Exhibit 10.20

 

 

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended,
modified, supplemented or restated, this “Agreement”) dated as of February 28,
2020 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited
liability company with an office located at 133 North Fairfax Street,
Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity,
“Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a
party hereto from time to time including Oxford in its capacity as a Lender and
SILICON VALLEY BANK, a California corporation with an office located at 3003
Tasman Drive, Santa Clara, CA 95054 (“Bank” or “SVB”) (each a “Lender” and
collectively, the “Lenders”), and SUTRO BIOPHARMA, INC., a Delaware corporation
with offices located at 310 Utah Avenue, Suite 150, South San Francisco, CA
94080 (“Borrower”), provides the terms on which the Lenders shall lend to
Borrower and Borrower shall repay the Lenders. The parties agree as follows:

 

 

1.

ACCOUNTING AND OTHER TERMS

 

 

1.1

Accounting terms not defined in this Agreement shall be construed in accordance
with GAAP. Calculations and determinations must be made in accordance with GAAP,
as applicable. Capitalized terms not otherwise defined in this Agreement shall
have the meanings set forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein. All references to “Dollars”
or “$” are United States Dollars, unless otherwise noted.

 

 

2.

LOANS AND TERMS OF PAYMENT

 

 

2.1

Promise to Pay. Borrower hereby unconditionally promises to pay Collateral Agent
(for the benefit of the Lenders), the outstanding principal amount of all Term
Loans advanced to Borrower by each Lender and accrued and unpaid interest
thereon and any other amounts due hereunder as and when due in accordance with
this Agreement.

 

 

2.2

Term Loan.

 

(a)Availability. (i) Subject to the terms and conditions of this Agreement, the
Lenders agree, severally and not jointly, to make term loans to Borrower on the
Effective Date in an aggregate amount of Twenty Five Million Dollars
($25,000,000) according to each Lender’s Term A Loan Commitment as
set  forth  on Schedule 1.1 hereto (such term loans are hereinafter referred to
singly as a “Term A Loan”, and collectively as the “Term A Loans”). After
repayment, no Term A Loan may be re-borrowed.

 

(ii) Subject to the terms and
conditions  of  this  Agreement,  the  Lenders  agree, severally and not
jointly, during the Second Draw Period, to make term loans to Borrower in an
aggregate amount up to Five Million Dollars ($5,000,000) according to each
Lender’s Term B Loan Commitment as set forth  on Schedule 1.1 hereto (such term
loans are hereinafter referred to singly as a “Term B Loan”, and collectively as
the “Term B Loans”; each Term A Loan or Term B Loan is hereinafter referred to
singly as a “Term Loan” and the Term A Loans and the Term B Loans are
hereinafter referred to collectively as the “Term Loans”). After repayment, no
Term B Loan may be re-borrowed.

 

(b)Repayment. Borrower shall make monthly payments of interest only commencing
on the first (1st) Payment Date following the Funding Date of each Term Loan,
and continuing on the Payment Date of each successive month thereafter through
and including the Payment Date immediately preceding the Amortization Date.
Borrower agrees to pay, on the Funding Date of each Term Loan, any initial
partial monthly interest payment otherwise due for the period between the
Funding Date of such Term Loan and the first Payment Date thereof. Commencing on
the Amortization Date, and continuing on the Payment Date of each month
thereafter, Borrower shall make consecutive equal monthly payments of principal,
together with applicable interest, in arrears, to Collateral Agent (for the
benefit of the Lenders), as calculated by Collateral Agent (which calculations
shall be deemed correct absent manifest error) based upon: (1) the amount of
such Lender’s Term Loan, (2) the effective rate of interest, as determined in
Section 2.3(a), and (3) a repayment schedule equal to twenty-four (24) months.
All unpaid principal and accrued and unpaid interest with respect to each Term
Loan is due and payable in full on the Maturity Date. Each Term Loan may only be
prepaid in accordance with Sections 2.2(c) and 2.2(d).

 

 

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(c)Mandatory Prepayments. If the Term Loans are accelerated following the
occurrence of an Event of Default, Borrower shall immediately pay to Collateral
Agent (for the benefit of the Lenders), payable to Collateral Agent in
accordance with each Lender’s respective Pro Rata Share, an amount equal to the
sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid
interest thereon through the prepayment date, (ii) the Final Payment, (iii) the
Prepayment Fee, plus (iv) all other Obligations that are due and payable,
including Lenders’ Expenses and interest at the Default Rate with respect to any
past due amounts. Notwithstanding (but without duplication with) the foregoing,
on the Maturity Date, if the Final Payment had not previously been paid in full
in connection with the prepayment of the Term Loans in full, Borrower shall pay
to Collateral Agent, for payment to each Lender in accordance with its
respective Pro Rata Share, the Final Payment in respect of the Term Loan(s).

 

(d)Permitted Prepayment of Term Loans. Borrower shall have the option to prepay
all, but not less than all, of the Term Loans advanced by the Lenders under this
Agreement, provided Borrower (i) provides written notice to Collateral Agent of
its election to prepay the Term Loans at least thirty (30) days prior to such
prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable
to each Lender in accordance with its respective Pro Rata Share, an amount equal
to the sum of (A) all outstanding principal of the Term Loans plus accrued and
unpaid interest thereon through the prepayment date, (B) the Final Payment, (C)
the Prepayment Fee, plus (D) all other Obligations that are due and payable,
including Lenders’ Expenses and interest at the Default Rate with respect to any
past due amounts.

 

 

2.3

Payment of Interest on the Credit Extensions.

 

(a)Interest Rate. Subject to Section 2.3(b), the principal amount outstanding
under the Term Loans shall accrue interest at a floating per annum rate equal to
the Basic Rate, determined by Collateral Agent on the Funding Date of the
applicable Term Loan, which interest shall be payable monthly in arrears in
accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term
Loan commencing on, and including, the Funding Date of such Term Loan, and shall
accrue on the principal amount outstanding under such Term Loan through and
including the day on which such Term Loan is paid in full.

 

(b)Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall accrue interest at a floating per annum
rate equal to the rate that is otherwise applicable thereto plus five percentage
points (5.00%) (the “Default Rate”). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Collateral Agent.

 

(c)360-Day Year. Interest shall be computed on the basis of a three hundred
sixty (360) day year, and the actual number of days elapsed.

 

(d)Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any
deposit accounts, maintained by Borrower or any of its Subsidiaries, including
the Designated Deposit Account, for principal and interest payments or any other
amounts Borrower owes the Lenders under the Loan Documents when due. Any such
debits (or ACH activity) shall not constitute a set-off.

 

(e)Payments. Except as otherwise expressly provided herein, all payments by
Borrower under the Loan Documents shall be made to Collateral Agent for the
benefit of the respective Lender to which such payments are owed, at Collateral
Agent’s office in immediately available funds on the date specified herein.
Unless otherwise provided, interest is payable monthly on the Payment Date of
each month. Payments of principal and/or interest received after 3:00 PM Eastern
time are considered received at the opening of business on the next Business
Day. When a payment is due on a day that is not a Business Day, the payment is
due the next Business Day and additional fees or interest, as applicable, shall
continue to accrue until paid. All payments to be made by Borrower hereunder or
under any other Loan Document, including payments of principal and interest, and
all fees, expenses, indemnities and reimbursements, shall be made without
set-off, recoupment or counterclaim, in lawful money of the United States and in
immediately available funds.

 

 

2.4

Secured Promissory Notes. The Term Loans shall be evidenced by a Secured
Promissory Note or Notes in the form attached as Exhibit D hereto (each a
“Secured Promissory Note”), and shall be repayable as set forth in this
Agreement. Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the

 

 

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Funding Date of any Term Loan or at the time of receipt of any payment of
principal on such Lender’s Secured Promissory Note, an appropriate notation on
such Lender’s Secured Promissory Note Record reflecting the making of such Term
Loan or (as the case may be) the receipt of such payment. The outstanding amount
of each Term Loan set forth on such Lender’s Secured Promissory Note Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Lender, but the failure to record, or any error in so recording, any
such amount on such Lender’s Secured Promissory Note Record shall not limit or
otherwise affect the obligations of Borrower under any Secured Promissory Note
or any other Loan Document to make payments of principal of or interest on any
Secured Promissory Note when due. Upon receipt of an affidavit of an officer of
a Lender as to the loss, theft, destruction, or mutilation of its Secured
Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured
Promissory Note in the same principal amount thereof and of like tenor.

 

 

2.5

Fees. Borrower shall pay to Collateral Agent:

 

(a)Final Payment. The Final Payment, when due hereunder, to be shared between
the Lenders in accordance with their respective Pro Rata Shares;

 

(b)Prepayment Fee. The Prepayment Fee, when due hereunder, to be shared between
the Lenders in accordance with their respective Pro Rata Shares; and

 

(c)Good Faith Deposit. An amount of Fifty Thousand Dollars ($50,000) has been
received by Collateral Agent as a good faith deposit from Borrower on or about
February 13, 2020, and will be applied towards Lenders’ Expenses for the
documentation and negotiation of this Agreement that are payable by the Borrower
pursuant to Section 2.5(d) hereof. For the purposes of clarity, Borrower shall
be responsible for all Lender’s Expenses payable pursuant to Section 2.5(d)
hereof.

 

(d)Lenders’ Expenses. All out-of-pocket Lenders’ Expenses (including reasonable
attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.

 

 

2.6

Withholding. Payments received by the Lenders from Borrower hereunder will be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or
other charges imposed by any governmental authority (including any interest,
additions to tax or penalties applicable thereto). Specifically, however, if at
any time any Governmental Authority, applicable law, regulation or international
agreement requires Borrower to make any withholding or deduction from any such
payment or other sum payable hereunder to the Lenders, Borrower hereby covenants
and agrees that the amount due from Borrower with respect to such payment or
other sum payable hereunder will be increased to the extent necessary to ensure
that, after the making of such required withholding or deduction, each Lender
receives a net sum equal to the sum which it would have received had no
withholding or deduction been required and Borrower shall pay the full amount
withheld or deducted to the relevant Governmental Authority; provided, that
Borrower shall not be required to make such increased payment to a Lender who is
not a United States Person (as defined in Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended) or who has not provided a duly executed
original IRS Form W-9 certifying that such Lender is exempt from U.S. federal
backup withholding tax. Borrower will, upon request, furnish the Lenders with
proof reasonably satisfactory to the Lenders indicating that Borrower has made
such withholding payment; provided, however, that Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower. The agreements and
obligations of Borrower contained in this Section 2.6 shall survive the
termination of this Agreement.

 

 

 

3.

CONDITIONS OF LOANS

 

 

3.1

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

 

 

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(a)

original Loan Documents, each duly executed by Borrower and each Subsidiary, as

applicable;

 

(b)duly executed original Control Agreements with respect to any Collateral
Accounts maintained by Borrower or any of its Subsidiaries;

 

(c)duly executed original Secured Promissory Notes in favor of each Lender
according to its Term Loan Commitment Percentage;

 

 

(d)

[Reserved];

 

(e)the Operating Documents and good standing certificates of Borrower and its
Subsidiaries certified by the Secretary of State (or equivalent agency) of
Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and
each jurisdiction in which Borrower and each Subsidiary is qualified to conduct
business, each as of a date no earlier than thirty (30) days prior to the
Effective Date;

 

 

(f)

a completed Perfection Certificate for Borrower and each of its Subsidiaries;

 

 

(g)

the Annual Projections, for the current calendar year;

 

(h)duly executed original officer’s certificate for Borrower and each Subsidiary
that is a party to the Loan Documents, in a form acceptable to Collateral Agent
and the Lenders;

 

(i)certified copies, dated as of date no earlier than thirty (30) days prior to
the Effective Date, of financing statement searches, as Collateral Agent shall
request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;

 

(j)subject to the terms of the Post Closing Letter, to the extent requested by
the Lenders, a landlord’s consent executed in favor of Collateral Agent in
respect of all of Borrower’s and each Subsidiaries’ leased locations;

 

(k)subject to the terms of the Post Closing Letter, a bailee waiver executed in
favor of Collateral Agent in respect of each third party bailee where Borrower
or any Subsidiary maintains Collateral having a book value in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00);

 

 

(l)

a duly executed legal opinion of counsel to Borrower dated as of the Effective
Date;

 

(m)evidence satisfactory to Collateral Agent and the Lenders that the insurance
policies required by Section 6.5 hereof are in full force and effect, together
with appropriate evidence showing loss payable and/or additional insured clauses
or endorsements in favor of Collateral Agent, for the ratable benefit of the
Lenders;

 

(n)a copy of any applicable Registration Rights Agreement or Investors’ Rights
Agreement and any amendments thereto;

 

 

(o)

a payoff letter from Oxford Finance LLC and Silicon Valley Bank in respect of
the Existing

Indebtedness;

 

(p)evidence that (i) the Liens securing the Existing Indebtedness will be
terminated, and (ii) the documents and/or filings evidencing the perfection of
such Liens, including without limitation any financing statements and/or control
agreements, have or will, concurrently with the initial Credit Extension, be
terminated;

 

 

(q)

a subordination agreement, duly executed by each holder of Subordinated Debt;
and

 

 

(r)

payment of the fees and Lenders’ Expenses then due as specified in Section 2.5
hereof.

