not paid within one hundred
five (105) days of invoice date regardless of invoice payment period terms;

(c)          Accounts with credit balances over one hundred five (105) days from
invoice date;

(d)          Accounts owing from an Account Debtor if fifty percent (50%) or
more of the Accounts owing from such Account Debtor have not been paid within
one hundred five (105) days of invoice date;

(e)          Accounts owing from an Account Debtor (i) which does not have its
principal place of business in the United States or (ii) whose billing address
(as set forth in the applicable invoice for such Account) is not in the United
States, unless in the case of both (i) and (ii), such Accounts are otherwise
approved by Bank in writing;

(f)           Accounts billed from and/or payable to Borrower outside of the
United States (sometimes called foreign invoiced accounts);

(g)          Accounts in which Bank does not have a first priority, perfected
security interest under all applicable laws;

27

 

(h)          Accounts billed and/or payable in a Currency other than Dollars;

(i)           Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called “contra” accounts, accounts
payable, customer deposits or credit accounts);

(j)           Accounts with or in respect of accruals for marketing allowances,
incentive rebates, price protection, cooperative advertising and other similar
marketing credits;

(k)          Accounts owing from an Account Debtor which is a United States
government entity or any department, agency, or instrumentality thereof unless
Borrower has assigned its payment rights to Bank and the assignment has been
acknowledged under the Federal Assignment of Claims Act of 1940, as amended;

(l)           Accounts with customer deposits and/or with respect to which
Borrower has received an upfront payment, to the extent of such customer deposit
and/or upfront payment;

(m)         Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on
approval”, or other terms if Account Debtor’s payment may be conditional;

(n)          Accounts owing from an Account Debtor where goods or services have
not yet been rendered to the Account Debtor (sometimes called memo billings or
pre-billings);

(o)          Accounts subject to contractual arrangements between Borrower and
an Account Debtor where payments shall be scheduled or due according to
completion or fulfillment requirements (sometimes called contracts accounts
receivable, progress billings, milestone billings, or fulfillment contracts);

(p)          Accounts owing from an Account Debtor the amount of which may be
subject to withholding based on the Account Debtor’s satisfaction of Borrower’s
complete performance (but only to the extent of the amount withheld; sometimes
called retainage billings);

(q)          Accounts subject to trust provisions, subrogation rights of a
bonding company, or a statutory trust;

(r)           Accounts owing from an Account Debtor that has been invoiced for
goods that have not been shipped to the Account Debtor unless Bank, Borrower,
and the Account Debtor have entered into an agreement acceptable to Bank wherein
the Account Debtor acknowledges that (i) it has title to and has ownership of
the goods wherever located, (ii) a bona fide sale of the goods has occurred, and
(iii) it owes payment for such goods in accordance with invoices from Borrower
(sometimes called “bill and hold” accounts);

(s)           Accounts for which the Account Debtor has not been invoiced;

(t)           Accounts that represent non-trade receivables or that are derived
by means other than in the ordinary course of Borrower’s business;

(u)          Accounts for which Borrower has permitted Account Debtor’s payment
to extend beyond one hundred five (105) days (including Accounts with a due date
that is more than one hundred five (105) days from invoice date);

(v)          Accounts arising from chargebacks, debit memos or other payment
deductions taken by an Account Debtor;

(w)         Accounts arising from product returns and/or exchanges (sometimes
called “warranty” or “RMA” accounts);

28

 

(x)          Accounts in which the Account Debtor disputes liability or makes
any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding (whether voluntary or
involuntary), or becomes insolvent, or goes out of business;

(y)          Accounts owing from an Account Debtor with respect to which
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue);

(z)          Accounts owing from an Account Debtor, whose total obligations to
Borrower exceed fifty percent (50.0%) of all Accounts, for the amounts that
exceed that percentage, unless Bank approves the Account Debtor in writing;

(aa)         Accounts not owing from the sale of Omidria; and

(bb)        Accounts for which Bank in its good faith business judgment
determines collection to be doubtful, including, without limitation, accounts
represented by “refreshed” or “recycled” invoices.

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

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

“Event of Default” is defined in Section 8.

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

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

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

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

“FX Contract” is defined in Section 2.4.

“FX Reduction Amount” means, with respect to a given FX Contract, the notional
amount thereof multiplied by the currency exchange risk factor for the
currencies involved in the FX Contract, multiplied by the current foreign
exchange spot rates, in each instance as determined and calculated by Bank in
its sole discretion.

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

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

29

 

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

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

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

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

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

“Indemnified Person” is defined in Section 12.3.

“Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and
Borrower’s Books, with results satisfactory to Bank in its sole and absolute
discretion.

