Exhibit 10.59
 

LOAN AND SECURITY AGREEMENT

 
THIS LOAN AND SECURITY AGREEMENT, dated as of October 14, 2008 (as amended,
restated, supplemented or otherwise modified from time to time, this
“Agreement”) is among GENERAL ELECTRIC CAPITAL CORPORATION (“GECC”), in its
capacity as agent for Lenders (as defined below) (together with its successors
and assigns in such capacity, “Agent”), the financial institutions who are or
hereafter become parties to this Agreement as lenders (together with GECC,
collectively the “Lenders”, and each individually, a “Lender”), CYTORI
THERAPEUTICS, INC., a Delaware corporation (“Borrower”), and the other entities
or persons, if any, who are or hereafter become parties to this Agreement as
guarantors (each a “Guarantor” and collectively, the “Guarantors”, and together
with Borrower, each a “Loan Party” and collectively, “Loan Parties”).
 
RECITALS
 
Borrower wishes to borrow funds from time to time from Lenders, and Lenders
desire to make loans, advances and other extensions of credit, severally and not
jointly, to Borrower from time to time pursuant to the terms and conditions of
this Agreement.

AGREEMENT
 
Loan Parties, Agent and Lenders agree as follows:

1.  
DEFINITIONS.

 
As used in this Agreement, all capitalized terms shall have the definitions as
provided herein.  Any accounting term used but not defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States of America, as in effect from time to time (“GAAP”) and all
calculations shall be made in accordance with GAAP.  The term “financial
statements” shall include the accompanying notes and schedules.  All other terms
used but not defined herein shall have the meaning given to such terms in the
Uniform Commercial Code as adopted in the State of New York, as amended and
supplemented from time to time (the “UCC”).
 
2.  
LOANS AND TERMS OF PAYMENT.

 
2.1. Promise to Pay.  Borrower promises to pay Agent, for the ratable accounts
of Lenders, when due pursuant to the terms hereof, the aggregate unpaid
principal amount of all loans, advances and other extensions of credit made
severally by the Lenders to Borrower under this Agreement, together with
interest on the unpaid principal amount of such loans, advances and other
extensions of credit at the interest rates set forth herein.
 
2.2. Term Loans.
 
(a) Commitment.  Subject to the terms and conditions hereof, each Lender,
severally, but not jointly, agrees to make term loans (each a “Term Loan” and
collectively, the “Term Loans”) to Borrower from time to time on any Business
Day (as defined below) during the period from the Closing Date (as defined
below) until December 12, 2008 (the “Commitment Termination Date”) in an
aggregate principal amount not to exceed such Lender’s commitment as identified
on Schedule A hereto (such commitment of each Lender as it may be amended to
 
 
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reflect assignments made in accordance with this Agreement or terminated or
reduced in accordance with this Agreement, its “Commitment”, and the aggregate
of all such commitments, the “Commitments”).  Notwithstanding the foregoing, the
aggregate principal amount of the Term Loans made hereunder shall not exceed
$15,000,000 (the “Total Commitment”).  Each Lender’s obligation to fund a Term
Loan shall be limited to such Lender’s Pro Rata Share (as defined below) of such
Term Loan.  Subject to the terms and conditions hereof, the initial Term Loan
shall be made on the Closing Date in an aggregate principal amount equal to
$7,500,000 (the “Initial Term Loan”).   After the Initial Term Loan, Borrower
may request one (1) additional Term Loan, and such subsequent Term Loan (the
“Subsequent Term Loan”) must be in an amount equal to $7,500,000.  
 
(b) Method of Borrowing.  When Borrower desires a Term Loan, Borrower will
notify Agent (which notice shall be irrevocable) by facsimile (or by telephone,
provided that such telephonic notice shall be promptly confirmed in writing, but
in any event on or before the following Business Day) on the date that is ten
(10) Business Days prior to the day the Term Loan (other than the Initial Term
Loan) is to be made (or such shorter period of time as Agent may agree). Agent
and Lenders may act without liability upon the basis of such written or
telephonic notice believed by Agent to be from any authorized officer of
Borrower.  Agent and Lenders shall have no duty to verify the authenticity of
the signature appearing on any such written notice.
 
(c) Funding of Term Loans.  Promptly after receiving a request for a Term Loan,
Agent shall notify each Lender of the contents of such request and such Lender’s
Pro Rata Share of the requested Term Loan.  Upon the terms and subject to the
conditions set forth herein, each Lender, severally and not jointly, shall make
available to Agent its Pro Rata Share of the requested Term Loan, in lawful
money of the United States of America in immediately available funds, to the
Collection Account (as defined below) prior to 11:00 a.m. (New York time) on the
specified date.  Agent shall, unless it shall have determined that one of the
conditions set forth in Section 4.1 or 4.2, as applicable, has not been
satisfied, by 4:00 p.m. (New York time) on such day, credit the amounts received
by it in like funds to Borrower by wire transfer to, unless otherwise specified
in a Disbursement Letter (as defined below), the following deposit account of
Borrower (or such other deposit account as specified in writing by an authorized
officer of Borrower and acceptable to Agent) (the “Designated Deposit Account”):
 
Bank Name:  U.S. Bank N.A.
Bank Address:  XXXXXXX
ABA#:  XXXXXXX
Account #:  XXXXXXX
Account Name:  Cytori
Ref:  XXXXXXX
 
(d) Notes.  If requested by a Lender, the Term Loans of such Lender shall be
evidenced by a promissory note substantially in the form of Exhibit A hereto
(each a “Note” and, collectively, the “Notes”), and Borrower shall execute and
deliver a Note to such Lender.  Each Note shall represent the obligation of
Borrower to pay to such Lender the lesser of (a) the aggregate unpaid principal
amount of all Term Loans made by such Lender to or on behalf of Borrower under
this Agreement or (b) the amount of such Lender’s Commitment, in each case
together with interest thereon as prescribed in Section 2.3(a).
 
(e) Agent May Assume Funding.  Unless Agent shall have received notice from a
Lender prior to the date of any particular Term Loan that such Lender will not
make available to
 
 
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Agent such Lender’s Pro Rata Share of such Term Loan, Agent may assume that such
Lender has made such amount available to it on the date of such Term Loan in
accordance with subsection (c) of this Section 2.2, and may (but shall not be
obligated to), in reliance upon such assumption, make available a corresponding
amount for the account of Borrower on such date.  If and to the extent that such
Lender shall not have so made such amount available to Agent, such Lender and
Borrower severally agree to repay to Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the day
such amount is made available to Borrower until the day such amount is repaid to
Agent, at (i) in the case of Borrower, a rate per annum equal to the interest
rate applicable thereto pursuant to Section 2.3(a), and (ii) in the case of such
Lender, a floating rate per annum equal to, for each day from the day such
amount is made available to Borrower until such amount is reimbursed to Agent,
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent in its sole
discretion (the “Federal Funds Rate”) for the first Business Day and thereafter,
at the interest rate applicable to such Term Loan.  If such Lender shall repay
such corresponding amount to Agent, the amount so repaid shall constitute such
Lender’s loan included in such Term Loan for purposes of this Agreement.
 
2.3. Interest and Repayment.
 
(a) Interest.  Each Term Loan shall accrue interest in arrears from the date
made until such Term Loan is fully repaid at a fixed per annum rate of interest
equal to 10.58%.  All computations of interest and fees calculated on a per
annum basis shall be made by Agent on the basis of a 360-day year, in each case
for the actual number of days occurring in the period for which such interest
and fees are payable.  Each determination of an interest rate or the amount of a
fee hereunder shall be made by Agent and shall be conclusive, binding and final
for all purposes, absent manifest error.  As used herein, the term “Treasury
Rate” means a per annum rate of interest equal to the rate published by the
Board of Governors of the Federal Reserve System in Federal Reserve Statistical
Release H.15 entitled “Selected Interest Rates” under the heading “U.S.
Government Securities/Treasury Constant Maturities” as the three year treasuries
constant maturities rate.  In the event Release H.15 is no longer published,
Agent shall select a comparable publication to determine the U.S. Treasury note
yield to maturity.
 
(b) Payments of Principal and Interest.  For the Initial Term Loan, Borrower
shall pay to the Agent, for the ratable benefit of the Lenders, (i) one payment
of interest only (payable in arrears) for the period from the Closing Date to
and including October 31, 2008 at the rate of interest determined in accordance
with Section 2.3(a), to be paid on November 1, 2008, (ii) three (3) consecutive
payments of interest only (payable in arrears) at the rate of interest
determined in accordance with Section 2.3(a) on the first day of each calendar
month (a “Scheduled Payment Date”) commencing on December 1, 2008 and (iii)
thirty-three (33) equal consecutive payments of principal and interest (payable
in arrears) at the rate of interest determined in accordance with Section 2.3(a)
on each Scheduled Payment Date commencing on March 1, 2009.  For the Subsequent
Term Loan, Borrower shall pay to the Agent, for the ratable benefit of the
Lenders, (i) one payment of interest only (payable in arrears) for the period
from date of funding such Subsequent Term Loan to and including the last day of
the month in which the Subsequent Term Loan was made at the rate of interest
determined in accordance with Section 2.3(a), to be paid on the first day of the
calendar month occurring after the month in which the Subsequent Term Loan was
made, and (ii) thirty-six (36) equal consecutive payments of principal and
interest (payable in arrears) at the rate of interest determined in accordance
with Section 2.3(a) on each Scheduled Payment Date commencing on the first day
of the second calendar month occurring after the month during which the
Subsequent Term Loan was made.  The amount of each such payment of principal and
interest with respect to each of the Initial Term Loan and the Subsequent Term
 
 
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Loan shall be calculated by the Agent and shall be sufficient to fully amortize
the principal and interest due with respect to the applicable Term Loan over
such repayment period.  Each scheduled payment of interest only or interest and
principal hereunder is referred to herein as a “Scheduled
Payment.”  Notwithstanding the foregoing, all unpaid principal and accrued
interest with respect to a Term Loan is due and payable in full to Agent, for
the ratable benefit of Lenders, on the earlier of (A) the first day of the
thirty-seventh month following the date such Term Loan was made or (B) the date
that such Term Loan otherwise becomes due and payable hereunder, whether by
acceleration of the Obligations (as defined below) pursuant to Section 8.2 or
otherwise (the earlier of (A) or (B), the “Applicable Term Loan Maturity Date”).
Each Scheduled Payment, when paid, shall be applied first to the payment of
accrued and unpaid interest on the applicable Term Loan and then to unpaid
principal balance of such Term Loan.  Without limiting the foregoing, all
Obligations shall be due and payable on the Applicable Term Loan Maturity Date
for the last Term Loan made.
 
(c) No Reborrowing.  Once a Term Loan is repaid or prepaid, it cannot be
reborrowed.
 
(d) Payments.  All payments (including prepayments) to be made by any Loan Party
under any Debt Document shall be made in immediately available funds in U.S.
dollars, without setoff or counterclaim to the Collection Account (as defined
below) before 11:00 a.m. (New York time) on the date when due.  All payments
received by Agent after 11:00 a.m. (New York time) on any Business Day or at any
time on a day that is not a Business Day shall be deemed to be received on the
next Business Day.  Whenever any payment required under this Agreement would
otherwise be due on a date that is not a Business Day, such payment shall
instead be due on the next Business Day, and additional fees or interest, as the
case may be, shall accrue and be payable for the period of such extension.  The
payment of any Scheduled Payment prior to its due date shall be deemed to have
been received on such due date for purposes of calculating interest
hereunder.  All Scheduled Payments due to Agent and Lenders under Section 2.3(b)
shall be effected by automatic debit of the appropriate funds from Borrower’s
operating account specified on the EPS Setup Form (as defined below). As used
herein, the term “Collection Account” means the following account of Agent (or
such other account as Agent shall identify to Borrower in writing):
 
Bank Name: Deutsche Bank
Bank Address: XXXXXXX
ABA Number: XXXXXXX
Account Number: XXXXXXX
Account Name: GECC HH Cash Flow Collections
Ref: XXXXXXX
 
(e) Withholdings and Increased Costs.  All payments shall be made free and clear
of any taxes, withholdings, duties, impositions or other charges (other than
taxes on the overall net income of any Lender and comparable taxes), such that
Agent and Lenders will receive the entire amount of any Obligations, regardless
of source of payment.  If Agent or any Lender shall have reasonably determined
that the introduction of or any change in, after the date hereof, any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order reduces the rate of return on Agent or such Lender’s capital as a
consequence of its obligations hereunder or increases the cost to Agent or such
Lender of agreeing to make or making, funding or maintaining any Term Loan, then
Borrower shall from time to time upon demand by Agent or such Lender (with a
copy of such demand to Agent) promptly pay to Agent for its own account or for
the account of such Lender, as the case may be, additional amounts sufficient to
compensate Agent or such Lender for such reduction or for such increased
cost.  A certificate as to the amount of such
 
 
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reduction or such increased cost submitted by Agent or such Lender (with a copy
to Agent) to Borrower shall be conclusive and binding on Borrower, absent
manifest error, provided that, neither Agent nor any Lender shall be entitled to
payment of any amounts under this Section 2.3(e) unless it has delivered such
certificate to Borrower within 180 days after the occurrence of the changes or
events giving rise to the increased costs to, or reduction in the amounts
received by, Agent or such Lender.  This provision shall survive the termination
of this Agreement. Any Lender claiming any additional amounts payable pursuant
to this Section 2.3(e) shall use its reasonable efforts (consistent with its
internal policies and requirements of law) to change the jurisdiction of its
lending office if such a change would reduce any such additional amounts (or any
similar amount that may thereafter accrue) and would not, in the sole
determination of such Lender, be otherwise disadvantageous to such Lender. Each
Lender organized under the laws of a jurisdiction outside the United States as
to which payments to be made under this Agreement or under the Notes are exempt
from United States withholding tax under an applicable statute or tax treaty
shall provide to Borrower and Agent a properly completed and executed IRS Form W
8ECI or Form W 8BEN or other applicable form, certificate or document prescribed
by the IRS or the United States.
 
(f) Loan Records.  Each Lender shall maintain in accordance with its usual
practice accounts evidencing the Obligations of Borrower to such Lender
resulting from such Lender’s Pro Rata Share of each Term Loan, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.  Agent shall maintain in accordance with its usual
practice a loan account on its books to record the Term Loans and any other
extensions of credit made by Lenders hereunder, and all payments thereon made by
Borrower.  The entries made in such accounts shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
Obligations recorded therein absent manifest error; provided, however, that no
error in such account and no failure of any Lender or Agent to maintain any such
account shall affect the obligations of Borrower to repay the Obligations in
accordance with their terms.
 
(g) Payment of Expenses.  Agent is authorized to, and at its sole election may,
debit funds from Borrower’s operating account specified on the EPS Setup Form
(as defined below) to pay all fees, expenses, costs and interest owing by
Borrower under this Agreement or any of the other Debt Documents if and to the
extent Borrower fails to pay any such amounts within three (3) Business Days of
the date when due.
 
2.4. Prepayments.  Borrower can voluntarily prepay, upon five (5) Business Days’
prior written notice to Agent, any Term Loan in full, but not in part.  Upon the
date of (a) any voluntary prepayment of a Term Loan in accordance with the
immediately preceding sentence or (b) any mandatory prepayment of a Term Loan
required under this Agreement (whether by acceleration of the Obligations
pursuant to Section 8.2 or otherwise, except to the extent that the sole basis
for such acceleration is the occurrence of an Event of Default under Section
8.1(h)), Borrower shall pay to Agent, for the ratable benefit of the Lenders, a
sum equal to (i) all outstanding principal plus accrued interest with respect to
such Term Loan, (ii) the Final Payment Fee (as such term is defined in Section
2.7(d)) for such Term Loan, and (iii) a prepayment premium (as yield maintenance
for the loss of a bargain and not as a penalty) equal to: (i) 4% of such
prepayment amount, if such prepayment is made on or before the one year
anniversary of such Term Loan, (ii) 3% of such prepayment amount, if such
prepayment is made after the one year anniversary of such Term Loan but on or
before the two year anniversary of such Term Loan, and (iii) 2% of such
prepayment amount, if such prepayment is made after the two year anniversary of
such Term Loan but before the first day of the thirty-seventh month following
the date such Term Loan was made.
 