 

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3.2

Conditions Precedent to all Credit Extensions. The obligation of each Lender to
make each Credit Extension, including the initial Credit Extension, is subject
to the following conditions precedent:

 

 

(a)receipt by (i) the Lenders of an executed Disbursement Letter in the form of
Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance
Request Form in the form of Exhibit B-2 attached hereto;

 

(b)the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the date of the Disbursement
Letter (and the Loan Payment/Advance Request Form) and on the Funding Date of
each Credit Extension; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date,
and no Event of Default shall have occurred and be continuing or result from the
Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
hereof are true, accurate and complete in all material respects; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

 

 

(c)

in such Lender’s sole but reasonable discretion, there has not been any Material
Adverse

Change;

 

(d)to the extent not delivered at the Effective Date, (i) duly executed original
Secured Promissory Notes in the form attached hereto as Exhibit D in favor of
each Lender according to its Commitment Percentage, with respect to each Credit
Extension made by such Lender after the Effective Date and (ii) Warrants, in
number, form and content acceptable to each Lender, and in favor of each Lender
to purchase a certain number of shares of the Common Stock (as defined in the
Warrant) as set forth therein; and

 

 

(e)

payment of the fees and Lenders’ Expenses then due as specified in Section 2.5
hereof.

 

 

3.3

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

 

 

 

3.4

Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of a Term Loan set forth in this Agreement,
to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 3:00 PM Eastern time
five (5) Business Days prior to the date the Term Loan is to be made. Together
with any such electronic, facsimile or telephonic notification, Borrower shall
deliver to the Lenders by electronic mail or facsimile a completed Disbursement
Letter (and the Loan Payment/Advance Request Form, with respect to SVB) executed
by a Responsible Officer or his or her designee. The Lenders may rely on any
telephone notice given by a person whom a Lender reasonably believes is a
Responsible Officer or designee. On the Funding Date, each Lender shall credit
and/or transfer (as applicable) to the Designated Deposit Account, an amount
equal to its Term Loan Commitment.

 

 

 

4.

CREATION OF SECURITY INTEREST

 

 

4.1

Grant of Security Interest. Borrower hereby grants Collateral Agent, for the
ratable benefit of the Lenders, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in, and pledges to
Collateral Agent, for the ratable benefit of the Lenders, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral, subject only to
Permitted Liens that are permitted by the terms of this Agreement to

 

 

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have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial
tort claim (as defined in the Code), Borrower, shall promptly notify Collateral
Agent in a writing signed by Borrower, as the case may be, of the general
details thereof (and further details as may be required by Collateral Agent) and
grant to Collateral Agent, for the ratable benefit of the Lenders, in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Collateral Agent.

 

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

 

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as the Lenders’ obligation
to make Credit Extensions has terminated, Collateral Agent shall, at the sole
cost and expense of Borrower, release its Liens in the Collateral (including by
filing any appropriate termination statements and executing such other documents
reasonably requested by Borrower, and at the sole cost and expense of Borrower,
to effect and/or evidence the termination of its Liens in the Collateral) and
all rights therein shall revert to Borrower. In the event (x) all Obligations
(other than inchoate indemnity obligations), except for Bank Services, are
satisfied in full, and (y) this Agreement is terminated, Collateral Agent shall
terminate the security interest granted herein upon Borrower providing cash
collateral acceptable to Bank in its good faith business judgment for Bank
Services, if any. In the event such Bank Services consist of outstanding Letters
of Credit, it shall be sufficient cash collateral acceptable to Bank for
securing such Bank Services in applying the provisions of clause (y) with
respect to Bank Services that consist of Letters of Credit, if Borrower
provides, to Bank cash collateral in an amount equal to (x) if such Letters of
Credit are denominated in Dollars, then one hundred five percent (105%); and (y)
if such Letters of Credit are denominated in a Foreign Currency, then one
hundred ten percent (110%), of the Dollar Equivalent of the face amount of all
such Letters of Credit plus all interest, fees, and costs due or to become due
in connection therewith (as estimated by Bank in its good faith business
judgment), to secure all of the Obligations relating to such Letters of Credit.

 

 

4.2

Authorization to File Financing Statements. Borrower hereby authorizes
Collateral Agent to file financing statements or take any other action required
to perfect Collateral Agent’s security interests in the Collateral, without
notice to Borrower, with all appropriate jurisdictions to perfect or protect
Collateral Agent’s interest or rights under the Loan Documents, including a
notice that any disposition of the Collateral, except to the extent permitted by
the terms of this Agreement, by Borrower, or any other Person, shall be deemed
to violate the rights of Collateral Agent under the Code.

 

 

 

4.3

Pledge of Collateral. Borrower hereby pledges, assigns and grants to Collateral
Agent, for the ratable benefit of the Lenders, a security interest in all the
Shares, together with all proceeds and substitutions thereof, all cash, stock
and other moneys and property paid thereon, all rights to subscribe for
securities declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance of the
Obligations. On the Effective Date, or, to the extent not certificated as of the
Effective Date, within ten (10) days of the certification of any Shares, the
certificate or certificates for the Shares will be delivered to Collateral
Agent, accompanied by an instrument of assignment duly executed in blank by
Borrower. To the extent required by the terms and conditions governing the
Shares, Borrower shall cause the books of each entity whose Shares are part of
the Collateral and any transfer agent to reflect the pledge of the Shares. Upon
the occurrence and during the continuance of an Event of Default hereunder,
Collateral Agent may effect the transfer of any securities included in the
Collateral (including but not limited to the Shares) into the name of Collateral
Agent and cause new (as applicable) certificates representing such securities to
be issued in the name of Collateral Agent or its transferee. Borrower will
execute and deliver such documents, and take or cause to be taken such actions,
as Collateral Agent may reasonably request to perfect or continue the perfection
of Collateral Agent’s security interest in the Shares. Unless an Event of
Default shall have occurred and be continuing, Borrower shall be entitled to
exercise any voting rights with respect to the Shares and to give consents,
waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be
inconsistent with any of the terms of this Agreement or which would constitute
or create any violation of any of such terms. All such rights to vote and give
consents, waivers and ratifications shall terminate upon the occurrence and
continuance of an Event of Default.

 

 

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5.

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Collateral Agent and the Lenders as follows:

 

 

5.1

Due Organization, Authorization: Power and Authority. Borrower and each of its
Subsidiaries is duly existing and in good standing as a Registered Organization
in its jurisdictions of organization or formation and Borrower and each of its
Subsidiaries is qualified and licensed to do business and is in good standing in
any jurisdiction in which the conduct of its businesses or its ownership of
property requires that it be qualified except where the failure to do so could
not reasonably be expected to have a Material Adverse Change. In connection with
this Agreement, Borrower and each of its Subsidiaries has delivered to
Collateral Agent a completed perfection certificate signed by an officer of
Borrower or such Subsidiary (each a “Perfection Certificate” and collectively,
the “Perfection Certificates”). Borrower represents and warrants that as of the
Effective Date (a) Borrower and each of its Subsidiaries’ exact legal name is
that which is indicated on its respective Perfection Certificate and on the
signature page of each Loan Document to which it is a party; (b) Borrower and
each of its Subsidiaries is an organization of the type and is organized in the
jurisdiction set forth on its respective Perfection Certificate; (c) each
Perfection Certificate accurately sets forth each of Borrower’s and its
Subsidiaries’ organizational identification number or accurately states that
Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately
sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if
more than one, its chief executive office as well as Borrower’s and each of its
Subsidiaries’ mailing address (if different than its chief executive office);
(e) Borrower and each of its Subsidiaries (and each of its respective
predecessors) have not, in the past five (5) years, changed its jurisdiction of
organization, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is
accurate and complete as of the Effective Date and as of any date that such
Perfection Certificates may be updated after the Effective Date to the extent
permitted by one or more specific provisions in this Agreement; such updated
Perfection Certificates subject to the review and approval of Collateral Agent.
If Borrower or any of its Subsidiaries is not now a Registered Organization but
later becomes one, Borrower shall notify Collateral Agent of such occurrence and
provide Collateral Agent with such Person’s organizational identification number
within five (5) Business Days of receiving such organizational identification
number.

 

 

The execution, delivery and performance by Borrower and each of its Subsidiaries
of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational
documents, including its respective Operating Documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law applicable thereto, (iii) contravene, conflict or violate any applicable
order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or such Subsidiary, or any of their
property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant
to Section 6.1(b), or (v) constitute an event of default under any material
agreement by which Borrower or any of such Subsidiaries, or their respective
properties, is bound. Neither Borrower nor any of its Subsidiaries is in default
under any agreement to which it is a party or by which it or any of its assets
is bound in which such default could reasonably be expected to have a Material
Adverse Change.

 

 

5.2

Collateral.

 

(a)Borrower and each of its Subsidiaries have good title to, have rights in, and
the power to transfer each item of the Collateral upon which it purports to
grant a Lien under the Loan Documents, free and clear of any and all Liens
except Permitted Liens, and neither Borrower nor any of its Subsidiaries have
any Deposit Accounts, Securities Accounts, Commodity Accounts or other
investment accounts other than the Collateral Accounts or the other investment
accounts, if any, described in the Perfection Certificates delivered to
Collateral Agent in connection herewith with respect of which Borrower or such
Subsidiary has given Collateral Agent notice and taken such actions as are
necessary to give Collateral Agent a perfected security interest therein. The
Accounts are bona fide, existing obligations of the Account Debtors.

 

(b)On the Effective Date, and except as disclosed on the Perfection Certificate
(i) the Collateral is not in the possession of any third party bailee (such as a
warehouse), and (ii) no such third party bailee possesses components of the
Collateral in excess of Two Hundred Fifty Thousand Dollars ($250,000.00). None
of

 

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the components of the Collateral shall be maintained at locations other than as
disclosed in the Perfection Certificates on the Effective Date or as permitted
pursuant to Section 6.11.

 

 

(c)

All Inventory is in all material respects of good and marketable quality, free
from material

defects.

 

(d)Borrower and each of its Subsidiaries is the sole owner of the Intellectual
Property each respectively purports to own, free and clear of all Liens other
than Permitted Liens. Except as noted on the Perfection Certificates or
otherwise notified to Collateral Agent in writing after the Effective Date,
neither Borrower nor any of its Subsidiaries is a party to, nor is bound by, any
material license or other material agreement with respect to which Borrower or
such Subsidiary is the licensee that (i) prohibits or otherwise restricts
Borrower or its Subsidiaries from granting a security interest in Borrower’s or
such Subsidiaries’ interest in such material license or material agreement or
any other property, or (ii) for which a default under or termination of could
interfere with Collateral Agent’s or any Lender’s right to sell any Collateral.
Borrower shall provide written notice to Collateral Agent and each Lender within
ten (10) Business Days of Borrower or any of its Subsidiaries entering into or
becoming bound by any material license or other material agreement with respect
to which Borrower or any Subsidiary is the licensee (other than over-the-counter
software that is commercially available to the public).

 

 

5.3

Litigation. Except as disclosed (i) on the Perfection Certificates, or (ii) in
accordance  with Section 6.9 hereof, there are no actions, suits,
investigations, or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of its
Subsidiaries involving more than Two Hundred Fifty Thousand Dollars
($250,000.00).

 

 

 

5.4

No Material Deterioration in Financial Condition; Financial Statements. All
consolidated financial statements for Borrower and its Subsidiaries, delivered
to Collateral Agent fairly present, in conformity with GAAP, as applicable, in
all material respects the consolidated financial condition of Borrower and its
Subsidiaries, and the consolidated results of operations of Borrower and its
Subsidiaries. There has not been any material deterioration in the consolidated
financial condition of Borrower and its Subsidiaries since the date of the most
recent financial statements submitted to any Lender.

 

 

 

5.5

Solvency. Borrower is, and Borrower and each of its Subsidiaries, taken as a
whole, are, Solvent.