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

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

(a)          Copyrights, Trademarks and Patents;

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

(c)          any and all source code;

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

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

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

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

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

30

 

“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Gregory
A. Demopulos, MD, as of the Effective Date, and (b) Chief Accounting Officer,
who is Michael A. Jacobsen, as of the Effective Date.

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.3.

“Letter of Credit Application” is defined in Section 2.3(b).

“Letter of Credit Reserve” is defined in Section 2.3(e).

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

“Liquidity” is, at any time, the sum of (a) the aggregate amount of unrestricted
and unencumbered cash held in accounts in the name of Borrower maintained with
Bank or its Affiliates, and (b) the unused portion of the Availability Amount.

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

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

“Non-U.S. Lender” is defined in Section 2.10(b).

“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, fees, Bank Expenses, the Termination Fee, the Anniversary Fees, and
other amounts Borrower owes Bank now or later, whether under this Agreement, the
other Loan Documents, or otherwise, including, without limitation, all
obligations relating to Bank Services and interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank, and to perform Borrower’s duties under the Loan Documents.

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

“Overadvance” is defined in Section 2.6.

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

“Payment Date” is, with respect to Advances, the last calendar day of each
month.

“Perfection Certificate” is defined in Section 5.1.

“Permitted Accounts” is defined in Section 6.8(a).

31

 

“Permitted Convertible Debt” is defined in clause (h) of the definition of
“Permitted Indebtedness” hereunder.

“Permitted Convertible Debt Default” is defined in clause (h) of the definition
of “Permitted Indebtedness” hereunder.

“Permitted Indebtedness” is:

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

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

(c)          Subordinated Debt;

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

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

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

(g)          Subject to the execution of the Subordination Agreement in form and
substance satisfactory to Bank, any Indebtedness to Vulcan arising under the
Vulcan Agreement, as in effect as of the date hereof, provided that such
permitted amount shall reduce on a dollar-for-dollar basis as such Indebtedness
is repaid or otherwise satisfied;

(h)          unsecured Indebtedness which by its terms is convertible into
equity securities of Borrower (the “Permitted Convertible Debt”) provided that
(i) the aggregate principal amount of the Permitted Convertible Debt shall not
exceed Three Hundred Ten Million Dollars ($310,000,000.00) at any time
outstanding, (ii) no scheduled principal payments may be made with respect to
the Permitted Convertible Debt, and (iii) if a default or an event of default
(however defined) has occurred and is continuing under the Permitted Convertible
Debt (“Permitted Convertible Debt Default”), all outstanding liabilities and
obligations of Borrower to Bank shall be immediately be repaid in full;

(i)           Indebtedness in respect of customer deposits and advance payments
received in the ordinary course of business;

(j)           to the extent constituting Indebtedness obligations, Indebtedness
incurred in connection with the financing of insurance premiums in the ordinary
course of business;

(k)          other unsecured Indebtedness in an aggregate amount not to exceed
Two Hundred Fifty Thousand Dollars ($250,000.00) in any calendar year;

(l)           Indebtedness of any Subsidiary to Borrower;

(m)         unsecured Indebtedness in connection with a corporate credit card
with American Express (the “American Express Card”) in an aggregate principal
amount not to exceed Five Hundred Thousand Dollars ($500,000.00) at any time;

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

“Permitted Investments” are:

32

 

(a)          Investments (including, without limitation, Subsidiaries) existing
on the Effective Date which are shown on the Perfection Certificate;

(b)          Investments consisting of Cash Equivalents;

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

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

(e)          Investments in Subsidiaries not to exceed Seven Hundred Fifty
Thousand Dollars ($750,000.00) per fiscal year of Borrower; provided that no
Event of Default has occurred and that no Event of Default would result from
such Investment;

(f)           Investments by a Subsidiary in other Subsidiaries;

(g)          joint ventures or strategic alliances in the ordinary course of
Borrower’s business consisting of non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash Investments by Borrower do not exceed Five Hundred Thousand Dollars
($500,000.00) in the aggregate in any fiscal year;

(h)          repurchases of stock permitted by Section 7.7;

(i)           Investment accepted in connection with Transfers permitted by
Section 7.1; and

(j)           Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business.