 
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2.5. Late Fees.  If Agent does not receive any Scheduled Payment or other
payment under any Debt Document from any Loan Party within 5 days after its due
date, then, at Agent’s election or upon the request of the Requisite Lenders (as
defined below), such Loan Party agrees to pay to Agent for the ratable benefit
of all Lenders, a late fee equal to (a) 5% of the amount of such unpaid payment
or (b) such lesser amount that, if paid, would not cause the interest and fees
paid by such Loan Party under this Agreement to exceed the Maximum Lawful Rate
(as defined below) (the “Late Fee”).
 
2.6. Default Rate.  All Term Loans and other Obligations shall bear interest, at
the option of Agent or upon the request of the Requisite Lenders, from and after
the occurrence and during the continuation of an Event of Default (as defined
below), at a rate equal to the lesser of (a) 5% above the rate of interest
applicable to such Obligations as set forth in Section 2.3(a) immediately prior
to the occurrence of the Event of Default and (b) the Maximum Lawful Rate (the
“Default Rate”).  The application of the Default Rate shall not be interpreted
or deemed to extend any cure period or waive any Default or Event of Default or
otherwise limit the Agent’s or any Lender’s right or remedies hereunder.  All
interest payable at the Default Rate shall be payable on demand.
 
2.7. Lender Fees.
 
(a) Agency Fee.  On the Closing Date, Borrower shall pay to Agent, for its own
account, a non-refundable agency fee in an amount equal to $175,000, which fee
shall be fully earned when paid.
 
(b) Closing Fee.  On the Closing Date, Borrower shall pay to Agent, for the
benefit of Lenders in accordance with their Pro Rata Shares, a non-refundable
closing fee in an amount equal to $300,000, which fee shall be fully earned when
paid.
 
(c) Unused Line Fee. On the Commitment Termination Date, Borrower shall pay to
Agent, for the benefit of Lenders in accordance with their Pro Rata Shares, a
non-refundable unused line fee equal to 1.0% of the undrawn amount of the Total
Commitment as of such date, which fee shall be fully earned on the Commitment
Termination Date, regardless of whether the Subsequent Term Loan is advanced.
 
(d) Final Payment Fee. On the date upon which the outstanding principal amount
of any Term Loan is repaid in full, or if earlier, is required to be repaid in
full (whether by scheduled payment, voluntary prepayment, acceleration of the
Obligations pursuant to Section 8.2 or otherwise), Borrower shall pay to Agent,
for the ratable accounts of Lenders, a fee equal to 5.0% of the original
principal amount of such Term Loan (the “Final Payment Fee”), which Final
Payment Fee shall be deemed to be fully-earned on the Closing Date.
 
2.8. Maximum Lawful Rate. Anything herein, any Note or any other Debt Document
(as defined below) to the contrary notwithstanding, the obligations of Loan
Parties hereunder and thereunder shall be subject to the limitation that
payments of interest shall not be required, for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by Agent and Lenders would be contrary to the
provisions of any law applicable to Agent and  Lenders limiting the highest rate
of interest which may be lawfully contracted for, charged or received by  Agent
and Lenders, and in such event Loan Parties shall pay Agent and Lenders interest
at the highest rate permitted by applicable law (“Maximum Lawful Rate”);
provided, however, that if at any time thereafter the rate of interest payable
hereunder or thereunder is less than the Maximum Lawful Rate, Loan Parties shall
continue to pay interest hereunder at the Maximum Lawful Rate until such time as
the total interest received by Agent and Lenders is equal to the total interest
that would have been received had the interest payable hereunder been (but for
the operation of this paragraph) the interest rate payable
 
 
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since the making of the Initial Term Loan as otherwise provided in this
Agreement, any Note or any other Debt Document.
 
2.9. Authorization and Issuance of the Warrants.  Borrower has duly authorized
the issuance to Lenders (or their respective affiliates or designees) of stock
purchase warrants substantially in the form of the warrant attached hereto as
Exhibit F (collectively, the “Warrants”) evidencing Lenders’ (or their
respective affiliates or designees) right to acquire their respective Pro Rata
Share of up to 178,148 shares of common stock of Borrower at an exercise price
of $4.21 per share.  Subject to the terms and conditions of the Warrants, the
exercise period shall expire ten (10) years from the date such Warrants are
issued.
 
3.  
CREATION OF SECURITY INTEREST.

 
3.1. Grant of Security Interest.  As security for the prompt payment and
performance, whether at the stated maturity, by acceleration or otherwise, of
all Term Loans and other debt, obligations and liabilities of any kind
whatsoever of Borrower to Agent and Lenders under the Debt Documents whether for
principal, interest, fees, expenses, prepayment premiums, indemnities,
reimbursements or other sums, and whether or not such amounts accrue after the
filing of any petition in bankruptcy or after the commencement of any
insolvency, reorganization or similar proceeding, and whether or not allowed in
such case or proceeding), absolute or contingent, now existing or arising in the
future, including but not limited to the payment and performance of any
outstanding Notes, and any renewals, extensions and modifications of such Term
Loans (such indebtedness under the Notes, Term Loans and other debt, obligations
and liabilities in connection with the Debt Documents are collectively called
the “Obligations”), and as security for the prompt payment and performance by
each Guarantor of the Guaranteed Obligations as defined in the Guaranty (as
defined below), each Loan Party does hereby grant to Agent, for the benefit of
Agent and Lenders, a security interest in the property listed below (all
hereinafter collectively called the “Collateral”):
 
All of such Loan Party’s personal property of every kind and nature whether now
owned or hereafter acquired by, or arising in favor of, such Loan Party, and
regardless of where located, including, without limitation, all accounts,
chattel paper (whether tangible or electronic), commercial tort claims, deposit
accounts, documents, equipment, financial assets, fixtures, goods, instruments,
investment property (including, without limitation, all securities accounts),
inventory, letter-of-credit rights, letters of credit, securities, supporting
obligations, cash, cash equivalents, any other contract rights (including,
without limitation, rights under any license agreements), or rights to the
payment of money, and general intangibles (including Intellectual Property, as
defined in Section 3.3 below), and all books and records of such Loan Party
relating thereto, and in and against all additions, attachments, accessories and
accessions to such property, all substitutions, replacements or exchanges
therefor, all proceeds, insurance claims, products, profits and other rights to
payments not otherwise included in the foregoing (with each of the foregoing
terms that are defined in the UCC having the meaning set forth in the UCC).
 
Notwithstanding the provisions of this Section 3.1 or Section 3.3 below, the
grant of security interest herein shall not extend to and the term “Collateral”
shall not include: (i) to the extent that Borrower would incur adverse tax
consequences resulting from a pledge of 100% of the shares of the outstanding
capital stock of any Subsidiary of Borrower that is incorporated or organized in
a jurisdiction other than the United States or any state or territory thereof
(each, a “Foreign Subsidiary”), more than 65% of the issued and outstanding
voting capital stock of such Foreign Subsidiary or Foreign Subsidiaries, as
applicable (but the Collateral shall still include 100% of the shares of the
outstanding non-voting capital stock of such Foreign Subsidiary or Foreign
Subsidiaries, as applicable), (ii) any license or contract (in each case to the
extent such license or contract is not prohibited by this Agreement), and the
property
 
 
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subject to such license or contract, to the extent and only to the extent that
(A) the granting of such security interest is prohibited by any applicable
statute, law or regulation, or would constitute a default under the license or
contract, as applicable, and (B) such prohibition or default is enforceable
under applicable law (including without limitation Sections 9-406, 9-407 and
9-408 of the UCC); provided that upon the termination or expiration of any such
prohibition, such license, contract and/or property, as applicable, shall
automatically be subject to the security interest granted in favor of the Agent
hereunder and become part of the “Collateral” or (iii) Borrower’s stock in
Olympus-Cytori, Inc., a Delaware corporation (such entity, “Olympus-Cytori” and
such stock, the “Olympus-Cytori Stock”); provided that upon the termination or
expiration of all provisions in the Olympus Agreements (as defined below)
prohibiting the granting of a Lien in the Olympus-Cytori Stock, the
Olympus-Cytori Stock shall automatically be subject to the security interest
granted in favor of the Agent hereunder and become part of the “Collateral.”
 
Each Loan Party hereby represents and covenants that such security interest
constitutes a valid, first priority security interest (subject only to Permitted
Liens) in the presently existing Collateral, and will constitute a valid, first
priority security interest (subject only to Permitted Liens) in Collateral
acquired after the date hereof.  Each Loan Party hereby covenants that it shall
give written notice to Agent promptly upon the acquisition by such Loan Party or
creation in favor of such Loan Party of any commercial tort claim after the
Closing Date.
 
3.2. Financing Statements.  Each Loan Party hereby authorizes Agent to file UCC
financing statements with all appropriate jurisdictions to perfect Agent’s
security interest (for the benefit of itself and the Lenders) granted hereby.
 
3.3. Grant of Intellectual Property Security Interest.  The Collateral shall
include all intellectual property of each Loan Party, which shall be defined as
any and all copyright, trademark, servicemark, patent, design right, software,
license, trade secret and intangible rights of a Loan Party and any
applications, registrations, claims, products, awards, judgments, amendments,
renewals, extensions, improvements and insurance claims related thereto
(collectively, “Intellectual Property”) now or hereafter owned or licensed by a
Loan Party, together with all accessions and additions thereto, proceeds and
products thereof (including, without limitation, any proceeds resulting under
insurance policies).  In order to perfect or protect Agent’s security interest
and other rights in Loan Party’s Intellectual Property, each Loan Party hereby
authorizes Agent to file one or more intellectual property security agreements,
substantially in the form executed and delivered to Agent on the Closing Date
(each an “Intellectual Property Security Agreement” and collectively, the
“Intellectual Property Security Agreements”) with the United States Patent and
Trademark Office and/or United States Copyright Office, as each are applicable
and required by Agent.
 
3.4. Termination of Security Interest.  Upon the date on which all of the
Obligations (other than contingent indemnity obligations that survive the
termination of this Agreement and for which no claim has been asserted) are
indefeasibly repaid in full in cash, all of the Commitments hereunder are
terminated, and this Agreement shall have been terminated (the “Termination
Date”), and upon receipt of a payoff letter or termination agreement executed by
the Loan Parties in form and substance acceptable to Agent, Agent shall, at Loan
Parties’ sole cost and expense and without any recourse, representation or
warranty, release its Liens in the Collateral.
 
4.  
CONDITIONS OF CREDIT EXTENSIONS

 
4.1. Conditions Precedent to Initial Term Loan.  No Lender shall be obligated to
make the Initial Term Loan, or to take, fulfill, or perform any other action
hereunder, until the following have been delivered to the Agent and each Lender
(the date on which the Lenders make the Initial Term Loan after
 
 
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all such conditions shall have been satisfied in a manner satisfactory to Agent
or waived in accordance with this Agreement, the “Closing Date”):
 
(a) a counterpart of this Agreement duly executed by each Loan Party;
 
(b) a certificate executed by the Secretary of each Loan Party, the form of
which is attached hereto as Exhibit B (the “Secretary’s Certificate”), providing
verification of incumbency and attaching (i) such Loan Party’s board resolutions
approving the transactions contemplated by this Agreement and the other Debt
Documents and (ii) such Loan Party’s governing documents;
 
(c) Notes duly executed by Borrower in favor of each applicable Lender (if
requested by such Lender);
 
(d) filed copies of UCC financing statements, collateral assignments, and
terminations statements, with respect to the Collateral, as Agent shall request;
 
(e) certificates of insurance evidencing the insurance coverage, and
satisfactory additional insured and lender loss payable endorsements, in each
case as required pursuant to Section 6.4 herein;
 
(f) current UCC lien, judgment, bankruptcy and tax lien search results
demonstrating that there are no other security interests or other Liens on the
Collateral, other than Permitted Liens (as defined below);
 
(g) a Warrant in favor of each Lender (or its affiliate or designee);
 
(h) the Intellectual Property Security Agreement required by Section 3.3 above,
duly executed by each Loan Party;
 
(i) a certificate of good standing of each Loan Party from the jurisdiction of
such Loan Party’s organization and a certificate of foreign qualification from
each jurisdiction where such Loan Party’s failure to be so qualified could
reasonably be expected to have a Material Adverse Effect (as defined below), in
each case as of a recent date acceptable to Agent;
 
(j) a landlord consent and/or bailee letter in favor of Agent executed by the
landlord or bailee, as applicable, for any third party location (other than a
Permitted Location as defined below) where (a) any Loan Party’s principal place
of business is located, (b) any Loan Party’s books or records are located or (c)
Collateral with an aggregate value in excess of $50,000 is located (each of the
locations described in the immediately preceding clauses (a), (b) and (c), a
“Collateral Location”), a form of which is attached hereto as Exhibit C-1 and
Exhibit C-2, as applicable (each an “Access Agreement”);
 
(k) a legal opinion of Loan Parties’ counsel, in form and substance satisfactory
to Agent;
 
(l) a completed EPS set-up form, a form of which is attached hereto as Exhibit E
(the “EPS Setup Form”);
 
(m) a completed perfection certificate, duly executed by each Loan Party (the
“Perfection Certificate”), a form of which Agent previously delivered to
Borrower;
 
 
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(n) one or more Account Control Agreements (as defined below), in form and
substance reasonably acceptable to Agent, duly executed by the applicable Loan
Parties and the applicable depository or financial institution, for each deposit
and securities account listed on the Perfection Certificate, to the extent
required pursuant to the terms and conditions of Section 7.10;
 
(o) a pledge agreement, in form and substance satisfactory to Agent, executed by
each Loan Party and pledging to Agent, for the benefit of itself and the
Lenders, a security interest in (a) 100% of the shares of the outstanding
capital stock, of any class, of each Subsidiary (as defined below) of each Loan
Party that is not a Foreign Subsidiary, (b) to the extent that Borrower would
incur adverse tax consequences resulting from a pledge of 100% of the shares of
the outstanding capital stock of any Foreign Subsidiary, 65% of the shares of
the outstanding voting capital stock and 100% of the shares of the outstanding
non-voting capital stock of each such Foreign Subsidiary and (c) any and all
Indebtedness (as defined in Section 7.2 below) owing to Loan Parties (the
“Pledge Agreement”);
 
(p) a guaranty agreement (together with any other guaranty that purports to
provide for a guaranty of the Obligation, the “Guaranty”), in form and substance
satisfactory to Agent, executed by each Guarantor;
 
(q) a disbursement instruction letter, in form and substance satisfactory to
Agent, executed by each Loan Party, Agent and each Lender (the “Disbursement
Letter”);
 
(r) Borrower shall have unrestricted balance sheet cash and Cash Equivalents (as
defined below) in one or more deposit accounts or securities accounts over which
Agent has obtained control under Section 7.10 of not less than the product of
(i) negative three (-3) times (ii) the Cash Burn Amount (as defined below) at
such time;
 
(s) evidence of the payment of all loans and other indebtedness, obligations and
liabilities of any kind whatsoever of Borrower to GECC in connection with (i)
those two certain promissory notes in the original principal amounts of $600,000
and $1,380,467.48, respectively, made by Borrower in favor of GECC and (ii) that
certain Master Security Agreement dated as of October 1, 2001 by and between
Borrower and GECC (as amended, restated, supplemented or otherwise modified from
time to time, and together with all schedules attached thereto) (such loans,
indebtedness, obligations and liabilities, collectively, the (“GE Equipment
Indebtedness”);
 
(t) all other documents and instruments as Agent or the Lenders may reasonably
deem necessary or appropriate to effectuate the intent and purpose of this
Agreement (together with the Agreement, Note, Warrants, Intellectual Property
Security Agreements, the Perfection Certificate, the Pledge Agreement, the
Guaranty, if any, the Secretary’s Certificate and the Disbursement Letter, and
all other agreements, instruments, documents and certificates executed and/or
delivered to or in favor of Agent and/or the Lenders from time to time in
connection with this Agreement or the transactions contemplated hereby, the
“Debt Documents”); and
 
(u) Agent and Lenders shall have received the fees required to be paid by
Borrower, if any, in the respective amounts specified in Section 2.7, and
Borrower shall have reimbursed Agent and Lenders for all reasonable fees, costs
and expenses of closing presented as of the date of this Agreement.
 