 

 

5.6

Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an
“investment company” or a company “controlled” by an “investment company” under
the Investment Company Act of 1940, as amended. Neither Borrower nor any of its
Subsidiaries is engaged as one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the Federal Reserve Board of
Governors). Borrower and each of its Subsidiaries has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of
its Subsidiaries is a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” as each term is defined and
used in the Public Utility Holding Company Act of 2005. Neither Borrower nor any
of its Subsidiaries has violated any laws, ordinances or rules, the violation of
which could reasonably be expected to have a Material Adverse Change. Neither
Borrower’s nor any of its Subsidiaries’ properties or assets has been used by
Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than in material compliance with applicable laws. Borrower and each of its
Subsidiaries has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as
currently conducted.

 

 

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise

 

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engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law.

 

 

5.7

Investments. Neither Borrower nor any of its Subsidiaries owns any stock,
shares, partnership interests or other equity securities except for Permitted
Investments.

 

 

 

5.8

Tax Returns and Payments; Pension Contributions. Borrower and each of its
Subsidiaries has timely filed all required tax returns and reports, and Borrower
and each of its Subsidiaries, has timely paid all foreign, federal, state, and
local taxes, assessments, deposits and contributions owed by Borrower and such
Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is
subject to taxes, including the United States, unless such taxes are being
contested in accordance with the following sentence or unless such unpaid state
and/or local taxes do not exceed $25,000 in the aggregate. Borrower and each of
its Subsidiaries, may defer payment of any contested taxes, provided that
Borrower or such Subsidiary, (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Collateral Agent in writing of the commencement of, and
any material development in, the proceedings, and (c) posts bonds or takes any
other steps required to prevent the Governmental Authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien.” Neither Borrower nor any of its Subsidiaries is aware
of any claims or adjustments proposed for any of Borrower’s or such
Subsidiaries’, prior tax years which could result in additional taxes becoming
due and payable by Borrower or its Subsidiaries. Borrower and each of its
Subsidiaries have paid all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms, and
neither Borrower nor any of its Subsidiaries have, withdrawn from participation
in, and have not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any liability of Borrower or its
Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other Governmental Authority.

 

 

 

5.9

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

 

 

 

5.10

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

 

 

 

5.11

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

 

 

 

5.12

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

 

 

9

 

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6.

AFFIRMATIVE COVENANTS

 

Borrower shall, and shall cause each of its Subsidiaries to, do all of the
following:

 

 

6.1

Government Compliance.

 

(a)Maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of organization and maintain qualification in
each jurisdiction in which the failure to so qualify could reasonably be
expected to have a Material Adverse Change. Comply with all laws, ordinances and
regulations to which Borrower or any of its Subsidiaries is subject, the
noncompliance with which could reasonably be expected to have a Material Adverse
Change.

 

(b)Obtain and keep in full force and effect, all of the material Governmental
Approvals necessary for the performance by Borrower and its Subsidiaries of
their respective businesses and obligations under the Loan Documents and the
grant of a security interest to Collateral Agent for the ratable benefit of the
Lenders, in all of the Collateral. Borrower shall promptly provide copies to
Collateral Agent of any material Governmental Approvals obtained by Borrower or
any of its Subsidiaries.

 

 

6.2

Financial Statements, Reports, Certificates.

 

 

(a)

Deliver to each Lender:

 

(i)as soon as available, but no later than forty (40) days after the last day of
each quarter, a company prepared consolidated and consolidating balance sheet,
income statement and cash flow statement covering the consolidated operations of
Borrower and its Subsidiaries for such quarter certified by a Responsible
Officer as being fairly stated in all material respects (subject to normal
year-end GAAP and audit adjustments and the absence of footnotes) and in a form
reasonably acceptable to Collateral Agent;

 

(ii)as soon as available, but no later than ninety (90) days after the last day
of Borrower’s fiscal year or within five (5) days of filing with the SEC,
audited consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion (other than a going-concern
qualification typical for companies similar to Borrower) on the financial
statements from an independent certified public accounting firm;

 

(iii)as soon as available after approval thereof by Borrower’s Board of
Directors, but no later than thirty (30) days after the last day of each of
Borrower’s fiscal years, Borrower’s annual financial projections for the entire
current fiscal year as approved by Borrower’s Board of Directors, which such
annual financial projections shall be set forth in a month-by-month format (such
annual financial projections delivered under this Section 6.2(a)(iii) to
Collateral Agent and the Lenders are referred to herein as the “Annual
Projections”; provided that, any revisions of the Annual Projections approved by
Borrower’s Board of Directors shall be delivered to Collateral Agent and the
Lenders no later than seven (7) days after such approval);

 

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

 

(v)in the event (and during the period) that Borrower becomes subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended,
within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission,

 

(vi)Borrower shall prompt notice of any material amendments of or other material
changes to the capitalization table of Borrower and any amendments of or other
changes to the Operating Documents of Borrower or any of its Subsidiaries,
together with any copies reflecting such amendments or changes with respect
thereto;

 

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(vii)prompt notice of any event (other than with respect to any third party)
that could reasonably be expected to materially and adversely affect the value
of the Intellectual Property;

 

(viii)as soon as available, but no later than thirty (30) days after the last
day of each month, copies of the month-end account statements for each
Collateral Account maintained by Borrower or its Subsidiaries, which statements
may be provided to Collateral Agent and each Lender by Borrower or directly from
the applicable institution(s);

 

(ix)prompt written notice of any changes to the beneficial ownership information
set out in Addendum 1 to the Perfection Certificate. Borrower understands and
acknowledges that Collateral Agent and each Lender relies on such true, accurate
and up-to-date beneficial ownership information to meet Collateral Agent’s and
such Lender’s regulatory obligations to obtain, verify and record information
about the beneficial owners of its legal entity customers; and

 

 

(x)

other information as reasonably requested by Collateral Agent or any Lender.

 

Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
internet at Borrower’s website address.

 

(b)Within thirty (30) days after the last day of each month, deliver to each
Lender, a duly completed Compliance Certificate signed by a Responsible Officer.

 

(c)Keep proper books of record and account in accordance with GAAP in all
material respects (except for interim and unaudited financial statements), in
which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities. Borrower shall, and
shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower,
Collateral Agent or any Lender, during regular business hours upon reasonable
prior notice (provided that no notice shall be required when an Event of Default
has occurred and is continuing), to visit and inspect any of its properties, to
examine and make abstracts or copies from any of its books and records, and to
conduct a collateral audit and analysis of its operations and the Collateral.
Such audits shall be conducted no more often than twice every year unless (and
more frequently if) an Event of Default has occurred and is continuing.

 

 

6.3

Inventory; Returns. Keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower, or any of its
Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or
such Subsidiary’s, customary practices as they exist at the Effective Date.
Borrower must promptly notify Collateral Agent and the Lenders of all returns,
recoveries, disputes and claims that involve more than Two Hundred Fifty
Thousand Dollars ($250,000.00) individually or in the aggregate in any calendar
year.

 

 

 

6.4

Taxes; Pensions. Timely file and require each of its Subsidiaries to timely
file, all required tax returns and reports and timely pay, and require each of
its Subsidiaries to timely file, all foreign, federal, state, and local taxes,
assessments, deposits and contributions owed by Borrower or its Subsidiaries,
except for deferred payment of any taxes contested pursuant to the terms of
Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with the terms of such plans.

 

 

 

6.5

Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral
insured for risks and in amounts standard for companies in Borrower’s and its
Subsidiaries’ industry and location and as Collateral Agent may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are reasonably satisfactory to Collateral Agent and Lenders. All property
policies shall have a lender’s loss payable endorsement showing Collateral Agent
as lender loss payee and waive subrogation against Collateral Agent, and all
liability policies shall show, or have endorsements showing, Collateral Agent,
as additional insured. The Collateral Agent shall be named as lender loss payee
and/or additional insured with respect to any such insurance providing coverage
in respect of any Collateral, and each provider of any such insurance agree, by
endorsement upon the policy or policies issued

 

 

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by it or by independent instruments furnished to the Collateral Agent, that it
will give the Collateral Agent thirty (30) days prior written notice before any
such policy or policies shall be materially altered or canceled; provide that in
the event that any provider of any such insurance refuses to give the Collateral
Agent thirty (30) days prior written notice before any such policy or policies
shall be materially altered or canceled, then Borrower shall (i) give the
Collateral Agent twenty (20) days prior written notice before Borrower initiates
any material alteration or cancels any such policy or policies, and (ii)
immediately give the Collateral Agent written notice upon obtaining knowledge
that any such policy or policies shall be materially altered or canceled by a
provider of any such insurance. At Collateral Agent’s request, Borrower shall
deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Collateral Agent’s option, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account
of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of
Default has occurred and is continuing, Borrower shall have the option of
applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand
Dollars ($250,000.00) with respect to any loss, but not exceeding Five Hundred
Thousand Dollars ($500,000.00), in the aggregate for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property (i)
shall be of equal or like value as the replaced or repaired Collateral and (ii)
shall be deemed Collateral in which Collateral Agent has been granted a first
priority security interest, and (b) after the occurrence and during the
continuance of an Event of Default, all proceeds payable under such casualty
policy shall, at the option of Collateral Agent, be payable to Collateral Agent,
for the ratable benefit of the Lenders, on account of the Obligations. If
Borrower or any of its Subsidiaries fails to obtain insurance as required under
this Section 6.5 or to pay any amount or furnish any required proof of payment
to third persons, Collateral Agent and/or any Lender may make, at Borrower’s
expense, all or part of such payment or obtain such insurance policies required
in this Section 6.5, and take any action under the policies Collateral Agent or
such Lender deems prudent.

 

 

6.6

Operating Accounts.

 

(a)Maintain all of Borrower’s and its Subsidiaries’ Collateral Accounts with
Bank or its Affiliates in accounts which are subject to a Control Agreement in
favor of Collateral Agent.

 

(b)Borrower shall provide Collateral Agent five (5) days’ prior written notice
before Borrower or any of its Subsidiaries establishes any Collateral Account at
or with any Person other than Bank or its Affiliates. In addition, for each
Collateral Account that Borrower or any of its Subsidiaries at any time
maintains, Borrower or such Subsidiary shall cause the applicable bank or
financial institution at or with which such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such
Collateral Account in accordance with the terms hereunder prior to the
establishment of such Collateral Account, which Control Agreement may not be
terminated without prior written consent of Collateral Agent. The provisions of
the previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s, or any of its Subsidiaries’, employees and identified
to Collateral Agent by Borrower as such in the Perfection Certificates as may be
updated after the Effective Date subject to the review and approval of
Collateral Agent.

 

(c)Neither Borrower nor any of its Subsidiaries shall maintain any Collateral
Accounts except Collateral Accounts maintained in accordance with Sections
6.6(a) and (b).

 

 

6.7

Protection of Intellectual Property Rights. Borrower and each of its
Subsidiaries shall: (a) use commercially reasonable efforts consistent with
current business practices to protect, defend and maintain the validity and
enforceability of its Intellectual Property that is material to Borrower’s
business; (b) promptly after Borrower becomes aware thereof advise Collateral
Agent in writing of material infringement by a third party of its Intellectual
Property that is material to Borrower’s business; and (c) not allow any
Intellectual Property material to Borrower’s business to be abandoned, forfeited
or dedicated to the public without Collateral Agent’s prior written consent,
provided, however, Borrower may abandon, modify or delay filing, prosecution or
issuance of any immaterial Intellectual Property without Collateral Agent’s
prior written consent if Borrower determines in its reasonable discretion that
further prosecution of such application is not commercially reasonable, and
provides Collateral Agent with prompt written notice of the same.

 

 

 

6.8

Litigation Cooperation. Commencing on the Effective Date and continuing through
the termination of this Agreement, make available to Collateral Agent and the
Lenders, without expense to Collateral

 

 

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Agent or the Lenders at reasonable times and with reasonable advance notice,
Borrower and each of Borrower’s officers, employees and agents and Borrower’s
Books, to the extent that Collateral Agent or any Lender may reasonably deem
them necessary to prosecute or defend any third-party suit or proceeding
instituted by or against Collateral Agent or any Lender with respect to any
Collateral or relating to Borrower. In such event, Collateral Agent and the
Lenders shall work cooperatively with Borrower to minimize disruption, to the
extent reasonably possible, of Borrower’s ongoing operations.