“Permitted Liens” are:

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

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

(c)          purchase money Liens and finance leases (i) on Equipment acquired
or held by Borrower incurred for financing the acquisition of the Equipment
securing no more than Ten Million Dollars ($10,000,000.00) in the aggregate
amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;

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

(e)          Liens of carriers, warehousemen, suppliers, or other Persons that
are possessory in nature arising in the ordinary course of business so long as
such Liens attach only to Inventory, securing liabilities in the aggregate
amount not to exceed One Hundred Thousand Dollars ($100,000.00) and which are
not delinquent or remain

33

 

payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;

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

(g)          leases or subleases of real property granted in the ordinary course
of Borrower’s business (or, if referring to another Person, in the ordinary
course of such Person’s business), and leases, subleases, non-exclusive licenses
or sublicenses of personal property (other than Intellectual Property) granted
in the ordinary course of Borrower’s business (or, if referring to another
Person, in the ordinary course of such Person’s business), if the leases,
subleases, licenses and sublicenses do not prohibit granting Bank a security
interest therein;

(h)          licenses or sublicenses of Intellectual Property specifically
related to individual GPCR targets (as defined in the Vulcan Agreement) (but not
the GPCR platform as a whole) in connection with the development and
commercialization thereof as contemplated by the Vulcan Agreement;

(i)           non-exclusive licenses for the use of the property of Borrower or
its Subsidiaries and exclusive licenses for the use of the property of Borrower
or its Subsidiaries in the ordinary course of business (including, for the
avoidance of doubt, commercialization, manufacturing, research and development,
marketing, distribution and similar partnerships or strategic arrangements, each
in the ordinary course of business) that could not result in a legal transfer of
title of the licensed property; and

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

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

“Prime Rate” is the rate of interest per annum from time to time published in
the money rates section of The Wall Street Journal or any successor publication
thereto as the “prime rate” then in effect; provided that, in the event such
rate of interest is less than zero, such rate shall be deemed to be zero for
purposes of this Agreement; and provided further that if such rate of interest,
as set forth from time to time in the money rates section of The Wall Street
Journal, becomes unavailable for any reason as determined by Bank, the “Prime
Rate” shall mean the rate of interest per annum announced by Bank as its prime
rate in effect at its principal office in the State of California (such Bank
announced Prime Rate not being intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to debtors); provided
that, in the event such rate of interest is less than zero, such rate shall be
deemed to be zero for purposes of this Agreement.

“Product” means OMIDRIA® (phenylephrine and ketorolac intraocular solution)
1%/0.3%.

“Quarterly Financial Statements” is defined in Section 6.2(c).

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

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

“Reserves” means, as of any date of determination, such amounts as Bank may from
time to time establish and revise in its good faith business judgment, reducing
the amount of Advances and other financial accommodations which would otherwise
be available to Borrower (a) to reflect events, conditions, contingencies or
risks which, as

34

 

determined by Bank in its good faith business judgment, do or would reasonably
be expected to adversely affect (i) the Collateral or any other property which
is security for the Obligations or its value (including without limitation any
increase in delinquencies of Accounts), (ii) the assets, business or prospects
of Borrower or any Guarantor, or (iii) the security interests and other rights
of Bank in the Collateral (including the enforceability, perfection and priority
thereof); or (b) to reflect Bank's reasonable belief that any collateral report
or financial information furnished by or on behalf of Borrower or any Guarantor
to Bank is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Bank determines
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.

“Reserve Event” means, as of the date of determination, confirmation by Bank
that Liquidity is less than Thirty Million Dollars ($30,000,000.00).

“Reserve Amount” is a principal amount of Twenty Million Dollars
($20,000,000.00).

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Accounting Officer and Director of Finance of Borrower.

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

“Revolving Line” is an aggregate principal amount equal to Fifty Million Dollars
($50,000,000.00).

“Revolving Line Maturity Date” is the earlier of (a) thirty (30) days prior to
the scheduled maturity date of any portion of the Permitted Convertible Debt, or
(b) August 2, 2022.

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

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

“Specified Affiliate” is any Person (a) more than ten percent (10.0%) of whose
aggregate issued and outstanding equity or ownership securities or interests,
voting, non-voting or both, are owned or held directly or indirectly,
beneficially or of record, by Borrower, and/or (b) whose equity or ownership
securities or interests representing more than ten percent (10.0%) of such
Person’s total outstanding combined voting power are owned or held directly or
indirectly, beneficially or of record, by Borrower.

“Streamline Period” is, on and after the Effective Date, provided no Event of
Default has occurred and is continuing, the period (a) commencing on the first
(1st) day of the month following the day that Borrower provides to Bank a
written report that Borrower has, at all times in the immediately preceding
calendar month maintained Liquidity, as determined by Bank in its sole
discretion, in an amount of greater than Thirty Million Dollars ($30,000,000.00)
(the “Threshold Amount”); and (b) terminating on the earlier to occur of (i) the
occurrence of an Event of Default, or (ii) the first (1st) day thereafter in
which Borrower fails to maintain the Threshold Amount, as determined by Bank in
its good faith business discretion.  Upon the termination of a Streamline
Period, Borrower must maintain the Threshold Amount each consecutive day for
sixty (60) consecutive days as determined by Bank in its good faith business
discretion, prior to entering into a subsequent Streamline Period.  Borrower
shall give Bank prior written notice of Borrower’s election to enter into any
such Streamline Period, and each such Streamline Period shall commence on the
first (1st) day of the monthly period following the date Bank determines, in its
good faith business discretion, that the Threshold Amount has been achieved.