4.2. Conditions Precedent to All Term Loans.  No Lender shall be obligated to
make any Term Loan, including the Initial Term Loan, unless the following
additional conditions have been satisfied:
 
 
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(a) (i) all representations and warranties in Section 5 below shall be true as
of the date of such Term Loan, except to the extent such representations and
warranties expressly refer to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date; (ii) no Event of Default or any other event, which with the giving of
notice or the passage of time, or both, would constitute an Event of Default
(such event, a “Default”) has occurred and is continuing or will result from the
making of any Term Loan, and (iii) Agent shall have received a certificate from
an authorized officer of each Loan Party confirming each of the foregoing;
 
(b) Agent shall have received the redelivery or supplemental delivery of the
items set forth in the following sections to the extent circumstances have
changed since the Initial Term Loan:  Sections 4.1(b), (e), (f), (g), (i), (j),
(k), (m) and (q);
 
(c) with respect to the Subsequent Term Loan only, Agent shall have received
evidence satisfactory to Agent and the Lenders that Borrower has, at the time of
and after giving effect to such Term Loan, satisfied each of the following
conditions precedent:
 
(i)  (A)  If the Subsequent Term Loan is to be made on or prior to October 31,
2008, the aggregate gross income from the sale of inventory of Borrower and its
consolidated Subsidiaries for the period of 3 consecutive months ending as of
September 30, 2008 shall not be less than $2,300,000; (B) if the Subsequent Term
Loan is to be made after October 31, 2008 but prior to November 30, 2008, the
aggregate gross income from the sale of inventory of Borrower and its
consolidated Subsidiaries for the period of 3 consecutive months ending as of
October 31, 2008 shall not be less than $3,100,000, and (C) if the Subsequent
Term Loan is to be made on or after November 30, 2008 but prior to the
Commitment Termination Date, the aggregate gross income from the sale of
inventory of Borrower and its consolidated Subsidiaries for the period of 3
consecutive months ending as of November 30, 2008 shall not be less than
$4,000,000;
 
(ii)  (A)  If the Subsequent Term Loan is to be made on or prior to October 31,
2008, the aggregate expenses (excluding non-cash expenses relating to the
granting of stock options) and non-financed capital expenditures of Borrower and
its consolidated Subsidiaries for the period of 3 consecutive months ending as
of September 30, 2008 shall not be greater than $9,100,000; (B) if the
Subsequent Term Loan is to be made after October 31, 2008 but prior to November
30, 2008, the aggregate expenses (excluding non-cash expenses relating to the
granting of stock options) and non-financed capital expenditures of Borrower and
its consolidated Subsidiaries for the period of 3 consecutive months ending as
of October 31, 2008 shall not be greater than $8,800,000, and (C) if the
Subsequent Term Loan is to be made on or after November 30, 2008 but prior to
the Commitment Termination Date, the aggregate expenses (excluding non-cash
expenses relating to the granting of stock options) and non-financed capital
expenditures of Borrower and its consolidated Subsidiaries for the period of 3
consecutive months ending as of November 30, 2008 shall not be greater than
$8,600,000;
 
(iii)  Borrower shall have received at least $10,000,000 in unrestricted net
cash proceeds from the sale and issuance of Borrower’s equity securities after
the Closing Date, which equity issuance shall be on terms and conditions not
otherwise prohibited by any provision of this Agreement or the other Debt
Documents;
 
 
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(iv)  The market capitalization of Borrower is not less than $100,000,000 based
on the 10-day trailing average of Borrower’s common stock price, as determined
as of the close of business on the Business Day (as defined below) immediately
prior to the proposed date of the Subsequent Term Loan;
 
(v)  Borrower shall have unrestricted balance sheet cash and Cash Equivalents
(as defined below) in one or more deposit accounts or securities accounts over
which Agent has obtained control under Section 7.10 of not less than the product
of (i) negative six (-6) times (ii) the Cash Burn Amount (as such term is
defined in Section 7.12 below) at such time; and
 
(vi)  Evidence that all obligations set forth in that certain Post-Closing
Obligations Letter dated October 14, 2008 by and between Borrower and Agent have
been satisfied; and
 
(d) Agent and Lenders shall have received such other documents, agreements,
instruments or information as Agent or such Lender shall reasonably request.
 
5.  
REPRESENTATIONS AND WARRANTIES OF LOAN PARTIES.

 
Each Loan Party, jointly and severally, represents, warrants and covenants to
Agent and each Lender that:
 
5.1. Due Organization and Authorization.  Each Loan Party’s exact legal name is
as set forth in the Perfection Certificate (or as disclosed to and consented to
by Agent pursuant to Section 7.4) and each Loan Party is, and will remain, duly
organized, existing and in good standing under the laws of the State of its
organization as specified in the Perfection Certificate, has its chief executive
office at the location specified in the Perfection Certificate, and is, and will
remain, duly qualified and licensed in every jurisdiction wherever necessary to
carry on its business and operations, except where the failure to be so
qualified and licensed could not reasonably be expected to have a Material
Adverse Effect.  This Agreement and the other Debt Documents have been duly
authorized, executed and delivered by each Loan Party and constitute legal,
valid and binding agreements enforceable in accordance with their terms, subject
only to bankruptcy, moratorium, insolvency and other laws of general application
affecting secured creditors and general principles of equity.  The execution,
delivery and performance by each Loan Party of each Debt Document executed or to
be executed by it is in each case within such Loan Party’s powers.
 
5.2. Required Consents.  No filing, registration, qualification with, or
approval, consent or withholding of objections from, any governmental authority
or instrumentality or any other entity or person is required with respect to the
entry into, or performance by any Loan Party of, any of the Debt Documents,
except any already obtained.
 
5.3. No Conflicts.  Except as described in the note to Item 8 in Section D on
Schedule B hereto, the entry into, and performance by each Loan Party of, the
Debt Documents will not (a) violate any of the organizational documents of such
Loan Party, (b) violate any law, rule, regulation, order, award or judgment
applicable to such Loan Party, or (c) result in any breach of or constitute a
default under, or result in the creation of any Lien on any of such Loan Party’s
property (except for Liens in favor of Agent, on behalf of itself and Lenders)
pursuant to, any indenture, mortgage, deed of trust, bank loan, credit
agreement, or other Material Agreement (as defined below) to which such Loan
Party is a party.  As used herein, “Material Agreement” means (i) any agreement
or contract required to be filed by a Loan
 
 
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Party with the Securities and Exchange Commission (“SEC”) pursuant to Item
601(b)(10) of Regulation S-K (other than (x) employment or compensation related
agreements, including agreements relating to stock option grants to employees,
consultants and directors, and (y) agreements that have been filed with the SEC
but that have been assigned or terminated or as to which no Loan Party has any
continuing obligations and is owed no further consideration or performance by
the other parties thereto, in each case, prior to the date of this Agreement)
and (ii) the Olympus Agreements (as defined below).  A list of all Material
Agreements as of the Closing Date is set forth on Schedule B hereto.  As used
herein, the “Olympus Agreements” means each of (1) that certain Joint Venture
Agreement, dated as of November 4, 2005 (the “Joint Venture Agreement”), between
Borrower and Olympus Corporation, a Japanese corporation (“Olympus”), (2) that
certain Shareholders Agreement, dated as of November 4, 2005 (the “Shareholders
Agreement”), between Borrower and Olympus, and (3) all other agreements,
documents and instruments executed or delivered in connection with the Joint
Venture Agreement or the Shareholders Agreement, in each case as the Joint
Venture Agreement, the Shareholders Agreement and such other agreements,
documents and instruments are amended, modified, restated or replaced from time
to time in accordance with the terms and conditions of this Agreement.
 
5.4. Litigation.  Except as disclosed in the Perfection Certificate or as
disclosed to Agent pursuant to Section 6.2(d), there are no actions, suits,
proceedings or investigations pending against or affecting any Loan Party before
any court, federal, state, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any basis thereof, the outcome of which could reasonably be expected
to have a Material Adverse Effect, or which questions the validity of the Debt
Documents, or the other documents required thereby or any action to be taken
pursuant to any of the foregoing, nor have any such actions, suits, proceedings
or investigations been threatened in writing.  As used in this Agreement, the
term “Material Adverse Effect” means a material adverse effect on any of (a) the
operations, business, assets, properties, or condition (financial or otherwise)
of Borrower, individually, or the Loan Parties, collectively, (b) the ability of
a Loan Party to perform any of its obligations under any Debt Document to which
it is a party, (c) the legality, validity or enforceability of any Debt
Document, (d) the rights and remedies of Agent or Lenders under any Debt
Document or (e) the validity, perfection or priority of any Lien in favor of
Agent, on behalf of itself and Lenders, on any of the Collateral.
 
5.5. Financial Statements.  All financial statements delivered to Agent and
Lenders pursuant to Section 6.3 have been prepared in accordance with GAAP
(subject, in the case of unaudited financial statements, to the absence of
footnotes and normal year end audit adjustments), and since the date of the most
recent audited financial statement, no event has occurred which has had or could
reasonably be expected to have a Material Adverse Effect.  There has been no
material adverse deviation from the most recent annual operating plan of
Borrower delivered to Agent and Lenders in accordance with Section 6.3.
 
5.6. Use of Proceeds.  The proceeds of the Term Loans shall be used to repay in
full the GE Equipment Indebtedness and for working capital, capital expenditures
and other general corporate purposes.
 
5.7. Collateral.  Each Loan Party is, and will remain, the sole and lawful
owner, and in possession of, the Collateral, and has the sole right and lawful
authority to grant the security interest described in this Agreement.  The
Collateral is, and will remain, free and clear of all liens, security interests,
claims and encumbrances of any kind whatsoever (each, a “Lien”), except for (a)
Liens in favor of Agent, on behalf of itself and Lenders, to secure the
Obligations, (b) Liens (i) with respect to the payment of taxes, assessments or
other governmental charges or (ii) of suppliers, carriers, materialmen,
warehousemen, workmen or mechanics and other similar Liens, in each case imposed
by law and arising in the ordinary course of business, and securing amounts that
are not yet delinquent (in the case of taxes) or not yet due (with respect to
all cases described in the immediately preceding clauses (i) and (ii) other
 
 
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than taxes) or that in any case are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves or
other appropriate provisions are maintained on the books of the applicable Loan
Party in accordance with GAAP and which do not involve, in the judgment of
Agent, any risk of the sale, forfeiture or loss of any of the Collateral (a
“Permitted Contest”), (c) Liens existing on the date hereof and set forth on
Schedule B hereto, (d) Liens securing Indebtedness (as defined in Section 7.2
below) permitted under Section 7.2(c) below, provided that (i) such Liens exist
prior to the acquisition of, or attach substantially simultaneous with, or
within 20 days after the, acquisition, repair, improvement or construction of,
such property financed by such Indebtedness and (ii) such Liens do not extend to
any property of a Loan Party other than the property (and any attachments,
additions, accessions thereto and proceeds thereof) acquired or built, or the
improvements or repairs, financed by such Indebtedness, (e) licenses described
in Section 7.3(c), (d) and (e) below and the rights and interests of licensors
under licenses where a Loan Party is the licensee (to the extent such licenses
are permitted under this Agreement), (f) zoning restrictions, easements, rights
of way, encroachments or other restrictions on the use of, and other minor
defects or irregularities in title with respect to, any real property of
Borrower or its Subsidiaries so long as the same do not materially impair the
use of such real property by Borrower or such Subsidiary, (g) purported Liens
evidenced by the filing of precautionary UCC financing statements relating
solely to operating leases of personal property entered into in the ordinary
course of business, (h) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods, (i) pledges or cash deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance or other types of social security benefits (other than any Lien
imposed by ERISA) that secure amounts that are not past due, (j) bankers’ Liens
or other set-off rights in favor of other financial institutions arising in
connection with the Loan Parties’ deposit and securities accounts held at such
institutions, to the extent the same are permitted under the Account Control
Agreement with respect to such deposit or securities accounts, (k) Liens arising
from judgments, decrees or attachments that do not constitute an Event of
Default hereunder, (l) Liens of Silicon Valley Bank on a Certificate of Deposit
in an aggregate amount not to exceed $250,000 (the “SVB Certificate of Deposit”)
issued by Silicon Valley Bank to Borrower to secure Borrower’s reimbursement
obligations with respect to (i)  credit card, payroll and foreign exchange
services provided by Silicon Valley Bank to Borrower and (ii) standby letters of
credit issued by Silicon Valley Bank on behalf of Borrower, in each case to the
extent permitted under Section 7.2(g) (such reimbursement obligations
collectively hereinafter referred to as the “SVB Cash Management Obligations”),
and (m) Liens of landlords (i) arising by statute or under any lease or related
contractual obligation entered into in the ordinary course of business, (ii) on
fixtures and movable tangible property located on the real property leased or
subleased from such landlord, (iii) for amounts not yet due or that are being
contested in good faith by appropriate proceedings diligently conducted, (iv)
for which adequate reserves or other appropriate provisions are maintained on
the books of such Loan Party in accordance with GAAP and (v) which Liens are
subordinated to the security interests granted under Section 3.1 pursuant to an
Access Agreement (all of such Liens described in the foregoing clauses (a)
through (m) are called  “Permitted Liens”).
 
5.8. Compliance with Laws.
 
(a) Each Loan Party is and will remain in compliance in all respects with all
laws, statutes, ordinances, rules and regulations applicable to it, except to
the extent that any such non-compliance, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.
 
(b) Without limiting the generality of the immediately preceding clause (a),
each Loan Party further agrees that it is and will remain in compliance in all
material respects with all U.S. economic sanctions laws, Executive Orders and
implementing regulations as promulgated by the U.S. Treasury Department's Office
of Foreign Assets Control (“OFAC”), and all applicable anti-
 
 
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money laundering and counter-terrorism financing provisions of the Bank Secrecy
Act and the USA Patriot Act and all regulations issued pursuant to it.  No Loan
Party nor any of its subsidiaries, affiliates or joint ventures (A) is a person
or entity designated by the U.S. Government on the list of the Specially
Designated Nationals and Blocked Persons (the “SDN List”) with which a U.S.
person or entity cannot deal with or otherwise engage in business transactions,
(B) is a person or entity who is otherwise the target of U.S. economic sanctions
laws such that a U.S. person or entity cannot deal or otherwise engage in
business transactions with such person or entity; or (C) is controlled by
(including without limitation by virtue of such person being a director or
owning voting shares or interests), or acts, directly or indirectly, for or on
behalf of, any person or entity on the SDN List or a foreign government that is
the target of U.S. economic sanctions prohibitions such that the entry into, or
performance under, this Agreement or any other Debt Document would be prohibited
under U.S. law.  The SDN List is maintained by OFAC and is available at:
http://www.ustreas.gov/offices/enforcement/ofac/sdn/.
 
(c) Each Loan Party has met the minimum funding requirements of the United
States Employee Retirement Income Security Act of 1974 (as amended, “ERISA”)
with respect to any employee benefit plans subject to ERISA.  No Loan Party is
an “investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940.  No Loan Party is
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T, U and X of the Board of Governors of the Federal
Reserve System (the “Federal Reserve Board”).
 
5.9. Intellectual Property.  The Intellectual Property is and will remain free
and clear of all Liens, except for Permitted Liens described in clauses (b)(i),
(d) (to the extent consisting of software financed in connection with the
acquisition of related equipment) and (e) of Section 5.7.  No Loan Party has nor
will it enter into any other agreement or financing arrangement in which such
Loan Party has agreed that it will not grant a security interest in such Loan
Party’s Intellectual Property to any other party (other than agreements with
licensors that prohibit such Loan Party from encumbering or assigning the
license from such licensor or the Intellectual Property licensed from such
licensor, but only to the extent that such prohibition is not enforceable under
applicable law, including, without limitation, Sections 9-406, 9-407 and 9-408
of the UCC).  Except as disclosed in the Perfection Certificate and except as
disclosed to the Agent in writing after the Closing Date, as of the Closing Date
and each date a Term Loan is advanced to Borrower, no Loan Party has any
interest in, or title to any Intellectual Property that is (i) a registered
trademark, or a trademark for which an application has been filed, (ii) a
registered copyright, or a copyright for which an application has been filed, or
(iii) a registered patent or a patent application.  Upon filing of the
Intellectual Property Security Agreements with the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, and the
filing of appropriate financing statements, all action necessary or desirable to
protect and perfect Agent’s Lien on each Loan Party’s Intellectual Property that
is registered or for which an application has been filed shall have been duly
taken.  Each Loan Party owns or has rights to use all Intellectual Property
material to the conduct of its business as now conducted by it or proposed to be
conducted by it, without any actual or claimed infringement upon the rights of
third parties.
 