 

 

6.9

Notices of Litigation and Default. Borrower will give prompt written notice to
Collateral Agent and the Lenders of any litigation or governmental proceedings
pending or threatened (in writing) against Borrower or any of its Subsidiaries,
which could reasonably be expected to result in damages or costs to Borrower or
any of its Subsidiaries of Two Hundred Fifty Thousand Dollars ($250,000.00) or
more or which could reasonably be expected to have a Material Adverse Change.
Without limiting or contradicting any other more specific provision of this
Agreement, promptly (and in any event within three (3) Business Days) upon
Borrower becoming aware of the existence of any Event of Default or event which,
with the giving of notice or passage of time, or both, would constitute an Event
of Default, Borrower shall give written notice to Collateral Agent and the
Lenders of such occurrence, which such notice shall include a reasonably
detailed description of such Event of Default or event which, with the giving of
notice or passage of time, or both, would constitute an Event of Default.

 

 

 

6.10

Intentionally Omitted.

 

 

6.11

Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its
Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will first
receive the written consent of Collateral Agent (unless the new location is not
the chief executive office of Borrower or such Subsidiary or the Collateral at
such new location is not valued in excess of Two Hundred Fifty Thousand
($250,000.00) in the aggregate, and then Borrower or such Subsidiary shall only
be required to provide Collateral Agent with written notice of such new location
with thirty (30) days of the addition of such new location as an office or
business location) and, in the event that the new location is the chief
executive office of Borrower or such Subsidiary or the Collateral at any such
new location is valued in excess of Two Hundred Fifty Thousand ($250,000.00) in
the aggregate, such bailee or landlord, as applicable, must execute and deliver
a bailee waiver or landlord waiver, as applicable, in form and substance
reasonably satisfactory to Collateral Agent prior to the addition of any new
offices or business locations, or any such storage with or delivery to any such
bailee, as the case may be.

 

 

 

6.12

Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its
Subsidiaries creates or acquires any Subsidiary, Borrower shall provide prior
written notice to Collateral Agent and each Lender of the creation or
acquisition of such new Subsidiary and take all such action as may be reasonably
required by Collateral Agent or any Lender to cause each such Subsidiary to
become a co-Borrower hereunder or to guarantee the Obligations of Borrower under
the Loan Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant
and pledge to Collateral Agent, for the ratable benefit of the Lenders, a
perfected security interest in the Shares of each such newly created Subsidiary;
provided, however, that solely in the circumstance in which Borrower or any
Subsidiary creates or acquires a Foreign Subsidiary in an acquisition permitted
by Section 7.7 hereof or otherwise approved by the Required Lenders, (i) such
Foreign Subsidiary shall not be required to become a co-Borrower hereunder,
guarantee the Obligations of Borrower under the Loan Documents and grant a
continuing pledge and security interest in and to the assets of such Foreign
Subsidiary, and (ii) Borrower shall not be required to grant and pledge to
Collateral Agent, for the ratable benefit of Lenders, a perfected security
interest in more than sixty-five percent (65%) of the Shares of such Foreign
Subsidiary, if Borrower demonstrates to the reasonable satisfaction of
Collateral Agent that such Foreign Subsidiary providing such guarantee or pledge
and security interest or Borrower providing a perfected security interest in
more than sixty-five percent (65%) of the Shares would create a present and
existing adverse tax consequence to Borrower under the U.S. Internal Revenue
Code.

 

 

 

6.13

Further Assurances.

 

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(a)Execute any further instruments and take further action as Collateral Agent
or any Lender reasonably requests to perfect or continue Collateral Agent’s Lien
in the Collateral or to effect the purposes of this Agreement.

 

(b)Deliver to Collateral Agent and Lenders, within five (5) days after the same
are sent or received, copies of all material correspondence, reports, documents
and other filings with any Governmental Authority that could reasonably be
expected to have a material adverse effect on any of the Governmental Approvals
material to Borrower’s business or otherwise could reasonably be expected to
have a Material Adverse Change.

 

 

7.

NEGATIVE COVENANTS

 

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of
the following without the prior written consent of the Required Lenders:

 

 

7.1

Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (a) of Inventory
in the ordinary course of business; (b) of worn out or obsolete Equipment; (c)
of property by the Borrower to a Subsidiary that is a Guarantor; (d) in
connection with Permitted Assignments, Permitted Liens, Permitted Investments
and Permitted Licenses; and (e) Transfers in the ordinary course of business of
Borrower, or its Subsidiaries, in addition to those specifically enumerated
above, to the extent the same are specifically reflected in the Annual
Projections and not otherwise prohibited by the terms of this Agreement or any
other Loan Document.

 

 

 

7.2

Changes in Business, Management, Ownership, or Business Locations. (a) Engage in
or permit any of its Subsidiaries to engage in any business other than the
businesses engaged in by Borrower as of the Effective Date or reasonably related
thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be
actively engaged in the management of Borrower unless written notice thereof is
provided to Collateral Agent within five (5) Business Days of such change, or
(ii) enter into any transaction or series of related transactions in which the
stockholders of Borrower who were not stockholders immediately prior to the
first such transaction own more than forty nine percent (49%) of the voting
stock of Borrower immediately after giving effect to such transaction or related
series of such transactions (other than by the sale of Borrower’s equity
securities in a public offering, a private placement of public equity or to
venture capital investors so long as Borrower identifies to Collateral Agent the
venture capital investors prior to the closing of the transaction). Borrower
shall not, without at least thirty (30) days’ prior written notice to Collateral
Agent: (A) add any new offices or business locations, including warehouses
(unless such new offices or business locations (i) contain less than Two Hundred
Fifty Thousand Dollars ($250,000.00) in assets or property of Borrower or any of
its Subsidiaries and (ii) are not Borrower’s or its Subsidiaries’ chief
executive office); (B) change its jurisdiction of organization, (C) change its
organizational structure or type, (D) change its legal name, or (E) change any
organizational number (if any) assigned by its jurisdiction of organization.

 

 

 

7.3

Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries
to merge or consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock, shares
or property of another Person. A Subsidiary may merge or consolidate into
another Subsidiary (provided such surviving Subsidiary is a “co-Borrower”
hereunder or has provided a secured Guaranty of Borrower’s Obligations
hereunder) or with (or into) Borrower provided Borrower is the surviving legal
entity, and as long as no Event of Default is occurring prior thereto or arises
as a result therefrom. Without limiting the foregoing, Borrower shall not,
without Collateral Agent’s prior written consent, enter into any binding
contractual arrangement with any Person to attempt to facilitate a merger or
acquisition of Borrower, unless (i) no Event of Default exists when such
agreement is entered into by Borrower, (ii) such agreement does not give such
Person the right to claim any fees, payments or damages from Borrower in excess
of Two Hundred Fifty Thousand Dollars ($250,000.00), and (iii) Borrower notifies
Collateral Agent in advance of entering into such an agreement.

 

 

 

7.4

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

 

 

 

7.5

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

 

 

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for Permitted Liens that are permitted by the terms of this Agreement to have
priority over Collateral Agent’s Lien), or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Collateral Agent,
for the ratable benefit of the Lenders) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower, or any of its
Subsidiaries, from assigning, mortgaging, pledging, granting a security interest
in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual
Property, except as is otherwise permitted in Section 7.1 hereof and the
definition of “Permitted Liens” herein.

 

 

7.6

Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.6 hereof.

 

 

 

7.7

Distributions; Investments. (a) Pay any dividends (other than dividends payable
solely in capital stock) or make any distribution or payment in respect of or
redeem, retire or purchase any capital stock (other than repurchases (x) made
pursuant to the terms of employee stock purchase plans, employee restricted
stock agreements, stockholder rights plans, director or consultant stock option
plans, or similar plans, provided such repurchases do not exceed One Two Hundred
Fifty Thousand Dollars ($250,000.00) in the aggregate per fiscal year, (y) that
are deemed to occur upon exercise of stock options or warrants if such equity
interests represents a portion of the exercise price or such options or
warrants, or (z) that are deemed to occur upon the withholding of a portion of
the equity interests granted or awarded to a current or former officer,
director, employee or consultant to pay for the taxes payable by such Person
upon such grant or award (or upon vesting thereof), or (b) directly or
indirectly make any Investment other than Permitted Investments, or permit any
of its Subsidiaries to do so.

 

 

 

7.8

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

 

(b) Subordinated Debt or equity investments by Borrower’s investors in Borrower
or its Subsidiaries.

 

 

7.9

Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or

 

(b) amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or adversely affect the subordination thereof
to Obligations owed to the Lenders.

 

 

7.10

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

 

 

 

7.11

Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower
and each of its Subsidiaries that pursuant to the requirements of Anti-Terrorism
Laws, and Collateral Agent’s policies and practices, Collateral Agent is
required to obtain, verify and record certain information and documentation that
identifies Borrower and each of its Subsidiaries and their principals, which
information includes the name and address of Borrower and each of its
Subsidiaries and their principals and such other information that will allow
Collateral Agent to identify such party in accordance with Anti-Terrorism Laws.
Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of
its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly
enter into any documents, instruments, agreements or contracts with any Person
listed on the OFAC Lists. Borrower and each of its Subsidiaries shall
immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge
that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering. Neither Borrower nor any of its
Subsidiaries shall, nor shall Borrower or any

 

 

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of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i)
conduct any business or engage in any transaction or dealing with any Blocked
Person, including, without limitation, the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to Executive Order No. 13224
or any similar executive order or other Anti-Terrorism Law, or (iii) engage in
or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

 

8.

EVENTS OF DEFAULT

 

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

 

 

8.1

Payment Default. Borrower fails to (a) make any payment of principal or interest
on any Credit Extension on its due date, or (b) pay any other Obligations within
three (3) Business Days after such Obligations are due and payable (which three
(3) Business Day grace period shall not apply to payments due on the Maturity
Date or the date of acceleration pursuant to Section 9.1 (a) hereof). During the
cure period, the failure to cure the payment default is not an Event of Default
(but no Credit Extension will be made during the cure period);

 

 

 

8.2

Covenant Default.

 

 

(a)

Borrower or any of its Subsidiaries fails or neglects to perform any obligation
in Sections

6.2 (Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance),
6.6 (Operating Accounts), 6.7 (Protection of Intellectual Property Rights), 6.9
(Notice of Litigation and Default), 6.12 (Creation/Acquisition of Subsidiaries)
or 6.13 (Further Assurances) or Borrower violates any covenant in Section 7; or

 

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

 

(a)

above;

 

 

8.3

Material Adverse Change. A Material Adverse Change occurs;

 

 

8.4

Attachment; Levy; Restraint on Business.

 

(a)(i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or any of its Subsidiaries or of any entity under control
of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s
Affiliate or any bank or other institution at which Borrower or any of its
Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or
assessment is filed against Borrower or any of its Subsidiaries or their
respective assets by any government agency, and the same under subclauses (i)
and (ii) hereof are not, within ten

(10) days after the occurrence thereof, discharged or stayed (whether through
the posting of a bond or otherwise); provided, however, no Credit Extensions
shall be made during any ten (10) day cure period; and

 

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

 

 

8.5

Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b)
Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower or

 

 

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any of its Subsidiaries and not dismissed or stayed within forty-five (45) days
(but no Credit Extensions shall be made while Borrower or any Subsidiary is
Insolvent and/or until any Insolvency Proceeding is dismissed);

 

 

8.6

Other Agreements. There is a default in any agreement to which Borrower or any
of its Subsidiaries is a party with a third party or parties resulting in a
right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00) or that could reasonably be expected to have a
Material Adverse Change;

 

 

 

8.7

Judgments. One or more judgments, orders, or decrees for the payment of money in
an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000.00) (not covered by independent third-party insurance
as to which liability has been accepted by such insurance carrier) shall be
rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a period of ten

 

(10) days after the entry thereof (provided that no Credit Extensions will be
made prior to the satisfaction, vacation, or stay of such judgment, order or
decree);

 

 

8.8

Misrepresentations. Borrower or any of its Subsidiaries or any Person acting for
Borrower or any of its Subsidiaries makes any representation, warranty, or other
statement now or later in this Agreement, any Loan Document or in any writing
delivered to Collateral Agent and/or Lenders or to induce Collateral Agent
and/or the Lenders to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material
respect when made;

 

 

 

8.9

Subordinated Debt. A default or breach occurs under any agreement between
Borrower or any of its Subsidiaries and any creditor of Borrower or any of its
Subsidiaries that signed a subordination, intercreditor, or other similar
agreement with Collateral Agent or the Lenders, or any creditor that has signed
such an agreement with Collateral Agent or the Lenders breaches any terms of
such agreement;

 

 

 

8.10

Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in full
force and effect;

(b)any Guarantor does not perform any obligation or covenant under any Guaranty;
(c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs
with respect to any Guarantor, or (d) the liquidation, winding up, or
termination of existence of any Guarantor;

 

 

8.11

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

 

 

 

8.12

Lien Priority. Any Lien created hereunder or by any other Loan Document shall at
any time fail to constitute a valid and perfected Lien on any of the Collateral
purported to be secured thereby, subject to no prior or equal Lien, other than
Permitted Liens which are permitted to have priority in accordance with the
terms of this Agreement; or

 

 

 

8.13

Delisting. The shares of common stock of Borrower are delisted from the NASDAQ
Capital Market or New York Stock Exchange (or any other nationally recognized
stock exchange in the United States having listing standards at least as
restrictive as the NASDAQ Capital Market or New York Stock Exchange) because of
failure to comply with continued listing standards thereof or due to a voluntary
delisting which results in such shares not being listed on the NASDAQ Capital
Market, New York Stock Exchange or any other nationally recognized stock
exchange in the United States having listing standards at least as restrictive
as the NASDAQ Capital Market or New York Stock Exchange.