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

35

 

“Subordination Agreement” means that certain Subordination Agreement by and
between Bank and Vulcan as in effect as of the date thereof, as may be amended,
modified, supplemented, and/or restated from time to time.

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

 “Threshold Amount” is defined in the definition of Streamline Period.

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

“Transfer” is defined in Section 7.1.

“Vulcan” means, collectively, (a) Vulcan Inc., a Washington corporation and (b)
Vulcan Capital Venture Capital II LLC, a Delaware limited liability company.

“Vulcan Agreement” means that certain Platform Development Funding Agreement,
dated as of October 21, 2010, among Borrower and Vulcan, which may not be
amended without Bank’s prior written consent.

[Signature page follows.]

 

 

36

 

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

 

 

 

 

BORROWER:

 

 

 

OMEROS CORPORATION

 

 

 

 

By

/s/ Michael A. Jacobsen

 

Name:

Michael A. Jacobsen

 

Title:

VP, Finance and Chief Accounting Officer

 

 

 

 

 

 

 

 

 

 

BANK:

 

 

 

SILICON VALLEY BANK

 

 

 

 

By

/s/ Shawn Parry

 

Name:

Shawn Parry

 

Title:

Director

 

 

 

Signature Page to Loan and Security Agreement

 

 

EXHIBIT A - COLLATERAL DESCRIPTION

 

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

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

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

Notwithstanding the foregoing, the Collateral does not include (a) any
non-Product related Inventory, (b) any and all license agreements, but only with
respect to license agreements which Borrower is licensee, (c) any property to
the extent that such grant of security interest is prohibited by any Requirement
of Law of a Governmental Authority or constitutes a breach or default under or
results in the termination of or requires any consent not obtained under, any
contract, license, agreement, instrument or other document evidencing or giving
rise to such property, except to the extent that such Requirement of Law or the
term in such contract, license, agreement, instrument or other document
providing for such prohibition, breach, default or termination or requiring such
consent is ineffective under Section 9-406, 9-407, 9-408 or 9-409 of the Code
(or any successor provision or provisions) of any relevant jurisdiction or any
other applicable law (including the Bankruptcy Code) or principles of equity;
provided, however, that such security interest shall attach immediately at such
time as such Requirement of Law is not effective or applicable, or such
prohibition, breach, default or termination is no longer applicable or is
waived, and to the extent severable, shall attach immediately to any portion of
the Collateral that does not result in such consequences, and (d) any
Intellectual Property; provided,  however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property.

 

 

 

EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:           SILICON VALLEY BANK

Date:

 

FROM:     OMEROS CORPORATION

 

 

 

The undersigned authorized officer of OMEROS CORPORATION (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided,  however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided,  further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed
all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of
the Agreement, and (5) no Liens have been levied or claims made against Borrower
or any of its Subsidiaries, if any, relating to unpaid employee payroll or
benefits of which Borrower has not previously provided written notification to
Bank.  Attached are the required documents supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

 

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

 

Reporting Covenants

Required

Complies

 

 

 

Quarterly financial statements

Quarterly within 45 days (Q1-Q3)

Yes   No

Compliance Certificate

When Advance outstanding, Monthly within 30 days

When Advance not outstanding, Quarterly within 30 days

Yes   No

Annual financial statements (CPA Audited)

FYE within 90 days

Yes   No

10-Q, 10-K and 8-K

Within 5 days after filing with

SEC

Yes   No

A/R, A/P Agings & sell-through reports

When Advance outstanding, Monthly within 30 days

When Advance not outstanding, quarterly within 30 days

Yes   No

Borrowing Base Reports

When Advance requested and at all times when

Advance outstanding and streamline period is in effect,

monthly within 7 days; when not in Streamline and when no

Advances outstanding, quarterly within 45 days

Yes   No

Board approved projections

FYE within 90 days and as amended/updated

Yes   No

 

 

Streamline Period

Required

Actual

Eligible

Maintain:

 

 

 

Liquidity

  >$30,000,000.00

$_______________

Yes   No

 

 

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

 

 

 

OMEROS CORPORATION

    

BANK USE ONLY

 

 

 

 

By:

 

 

Received by:                                                                  

Name:

 

 

AUTHORIZED SIGNER

Title:

 

 

Date:                                                                              

 

 

 

 

 

 

 

Verified:                                                                        

 

 

 

AUTHORIZED SIGNER

 

 

 

Date:                                                                              

 

 

 

Compliance Status:    Yes        No