5.10. Solvency.  Both before and after giving effect to each Term Loan, the
transactions contemplated herein, and the payment and accrual of all transaction
costs in connection with the foregoing, each Loan Party is and will be
Solvent.  As used herein, “Solvent” means, with respect to a Loan Party on a
particular date, that on such date (a) the fair value of the property of such
Loan Party (including intangible assets and goodwill) is greater than the total
amount of liabilities, including contingent liabilities, of such Loan Party; (b)
the present fair salable value of the assets of such Loan Party is not less than
the amount that will be required to pay the probable liability of such Loan
Party on
 
 
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its debts as they become absolute and matured; (c) such Loan Party does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Loan Party’s ability to pay as such debts and liabilities mature; (d) such
Loan Party is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Loan Party’s property would
constitute an unreasonably small capital; and (e) such Loan Party is not
“insolvent” within the meaning of Section 101(32) of the United States
Bankruptcy Code (11 U.S.C. § 101, et. seq), as amended from time to time.  The
amount of contingent liabilities (such as litigation, guaranties and pension
plan liabilities) at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at the time, represents the amount that
can be reasonably be expected to become an actual or matured liability.
 
5.11. Taxes; Pension.  All federal (and all material state and local) tax
returns, reports and statements, including information returns, required by any
governmental authority to be filed by each Loan Party and its Subsidiaries have
been filed with the appropriate governmental authority and all federal (and all
material state and local) taxes, levies, assessments and similar charges have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added thereto for nonpayment thereof (or any such fine, penalty,
interest, late charge or loss has been paid), excluding taxes, levies,
assessments and similar charges or other amounts which are the subject of a
Permitted Contest.  Proper and accurate amounts have been withheld by each Loan
Party from its respective employees for all periods in compliance with
applicable laws and such withholdings have been timely paid to the respective
governmental authorities.  Each Loan Party has paid all amounts necessary to
fund all present pension, profit sharing and deferred compensation plans in
accordance with their terms, and no Loan Party has withdrawn from participation
in, or has 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 a Loan Party, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental authority.
 
5.12.  Full Disclosure.  Loan Parties hereby confirm that all of the information
disclosed on the Perfection Certificate is true, correct and complete as of the
date of this Agreement and as of the date of each Term Loan.  No representation,
warranty or other statement made by or on behalf of a Loan Party in any Debt
Document or any document delivered by any Loan Party in connection therewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, it being recognized by
Agent and Lenders that the projections and forecasts provided by Loan Parties in
good faith and based upon reasonable and stated assumptions are not to be viewed
as facts and that actual results during the period or periods covered by any
such projections and forecasts may differ from the projected or forecasted
results.
 
6.  
AFFIRMATIVE COVENANTS.

 
6.1. Good Standing.  Each Loan Party shall maintain its and each of its
Subsidiaries’ existence and good standing in its jurisdiction of organization
and maintain qualification in each jurisdiction in which the failure to so
qualify could reasonably be expected to have a Material Adverse Effect.  Each
Loan Party shall maintain, and shall cause each of its Subsidiaries to maintain,
in full force all licenses, approvals and agreements, the loss of which could
reasonably be expected to have a Material Adverse Effect.  “Subsidiary” means,
with respect to a Loan Party, any entity the management of which is, directly or
indirectly controlled by, or of which an aggregate of more than 50% of the
outstanding voting capital stock (or other voting equity interest) is, at the
time, owned or controlled, directly or indirectly by, such Loan Party or one or
more Subsidiaries of such Loan Party, and, unless the contest otherwise requires
each reference to a Subsidiary herein shall be a reference to a Subsidiary of
Borrower.  For avoidance of doubt, Olympus-Cytori shall not be deemed to be a
Subsidiary of Borrower for so long as Borrower does
 
 
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not own or control, directly or indirectly, more than 50% of the outstanding
voting capital stock of Olympus-Cytori.
 
6.2. Notice to Agent and Lenders.  Loan Parties shall provide Agent and Lenders
with (a) notice of any change in the accuracy of the Perfection Certificate or
any of the representations and warranties provided in Section 5 above,
immediately upon the occurrence of any such change, (b) notice of the occurrence
of any Default or Event of Default, promptly (but in any event within 3 Business
Days) after the date on which any executive officer of a Loan Party obtains
knowledge of the occurrence of any such event, (c) copies of all statements,
reports and notices made available generally by Borrower to its security holders
and notice of all filings on forms 10K, 10Q and 8K filed with the SEC or any
securities exchange or governmental authority exercising a similar function,
promptly, but in any event within 5 Business Days of delivering or receiving
such information to or from such persons, (d) a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could reasonably
be expected to result in damages or costs to Borrower or any Subsidiary of
$250,000 or more promptly, but in any event within 5 Business Days, upon receipt
of notice thereof, (e) notice of any new applications or registrations that any
Loan Party has made or filed in respect of any Intellectual Property or any
material adverse change in status of any outstanding application or registration
within 20 Business Days of such receipt of confirmation of the filing of such
application or filing or receipt of notice of such change in status, and (f)
notices of all material statements, reports and notices delivered to or by a
Loan Party in connection with any Material Agreement promptly (but in any event
within 5 Business Days) upon receipt thereof, and copies of the same upon
Agent’s request.
 
6.3. Financial Statements.  If Borrower is a private company, it shall deliver
to Agent and Lenders (a) unaudited consolidated and, if available, consolidating
balance sheets, statements of operations and cash flow statements within 30 days
of each month end, in a form acceptable to Agent and Lenders and certified by
Borrower’s president, chief executive officer or chief financial officer, and
(b) its complete annual audited consolidated and, if available, consolidating
financial statements prepared under GAAP and certified by an independent
certified public accountant selected by Borrower and satisfactory to Agent and
Lenders within 120 days of the fiscal year end or, if sooner, at such time as
Borrower’s Board of Directors receives the certified audit.  If Borrower is a
publicly held company, it shall deliver to Agent and Lenders quarterly unaudited
consolidated and, if available, consolidating balance sheets, statements of
operations and cash flow statements and annual audited consolidated and, if
available, consolidating balance sheets, statements of operations and cash flow
statements, certified by a recognized firm of certified public accountants,
within 5 days after the statements are required to be provided to the SEC, and
if Agent requests, Borrower shall deliver to Agent and Lenders monthly unaudited
consolidated and, if available, consolidating balance sheets, statements of
operations and cash flow statements within 30 days after the end of each
month.  All such statements are to be prepared using GAAP (subject, in the case
of unaudited financial statements, to the absence of footnotes and normal year
end audit adjustments) and, if Borrower is a publicly held company, are to be in
compliance with applicable SEC requirements.  All financial statements delivered
pursuant to this Section 6.3 shall be accompanied by a compliance certificate,
signed by the chief financial officer of Borrower, in the form attached hereto
as Exhibit D, and a management discussion and analysis that includes a
comparison to budget for the respective fiscal period and a comparison of
performance for such fiscal period to the corresponding period in the prior
year.  Borrower shall deliver to Agent and Lenders (i) as soon as available and
in any event not later than 45 days after the end of each fiscal year of
Borrower, an annual operating plan for Borrower, on a consolidated and, if
available, consolidating basis, approved by the Board of Directors of Borrower,
for the current fiscal year, in form and substance approved by the Board of
Directors of Borrower and (ii) such budgets, sales projections, or other
financial information as Agent or any Lender may reasonably request from time to
time generally prepared by Borrower in the ordinary course of business.
 
 
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6.4. Insurance. Borrower, at its expense, shall maintain, and shall cause each
Subsidiary to maintain, insurance (including, without limitation, comprehensive
general liability, hazard, and business interruption insurance) with respect to
all of its properties and businesses (including, the Collateral), in such
amounts and covering such risks as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event with deductible amounts, insurers and policies that shall be
reasonably acceptable to Agent.  Borrower shall deliver to Agent certificates of
insurance evidencing such coverage, together with endorsements to such policies
naming Agent as a lender loss payee or additional insured, as appropriate, in
form and substance satisfactory to Agent.  Each policy shall provide that
coverage may not be canceled or altered by the insurer except upon 30
days  prior written notice to Agent and shall not be subject to co-insurance
.  Borrower appoints Agent as its attorney-in-fact to make, settle and adjust
all claims under and decisions with respect to Borrower’s policies of insurance,
and to receive payment of and execute or endorse all documents, checks or drafts
in connection with insurance payments. Agent shall not act as Borrower’s
attorney-in-fact unless an Event of Default has occurred and is continuing.  The
appointment of Agent as Borrower’s attorney in fact is a power coupled with an
interest and is irrevocable until all of the Obligations are indefeasibly paid
in full. Proceeds of insurance shall be applied, at the option of Agent, to
repair or replace the Collateral or to reduce any of the Obligations if (a) such
proceeds are received at any time that a Default or an Event of Default has
occurred and is continuing or (b) no Default or Event of Default has occurred
and is continuing at the time such proceeds are received but such proceeds
exceed in the aggregate $250,000 in any calendar year.
 
6.5. Taxes.  Borrower shall, and shall cause each Subsidiary to, timely file all
federal (and all material state and local) tax reports and pay and discharge all
federal (and all material state and local) taxes, assessments and governmental
charges or levies imposed upon it, or its income or profits or upon its
properties or any part thereof, before the same shall be in default and before
the date on which penalties attach thereto, except to the extent such taxes,
assessments and governmental charges or levies are the subject of a Permitted
Contest.
 
6.6. Agreement with Landlord/Bailee.  Unless otherwise agreed to by the Agent in
writing, and except with respect to Permitted Locations (as defined below), each
Loan Party shall obtain and maintain such Access Agreement(s) with respect to
any Collateral Location as Agent may require.  With respect to Collateral
Locations (other than locations of the type described in clauses (ii) and (iii)
of the definition of Permitted Location below) for which the Loan Parties have
not delivered a fully executed Access Agreement to Agent, upon Agent’s request
Borrower shall deliver to Agent evidence in form reasonably satisfactory to
Agent that rental payments owing by any Loan Party were made and a certification
that no default or event of default exists under such Loan Party’s the lease or
leases for such Collateral Locations.  Notwithstanding anything in this
Agreement to the contrary, the failure to obtain a fully executed Access
Agreement with respect to a Collateral Location shall not constitute a Default
or Event of Default hereunder. As used herein, “Permitted Locations” means the
following locations: (i) facilities located outside of the United States at
which a Loan Party maintains Celution Systems (as defined below) in such Loan
Party’s ordinary course of business, (ii) locations where Celution Systems may
be temporarily located by a Loan Party for use in clinical trials by an
unaffiliated third party in such Loan Party’s ordinary course of business, (iii)
locations where Celution Systems may be temporarily located by a Loan Party with
physicians for demonstration, testing and product development purposes in such
Loan Party’s ordinary course of business, and (iv) locations where Collateral
may be temporarily located by a Loan Party for maintenance or repair in such
Loan Party’s ordinary course of business; provided, that with respect to the
locations described in the immediately preceding clauses (i) through and
including (iv), the book value of all Collateral at such locations shall at no
time be greater than $200,000 per location or $750,000 in the aggregate.  As
used herein, “Celution Systems” means the family of products (600, 700, 800,
900/MB & next generation Celution device), which processes patients’ cells at
the bedside in real time separating a therapeutic dose of stem and regenerative
cells from a patient’s own fat tissue, including
 
 
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a central processing device, a related single-use consumable used for each
patient specific procedure, and supportive procedural components.
 
6.7. Protection of Intellectual Property.  Each Loan Party shall take all
necessary actions to: (a) protect, defend and maintain the validity and
enforceability of its Intellectual Property to the extent material to the
conduct of its business now conducted by it or proposed to be conducted by it,
(b) promptly advise Agent and Lenders in writing of material infringements of
its Intellectual Property and, should the Intellectual Property be material to
such Loan Party’s business, take all appropriate actions to enforce its rights
in its Intellectual Property against infringement, misappropriation or dilution
and to recover any and all damages for such infringement, misappropriation or
dilution, (c) not allow any Intellectual Property material to such Loan Party’s
business to be abandoned, forfeited or dedicated to the public without Agent’s
written consent, except that a Loan Party may abandon or forfeit registrations
with respect to such Intellectual Property in jurisdictions outside the United
States where, in the good faith business judgment of Borrower’s board of
directors, the value of the registrations of such Intellectual Property is
outweighed by the cost of maintaining such registrations in such jurisdiction,
and (d) notify Agent promptly, but in any event within 10 Business Days, if it
knows or has reason to know that any application or registration relating to any
patent, trademark or copyright (now or hereafter existing) material to its
business may become abandoned or dedicated, or if any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court) regarding such Loan Party’s
ownership of any Intellectual Property material to its business, its right to
register the same, or to keep and maintain the same.  Each Loan Party shall
remain liable under each of its Intellectual Property licenses pursuant to which
it is a licensee (“Licenses”) to observe and perform all of the conditions and
obligations to be observed and performed by it thereunder, to the extent that
such License is material to the Loan Parties’ business.  None of Agent or any
Lender shall have any obligation or liability under any such License by reason
of or arising out of this Agreement, the granting of a Lien, if any, in such
License or the receipt by Agent (on behalf of itself and Lenders) of any payment
relating to any such License.  None of Agent or any Lender shall be required or
obligated in any manner to perform or fulfill any of the obligations of any Loan
Party under or pursuant to any License, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any License, or to present or
file any claims, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or which it may be
entitled at any time or times.
 
6.8. Special Collateral Covenants.
 
(a) Each Loan Party shall remain in possession of its respective Collateral
solely at (1) the location(s) specified on the Perfection Certificate, (2)
Permitted Locations and (3) locations where portable goods of a deminimis nature
(such as laptops, phones and other similar equipment) may be located with
employees or consultants of a Loan Party in such Loan Party’s ordinary course of
business; except that Agent, on behalf of itself and Lenders, shall have the
right to possess (i) any chattel paper or instrument that constitutes a part of
the Collateral, (ii) any other Collateral in which Agent’s security interest (on
behalf of itself and Lenders) may be perfected only by possession and (iii) any
Collateral after the occurrence of an Event of Default in accordance with this
Agreement and the other Debt Documents.  
 
(b) Each Loan Party shall (i) use the Collateral only in its trade or business,
(ii) maintain all of the Collateral in good operating order and repair, normal
wear and tear excepted, and (iii) use and maintain the Collateral only in
compliance with manufacturers’ recommendations or prudent industry practices and
all applicable laws, except where a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
 
 
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(c) Agent and Lenders do not authorize and each Loan Party agrees it shall not
(i) part with possession of any of the Collateral (except in accordance with
Section 6.8(a) above, to Agent (on behalf of itself and Lenders), or for a
Permitted Disposition), or (ii) remove any of the Collateral from the
continental United States except as provided in clause (i) of the definition of
“Permitted Locations” in Section 6.6.
 
(d) Each Loan Party shall pay promptly when due all federal (and all material
state and local) taxes, license fees, assessments and public and private charges
levied or assessed on any of the Collateral, on its use, or on this Agreement or
any of the other Debt Documents, other than in connection with a Permitted
Contest.  At its option, Agent may, after good faith consultation with Borrower
(unless a Default or an Event of Default has occurred and is continuing),
discharge taxes, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral and may pay for the maintenance, insurance
and preservation of the Collateral and effect compliance with the terms of this
Agreement or any of the other Debt Documents.  Each Loan Party agrees to
reimburse Agent, on demand, all costs and expenses incurred by Agent in
connection with such payment or performance and agrees that such reimbursement
obligation shall constitute Obligations.
 
(e) Each Loan Party shall, at all times, keep accurate and complete records of
the Collateral.
 
(f) Each Loan Party agrees and acknowledges that any third person who may at any
time possess all or any portion of the Collateral shall be deemed to hold, and
shall hold, the Collateral as the agent of, and as pledge holder for, Agent (on
behalf of itself and Lenders). Agent may at any time give notice to any third
person described in the preceding sentence that such third person is holding the
Collateral as the agent of, and as pledge holder for, Agent (on behalf of itself
and Lenders).
 