 

 

 

9.

RIGHTS AND REMEDIES

 

 

9.1

Rights and Remedies.

 

(a)Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent may, and at the written direction of Required Lenders shall,
without notice or demand, do any or all of the following:

 

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(i) deliver notice of the Event of Default to Borrower, (ii) by notice to
Borrower declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations shall be immediately due
and payable without any action by Collateral Agent or the Lenders) or (iii) by
notice to Borrower suspend or terminate the obligations, if any, of the Lenders
to advance money or extend credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Collateral Agent and/or the
Lenders (but if an Event of Default described in Section 8.5 occurs all
obligations, if any, of the Lenders to advance money or extend credit for
Borrower’s benefit under this Agreement or under any other agreement between
Borrower and Collateral Agent and/or the Lenders shall be immediately terminated
without any action by Collateral Agent or the Lenders).

 

(b)Without  limiting  the  rights  of  Collateral  Agent  and  the  Lenders  set  forth  in
Section 9.1(a) above, upon the occurrence and during the continuance of an Event
of Default, Collateral Agent shall have the right, without notice or demand, to
do any or all of the following:

 

 

(i)

foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

(ii)apply to the Obligations any (a) balances and deposits of Borrower that
Collateral Agent or any Lender holds or controls, or (b) any amount held or
controlled by Collateral Agent or any Lender owing to or for the credit or the
account of Borrower; and/or

 

(iii)commence and prosecute an Insolvency Proceeding or consent to Borrower
commencing any Insolvency Proceeding.

 

(c)Without limiting the rights of Collateral Agent and the Lenders set forth in
Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of
an Event of Default, Collateral Agent shall have the right, without notice or
demand, to do any or all of the following:

 

(i)settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Collateral Agent considers advisable,
notify any Person owing Borrower money of Collateral Agent’s security interest
in such funds, and verify the amount of such account;

 

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

 

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

 

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

 

 

(v)

demand and receive possession of Borrower’s Books;

 

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(vi)appoint a receiver to seize, manage and realize any of the Collateral, and
such receiver shall have any right and authority as any competent court will
grant or authorize in accordance with any applicable law, including any power or
authority to manage the business of Borrower or any of its Subsidiaries;

 

(vii)subject to clauses 9.1(a) and (b), exercise all rights and remedies
available to Collateral Agent and each Lender under the Loan Documents or at law
or equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof);

 

(viii)for any Letters of Credit, demand that Borrower (i) deposit cash with Bank
in an amount equal to (x) if such Letters of Credit are denominated in Dollars,
then one hundred five percent (105%); and

(y) if such Letters of Credit are denominated in a Foreign Currency, then one
hundred ten percent (110%), of the Dollar Equivalent of the aggregate face
amount of all Letters of Credit remaining undrawn (plus all interest, fees, and
costs due or to become due in connection therewith (as estimated by Bank in its
good faith business judgment)), to secure all of the Obligations relating to
such Letters of Credit, as collateral security for the repayment of any future
drawings under such Letters of Credit, and Borrower shall forthwith deposit and
pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to
be paid or payable over the remaining term of any Letters of Credit; and

 

 

(ix)

terminate any FX Contracts.

 

Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance.
As used in the immediately preceding sentence, “Exigent Circumstance” means any
event or circumstance that, in the reasonable judgment of Collateral Agent,
imminently threatens the ability of Collateral Agent to realize upon all or any
material portion of the Collateral, such as, without limitation, fraudulent
removal, concealment, or abscondment thereof, destruction or material waste
thereof, or failure of Borrower or any of its Subsidiaries after reasonable
demand to maintain or reinstate adequate casualty insurance coverage, or which,
in the judgment of Collateral Agent, could reasonably be expected to result in a
material diminution in value of the Collateral. Notwithstanding any provision of
this Agreement or any of the Loan Documents to the contrary, for so long as
Celgene Corporation’s existing collaboration and license agreement (referring
specifically to the amended and restated agreement in effect since August 2,
2017) with Borrower remains in effect, Collateral Agent shall not exercise any
of its rights or remedies with respect to any Collateral located at 870 and 894
Industrial Road, San Carlos, CA 94070, for a period of five (5) Business Days
following the occurrence of any Event of Default (other than an Event of Default
described in Section 8.5).

 

 

9.2

Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s or any of its
Subsidiaries’ name on any checks or other forms of payment or security; (b) sign
Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for
any Account or drafts against Account Debtors;

 

(c) settle and adjust disputes and claims about the Accounts directly with
Account Debtors, for amounts and on terms Collateral Agent determines
reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance
policies;

(e)pay, contest or settle any Lien, charge, encumbrance, security interest, and
adverse claim in or to the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; and (f) transfer
the Collateral into the name of Collateral Agent or a third party as the Code or
any applicable law permits. Borrower hereby appoints Collateral Agent as its
lawful attorney-in-fact to sign Borrower’s or any of its Subsidiaries’ name on
any documents necessary to perfect or continue the perfection of Collateral
Agent’s security interest in the Collateral regardless of whether an Event of
Default has occurred until all Obligations (other than inchoate indemnity
obligations) have been satisfied in full and Collateral Agent and the Lenders
are under no further obligation to make Credit Extensions hereunder. Collateral
Agent’s foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney
in fact, and all of Collateral Agent’s rights and powers, coupled with an
interest, are irrevocable until all Obligations (other than inchoate indemnity
obligations) have been fully repaid and performed and Collateral Agent’s and the
Lenders’ obligation to provide Credit Extensions terminates.

 

 

9.3

Protective Payments. If Borrower or any of its Subsidiaries fail to obtain the
insurance called for by Section 6.5 or fails to pay any premium thereon or fails
to pay any other amount which Borrower or any of its Subsidiaries is obligated
to pay under this Agreement or any other Loan Document, Collateral Agent may
obtain such insurance or make such payment, and all amounts so paid by
Collateral Agent are Lenders’ Expenses and immediately

 

 

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due and payable, bearing interest at the Default Rate, and secured by the
Collateral. Collateral Agent will make reasonable efforts to provide Borrower
with notice of Collateral Agent obtaining such insurance or making such payment
at the time it is obtained or paid or within a reasonable time thereafter. No
such payments by Collateral Agent are deemed an agreement to make similar
payments in the future or Collateral Agent’s waiver of any Event of Default.

 

 

9.4

Application of Payments and Proceeds. Notwithstanding anything to the contrary
contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default, (a) Borrower irrevocably waives the right to direct the
application of any and all payments at any time or times thereafter received by
Collateral Agent from or on behalf of Borrower or any of its Subsidiaries of all
or any part of the Obligations, and, as between Borrower on the one hand and
Collateral Agent and Lenders on the other, Collateral Agent shall have the
continuing and exclusive right to apply and to reapply any and all payments
received against the Obligations in such manner as Collateral Agent may deem
advisable notwithstanding any previous application by Collateral Agent, and (b)
the proceeds of any sale of, or other realization upon all or any part of the
Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued
and unpaid interest on the Obligations (including any interest which, but for
the provisions of the United States Bankruptcy Code, would have accrued on such
amounts); third, to the principal amount of the Obligations outstanding; and
fourth, to any other indebtedness or obligations of Borrower owing to Collateral
Agent or any Lender under the Loan Documents. Any balance remaining shall be
delivered to Borrower or to whoever may be lawfully entitled to receive such
balance or as a court of competent jurisdiction may direct. In carrying out the
foregoing, (x) amounts received shall be applied in the numerical order provided
until exhausted prior to the application to the next succeeding category, and
(y) each of the Persons entitled to receive a payment in any particular category
shall receive an amount equal to its pro rata share of amounts available to be
applied pursuant thereto for such category. Any reference in this Agreement to
an allocation between or sharing by the Lenders of any right, interest or
obligation “ratably,” “proportionally” or in similar terms shall refer to Pro
Rata Share unless expressly provided otherwise. Collateral Agent, or if
applicable, each Lender, shall promptly remit to the other Lenders such sums as
may be necessary to ensure the ratable repayment of each Lender’s portion of any
Term Loan and the ratable distribution of interest, fees and reimbursements paid
or made by Borrower. Notwithstanding the foregoing, a Lender receiving a
scheduled payment shall not be responsible for determining whether the other
Lenders also received their scheduled payment on such date; provided, however,
if it is later determined that a Lender received more than its ratable share of
scheduled payments made on any date or dates, then such Lender shall remit to
Collateral Agent or other Lenders such sums as may be necessary to ensure the
ratable payment of such scheduled payments, as instructed by Collateral Agent.
If any payment or distribution of any kind or character, whether in cash,
properties or securities, shall be received by a Lender in excess of its ratable
share, then the portion of such payment or distribution in excess of such
Lender’s ratable share shall be received by such Lender in trust for and shall
be promptly paid over to the other Lender for application to the payments of
amounts due on the other Lenders’ claims. To the extent any payment for the
account of Borrower is required to be returned as a voidable transfer or
otherwise, the Lenders shall contribute to one another as is necessary to ensure
that such return of payment is on a pro rata basis. If any Lender shall obtain
possession of any Collateral, it shall hold such Collateral for itself and as
agent and bailee for Collateral Agent and other Lenders for purposes of
perfecting Collateral Agent’s security interest therein.

 

 

 

9.5

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

 

 

 

9.6

No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender, at
any time or times, to require strict performance by Borrower of any provision of
this Agreement or any other Loan Document shall not waive, affect, or diminish
any right of Collateral Agent or any Lender thereafter to demand strict
performance and compliance herewith or therewith. No waiver hereunder shall be
effective unless signed by Collateral Agent and the Required Lenders and then is
only effective for the specific instance and purpose for which it is given. The
rights and remedies of Collateral Agent and the Lenders under this Agreement and
the other Loan Documents are cumulative. Collateral Agent and the Lenders have
all rights and remedies provided under the Code, any applicable law, by law, or
in equity. The exercise by Collateral Agent or any Lender of one right or remedy
is not an election, and Collateral

 

 

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Agent’s or any Lender’s waiver of any Event of Default is not a continuing
waiver. Collateral Agent’s or any Lender’s delay in exercising any remedy is not
a waiver, election, or acquiescence.

 

 

9.7

Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees held
by Collateral Agent or any Lender on which Borrower or any Subsidiary is liable.

 

 

 

10.

NOTICES

 

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

 

If to Borrower:Sutro Biopharma, Inc.

310 Utah Avenue, Suite 150 South San Francisco, CA 94080 Attn: Edward Albini

Email: ealbini@sutrobio.com

 

 

with a copy (which shall not constitute notice) to:

Fenwick & West LLP

1191 Second Ave, 10th Floor Seattle, WA 98101

Attn: Amanda Rose Fax: (415) 281-1350

Email: arose@fenwick.com

 

 

If to Collateral Agent:OXFORD FINANCE LLC

133 North Fairfax Street Alexandria, Virginia 22314 Attention: Legal Department
Fax: (703) 519-5225

Email: LegalDepartment@oxfordfinance.com

 

 

with a copy to

SILICON VALLEY BANK 3003 Tasman Drive

 

Santa Clara, CA 95054 Attn: Peter Sletteland

Fax: Email: PSletteland@svb.com

 

 

with a copy (which shall not constitute notice) to:

Troutman Sanders LLP

401 9th Street, NW, Suite 1000

Washington, DC 20004 Attn: Charles Charpentier Fax: (202) 274-2994

Email: charles.charpentier@troutmansanders.com

 

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11.

CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

 

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

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT
AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR

RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and orders applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies. The
private judge shall also determine all issues relating to the applicability,
interpretation, and enforceability of this paragraph.