(g) Each Loan Party shall, during normal business hours, and in the absence of a
Default or an Event of Default, upon one Business Day’s prior notice, as
frequently as Agent determines to be appropriate: (i) provide Agent (who may be
accompanied by representatives of any Lender) and any of its officers, employees
and agents access to the properties, facilities, advisors and employees
(including officers) of each Loan Party and to the Collateral, (ii) permit Agent
(who may be accompanied by representatives of any Lender), and any of its
officers, employees and agents, to inspect, audit and make extracts from any
Loan Party’s books and records (or at the request of Agent, deliver true and
correct copies of such books and records to Agent), and (iii) permit Agent (who
may be accompanied by representatives of any Lender), and its officers,
employees and agents, to inspect, review, evaluate and make test verifications
and counts of the Collateral of any Loan Party; provided, however, that absent
the occurrence and continuance of a Default or Event of Default, Borrower shall
only be obligated to reimburse Agent for costs and expenses under Section 10.5
with respect to four (4) such inspections and audits during any calendar
year.  Upon Agent’s request, each Loan Party will promptly notify Agent in
writing of the location of any Collateral (excluding the portable goods of a
deminimis nature described in Section 6.8(a)(3)).  If a Default or Event of
Default has occurred and is continuing or if access is necessary to preserve or
protect the Collateral as determined by Agent, each such Loan Party shall
provide such access to Agent and to each Lender at all times and without advance
notice.  Each Loan Party shall make available to Agent and its auditors or
counsel, as quickly as is possible under the circumstances, originals or copies
of all books and records that Agent or such Lender may reasonably
request.  Notwithstanding any other provision of this Agreement or any other
Debt Document, so long as no Default or Event of Default then exists, each Loan
Party shall have the right to deny or restrict the Agent, the Lenders and their
 
 
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respective representatives, access to highly confidential and proprietary
scientific data and specifications, in each case, solely to the extent
pertaining to Celution Systems.
 
6.9. MacroPore Dissolution.  On or prior to November 13, 2008, Borrower shall
deliver to Agent, in form and substance reasonably satisfactory to Agent,
evidence of the dissolution of MacroPore Biosurgery, Inc., a Delaware
corporation (such dissolution, the “MacroPore Dissolution”).
 
6.10. Further Assurances.  Each Loan Party shall, upon request of Agent, furnish
to Agent such further information, execute and deliver to Agent such documents
and instruments (including, without limitation, UCC financing statements) and
shall do such other acts and things as Agent may at any time reasonably request
relating to the perfection or protection of the security interest created by
this Agreement or for the purpose of carrying out the intent of this Agreement
and the other Debt Documents.
 
7.  
NEGATIVE COVENANTS

 
7.1. Liens.  No Loan Party shall, and no Loan Party shall permit any of its
Subsidiaries to, (a) create, incur, assume or permit to exist any Lien on any
Collateral, including, without limitation, any Intellectual Property, except
Permitted Liens or (b) become a party to any agreement that would prohibit the
granting of a security interest in such Loan Party’s Collateral to Agent (other
than agreements with licensors that prohibit such Loan Party or Subsidiary from
encumbering or assigning the license from such licensor or the Intellectual
Property licensed from such licensor, but only to the extent that such
prohibition is not enforceable under applicable law, including, without
limitation, Sections 9-406, 9-407 and 9-408 of the UCC).
 
7.2. Indebtedness. No Loan Party shall, and no Loan Party shall permit any of
its Subsidiaries to, directly or indirectly create, incur, assume, permit to
exist, guarantee or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness (as hereinafter defined), except for (a) the
Obligations, (b) Indebtedness existing on the date hereof and set forth on
Schedule B to this Agreement, (c) Indebtedness consisting of capitalized lease
obligations and purchase money Indebtedness, in each case incurred by Borrower
or any of its Subsidiaries to finance the acquisition, repair, improvement or
construction of fixed or capital assets of such person, provided that (i) the
aggregate outstanding principal amount of all such Indebtedness does not exceed
$250,000 at any time and (ii) the principal amount of such Indebtedness does not
exceed the lower of the cost or fair market value (plus taxes, shipping and
installation expenses) of the property so acquired or built or of such repairs
or improvements financed with such Indebtedness (each measured at the time of
such acquisition, repair, improvement or construction is made), (d) obligations
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement entered
into by a Loan Party in the ordinary course of business and designed to alter
the risks arising from fluctuations in currency values or interest rates, but
not for speculative purposes, (e) guaranties by one or more Loan Parties of
obligations or liabilities of other Loan Parties, so long as no Default or Event
of Default would occur either before or after giving effect to any such
guaranty, (f) Indebtedness incurred by Foreign Subsidiaries from third party
financial institutions in an aggregate amount not in excess of $250,000; (g)
Indebtedness consisting of SVB Cash Management Obligations owing by Borrower to
Silicon Valley Bank in an amount not to exceed $250,000 in the aggregate at any
time; and (h) Indebtedness owing by any Loan Party to another Loan Party,
provided that (i) each Loan Party shall have executed and delivered to each
other Loan Party a demand note (each, an “Intercompany Note”) to evidence such
intercompany loans or advances owing at any time by each Loan Party to the other
Loan Parties, which Intercompany Note shall be in form and substance reasonably
satisfactory to Agent and shall be pledged and delivered to Agent pursuant to
the Pledge Agreement as additional Collateral for the Obligations, (ii) any and
all Indebtedness of any Loan Party to another Loan Party shall be subordinated
to the Obligations pursuant to the subordination terms set forth in each
Intercompany Note, and (iii) no Default or Event of Default
 
 
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would occur either before or after giving effect to any such Indebtedness. The
term “Indebtedness” means, with respect to any person, at any date, without
duplication, (i) all obligations of such person for borrowed money, (ii) all
obligations of such person evidenced by bonds, debentures, notes or other
similar instruments, or upon which interest payments are customarily made, (iii)
all obligations of such person to pay the deferred purchase price of property or
services, but excluding obligations to trade creditors incurred in the ordinary
course of business and not past due by more than 90 days,  (iv) all capital
lease obligations of such person, (v) the principal balance outstanding under
any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product, (vi) all obligations of such person
to purchase securities (or other property) which arise out of or in connection
with the issuance or sale of the same or substantially similar securities (or
property), (vii) all contingent or non-contingent obligations of such person to
reimburse any bank or other person in respect of amounts paid under a letter of
credit or similar instrument, (viii) all equity securities of such person
subject to repurchase or redemption otherwise than at the sole option of such
person, (ix) all “earnouts” and similar payment obligations of such person, (x)
all indebtedness secured by a Lien on any asset of such person, whether or not
such indebtedness is otherwise an obligation of such person, (xi) all
obligations of such person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that person arising from
fluctuations in currency values or interest rates, in each case whether
contingent or matured, and (xii) all obligations or liabilities of others
guaranteed by such person.
 
7.3. Dispositions.  No Loan Party shall, and no Loan Party shall permit any of
its Subsidiaries to, convey, sell, rent, lease, sublease, mortgage, license,
transfer or otherwise dispose of (collectively, “Transfer”) any of the
Collateral or any Intellectual Property, except for the following (collectively,
“Permitted Dispositions”): (a) sales of inventory in the ordinary course of
business; (b) dispositions by a Loan Party or any of its Subsidiaries of
tangible assets for cash and fair value that are no longer used or useful in the
business of such Loan Party or such Subsidiary so long as (i) no Default or
Event of Default exists at the time of such disposition or would be caused after
giving effect thereto and (ii) the fair market value of all such assets disposed
of does not exceed $75,000 in any calendar year; (c) non-exclusive licenses for
the use of any Loan Party’s Intellectual Property in the ordinary course of
business; (d) exclusive licenses for the use of any Loan Party’s Intellectual
Property in the ordinary course of business, so long as, with respect to each
such exclusive license, (i) no Default or Event of Default exists at the time of
such Transfer, (ii) the license constitutes an arms-length transaction made in
connection with a bona fide corporate collaboration, distribution agreement or
similar arrangement in the ordinary course of business and the terms of which,
on their face, do not provide for a sale or assignment of any Intellectual
Property, (iii) the applicable Loan Party delivers 30 days prior written notice
and a brief summary of the terms of the license to Agent, (iv) the applicable
Loan Party delivers to Agent copies of the final executed licensing documents in
connection with the license promptly upon consummation of the license, and (v)
all royalties, milestone payments or other proceeds arising from the licensing
agreement are paid to a deposit account that is governed by an Account Control
Agreement; (e) licenses of Intellectual Property pursuant to the terms and
conditions of the Olympus Agreements as they exist on the Closing Date; (f) the
sale by Borrower of all or substantially all of the assets related to the
SurgiWrap Thin Film business, so long as, with respect to such sale of assets,
(i) no Default or Event of Default exists at the time of such sale, (ii) such
sale constitutes an arms-length transaction with a non-affiliate, (iii) Borrower
delivers to Agent copies of the final executed sale agreement upon consummation
of the sale, (iv) Borrower shall receive net cash proceeds of at least
$1,000,000 from such sale and (v) all such cash proceeds are paid to a deposit
account that is governed by an Account Control Agreement; and (g) the MacroPore
Dissolution.
 
7.4. Change in Name, Location or Executive Office; Change in Business; Change in
Fiscal Year.  No Loan Party shall, and no Loan Party shall permit any of its
Subsidiaries to, (a) change its name or its state of organization without the
prior written consent of Agent (such consent not to be unreasonably withheld),
(b) relocate its chief executive office without 30 days prior written
notification to
 
 
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Agent, (c) engage in any business other than or reasonably related or incidental
to the businesses currently engaged in by the Loan Parties and their
Subsidiaries, (d) cease to conduct business substantially in the manner
conducted by the Loan Parties and their Subsidiaries as of the date of this
Agreement or (e) change its fiscal year end.
 
7.5. Mergers or Acquisitions.  No Loan Party shall merge or consolidate, and no
Loan Party shall permit any of its Subsidiaries to merge or consolidate, with or
into any other person or entity (other than mergers of a Subsidiary into a Loan
Party in which such Loan Party is the surviving entity, or mergers of a Loan
Party (other than Borrower) into another Loan Party) or acquire, or permit any
of its Subsidiaries to acquire, all or substantially all of the capital stock or
property of another person or entity or all or substantially all of the assets
constituting any line of business, division, branch, operating division or other
unit operation of another person or entity.  Notwithstanding the foregoing,
Borrower may acquire all or substantially all of the assets or stock of another
business entity (such business entity, the “Target”) so long as (a) Agent and
each Lender shall receive at least twenty (20) Business Days’ prior written
notice of such proposed acquisition, which notice shall include a reasonably
detailed description of such proposed acquisition; (b) such acquisition shall
only involve assets located in the United States and comprise a business, or
those assets of a business, substantially of the type engaged in by Borrower or
its Subsidiaries and which business would not subject Agent or any Lender to
regulatory or third party approvals in connection with the exercise of its
rights and remedies under this Agreement or any other Debt Documents other than
approvals applicable to the exercise of such rights and remedies with respect to
Borrower prior to such acquisition; (c) such acquisition shall be consensual and
shall have been approved by Target’s board of directors or similar governing
body (as applicable); (d) the purchase price paid and/or payable in cash or
other property (other than capital stock) in connection with all acquisitions
(including all transaction costs and all Indebtedness, liabilities and
contingent obligations incurred or assumed in connection therewith or otherwise
reflected in a consolidated balance sheet of Borrower and Target) shall not
exceed $1,000,000 during the term of this Agreement; (e) with respect to an
acquisition paid for in whole or in part with capital stock, such acquisition
shall not result in any decrease in the Tangible Net Worth (as defined below) of
the Loan Parties; (f) the business and assets acquired in such acquisition shall
be free and clear of all Liens (other than Permitted Liens); (g) at or prior to
the closing of any acquisition, Agent will be granted a first priority perfected
Lien (subject to Permitted Liens), for the ratable benefit of Agent and Lenders,
in all assets or stock acquired pursuant thereto and Borrower shall have
executed such documents and taken such actions as may be required by Agent in
connection therewith; (h) at the time of such acquisition and after giving
effect thereto, no Default or Event of Default has occurred and is continuing;
and (i) immediately after the consummation of such acquisition and after giving
effect thereto, Borrower shall have unrestricted balance sheet cash and Cash
Equivalents in one or more deposit accounts or securities accounts over which
Agent has obtained control under Section 7.10 of not less than the product of
(x) negative twelve (-12) times (y) the Cash Burn Amount (as such term is
defined in Section 7.12 below) based on pro forma financial statements that are
delivered to and approved by Agent and Lenders.  “Tangible Net Worth” means, on
any date, the consolidated total assets of the Loan Parties and their
Subsidiaries minus, (x) any amounts attributable to (1) goodwill, (2) intangible
items such as unamortized debt discount and expense, patents, trade and service
marks and names, copyrights and research and development expenses except prepaid
expenses, and (3) reserves not already deducted from assets, and (y) the
obligations that should, under GAAP, be classified as liabilities on Borrower’s
consolidated balance sheet, including all Indebtedness.
 
7.6. Restricted Payments.  No Loan Party shall, and no Loan Party shall permit
any of its Subsidiaries to, (a) declare or pay any dividends (other than the
payment of dividends to Borrower and the payment of dividends of a Subsidiary of
a Loan Party (other than Borrower) to such Loan Party) or make any other
distribution or payment on account of or redeem, retire, defease or purchase any
of its capital stock (including without limitation any repurchase of any shares
of Olympus-Cytori, whether pursuant to Section 8.3 of the Shareholders Agreement
or otherwise), (b) purchase, redeem, defease or prepay any
 
 
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principal of, premium, if any, interest or other amount payable in respect of
any Indebtedness prior to its scheduled maturity, (c) make any payment in
respect of management fees or consulting fees (or similar fees) to any
equityholder or other affiliate of Borrower, or (d) be a party to or bound by an
agreement that restricts a Subsidiary from paying dividends or otherwise
distributing property to Borrower; provided, however, the foregoing shall not
restrict: (i) the declaration or payment of dividends, or the making of
distributions, payable solely in Borrower’s capital stock, (ii) the conversion
of debt securities into capital stock, or (iii) the issuance of capital stock
upon the exercise or conversion of warrants or options.
 
7.7. Investments.  No Loan Party shall, and no Loan Party shall permit any of
its Subsidiaries to, directly or indirectly (a) acquire or own, or make any
loan, advance or capital contribution (an “Investment”) in or to any person or
entity, (b) acquire or create any Subsidiary (other than in connection with an
acquisition permitted under the terms and conditions of Section 7.5), or (c)
engage in any joint venture or partnership with any other person or entity,
other than: (i) Investments existing on the date hereof and set forth on
Schedule B to this Agreement, (ii) Investments in cash and Cash Equivalents (as
defined below), (iii) cash Investments by Borrower in Olympus-Cytori in an
aggregate amount in any calendar year not to exceed $350,000 for the purpose
paying operating expenses of Olympus-Cytori in the ordinary course of its
business, (iv) Investments consisting of extensions of credit in the nature of
accounts receivable or notes receivable arising from the grant of trade credit
in the ordinary course of business, and Investments received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss; (v) acquisitions
permitted under the terms and conditions of Section 7.5, (vi) Investments by a
Loan Party in any other Loan Party; (vi) loans or advances to employees of
Borrower or any of its Subsidiaries to finance travel, entertainment and
relocation expenses and other ordinary business purposes in the ordinary course
of business as presently conducted, provided that the aggregate outstanding
principal amount of all loans and advances permitted pursuant to this clause
(vi) shall not exceed $100,000 at any time; (vii) Investments in joint ventures
or strategic alliances in the ordinary course of the Loan Parties’ business
consisting of the licensing of technology, the development of technology or the
providing of support, provided that (I) any cash Investments by the Loan Parties
do not exceed $100,000 in the aggregate in any fiscal year and (II) no Default
or Event of Default exists at the time of such Investment or would be caused
after giving effect thereto, and (viii) Investments pursuant to Borrower’s
investment policy attached hereto as Exhibit G (but not any changes to such
policy unless approved by Agent) (collectively, the “Permitted
Investments”).  The term “Cash Equivalents” means (v) any readily-marketable
securities (i) issued by, or directly, unconditionally and fully guaranteed or
insured by the United States federal government or (ii) issued by any agency of
the United States federal government the obligations of which are fully backed
by the full faith and credit of the United States federal government, (w) any
readily-marketable direct obligations issued by any other agency of the United
States federal government, any state of the United States or any political
subdivision of any such state or any public instrumentality thereof, in each
case having a rating of at least “A-1” from S&P or at least “P-1” from Moody’s,
(x) any commercial paper rated at least “A-1” by S&P or “P-1” by Moody’s and
issued by any entity organized under the laws of any state of the United States,
(y) any U.S. dollar-denominated time deposit, insured certificate of deposit,
overnight bank deposit or bankers’ acceptance issued or accepted by (i) Agent or
(ii) any commercial bank that is (A) organized under the laws of the United
States, any state thereof or the District of Columbia, (B) “adequately
capitalized” (as defined in the regulations of its primary federal banking
regulators) and (C) has Tier 1 capital (as defined in such regulations) in
excess of $250,000,000 or (z) shares of any United States money market fund that
(i) has substantially all of its assets invested continuously in the types of
investments referred to in clause (v), (w), (x) or (y) above with maturities as
set forth in the proviso below, (ii) has net assets in excess of $500,000,000
and (iii) has obtained from either S&P or Moody’s the highest rating obtainable
for money market funds in the United States; provided, however, that the
maturities of all obligations specified in any of clauses (v), (w), (x) and (y)
above shall not exceed 365 days.  For the avoidance of doubt, “Cash Equivalents”
does not include (and each Loan Party is prohibited from purchasing or
purchasing participations in) any auction rate securities or other corporate
 
 
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or municipal bonds with a long-term nominal maturity for which the interest rate
is reset through a Dutch auction.
 
7.8. Transactions with Affiliates.  No Loan Party shall, and no Loan Party shall
permit any of its Subsidiaries to, directly or indirectly enter into or permit
to exist any transaction with any Affiliate (as defined below) of a Loan Party
or any Subsidiary of a Loan Party except for (a) sales of equity securities of
Borrower in bona fide equity financings for the purpose of raising capital; (b)
Investments by a Loan Party in its Subsidiaries to the extent permitted under
Section 7.7; (c) transactions among Loan Parties; and (d) transactions that are
in the ordinary course of such Loan Party’s or such Subsidiary’s business, upon
fair and reasonable terms that are no more favorable to such Affiliate than
would be obtained in an arm’s length transaction.  As used herein, “Affiliate”
means, with respect to a Loan Party or any Subsidiary of a Loan Party, (i) each
person that, directly or indirectly, owns or controls 5% or more of the stock or
membership interests having ordinary voting power in the election of directors
or managers of such Loan Party or such Subsidiary, and (ii) each person that
controls, is controlled by or is under common control with such Loan Party or
such Subsidiary.
 
7.9. Compliance.  No Loan Party shall, and no Loan Party shall permit any of its
Subsidiaries to, (a) fail to comply with the laws and regulations described in
clauses (b) or (c) of Section 5.8 herein, (b) use any portion of the Term Loans
to purchase or carry margin stock (within the meaning of Regulation U of the
Federal Reserve Board) or (c) fail to comply in any material respect with, or
violate in any material respect any other law or regulation applicable to it.
 
7.10.  Deposit Accounts and Securities Accounts.  No Loan Party shall directly
or indirectly maintain or establish any deposit account or securities account,
unless Agent, the applicable Loan Party or Loan Parties and the depository
institution or securities intermediary at which the account is or will be
maintained enter into a deposit account control agreement or securities account
control agreement, as the case may be, in form and substance satisfactory to
Agent (an “Account Control Agreement”) (which agreement shall provide, among
other things, that (i) such depository institution or securities intermediary
has no rights of setoff or recoupment or any other claim against such deposit or
securities account (except as agreed to by Agent), other than for payment of its
service fees and other charges directly related to the administration of such
account and for returned checks or other items of payment, and (ii) such
depository institution or securities intermediary shall comply with all
instructions of Agent without further consent of such Loan Party or Loan
Parties, as applicable, including, without limitation, an instruction by Agent
to comply exclusively with instructions of the Agent with respect to such
account (such notice, a “Notice of Exclusive Control”)), prior to or
concurrently with the establishment of such deposit account or securities
account (or in the case of any such deposit account or securities account
maintained as of the date hereof, on or before the Closing Date).  Agent may
only give a Notice of Exclusive Control with respect to any deposit account or
securities account at any time at which an Event of Default has occurred and is
continuing.  Notwithstanding the provisions of this Section 7.10, Borrower shall
designate one or more dedicated deposit accounts to be used exclusively for
payroll or withholding tax purposes, and such dedicated deposit accounts shall
not be subject to any Account Control Agreement.
 
7.11.  Amendments to Other Agreements.  No Loan Party shall amend, modify or
waive any provision of (a) any Material Agreement or (b) any of such Loan
Party’s organizational documents, in each case, without the prior written
consent of Agent and the Requisite Lenders unless the net effect of such
amendment, modification or waiver is not adverse to any Loan Party, Agent or
Lenders.
 
7.12.  Financial Covenants.
 
(a) Borrower shall at all times have unrestricted balance sheet cash and Cash
Equivalents in one or more deposit accounts or securities accounts over which
Agent has obtained
 
 
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control under Section 7.10 of not less than the product of (i) negative three
(-3) times (ii) the Cash Burn Amount at such time; provided, however, that at
the time of requesting the Subsequent Term Loan and at all times after the
advance of the Subsequent Term Loan, Borrower shall at all times have
unrestricted balance sheet cash and Cash Equivalents in one or more deposit
accounts or securities accounts over which Agent has obtained control under
Section 7.10 of not less than the product of (i) negative six (-6) times (ii)
the Cash Burn Amount at such time.
 
(b) Borrower shall at all times have unrestricted balance sheet cash and Cash
Equivalents in one or more deposit accounts or securities accounts maintained
with Silicon Valley Bank and over which Agent has obtained control under Section
7.10 of not less than $1,000,000; provided, that any funds in such deposit or
securities accounts maintained with Silicon Valley Bank under this clause (b)
shall be included for purposes of determining compliance with clause (a) above.
 
(c) As used in this Agreement, “Cash Burn Amount” means, with respect to
Borrower and its consolidated Subsidiaries, as of any date of determination and
based on the financial statements most recently delivered to Agent and the
Lenders in accordance with this Agreement, the difference between:
 
(1) the product of (i) the sum of, without duplication, (A) net income (loss),
plus (B) depreciation, amortization and other non-cash charges (excluding
accruals for cash expenses made in the ordinary course of business), minus (C)
non-financed capital expenditures, minus (D) non-cash revenue, in each case of
clauses (A), (B), (C) and (D), for the immediately preceding six month period on
a trailing basis, divided by (ii) six,
 
minus
 
(2)             the product of (i) the current portion of interest bearing
liabilities due and payable in the immediately succeeding six months divided by
(ii) six.
 
 
8.  
DEFAULT AND REMEDIES.

 
8.1. Events of Default.  Loan Parties shall be in default under this Agreement
and each of the other Debt Documents if (each of the following, an “Event of
Default”):
 
(a) Borrower shall fail to pay (i) any principal when due, or (ii) any interest,
fees or other Obligations (other than as specified in clause (i)) within a
period of 3 days after the due date thereof (other than on any Applicable Term
Loan Maturity Date);
 
(b) any Loan Party breaches any of its obligations under Section 6.1 (solely as
it relates to maintaining its existence), Section 6.2, Section 6.3, Section 6.4
or Article 7;
 
(c) any Loan Party breaches any of its other obligations under any of the Debt
Documents and fails to cure such breach within 30 days after the earlier of (i)
the date on which an executive officer (including, without limitation, a
president, chief executive officer, chief financial officer, secretary, vice
president or general counsel) of such Loan Party becomes aware, or through the
exercise of reasonable diligence should have become aware, of such failure and
(ii) the date on which notice shall have been given to Borrower from Agent;
 
 
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(d) any warranty, representation or statement made or deemed made by or on
behalf of any Loan Party in any of the Debt Documents in connection with any of
the Obligations shall be false or misleading in any material respect when made
or deemed made;
 
(e) any of the Collateral with a value, individually or in the aggregate, in
excess of $50,000 is subjected to attachment, execution, levy, seizure or
confiscation in any legal proceeding or otherwise, or if any legal or
administrative proceeding is commenced against any Loan Party or any of the
Collateral, which subjects any of the Collateral with a value, individually or
in the aggregate, in excess of $50,000 to a material risk of attachment,
execution, levy, seizure or confiscation and no bond is posted or protective
order obtained to negate such risk;
 
(f) one or more judgments, orders or decrees shall be rendered against any Loan
Party or any Subsidiary of a Loan Party that exceeds by more than $100,000 any
insurance coverage applicable thereto (to the extent the relevant insurer has
been notified of such claim and has not denied coverage therefor) and either (i)
enforcement proceedings shall have been commenced by any creditor upon any such
judgment, order or decree or (ii) such judgment, order or decree shall not have
been vacated or discharged for a period of 30 consecutive days and there shall
not be in effect (by reason of a pending appeal or otherwise) any stay of
enforcement thereof;
 
(g) (i) any Loan Party or any Subsidiary of a Loan Party shall generally not pay
its debts as such debts become due, shall admit in writing its inability to pay
its debts generally, shall make a general assignment for the benefit of
creditors, or shall cease doing business as a going concern, (ii) any proceeding
shall be instituted by or against any Loan Party or any Subsidiary of a Loan
Party seeking to adjudicate it a bankrupt or insolvent or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief,
composition of it or its debts or any similar order, in each case under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors or
seeking the entry of an order for relief or the appointment of a custodian,
receiver, trustee, conservator, liquidating agent, liquidator, other similar
official or other official with similar powers, in each case for it or for any
substantial part of its property and, in the case of any such proceedings
instituted against (but not by or with the consent of) such Loan Party or such
Subsidiary, either such proceedings shall remain undismissed or unstayed for a
period of 45 days or more or any action sought in such proceedings shall occur
or (iii) any Loan Party or any Subsidiary of a Loan Party shall take any
corporate or similar action or any other action to authorize any action
described in clause (i) or (ii) above;
 
(h) a Material Adverse Effect shall have occurred;
 
(i) (i) any provision of any Debt Document shall fail to be valid and binding
on, or enforceable against, a Loan Party party thereto, or (ii) any Debt
Document purporting to grant a security interest to secure any Obligation shall
fail to create a valid and enforceable security interest on any Collateral
purported to be covered thereby or such security interest shall fail or cease to
be a perfected Lien with the priority required in the relevant Debt Document, or
any Loan Party shall state in writing that any of the events described in clause
(i) or (ii) above shall have occurred;
 
(j) (i) any Loan Party or any Subsidiary of a Loan Party defaults under any
Olympus Agreement or any other Material Agreement (after any applicable grace
period contained therein), (ii) (A) any Loan Party or any Subsidiary of a Loan
Party fails to make (after any applicable grace period) any payment when due
(whether due because of scheduled maturity, required prepayment provisions,
acceleration, demand or otherwise) on any Indebtedness (other than the
Obligations) of such Loan Party or such Subsidiary having an aggregate principal
 
 
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amount (including undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than $300,000 (“Material Indebtedness”), (B) any other event shall occur or
condition shall exist under any contractual obligation relating to any such
Material Indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of (without regard to any
subordination terms with respect thereto), the maturity of such Material
Indebtedness or (C) any such Material Indebtedness shall become or be declared
to be due and payable, or be required to be prepaid, redeemed, defeased or
repurchased (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof, or (iii) Borrower or any Subsidiary defaults
(beyond any applicable grace period) under any obligation for payments due under
any lease agreement that meets the criteria for the requirement of an Access
Agreement under Section 6.6; or
 
(k) (i) any of the chief executive officer, the chief financial officer or the
president of Borrower as of the date hereof shall cease to be involved in the
day to day operations (including, with respect to the chief scientific officer,
research development) or management of the business of Borrower, and a successor
of such officer reasonably acceptable to the Requisite Lenders is not appointed
on terms reasonably acceptable to the Requisite Lenders within 120 days of such
cessation or involvement, (ii) the acquisition, directly or indirectly, by any
person or group (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934) of more than thirty-five percent (35%) of the voting power
of the voting stock of Borrower by way of merger or consolidation or otherwise,
(iii) during any period of twelve consecutive calendar months, individuals who
at the beginning of such period constituted the board of directors of Borrower
(together with any new directors whose election by the board of directors of
Borrower or whose nomination for election by the stockholders of Borrower was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office, or (iv) Borrower ceases to own and control, directly or indirectly, all
of the economic and voting rights associated with the outstanding voting capital
stock (or other voting equity interest) of each of its Subsidiaries, other than
in connection with a transaction expressly permitted by the terms of this
Agreement; or
 
(l) Any event shall occur whereby Olympus obtains the right under Section 8.3 of
the Shareholders Agreement or under any other Olympus Agreement to require
Borrower to purchase or sell any shares of Olympus-Cytori.
 
8.2. Lender Remedies.  Upon the occurrence of any Event of Default, Agent shall,
at the written request of the Requisite Lenders, terminate the Commitments with
respect to further Term Loans and declare any or all of the Obligations to be
immediately due and payable, without demand or notice to any Loan Party and the
accelerated Obligations shall bear interest at the Default Rate pursuant to
Section 2.6, provided that, upon the occurrence of any Event of Default
specified in Section 8.1(g) above, the Commitments shall be automatically
terminated and the Obligations shall be automatically accelerated.  After the
occurrence of an Event of Default, Agent shall have (on behalf of itself and
Lenders) all of the rights and remedies of a secured party under the UCC, and
under any other applicable law; provided, however, that Agent shall not commence
the exercise of such rights and remedies (whether arising under this Agreement
or any other Debt Document) without the prior written request of Requisite
Lenders.  Upon the exercise of such rights and remedies, Agent shall consult
with and keep the Lenders informed thereof at reasonable intervals; provided,
however, that notwithstanding any such consultations and provision of
information to the Lenders, Agent shall retain the right to make all
determinations in the event of disagreements between Agent and Lenders.  Without
limiting the foregoing, (1) Agent shall have the right to, and at the written
request of the Requisite Lenders shall, (a) notify any account debtor of any
 
 
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Loan Party or any obligor on any instrument which constitutes part of the
Collateral of the security interest of the Agent in the same (for the benefit of
itself and Lenders) and (b) with or without legal process, enter any premises
where the Collateral may be and inspect the Collateral; and (2) Agent shall, at
the written request of the Required Lenders, (x) notify any account debtor of
any Loan Party or any obligor on any instrument which constitutes part of the
Collateral to make payments to Agent (for the benefit of itself and Lenders),
(y) sell the Collateral at public or private sale, in whole or in part, and have
the right to bid and purchase at such sale, and (z) lease or otherwise dispose
of all or part of the Collateral, applying proceeds from any such disposition to
the Obligations in accordance with Section 8.4.  If requested by Agent, Loan
Parties shall promptly assemble the Collateral and make it available to Agent at
a place to be designated by Agent.  Agent may also render any or all of the
Collateral unusable at a Loan Party’s premises and may dispose of such
Collateral on such premises without liability for rent or costs.  Any notice
that Agent is required to give to a Loan Party under the UCC of the time and
place of any public sale or the time after which any private sale or other
intended disposition of the Collateral is to be made shall be deemed to
constitute reasonable notice if such notice is given in accordance with this
Agreement at least 5 days prior to such action.  Effective only upon the
occurrence and during the continuance of an Event of Default, each Loan Party
hereby irrevocably appoints Agent (and any of Agent’s designated officers or
employees) as such Loan Party’s true and lawful attorney to: (i) take any of the
actions specified above in this paragraph; (ii) endorse such Loan Party’s name
on any checks or other forms of payment or security that may come into Agent’s
possession; (iii) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Agent determines
to be reasonable; and (iv) do such other and further acts and deeds in the name
of such Loan Party that Agent may deem necessary or desirable to enforce its
rights in or to any of the Collateral or to perfect or better perfect Agent’s
security interest (on behalf of itself and Lenders) in any of the
Collateral.  The appointment of Agent as each Loan Party’s attorney in fact is a
power coupled with an interest and is irrevocable until the Termination Date.
Notwithstanding any provision of this Section 8.2 to the contrary, upon the
occurrence of any Event of Default, Agent shall have the right to exercise any
and all remedies referenced in this Section 8.2 without the written consent of
Requisite Lenders following the occurrence of an Exigent Circumstance.  As used
in the immediately preceding sentence, “Exigent Circumstance” means any event or
circumstance that, in the reasonable judgment of Agent, imminently threatens the
ability of Agent to realize upon all or any material portion of the Collateral,
such as, without limitation, fraudulent removal, concealment, or abscondment
thereof, destruction or material waste thereof, or failure of any Loan Party
after reasonable demand to maintain or reinstate adequate casualty insurance
coverage, or which, in the reasonable judgment of Agent, could result in a
material diminution in value of the Collateral.
 