 

 

12.

GENERAL PROVISIONS

 

 

12.1

Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not transfer,
pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s and each Lender’s prior written consent (which may be granted
or withheld in Collateral Agent’s and each Lender’s discretion, subject to
Section 12.6). The Lenders have the right,

 

 

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without the consent of or notice to Borrower, to sell, transfer, assign, pledge,
negotiate, or grant participation in (any such sale, transfer, assignment,
negotiation, or grant of a participation, a “Lender Transfer”) all or any part
of, or any interest in, the Lenders’ obligations, rights, and benefits under
this Agreement and the other Loan Documents; provided, however, that any such
Lender Transfer (other than a transfer, pledge, sale or assignment to an
Eligible Assignee) of its obligations, rights, and benefits under this Agreement
and the other Loan Documents shall require the prior written consent of the
Required Lenders (such approved assignee, an “Approved Lender”). Borrower and
Collateral Agent shall be entitled to continue to deal solely and directly with
such Lender in connection with the interests so assigned until Collateral Agent
shall have received and accepted an effective assignment agreement in form
satisfactory to Collateral Agent executed, delivered and fully completed by the
applicable parties thereto, and shall have received such other information
regarding such Eligible Assignee or Approved Lender as Collateral Agent
reasonably shall require. Notwithstanding anything to the contrary contained
herein, so long as no Event of Default has occurred and is continuing, no Lender
Transfer (other than a Lender Transfer (i) in respect of the Warrants or

(ii) in connection with (x) assignments by a Lender due to a forced divestiture
at the request of any regulatory agency; or (y) upon the occurrence of a
default, event of default or similar occurrence with respect to a Lender’s own
financing or securitization transactions) shall be permitted, without Borrower’s
consent, to any Person which is an Affiliate or Subsidiary of Borrower, a direct
competitor of Borrower or a vulture hedge fund, each as determined by Collateral
Agent.

 

 

12.2

Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent
and the Lenders and their respective directors, officers, employees, agents,
attorneys, or any other Person affiliated with or representing Collateral Agent
or the Lenders (each, an “Indemnified Person”) harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, “Claims”) asserted
by any other party in connection with; related to; following; or arising from,
out of or under, the transactions contemplated by the Loan Documents; and (b)
all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in
connection with; related to; following; or arising from, out of or under, the
transactions contemplated by the Loan Documents between Collateral Agent, and/or
the Lenders and Borrower (including reasonable attorneys’ fees and expenses),
except for Claims and/or losses directly caused by such Indemnified Person’s
gross negligence or willful misconduct. Borrower hereby further indemnifies,
defends and holds each Indemnified Person harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the fees and disbursements of counsel for such Indemnified Person) in
connection with any investigative, response, remedial, administrative or
judicial matter or proceeding, whether or not such Indemnified Person shall be
designated a party thereto and including any such proceeding initiated by or on
behalf of Borrower, and the reasonable expenses of investigation by engineers,
environmental consultants and similar technical personnel and any commission,
fee or compensation claimed by any broker (other than any broker retained by
Collateral Agent or Lenders) asserting any right to payment for the transactions
contemplated hereby which may be imposed on, incurred by or asserted against
such Indemnified Person as a result of or in connection with the transactions
contemplated hereby and the use or intended use of the proceeds of the loan
proceeds except for liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements directly
caused by such Indemnified Person’s gross negligence or willful misconduct.

 

 

 

12.3

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

 

 

12.4

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

 

 

 

12.5

Correction of Loan Documents. Collateral Agent and the Lenders may correct
patent errors and fill in any blanks in this Agreement and the other Loan
Documents consistent with the agreement of the parties.

 

 

 

12.6

Amendments in Writing; Integration. (a) No amendment, modification, termination
or waiver of any provision of this Agreement or any other Loan Document, no
approval or consent thereunder, or any consent to any departure by Borrower or
any of its Subsidiaries therefrom, shall in any event be effective unless the
same shall be in writing and signed by Borrower, Collateral Agent and the
Required Lenders provided that:

 

 

(i)no such amendment, waiver or other modification that would have the effect of
increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage
shall be effective as to such Lender without such Lender’s written consent;

 

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(ii)no such amendment, waiver or modification that would affect the rights and
duties of Collateral Agent shall be effective without Collateral Agent’s written
consent or signature;

 

(iii)no such amendment, waiver or other modification shall, unless signed by all
the Lenders directly affected thereby, (A) reduce the principal of, rate of
interest on or any fees with respect to any Term Loan or forgive any principal,
interest (other than default interest) or fees (other than late charges) with
respect to any Term Loan (B) postpone the date fixed for, or waive, any payment
of principal of any Term Loan or of interest on any Term Loan (other than
default interest) or any fees provided for hereunder (other than late charges or
for any termination of any commitment); (C) change the definition of the term
“Required Lenders” or the percentage of Lenders which shall be required for the
Lenders to take any action hereunder; (D) release all or substantially all of
any material portion of the Collateral, authorize Borrower to sell or otherwise
dispose of all or substantially all or any material portion of the Collateral or
release any Guarantor of all or any portion of the Obligations or its guaranty
obligations with respect thereto, except, in each case with respect to this
clause (D), as otherwise may be expressly permitted under this Agreement or the
other Loan Documents (including in connection with any disposition permitted
hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the
definitions of the terms used in this Section 12.6 insofar as the definitions
affect the substance of this Section 12.6; (F) consent to the assignment,
delegation or other transfer by Borrower of any of its rights and obligations
under any Loan Document or release Borrower of its payment obligations under any
Loan Document, except, in each case with respect to this clause (F), pursuant to
a merger or consolidation permitted pursuant to this Agreement; (G) amend any of
the provisions of Section 9.4 or amend any of the definitions of Pro Rata Share,
Term Loan Commitment, Commitment Percentage or that provide for the Lenders to
receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of
Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral
Agent securing the Obligations; or (I) amend any of the provisions of Section
12.10. It is hereby understood and agreed that all Lenders shall be deemed
directly affected by an amendment, waiver or other modification of the type
described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the
preceding sentence;

 

(iv)the provisions of the foregoing clauses (i), (ii) and (iii) are subject to
the provisions of any interlender or agency agreement among the Lenders and
Collateral Agent pursuant to which any Lender may agree to give its consent in
connection with any amendment, waiver or modification of the Loan Documents only
in the event of the unanimous agreement of all Lenders.

 

(b)Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral
Agent may, if requested by the Required Lenders, from time to time designate
covenants in this Agreement less restrictive by notification to a representative
of Borrower.

 

(c)This Agreement and the Loan Documents represent the entire agreement about
this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.

 

 

12.7

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

 

 

 

12.8

Survival. All covenants, representations and warranties made in this Agreement
continue in full force and effect until this Agreement has terminated pursuant
to its terms and all Obligations (other than inchoate indemnity obligations and
any other obligations which, by their terms, are to survive the termination of
this Agreement) have been satisfied. Without limiting the foregoing, except as
otherwise provided in Section 4.1, the grant of security interest by Borrower in
Section 4.1 shall survive until the termination of all Bank Services Agreements.
The obligation of Borrower in Section 12.2 to indemnify each Lender and
Collateral Agent, as well as the confidentiality provisions in Section 12.9
below, shall survive until the statute of limitations with respect to such claim
or cause of action shall have run.

 

 

 

12.9

Confidentiality. In handling any confidential information of Borrower, the
Lenders and Collateral Agent shall exercise the same degree of care that it
exercises for their own proprietary information, but disclosure of information
may be made: (a) subject to the terms and conditions of this Agreement, to the
Lenders’ and Collateral

 

 

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Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own
financing or securitization transactions and upon the occurrence of a default,
event of default or similar occurrence with respect to such financing or
securitization transaction; (b) to prospective transferees (other than those
identified in (a) above) or purchasers of any interest in the Credit Extensions
(provided, however, the Lenders and Collateral Agent shall, except upon the
occurrence and during the continuance of an Event of Default, obtain such
prospective transferee’s or purchaser’s agreement to the terms of this provision
or to similar confidentiality terms); (c) as required by law, regulation,
subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or as
otherwise required in connection with an examination or audit; (e) as Collateral
Agent reasonably considers appropriate in exercising remedies under the Loan
Documents; and (f) to third party service providers of the Lenders and/or
Collateral Agent so long as such service providers have executed a
confidentiality agreement with the Lenders and Collateral Agent with terms no
less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in the Lenders’
and/or Collateral Agent’s possession when disclosed to the Lenders and/or
Collateral Agent, or becomes part of the public domain after disclosure to the
Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or
Collateral Agent by a third party, if the Lenders and/or Collateral Agent does
not know that the third party is prohibited from disclosing the information.
Collateral Agent and the Lenders may use confidential information for any
purpose, including, without limitation, for the development of client databases,
reporting purposes, and market analysis. The provisions of the immediately
preceding sentence shall survive the termination of this Agreement. The
agreements provided under this Section 12.9 supersede all prior agreements,
understanding, representations, warranties, and negotiations between the parties
about the subject matter of this Section 12.9.

 

 

12.10

Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender,
a lien, security interest and right of set off as security for all Obligations
to Collateral Agent and each Lender hereunder, whether now existing or hereafter
arising upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of Collateral Agent
or the Lenders or any entity under the control of Collateral Agent or the
Lenders (including a Collateral Agent affiliate) or in transit to any of them.
At any time after the occurrence and during the continuance of an Event of
Default, without demand or notice, Collateral Agent or the Lenders may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations, provided that Collateral Agent shall use
commercially reasonable efforts to promptly notify Borrower in writing of any
such set- off. Notwithstanding the foregoing, in no event shall Collateral
Agent’s failure to notify Borrower pursuant to the foregoing sentence cause or
result in any breach of this Agreement, subject Collateral Agent or any Lender
to any liability or in any way limit or restrict any rights or remedies
available to Collateral Agent or any Lender pursuant to this Agreement, any
other Loan Document or otherwise. ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

 

 

 

12.11

Silicon Valley Bank as Agent. Collateral Agent hereby appoints Silicon Valley
Bank (“SVB”) as its agent (and SVB hereby accepts such appointment) for the
purpose of perfecting Collateral Agent’s Liens in assets which, in accordance
with Article 8 or Article 9, as applicable, of the Code can be perfected by
possession or control, including without limitation, all deposit accounts
maintained at SVB.

 

 

 

12.12

Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any
documents (including new Secured Promissory Notes) reasonably required to
effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to
an assignee in accordance with Section 12.1, (ii) make Borrower’s management
available to meet with Collateral Agent and prospective participants and
assignees of Term Loan Commitments or Credit Extensions (which meetings shall be
conducted no more often than twice every twelve months unless an Event of
Default has occurred and is continuing), and (iii) assist Collateral Agent or
the Lenders in the preparation of information relating to the financial affairs
of Borrower as any prospective participant or assignee of a Term Loan Commitment
or Term Loan reasonably may request. Subject to the provisions of Section 12.9,
Borrower authorizes each Lender to disclose to any prospective participant or
assignee of a Term Loan Commitment, any and all information in such Lender’s
possession concerning Borrower and its financial affairs which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement,
or which has been delivered to such Lender by or on behalf of Borrower in
connection with such Lender’s credit evaluation of Borrower prior to entering
into this Agreement.

 

 

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13.

DEFINITIONS

 

 

13.1

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

 

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

 

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

 

“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Amortization Date” is, with respect to a Term Loan, April 1, 2022. “Annual
Projections” is defined in Section 6.2(a).

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the
laws administered by OFAC.

 

“Approved Fund” is any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b)
an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

 

“Approved Lender” is defined in Section 12.1. “Bank” is defined in the preamble
hereof.

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

 

“Basic Rate” is, with respect to the Term Loan, the floating per annum rate of
interest (based on a year of three hundred sixty (360) days) equal to the
greater of (i) eight and seven one hundredths of one percent (8.07%) or

(ii) the sum of (a) the greater of (1) the thirty (30) day U.S. LIBOR rate
reported in the Wall Street Journal on the last Business Day of the month that
immediately precedes the month in which the interest will accrue or (2) one and
sixty- seven one hundredths of one percent (1.67%) plus (b) six and four tenths
of one percent (6.40%). For the avoidance of doubt, the Basic Rate shall never
be less than 8.07%. If The Wall Street Journal (or another nationally recognized
rate reporting source acceptable to Collateral Agent) no longer reports the U.S.
LIBOR Rate or if such interest rate no longer exists or if The Wall Street
Journal no longer publishes the U.S. LIBOR Rate or ceases to exist, Collateral
Agent may in good faith, and with reference to the margin above such interest
rate in this definition, select a replacement interest rate and replacement
margin above such interest rate that results in a substantially similar interest
rate floor and total rate in effect immediately prior to the effectiveness of
such replacement interest rate and

 

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replacement margin, or replacement publication, as the case may be, and shall
notify Borrower of such replacement interest rate and replacement margin or
replacement publication. Notwithstanding the foregoing, the Basic Rate for the
Term Loan for the period from the Effective Date through and including February
29, 2020 shall be eight and seven hundredths of one percent (8.07%).