8.3. Additional Remedies. In addition to the remedies provided in Section 8.2
above, each Loan Party hereby grants to Agent (on behalf of itself and Lenders)
and any transferee of Collateral, solely for purposes of exercising its remedies
as provided herein, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to any Loan Party) to use, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Loan Party, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof. Such license rights shall be exercisable only during the continuance of
an Event of Default and in any event shall terminate on the Termination Date.
 
8.4. Application of Proceeds.
 
(a)           Proceeds from any Transfer of the Collateral, including, without
limitation, the Intellectual Property (other than Permitted Dispositions) and
all payments made to or proceeds of Collateral received by Agent during the
continuance of an Event of Default shall be applied as follows: (a) first, to
pay all fees, costs, indemnities, reimbursements and expenses then due to Agent
under the
 
 
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Debt Documents in its capacity as Agent under the Debt Documents, (b) second, to
pay all fees, costs, indemnities, reimbursements and expenses then due to
Lenders under the Debt Documents in accordance with their respective Pro Rata
Shares, until paid in full, (c) third, to pay all interest on the Term Loans
then due to Lenders in accordance with their respective Pro Rata Shares, until
paid in full (other than interest accrued after the commencement of any
proceeding referred to in Section 8.1(g) if a claim for such interest is not
allowable in such proceeding), (d) fourth, to pay all principal on the Term
Loans then due to Lenders in accordance with their respective Pro Rata Shares,
until paid in full, (e) fifth, to pay all other Obligations then due to Lenders
in accordance with their respective Pro Rata Shares, until paid in full
(including, without limitation, all interest accrued after the commencement of
any proceeding referred to in Section 8.1(g) whether or not a claim for such
interest is allowable in such proceeding), (f) sixth, to Borrower or as
otherwise required by law.  Borrower shall remain fully liable for any
deficiency.
 
(b)           Notwithstanding anything in Section 8.4(a) to the contrary,
proceeds from the SVB Certificate of Deposit shall first be retained by Silicon
Valley Bank for application to the SVB Cash Management Obligations in an amount
not to exceed $250,000, and then any remaining proceeds of the SVB Certificate
of Deposit shall be delivered by Silicon Valley Bank to Agent for application to
the Obligations in the order set forth in Section 8.4(a).
 
9.  
THE AGENT.

 
9.1. Appointment of Agent.
 
(a) Each Lender hereby appoints GECC (together with any successor Agent pursuant
to Section 9.9) as Agent under the Debt Documents and authorizes the Agent to
(a) execute and deliver the Debt Documents and accept delivery thereof on its
behalf from Loan Parties, (b) take such action on its behalf and to exercise all
rights, powers and remedies and perform the duties as are expressly delegated to
the Agent under such Debt Documents and (c) exercise such powers as are
reasonably incidental thereto.  The provisions of this Article 9 are solely for
the benefit of Agent and Lenders and none of Loan Parties nor any other person
shall have any rights as a third party beneficiary of any of the provisions
hereof.  In performing its functions and duties under this Agreement and the
other Debt Documents, Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Loan Party or any other
person.  Agent shall have no duties or responsibilities except for those
expressly set forth in this Agreement and the other Debt Documents.  The duties
of Agent shall be mechanical and administrative in nature and Agent shall not
have, or be deemed to have, by reason of this Agreement, any other Debt Document
or otherwise a fiduciary or trustee relationship in respect of any
Lender.  Except as expressly set forth in this Agreement and the other Debt
Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to Borrower or any of its
Subsidiaries that is communicated to or obtained by GECC or any of its
affiliates in any capacity.  
 
(b) Without limiting the generality of clause (a) above, Agent shall have the
sole and exclusive right and authority (to the exclusion of the Lenders), and is
hereby authorized, to (i) act as the disbursing and collecting agent for the
Lenders with respect to all payments and collections arising in connection with
the Debt Documents (including in any other bankruptcy, insolvency or similar
proceeding), and each person making any payment in connection with any Debt
Document to any Lender is hereby authorized to make such payment to Agent, (ii)
file and prove claims and file other documents necessary or desirable to allow
the claims of Agent and Lenders with respect to any Obligation in any proceeding
described in any bankruptcy, insolvency or similar proceeding (but not to vote,
consent or otherwise act on behalf of such Lender), (iii) act as collateral
agent for Agent and each Lender for purposes of the perfection of all Liens
created by
 
 
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the Debt Documents and all other purposes stated therein, (iv) manage, supervise
and otherwise deal with the Collateral, (v) take such other action as is
necessary or desirable to maintain the perfection and priority of the Liens
created or purported to be created by the Debt Documents, (vi) except as may be
otherwise specified in any Debt Document, exercise all remedies given to Agent
and the other Lenders with respect to the Collateral, whether under the Debt
Documents, applicable law or otherwise and (vii) execute any amendment, consent
or waiver under the Debt Documents on behalf of any Lender that has consented in
writing to such amendment, consent or waiver; provided, however, that Agent
hereby appoints, authorizes and directs each Lender to act as collateral
sub-agent for Agent and the Lenders for purposes of the perfection of all Liens
with respect to the Collateral, including any deposit account maintained by a
Loan Party with, and cash and cash equivalents held by, such Lender, and may
further authorize and direct the Lenders to take further actions as collateral
sub-agents for purposes of enforcing such Liens or otherwise to transfer the
Collateral subject thereto to Agent, and each Lender hereby agrees to take such
further actions to the extent, and only to the extent, so authorized and
directed.  Agent may, upon any term or condition it specifies, delegate or
exercise any of its rights, powers and remedies under, and delegate or perform
any of its duties or any other action with respect to, any Debt Document by or
through any trustee, co-agent, employee, attorney-in-fact and any other person
(including any Lender).  Any such person shall benefit from this Article 9 to
the extent provided by Agent. For the avoidance of doubt, Agent hereby
acknowledges and agrees that, with respect to the UCC Financing Statements
numbered 11540256, 32447855, 32823626, 40960056, 41365453, 42812172, 60048330,
11540264 and 0156611, each naming Borrower as debtor and previously filed by
General Electric Capital Corporation in the office of the Secretary of State of
the State of Delaware, such UCC Financing Statements are maintained by General
Electric Capital Corporation in its capacity as Agent for the perfection of the
Liens granted to Agent, for the benefit of itself and Lenders, under this
Agreement.
 
(c) If Agent shall request instructions from Requisite Lenders or all affected
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Debt Document, then Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from Requisite Lenders or all affected Lenders,
as the case may be, and Agent shall not incur liability to any person by reason
of so refraining.  Agent shall be fully justified in failing or refusing to take
any action hereunder or under any other Debt Document (a) if such action would,
in the opinion of Agent, be contrary to law or any Debt Document, (b) if such
action would, in the opinion of Agent, expose Agent to any potential liability
under any law, statute or regulation or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action.  Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting hereunder or under any other Debt Document in accordance with the
instructions of Requisite Lenders or all affected Lenders, as applicable.
 
9.2. Agent’s Reliance, Etc.  Neither Agent nor any of its affiliates nor any of
their respective directors, officers, agents, employees or representatives shall
be liable for any action taken or omitted to be taken by it or them hereunder or
under any other Debt Documents, or in connection herewith or therewith, except
for damages caused by its or their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.  Without limiting the
generality of the foregoing, Agent:  (a) may treat the payee of any Note as the
holder thereof until such Note has been assigned in accordance with Section
10.1; (b) may consult with legal counsel, independent public accountants and
other experts, whether or not selected by it, and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts; (c) shall not be responsible or
otherwise incur liability for any action or omission taken in reliance upon the
instructions
 
 
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of the Requisite Lenders, (d) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Debt
Documents; (e) shall not have any duty to inspect the Collateral (including the
books and records) or to ascertain or to inquire as to the performance or
observance of any provision of any Debt Document, whether any condition set
forth in any Debt Document is satisfied or waived, as to the financial condition
of any Loan Party or as to the existence or continuation or possible occurrence
or continuation of any Default or Event of Default and shall not be deemed to
have notice or knowledge of such occurrence or continuation unless it has
received a notice from Borrower or any Lender describing such Default or Event
of Default clearly labeled “notice of default”; (f) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
effectiveness, genuineness, sufficiency or value of, or the attachment,
perfection or priority of any Lien created or purported to be created under or
in connection with, any Debt Document or any other instrument or document
furnished pursuant hereto or thereto; and (g) shall incur no liability under or
in respect of this Agreement or the other Debt Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent or otherwise authenticated by the proper party or parties.
 
9.3. GECC and Affiliates.  GECC shall have the same rights and powers under this
Agreement and the other Debt Documents as any other Lender and may exercise the
same as though it were not Agent; and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated, include GECC in its individual
capacity.  GECC and its affiliates may lend money to, invest in, and generally
engage in any kind of business with, Borrower, any of Borrower’s Subsidiaries,
any of their Affiliates and any person who may do business with or own
securities of Borrower, any of Borrower’s Subsidiaries or any such Affiliate,
all as if GECC were not Agent and without any duty to account therefor to
Lenders.  GECC and its affiliates may accept fees and other consideration from
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.  Each Lender acknowledges the
potential conflict of interest between GECC as a Lender holding disproportionate
interests in the Term Loans and GECC as Agent, and expressly consents to, and
waives, any claim based upon, such conflict of interest.
 
9.4. Lender Credit Decision.  Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Section 6.3 and such other documents and
information as it has deemed appropriate, made its own credit and financial
analysis of each Loan Party and its own decision to enter into this
Agreement.  Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.  Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Term Loans, and
expressly consents to, and waives, any claim based upon, such conflict of
interest.
 
9.5. Indemnification.  Lenders shall and do hereby indemnify Agent (to the
extent not reimbursed by Loan Parties and without limiting the obligations of
Loan Parties hereunder), ratably according to their respective Pro Rata Shares
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Debt Document or any action taken or omitted to be taken by Agent in
connection therewith; provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent’s gross negligence
or willful misconduct as finally determined by a court of competent
jurisdiction. Without limiting the foregoing, each Lender agrees to reimburse
Agent promptly upon demand for its Pro Rata Share of any out-of-pocket expenses
(including reasonable counsel fees)
 
 
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incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Debt Document,
to the extent that Agent is not reimbursed for such expenses by Loan
Parties.  The provisions of this Section 9.5 shall survive the termination of
this Agreement.
 
9.6. Successor Agent.  Agent may resign at any time by giving not less than 30
days’ prior written notice thereof to Lenders and Borrower.  Upon any such
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent.  If no successor Agent shall have been so appointed by the Requisite
Lenders and shall have accepted such appointment within 30 days after the
resigning Agent’s giving notice of resignation, then the resigning Agent may, on
behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a
Lender is willing to accept such appointment, or otherwise shall be a commercial
bank or financial institution or a subsidiary of a commercial bank or financial
institution if such commercial bank or financial institution is organized under
the laws of the United States of America or of any State thereof and has a
combined capital and surplus of at least $300,000,000.  If no successor Agent
has been appointed pursuant to the foregoing, within 30 days after the date such
notice of resignation was given by the resigning Agent, such resignation shall
become effective and the Requisite Lenders shall thereafter perform all the
duties of Agent hereunder until such time, if any, as the Requisite Lenders
appoint a successor Agent as provided above.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent.  Upon the earlier of the acceptance of any appointment
as Agent hereunder by a successor Agent or the effective date of the resigning
Agent’s resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Debt Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue.  After any resigning Agent’s resignation hereunder, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was acting as Agent under this Agreement and the other
Debt Documents.  
 
9.7. Setoff and Sharing of Payments.  In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default and
subject to Section 9.8(e), each Lender is hereby authorized at any time or from
time to time upon the direction of Agent, without notice to Borrower or any
other person, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of Borrower (regardless of whether such balances are then due to
Borrower) and any other properties or assets at any time held or owing by that
Lender or that holder to or for the credit or for the account of Borrower
against and on account of any of the Obligations that are not paid when
due.  Any Lender exercising a right of setoff or otherwise receiving any payment
on account of the Obligations in excess of its Pro Rata Share thereof shall
purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender’s or holder’s Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance with
their respective Pro Rata Shares of the Obligations.  Borrower agrees, to the
fullest extent permitted by law, that (a) any Lender may exercise its right to
offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the Term
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers’ lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender or holder were a direct holder
of the Term Loans and the other Obligations in the amount of such
participation.  Notwithstanding the foregoing, if all or any portion of the
offset amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of offset, the purchase of participations by
that Lender shall be rescinded and the purchase price restored without
interest.  The term “Pro Rata Share” means, with respect to any Lender at
 
 
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any time, the percentage obtained by dividing (x) the Commitment of such Lender
then in effect (or, if such Commitment is terminated, the aggregate outstanding
principal amount of the Term Loans owing to such Lender) by (y) the Total
Commitment then in effect (or, if the Total Commitment is terminated, the
outstanding principal amount of the Term Loans owing to all Lenders).
 
9.8. Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.
 
(a) Advances; Payments.  If Agent receives any payment for the account of
Lenders on or prior to 11:00 a.m. (New York time) on any Business Day, Agent
shall pay to each applicable Lender such Lender’s Pro Rata Share of such payment
on such Business Day. If Agent receives any payment for the account of Lenders
after 11:00 a.m. (New York time) on any Business Day, Agent shall pay to each
applicable Lender such Lender’s Pro Rata Share of such payment on the next
Business Day. To the extent that any Lender has failed to fund any such payments
and Term Loans (a “Non-Funding Lender”), Agent shall be entitled to set off the
funding short-fall against that Non-Funding Lender’s Pro Rata Share of all
payments received from Borrower.
 
(b) Return of Payments.
 
(i)  If Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from a
Loan Party and such related payment is not received by Agent, then Agent will be
entitled to recover such amount (including interest accruing on such amount at
the Federal Funds Rate for the first Business Day and thereafter, at the rate
otherwise applicable to such Obligation) from such Lender on demand without
setoff, counterclaim or deduction of any kind.
 
(ii)  If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to a Loan Party or paid to any other person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Debt Document, Agent will not
be required to distribute any portion thereof to any Lender.  In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to a Loan Party or such other person, without setoff,
counterclaim or deduction of any kind.
 
(c) Non-Funding Lenders.  The failure of any Non-Funding Lender to make any Term
Loan or any payment required by it hereunder shall not relieve any other Lender
(each such other Lender, an “Other Lender”) of its obligations to make such Term
Loan, but neither any Other Lender nor Agent shall be responsible for the
failure of any Non-Funding Lender to make a Term Loan or make any other payment
required hereunder.  Notwithstanding anything set forth herein to the contrary,
a Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Debt Document or constitute a “Lender” (or be included in the
calculation of “Requisite Lender” hereunder) for any voting or consent rights
under or with respect to any Debt Document.  At Borrower’s request, Agent or a
person reasonably acceptable to Agent shall have the right with Agent’s consent
and in Agent’s sole discretion (but shall have no obligation) to purchase from
any Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at
Agent’s request, sell and assign to Agent or such person, all of the Commitments
and all of the outstanding Term Loans of that Non-Funding Lender for an amount
equal to the principal balance of all Term Loans held by such Non-Funding Lender
and all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment
Agreement (as defined below).
 
 
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(d) Dissemination of Information.  Agent shall use reasonable efforts to provide
Lenders with any notice of Default or Event of Default received by Agent from,
or delivered by Agent to Borrower, with notice of any Event of Default of which
Agent has actually become aware and with notice of any action taken by Agent
following any Event of Default; provided that Agent shall not be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to Agent’s gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.  Lenders acknowledge that
Borrower is required to provide financial statements to Lenders in accordance
with Section 6.3 hereto and agree that Agent shall have no duty to provide the
same to Lenders.
 
(e) Actions in Concert.  Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement, the Notes or any other Debt Documents (including exercising any
rights of setoff) without first obtaining the prior written consent of Agent and
Requisite Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes shall be taken in
concert and at the direction or with the consent of Agent and Requisite Lenders.
 