 

“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or

(e) a Person that is named a “specially designated national” or “blocked person”
on the most current list published by OFAC or other similar list.

 

“Borrower” is defined in the preamble hereof.

 

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

“Business Day” is any day that is not a Saturday, Sunday or a day on which
Collateral Agent is closed. “Cash Equivalents” are (a) marketable direct
obligations issued or unconditionally guaranteed by the United

States or any agency or any State thereof having maturities of not more than one
(1) year from the date of acquisition;

(b)commercial paper or other debt securities maturing no more than one (1) year
after the date of acquisition and a rating of at least A (or the equivalent)
from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.,
(c) time deposits, certificates of deposit and bankers’ acceptances maturing no
more than one (1) year after the date of acquisition, provided that the account
in which any such time deposit, certificate of deposit or bankers’ acceptance is
maintained is subject to a Control Agreement in favor of Collateral Agent, (d)
demand deposits and overnight bank deposits, provided that the account in which
any such deposit is maintained is subject to a Control Agreement in favor of
Collateral Agent, (e) money market funds that invest in short term investment
grade investments, provided that the account in which any such money market
funds are maintained is subject to a Control Agreement in favor of Collateral
Agent, and (f) investments similar to those described in clauses (a) through (e)
above that are permitted pursuant to Borrower’s investment policy as approved by
the Board of Directors of Borrower from time to time, provided that such
investment policy (and any such amendment thereto) has been approved in writing
by Collateral Agent. For the avoidance of doubt, the direct purchase by Borrower
or any of its Subsidiaries of any Auction Rate Securities, or purchasing
participations in, or entering into any type of swap or other derivative
transaction, or otherwise holding or engaging in any ownership interest in any
type of Auction Rate Security by Borrower or any of its Subsidiaries shall be
conclusively determined by the Lenders as an ineligible Cash Equivalent, and any
such transaction shall expressly violate each other provision of this Agreement
governing Permitted Investments. Notwithstanding the foregoing, Cash Equivalents
does not include and Borrower, and each of its Subsidiaries, are prohibited from
purchasing, purchasing participations in, entering into any type of swap or
other equivalent derivative transaction, or otherwise holding or engaging in any
ownership interest in any type of debt instrument, including, without
limitation, any corporate or municipal bonds with a long-term nominal maturity
for which the interest rate is reset through a dutch auction and more commonly
referred to as an auction rate security (each, an “Auction Rate Security”).

 

“Claims” are defined in Section 12.2.

 

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

 

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jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions
relating to such provisions.

 

“Collaboration Agreement” means that certain Amended and Restated Collaboration
and License Agreement entered into by the Borrower and Celgene Corporation as of
August 2, 2017.

 

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

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account, or any other bank account maintained by Borrower or any Subsidiary at
any time.

 

“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

 

“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to
time.

 

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

 

“Communication” is defined in Section 10.

 

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

 

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

 

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

 

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

 

“Credit Extension” is any Term Loan or any other extension of credit by
Collateral Agent or Lenders for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.3(b).

 

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

 

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“Designated Deposit Account” is Borrower’s deposit account, account number
*****3228, maintained with

Bank.

 

“Disbursement Letter” is that certain form attached hereto as Exhibit B-1.

 

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

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.
“Effective Date” is defined in the preamble of this Agreement.

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund and (iv) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933, as amended) and which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which either (A) has a rating of BBB or higher from Standard & Poor’s
Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc.
at the date that it becomes a Lender or (B) has total assets in excess of Five
Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through
(iv), which, through its applicable lending office, is capable of lending to
Borrower without the imposition of any withholding or similar taxes; provided
that notwithstanding the foregoing, “Eligible Assignee” shall not include,
unless an Event of Default has occurred and is continuing, (i) Borrower or any
of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower
or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding
the foregoing, (x) in connection with assignments by a Lender due to a forced
divestiture at the request of any regulatory agency, the restrictions set forth
herein shall not apply and Eligible Assignee shall mean any Person or party and
(y) in connection with a Lender’s own financing or securitization transactions,
the restrictions set forth herein shall not apply and Eligible Assignee shall
mean any Person or party providing such financing or formed to undertake such
securitization transaction and any transferee of such Person or party upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; provided that no such sale,
transfer, pledge or assignment under this clause (y) shall release such Lender
from any of its obligations hereunder or substitute any such Person or party for
such Lender as a party hereto until Collateral Agent shall have received and
accepted an effective assignment agreement from such Person or party in form
satisfactory to Collateral Agent executed, delivered and fully completed by the
applicable parties thereto, and shall have received such other information
regarding such Eligible Assignee as Collateral Agent reasonably shall require.

 

“EMD License Agreement” means that certain License Agreement entered into by the
Borrower and Merck KGaA as of September 16, 2014.

 

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

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations. “Existing Indebtedness” is the indebtedness of Borrower to
Oxford Finance LLC and Silicon Valley Bank

in the aggregate principal outstanding amount as of the Effective Date of
approximately Nine Million Dollars ($9,000,000.00) pursuant to that certain Loan
and Security Agreement, dated August 4, 2017, as amended and restated from time
to time, entered into by and among Oxford Finance LLC, Silicon Valley Bank and
Borrower.

 

“Event of Default” is defined in Section 8.

 

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the earliest
to occur of (a) the Maturity Date, or (b) the acceleration of any

 

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Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or
(d), equal to the original principal amount of such Term Loan multiplied by the
Final Payment Percentage, payable to Lenders in accordance with their respective
Pro Rata Shares.

 

“Final Payment Percentage” is three and eighty-three one hundredths of one
percent (3.83%). “Foreign Currency” means lawful money of a country other than
the United States.

“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any territory thereof.

 

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

 

“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

 

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

 

“General Intangibles” are all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

 

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

 

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

 

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

 

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

 

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

 

“Indemnified Person” is defined in Section 12.2.

 

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

 

“Insolvent” means not Solvent.

 

“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title
and interest in and to the following:

 

 

(a)

its Copyrights, Trademarks and Patents;

 

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

 

 

(c)

any and all source code;

 

 

(d)

any and all design rights which may be available to Borrower;

 

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

 

(f)

all amendments, renewals and extensions of any of the Copyrights, Trademarks or
Patents. “Inventory” is all “inventory” as defined in the Code in effect on the
date hereof with such additions to such

 

term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products, including without limitation such inventory as is
temporarily out of any Person’s custody or possession or in transit and
including any returned goods and any documents of title representing any of the
above.

 

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

 

“Key Person” is each of Borrower’s (i) Chief Executive Officer, who is William
Newell as of the Effective Date, and (ii) Chief Financial Officer, who is Edward
C. Albini as of the Effective Date.

 

“Lender” is any one of the Lenders.

 

“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee
that becomes a party to this Agreement pursuant to Section 12.1.

 

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses, as well as appraisal fees,
fees incurred on account of lien searches, inspection fees, and filing fees) for
preparing, amending, negotiating, administering, defending and enforcing the
Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent
and/or the Lenders in connection with the Loan Documents.

 

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

 

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

 

“Loan Documents” are, collectively, this Agreement, the Warrants, the Perfection
Certificates, each Compliance Certificate, each Disbursement Letter, each Loan
Payment/Advance Request Form and any Bank Services

 

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Agreement, the Post Closing Letter, each Guaranty, any subordination agreements,
any note, or notes or guaranties executed by Borrower or any other Person, and
any other present or future agreement entered into by Borrower, any Guarantor or
any other Person for the benefit of the Lenders and Collateral Agent in
connection with this Agreement; all as amended, restated, or otherwise modified.

 

“Loan Payment/Advance Request Form” is that certain form attached hereto as
Exhibit B-2.

 

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Collateral Agent’s Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, or operations or
condition (financial or otherwise) of Borrower or, Borrower and each of its
Subsidiaries, taken as a whole; or (c) a material impairment of the prospect of
repayment of any portion of the Obligations.

 

“Maturity Date” is, for each Term Loan, March 1, 2024.

 

“Merck Collaboration Agreement” means that certain Exclusive Patent License and
Research Collaboration Agreement entered into by the Borrower and Merck Sharp &
Dohme Corp. as of July 23, 2018.

 

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment,
and other amounts Borrower owes the Lenders now or later, in connection with,
related to, following, or arising from, out of or under, this Agreement or, the
other Loan Documents (other than the Warrants), or otherwise, including, without
limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, unless otherwise
provided in any applicable Bank Services Agreement, and including interest
accruing after Insolvency Proceedings begin (whether or not allowed) and debts,
liabilities, or obligations of Borrower assigned to the Lenders and/or
Collateral Agent, and the performance of Borrower’s duties under the Loan
Documents (other than the Warrants).

 

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

 

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

 

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

 

“Payment Date” is the first (1st) calendar day of each calendar month,
commencing on April 1, 2020. “Perfection Certificate” and “Perfection
Certificates” is defined in Section 5.1.

“Permitted Assignment” means an assignment (i) to Celgene Corporation by
Borrower, or any of its Subsidiaries, of the composition of matter, methods of
use, and formulation of each Nominated Development Candidate (as defined in the
Collaboration Agreement) and corresponding Licensed Product (as defined in the
Collaboration Agreement); provided that (a) in no event shall the foregoing
include any SUTRO IP (as defined in the Collaboration Agreement); and (b) all
upfront payments, milestone payments or other proceeds arising from the
assignment that are payable to Borrower or any of its Subsidiaries are paid to a
Deposit Account that is governed by a Control Agreement; (ii) to Merck Sharp &
Dohme Corp. pursuant to the Merck Collaboration Agreement; provided

 

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that (a) in no event shall the foregoing include any of Borrower’s, or any of
its Subsidiaries’ background Intellectual Property and/or core technology (as
such terms are to be defined in such license and/or collaboration agreement);
and

(b) all upfront payments, milestone payments or other proceeds arising from the
assignment that are payable to Borrower or any of its Subsidiaries are paid to a
Deposit Account that is governed by a Control Agreement; (iii) to Merck KGaA
pursuant to the EMD License Agreement; provided that (a) in no event shall the
foregoing include any of Borrower’s, or any of its Subsidiaries’ background
Intellectual Property and/or core technology (as such terms are to be defined in
such license and/or collaboration agreement); and (b) all upfront payments,
milestone payments or other proceeds arising from the assignment that are
payable to Borrower or any of its Subsidiaries are paid to a Deposit Account
that is governed by a Control Agreement; and (iv) to a third party (other than
Celgene Corporation, Merck Sharp & Dohme Corp. or Merck KGaA) by Borrower, or
any of its Subsidiaries, of the composition of matter, methods of use, and
formulation of any protein drug, antibody, antibody fragment, or antibody-drug
conjugate identified as a development candidate or licensed product, in
connection with such license and/or collaboration agreement with such third
party; provided that (a) in no event shall the foregoing include any of
Borrower’s, or any of its Subsidiaries’ background Intellectual Property and/or
core technology (as such terms are to be defined in such license and/or
collaboration agreement); and (b) all upfront payments, milestone payments or
other proceeds arising from the assignment that are payable to Borrower or any
of its Subsidiaries are paid to a Deposit Account that is governed by a Control
Agreement. In order for an assignment under the preceding sub-clause (iv) to
meet the requirements of a “Permitted Assignment”, Borrower shall obtain
Collateral Agent’s and the Required Lenders’ prior written approval (such
approval shall be in Collateral Agent’s or the Required Lenders’ sole but
reasonable discretion) of (A) the proposed definitive license and/or
collaboration agreement evidencing the final material terms of such assignment,
or

(B)in the event such assignment relates to a protein drug, antibody, antibody
fragment, or antibody-drug conjugate or other candidate to be identified as part
of a discovery program conducted by Borrower pursuant to a licensing and/or
collaboration agreement with such third party, the proposed final term sheet for
such license and/or collaboration, provided that the final definitive license
and/or collaboration agreement is consistent in all material respects with such
term sheet.