10.  
MISCELLANEOUS.

 
10.1.  Assignment.  Subject to the terms of this Section 10.1, any Lender may
make an assignment to an assignee of, or sell participations in, at any time or
times, the Debt Documents, its Commitment, Term Loans or any portion thereof or
interest therein, including any Lender’s rights, title, interests, remedies,
powers or duties thereunder.  Any assignment by a Lender shall: (i) except in
the case of an assignment to a Qualified Assignee (as defined below), require
the consent of each Lender (which consent shall not be unreasonably withheld,
conditioned or delayed), (ii) require the execution of an assignment agreement
in form and substance reasonably satisfactory to, and acknowledged by, Agent (an
“Assignment Agreement”); (iii) be conditioned on such assignee Lender
representing to the assigning Lender and Agent that it is purchasing the
applicable Commitment and/or Term Loans to be assigned to it for its own
account, for investment purposes and not with a view to the distribution
thereof; (iv) be in an aggregate amount of not less than $1,000,000, unless such
assignment is made to an existing Lender or an affiliate of an existing Lender
or is of the assignor’s (together with its affiliates’) entire interest of the
Term Loans or is made with the prior written consent of Agent; and (v) include a
payment to Agent of an assignment fee of $3,500.  In the case of an assignment
by a Lender under this Section 10.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as all other Lenders
hereunder.  The assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitment and Term Loans, as applicable, or assigned
portion thereof from and after the date of such assignment.  Borrower hereby
acknowledges and agrees that any assignment shall give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a “Lender”.  In the event any Lender assigns or otherwise transfers all or
any part of the Commitments and Obligations, Agent shall so notify Borrower and
Borrower shall, upon the request of Agent, execute new Notes in exchange for the
Notes, if any, being assigned.  Agent may amend Schedule A to this Agreement to
reflect assignments made in accordance with this Section.
 
As used herein, “Qualified Assignee” means (a) any Lender and any affiliate of
any Lender and (b) any commercial bank, savings and loan association or savings
bank or any other entity which is an “accredited investor” (as defined in
Regulation D under the Securities Act) which extends credit or buys loans as one
of its businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, in each case, which has a rating of
BBB or higher from S&P and a rating of Baa2 or higher from Moody's at the date
that it becomes a Lender and in each case of clauses (a) and (b), which, through
its applicable lending office, is capable of lending to Borrower without the
 
 
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imposition of any withholding or similar taxes; provided that (i) no person
proposed to become a Lender after the Closing Date and determined by Agent to be
acting in the capacity of a vulture fund or distressed debt purchaser shall be a
Qualified Assignee, (ii) no person or Affiliate of such person proposed to
become a Lender after the Closing Date and that holds any subordinated debt or
stock issued by Borrower shall be a Qualified Assignee and (iii) no person
proposed to become a Lender after the Closing Date and that is a direct business
competitor of a Loan Party shall be a Qualified Assignee so long as no Default
or Event of Default exists at the time of the proposed assignment.
 
10.2.  Notices.  All notices, requests or other communications given in
connection with this Agreement shall be in writing, shall be addressed to the
parties at their respective addresses set forth on the signature pages hereto
below such parties’ name or in the most recent Assignment Agreement executed by
any Lender (unless and until a different address may be specified in a written
notice to the other party delivered in accordance with this Section), and shall
be deemed given  (a) on the date of receipt if delivered by hand, (b) on the
date of sender’s receipt of confirmation of proper transmission if sent by
facsimile transmission, (c) on the next Business Day after being sent by a
nationally-recognized overnight courier, and (d) on the fourth Business Day
after being sent by registered or certified mail, postage prepaid.  As used
herein, the term “Business Day” means and includes any day other than Saturdays,
Sundays, or other days on which commercial banks in New York, New York are
required or authorized to be closed.
 
10.3.  Correction of Debt Documents.  Agent may correct patent errors and fill
in all blanks in this Agreement or the Debt Documents consistent with the
agreement of the parties.
 
10.4.  Performance.  Time is of the essence of this Agreement.  This Agreement
shall be binding, jointly and severally, upon all parties described as the
“Borrower” and their respective successors and assigns, and shall inure to the
benefit of Agent, Lenders, and their respective successors and assigns.
 
10.5.  Payment of Fees and Expenses.  Loan Parties agree, jointly and severally,
to pay or reimburse upon demand for all reasonable fees, costs and expenses
incurred by Agent and Lenders in connection with (a) the investigation,
preparation, negotiation, execution, administration of, or any amendment,
modification, waiver or termination of, this Agreement or any other Debt
Document, (b) the administration of the Loans and the facilities hereunder and
any other transaction contemplated hereby or under the Debt Documents and (c)
the enforcement, assertion, defense or preservation of Agent’s and Lenders’
rights and remedies under this Agreement or any other Debt Document, in each
case of clauses (a) through (c), including, without limitation, reasonable
attorney’s fees and expenses, the allocated cost of in-house legal counsel,
reasonable fees and expenses of consultants, auditors and appraisers and UCC and
other corporate search and filing fees and wire transfer fees.  Borrower further
agrees that such fees, costs and expenses shall constitute Obligations.  This
provision shall survive the termination of this Agreement.
 
10.6.  Indemnity. Each Loan Party shall and does hereby jointly and severally
indemnify and defend Agent, Lenders, and their respective successors and
assigns, and their respective directors, officers, employees, consultants,
attorneys, agents and affiliates (each an “Indemnitee”) from and against all
liabilities, losses, damages, expenses, penalties, claims, actions and suits
(including, without limitation, related reasonable attorneys’ fees and the
allocated costs of in-house legal counsel) of any kind whatsoever arising,
directly or indirectly, which may be imposed on, incurred by or asserted against
such Indemnitee as a result of or in connection with this Agreement, the other
Debt Documents or any of the transactions contemplated hereby or thereby (the
“Indemnified Liabilities”); provided that, no Loan Party shall have any
obligation to any Indemnitee with respect to any Indemnified Liabilities to the
extent such Indemnified Liabilities arise from the gross negligence or willful
misconduct of such Indemnitee as
 
 
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determined by a final non-appealable judgment of a court of competent
jurisdiction.  This provision shall survive the termination of this Agreement.
 
10.7.  Rights Cumulative.  Agent’s and Lenders’ rights and remedies under this
Agreement or otherwise arising are cumulative and may be exercised singularly or
concurrently.  Neither the failure nor any delay on the part of Agent or any
Lender to exercise any right, power or privilege under this Agreement shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege preclude any other or further exercise of that or any other
right, power or privilege.  NONE OF AGENT OR ANY LENDER SHALL BE DEEMED TO HAVE
WAIVED ANY OF ITS RESPECTIVE RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER
AGREEMENT, INSTRUMENT OR PAPER SIGNED BY BORROWER UNLESS SUCH WAIVER IS
EXPRESSED IN WRITING AND SIGNED BY AGENT, REQUISITE LENDERS OR ALL LENDERS, AS
APPLICABLE.  A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
 
10.8.  Entire Agreement; Amendments, Waivers.
 
(a) This Agreement and the other Debt Documents constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof and
supersede all prior understandings (whether written, verbal or implied) with
respect to such subject matter.  Section headings contained in this Agreement
have been included for convenience only, and shall not affect the construction
or interpretation of this Agreement.
 
(b) Except for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Debt Document, or any consent to any departure by Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Agent, Borrower and Lenders having more than (x) 50.1% of the aggregate
Commitments of all Lenders or (y) if such Commitments have expired or been
terminated, 50.1% of the aggregate outstanding principal amount of the Term
Loans (the “Requisite Lenders”).  Except as set forth in clause (c) below, all
such amendments, modifications, terminations or waivers requiring the consent of
any Lenders shall require the written consent of Requisite Lenders.
 
(c) No amendment, modification, termination or waiver of any provision of this
Agreement or any other Debt Document shall, unless in writing and signed by
Borrower, Agent and each Lender directly affected thereby: (i) increase or
decrease any Commitment of any Lender or increase or decrease the Total
Commitment (which shall be deemed to affect all Lenders), (ii) reduce the
principal of or rate of interest on any Obligation or the amount of any fees
payable hereunder (other than waiving the imposition of the Default Rate), (iii)
postpone the date fixed for or waive any payment of principal of or interest on
any Term Loan, or any fees hereunder, (iv) release all or substantially all of
the Collateral, except as otherwise expressly permitted in the Debt Documents
(which shall be deemed to affect all Lenders), (v) subordinate the Lien granted
in favor of the Agent securing the Obligations (which shall be deemed to affect
all Lenders), (vi) release a Loan Party from, or consent to a Loan Party’s
assignment or delegation of, such Loan Party’s obligations hereunder and under
the other Debt Documents or any Guarantor from its guaranty of the
Obligations (which shall be deemed to affect all Lenders) or (vii) amend,
modify, terminate or waive Section 8.4, 9.7 or 10.8(b) or (c).
 
(d) Notwithstanding any provision in this Section 10.8 to the contrary, no
amendment, modification, termination or waiver affecting or modifying the rights
or obligations of Agent hereunder shall be effective unless signed by Borrower,
Agent and Requisite Lenders.
 
 
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(e) Each Lender hereby consents to the release by Agent of any Lien held by the
Agent for the benefit of itself and the Lenders in any or all of the Collateral
to secure the Obligations upon the termination of the Commitments and the
payment and satisfaction in full of the Obligations.
 
10.9.  Binding Effect.  This Agreement shall continue in full force and effect
until the Termination Date; provided, however, that the provisions of Sections
2.3(e), 9.5, 10.5 and 10.6 and the other indemnities contained in the Debt
Documents shall survive the Termination Date.  The surrender, upon payment or
otherwise, of any Note or any of the other Debt Documents evidencing any of the
Obligations shall not affect the right of Agent to retain the Collateral for
such other Obligations as may then exist or as it may be reasonably contemplated
will exist in the future.  This Agreement and the grant of the security interest
in the Collateral pursuant to Section 3.1 shall automatically be reinstated if
Agent or any Lender is ever required to return or restore the payment of all or
any portion of the Obligations (all as though such payment had never been made).
 
10.10. Use of Logo.  Each Loan Party authorizes Agent and the Lenders to use its
name, logo and/or trademark without notice to or consent by such Loan Party, in
connection with certain promotional materials that Agent or a Lender may
disseminate to the public.  The promotional materials may include, but are not
limited to, brochures, video tape, internet website, press releases, advertising
in newspaper and/or other periodicals, lucites, and any other materials relating
the fact that Agent or a Lender has a financing relationship with Borrower and
such materials may be developed, disseminated and used without Loan Parties’
review.  Nothing herein obligates Agent or any Lender to use a Loan Party’s
name, logo and/or trademark, in any promotional materials of Agent or any
Lender.  Loan Parties shall not, and shall not permit any of its respective
Affiliates to, issue any press release or other public disclosure (other than
any document filed with any governmental authority relating to a public offering
of the securities of Borrower) using the name, logo or otherwise referring to
General Electric Capital Corporation, GE Healthcare Financial Services, Inc. or
of any of their affiliates, the Debt Documents or any transaction contemplated
herein or therein without at least two (2) Business Days prior written notice to
and the prior written consent of Agent unless, and only to the extent that, Loan
Parties or such Affiliate is required to do so under applicable law and then,
only after consulting with Agent prior thereto.
 
10.11. Waiver of Jury Trial.  EACH OF LOAN PARTIES, AGENT AND LENDERS
UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT
DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS AMONG LOAN
PARTIES, AGENT AND/OR LENDERS RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION
OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
AMONG LOAN PARTIES, AGENT AND/OR LENDERS.  THE SCOPE OF THIS WAIVER IS INTENDED
TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT.
THIS WAIVER IS IRREVOCABLE.  THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING.  THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION.  THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
 
10.12. Governing Law. THIS AGREEMENT, THE OTHER DEBT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (WITHOUT REGARD TO THE CONFLICT OF
 
 
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LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE COLLATERAL; PROVIDED,
HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK SHALL GOVERN
IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF ANY LIEN OR IN
REGARD TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS IN COLLATERAL,
SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL CONTINUE TO APPLY TO THAT
EXTENT.  IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR ANY OTHER DEBT DOCUMENT
IS COMMENCED BY AGENT IN THE STATE COURTS OF THE STATE OF NEW YORK IN THE COUNTY
OF NEW YORK OR IN THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
EACH LOAN PARTY HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF NEW
YORK.  NOTWITHSTANDING THE FOREGOING, THE AGENT AND LENDERS SHALL HAVE THE RIGHT
TO BRING ANY ACTION OR PROCEEDING AGAINST ANY LOAN PARTY (OR ANY PROPERTY) IN
THE COURT OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE
OBLIGATIONS.  ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY
REGISTERED MAIL, POSTAGE PREPAID, TO LOAN PARTIES AT THEIR ADDRESS DESCRIBED IN
SECTION 10.2, OR IF SERVED BY ANY OTHER MEANS PERMITTED BY APPLICABLE LAW.
 
10.13. Confidentiality.  Agent and each Lender agrees, as to itself, to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender,
as the case may be, applies to maintaining the confidentiality of its own
confidential information) to maintain as confidential all confidential
information provided to it by Borrower, any other Loan Party or any of their
respective Subsidiaries, and designated as confidential, except that Agent and
Lenders may disclose such information (a) to persons employed by, or
professionals engaged by, Agent or a Lender (it being understood that the
persons to whom such disclosure is made will be informed of the confidential
nature of such information and instructed to keep such information
confidential); (b) to any bona fide assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained in
this Section 10.13 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any governmental authority or reasonably believed by Agent or any Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process, provided that Agent and each Lender shall use reasonable efforts to
provide prior written notice to the Loan Parties of such disclosure, unless such
notice is prohibited by applicable law or an order of a governmental authority;
(d) as, on the advice of Agent’s or such Lender’s counsel, required by law;
(e) in connection with the exercise of any right or remedy under the Debt
Documents or in connection with any litigation to which Agent or such Lender is
a party or bound that relates to this Agreement, any other Debt Document or the
transactions contemplated hereby or thereby; or (f) that ceases to be
confidential through no fault of Agent or such Lender.
 
10.14. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement.  Delivery of an executed
signature page of this Agreement by facsimile transmission or electronic
transmission shall be as effective as delivery of a manually executed
counterpart hereof.
 
[Signature Page Follows]
 
 
-39-

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IN WITNESS WHEREOF, each Loan Party, Agent and Lenders, intending to be legally
bound hereby, have duly executed this Agreement in one or more counterparts,
each of which shall be deemed to be an original, as of the day and year first
aforesaid.
 
BORROWER:

CYTORI THERAPEUTICS, INC.
 
By:  /s/ Mark E.
Saad                                                                    
Name: Mark E. Saad
Title:  Chief Financial Officer
 
 
Address For Notices For All Loan Parties:
 
Cytori Therapeutics, Inc.
3020 Callan Road
San Diego, California  92121
Attention: Mark E. Saad
Phone: (858) 458-0900
Facsimile: (858) 450-4355

With a copy to:

Cytori Therapeutics, Inc.
3020 Callan Road
San Diego, California  92121
Attention: In-House Counsel
Phone: (858) 458-0900
Facsimile: (858) 450-4335
 
 
SIGNATURE PAGE 1

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AGENT AND LENDER:

GENERAL ELECTRIC CAPITAL CORPORATION
 
By:     /s/ Peter
Gibson                                                                    
Name: Peter Gibson
Title: Duly Authorized Signatory

 
Address For Notices:
 
General Electric Capital Corporation
c/o GE Healthcare Financial Services, Inc., LSF
83 Wooster Heights Road, Fifth Floor
Danbury, Connecticut 06810
Attention: Senior Vice President of Risk
Phone: (203) 205-5200
Facsimile: (203) 205-2192
 
With a copy to:

General Electric Capital Corporation
c/o GE Healthcare Financial Services, Inc.
Two Bethesda Metro Center, Suite 600
Bethesda,  Maryland  20814
Attention: General Counsel
Phone: (301) 961-1640
Facsimile:  (301) 664-9866

 
SIGNATURE PAGE 2

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LENDER:

SILICON VALLEY BANK
 
By:       /s/ Andre P.
Pelletier                                                                    
Name: Andre P. Pelletier
Title: Senior Relationship Manager

Address For Notices:
 
4370 La Jolla Village Drive, Ste. 860
San Diego, CA 92122
Attention: Sarah Larson
Phone: 858-784-3308
Facsimile: 858-622-1424

 
SIGNATURE PAGE 3

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