 

“Permitted Indebtedness” is:

 

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

 

 

(b)

Indebtedness existing on the Effective Date and disclosed on the Perfection
Certificate(s);

 

 

(c)

Subordinated Debt;

 

 

(d)

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

 

(e)Indebtedness consisting of capitalized lease obligations and purchase money
Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to
finance the acquisition, repair, improvement or construction of fixed or capital
assets of such person, provided that (i) the aggregate outstanding principal
amount of all such Indebtedness does not exceed Two Hundred Fifty Thousand
Dollars ($250,000.00) at any time and (ii) the principal amount of such
Indebtedness does not exceed the lower of the cost or fair market value of the
property so acquired or built or of such repairs or improvements financed with
such Indebtedness (each measured at the time of such acquisition, repair,
improvement or construction is made);

 

(f)Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of Borrower’s business;

 

(g)Indebtedness owed in respect of any obligations (including, without
limitation, overdrafts and related liabilities) arising under the Bank Services
Agreement; and

 

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

 

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“Permitted Investments” are:

 

 

(a)

Investments disclosed on the Perfection Certificate(s) and existing on the
Effective Date;

 

(b)(i) Investments consisting of cash and Cash Equivalents, and (ii) any other
Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy as approved by the Board of Directors
of Borrower (and any such amendment thereto) has been approved in writing by
Collateral Agent;

 

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

 

 

(d)

Investments consisting of deposit accounts in which Collateral Agent has a
perfected

security interest;

 

 

(e)

Investments in connection with Transfers permitted by Section 7.1;

 

(f)Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors; not to
exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate for (i)
and (ii) in any fiscal year;

 

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

 

(h)Investments consisting of notes receivable of, or prepaid royalties and other
credit extensions, to customers and suppliers who are not Affiliates, in the
ordinary course of business; provided that this paragraph (h) shall not apply to
Investments of Borrower in any Subsidiary; and

 

(i)non-cash Investments in joint ventures or strategic alliances in the ordinary
course of Borrower’s business consisting of the non-exclusive licensing of
technology, the development of technology or the providing of technical support.

 

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public, (B) non-exclusive and exclusive licenses
for the use of the Intellectual Property of Borrower or any of its Subsidiaries
entered into in the ordinary course of business, provided, that, with respect to
each such license described in clause (B), (i) no Event of Default has occurred
or is continuing at the time of such license; (ii) the license constitutes an
arms-length transaction, the terms of which, on their face, do not provide for a
sale or assignment of any Intellectual Property and do not restrict the ability
of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a
security interest in or lien on, or assign or otherwise Transfer any
Intellectual Property; (iii) in the case of any exclusive license,

(x) Borrower delivers ten (10) days’ prior written notice and a brief summary of
the terms of the proposed license to Collateral Agent and the Lenders and
delivers to Collateral Agent and the Lenders copies of the final executed
licensing documents in connection with the exclusive license promptly upon
consummation thereof, and (y) any such license could not result in a legal
transfer of title of the licensed property but may be exclusive in respects
other than territory and may be exclusive as to territory only as to discrete
geographical areas outside of the United States; and

(iv) all upfront payments, royalties, milestone payments or other proceeds
arising from the licensing agreement that are payable to Borrower or any of its
Subsidiaries are paid to a Deposit Account that is governed by a Control
Agreement, (C) licenses to (I) Celgene Corporation pursuant to the Collaboration
Agreement, (II) Merck Sharp & Dohme Corp. pursuant to the Merck Collaboration
Agreement, (III) Merck KGaA pursuant to the EMD License Agreement and (IV)
SutroVax, Inc. pursuant to the SutroVax Agreement; provided, that, with respect
to each such license described in clause (C), (i) no Event of Default has
occurred or is continuing at the time of such license;

(ii)such license could not result in a legal transfer of title of the licensed
property (other than with respect to any Permitted Assignment); and (iii) all
upfront payments, royalties, milestone payments or other proceeds arising from

 

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the licensing agreement that are payable to Borrower or any of its Subsidiaries
are paid to a Deposit Account that is governed by a Control Agreement, and (D)
licenses to any third party of any protein drug, antibody, antibody fragment or
antibody-drug conjugate or other candidate, provided, that, with respect to each
such license described in clause (D), (i) no Event of Default has occurred or is
continuing at the time of such license; (ii) the license constitutes an
arms-length transaction, the terms of which, on their face, do not provide for a
sale or assignment of the applicable candidate (or any Intellectual Property
associated therewith), other than with respect to any Permitted Assignment;

(iii)(x) Borrower delivers to Collateral Agent and the Lenders copies of the
final executed licensing documents in connection with the license promptly upon
consummation thereof, and (y) any such license could not result in a legal
transfer of title of the licensed property (other than with respect to any
Permitted Assignment); and (iv) all upfront payments, royalties, milestone
payments or other proceeds arising from the licensing agreement that are payable
to Borrower or any of its Subsidiaries are paid to a Deposit Account that is
governed by a Control Agreement. In order for a license under the preceding
clause (D) to meet the requirements of a “Permitted License”, Borrower shall
obtain Collateral Agent’s and the Required Lenders’ prior written approval (such
approval shall be in Collateral Agent’s or the Required Lenders’ sole but
reasonable discretion) of (1) the proposed definitive license and/or
collaboration agreement evidencing the final material terms of such license, or
(2) in the event such license relates to a protein drug, antibody, antibody
fragment, or antibody-drug conjugate to be identified as part of a discovery
program conducted by Borrower pursuant to a licensing and/or collaboration
agreement with such third party, the proposed final term sheet for such license
and/or collaboration, provided that the final definitive license and/or
collaboration agreement is consistent in all material respects with such term
sheet.

 

“Permitted Liens” are:

 

(a)Liens existing on the Effective Date and disclosed on the Perfection
Certificates or arising under this Agreement and the other Loan Documents;

 

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

 

(c)liens securing Indebtedness permitted under clause (e) of the definition of
“Permitted Indebtedness,” provided that (i) such liens exist prior to the
acquisition of, or attach substantially simultaneous with, or within twenty (20)
days after the, acquisition, lease, repair, improvement or construction of, such
property financed or leased by such Indebtedness and (ii) such liens do not
extend to any property of Borrower other than the property (and proceeds
thereof) acquired, leased or built, or the improvements or repairs, financed by
such Indebtedness;

 

(d)Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Two Hundred Fifty Thousand Dollars ($250,000.00), and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

 

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

 

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

 

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

 

35

 

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(h)banker’s liens, rights of setoff and Liens in favor of financial institutions
incurred in the ordinary course of business arising in connection with
Borrower’s deposit accounts or securities accounts held at such institutions
solely to secure payment of fees and similar costs and expenses and provided
such accounts are maintained in compliance with Section 6.6(b) hereof;

 

(i)Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 8.4 or 8.7;

 

(j)Liens consisting of Permitted Licenses, or of intercompany licenses to which
only Borrower and Subsidiaries of Borrower that are Guarantors of the
Obligations are party; and

 

(k)Liens constituting deposits to secure real property lease obligations as a
lessee incurred by Borrower or any Subsidiary in the ordinary course of
business, including cash and Cash Equivalents deposited as collateral in support
of a letter of credit issued on behalf of Borrower or any Subsidiary in
connection with the same, provided that the aggregate amount of all such
deposits does not exceed One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00) at any time.

 

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

 

“Post Closing Letter” is that certain Post Closing Letter dated as of the
Effective Date by and between Collateral Agent and Borrower.

 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior
to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration
or otherwise, an additional fee payable to the Lenders in amount equal to:

 

(i)for a prepayment made on or after the Funding Date of such Term Loan through
and including the first anniversary of the Funding Date of such Term Loan, three
percent (3.00%) of the principal amount of such Term Loan prepaid;

 

(ii)for a prepayment made after the date which is after the first anniversary of
the Funding Date of such Term Loan through and including the second anniversary
of the Funding Date of such Term Loan, two percent (2.00%) of the principal
amount of the Term Loans prepaid; and

 

(iii)for a prepayment made after the second anniversary of the Funding Date of
such Term Loan and prior to the Maturity Date, one percent (1.00%) of the
principal amount of the Term Loans prepaid.

 

“Pro Rata Share” is, as of any date of determination, with respect to each
Lender, a percentage (expressed as a decimal, rounded to the ninth decimal
place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term
Loans.

 

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

 

“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their Term Loan, Lenders holding one
hundred percent (100%) of the aggregate outstanding principal balance of the
Term Loan, or (ii) at any time from and after any Original Lender has assigned
or transferred any interest in its Term Loan, Lenders holding at least sixty six
percent (66%) of the aggregate outstanding principal balance of the Term Loan
and, in respect of this clause (ii),

(A)each Original Lender that has not assigned or transferred any portion of its
Term Loan, (B) each assignee or transferee of an Original Lender’s interest in
the Term Loan, but only to the extent that such assignee or transferee is an
Affiliate or Approved Fund of such Original Lender, and (C) any Person providing
financing to any Person

 

36

 

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

 

described in clauses (A) and (B) above; provided, however, that this clause (C)
shall only apply upon the occurrence of a default, event of default or similar
occurrence with respect to such financing.

 

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

 

“Responsible Officer” is any of the President, Chief Executive Officer, or Chief
Financial Officer of Borrower acting alone.

 

“Second Draw Period” is the period commencing on the date of the occurrence of
the Term B Milestone Event and ending on the earliest of (i) December 31, 2020,
(ii) the thirtieth (30th) day following the occurrence of the Term B Milestone
Event, and (iii) the occurrence of an Event of Default; provided, however, that
the Second Draw Period shall not commence if on the date of the occurrence of
the Term B Milestone Event an Event of Default has occurred and is continuing.

 

“Secured Promissory Note” is defined in Section 2.4.

 

“Secured Promissory Note Record” is a record maintained by each Lender with
respect to the outstanding Obligations owed by Borrower to Lender and credits
made thereto.

 

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

 

“Shares” is one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by Borrower
or Borrower’s Subsidiary, in any Subsidiary and/or in any other entity; provided
that, in the event Borrower, demonstrates to Collateral Agent’s reasonable
satisfaction, that a pledge of more than sixty five percent (65%) of the Shares
of such Subsidiary which is a Foreign Subsidiary, creates a present and existing
adverse tax consequence to Borrower under the U.S. Internal Revenue Code,
“Shares” shall mean sixty-five percent (65%) of the issued and outstanding
capital stock, membership units or other securities owned or held of record by
Borrower or its Subsidiary in such Foreign Subsidiary; provided, further, that
the “Shares” shall not include any capital stock of SutroVax, Inc. for so long
as such capital stock is subject to (a) a right of first refusal of the other
equityholders of SutroVax, Inc., or (b) call options awarded to employees and
other service providers of Borrower pursuant to the Sutro Biopharma, Inc. 2017
Call Option Plan adopted by Borrower’s Board of Directors on February 6, 2017,
provided that upon the termination, lapsing or expiration of both such rights of
first refusal and such call options, such capital stock shall automatically
become part of the “Shares.”

 

“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement; and
such Person is able to pay its debts (including trade debts) as they mature.

 

“Subordinated Debt” is indebtedness incurred by Borrower or any of its
Subsidiaries subordinated to all Indebtedness of Borrower and/or its
Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance satisfactory to Collateral Agent
and the Lenders entered into between Collateral Agent, Borrower, and/or any of
its Subsidiaries, and the other creditor), on terms acceptable to Collateral
Agent and the Lenders.

 

“Subsidiary” is, with respect to any Person, any Person of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled, directly or indirectly,
by such Person or through one or more intermediaries.

 

“SutroVax Agreement” means that certain Amended and Restated SutroVax Agreement
entered into by the Borrower and SutroVax, Inc. as of October 12, 2015.

 

37

 

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“Term Loan” is defined in Section 2.2(a)(ii) hereof. “Term A Loan” is defined in
Section 2.2(a)(i) hereof. “Term B Loan” is defined in Section 2.2(a)(ii) hereof.

“Term B Milestone Event” is the achievement by Borrower of the closing of a new
collaboration agreement that includes an upfront payment of at least $50,000,000
to Borrower, as determined by Collateral Agent in its sole and absolute
discretion.

 

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make
a Term Loan, up to the principal amount shown on Schedule 1.1. “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.

 

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

 

“Transfer” is defined in Section 7.1.

 

“Warrants” are those certain Warrants to Purchase Stock dated as of the
Effective Date, or any date thereafter, issued by Borrower in favor of each
Lender or such Lender’s Affiliates.

 

 

[Balance of Page Intentionally Left Blank]

 

38

 

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement tobe executed
as of the Effective

Date.

 

BORR OWER :

 

SUTRO BIOPHARMA, INC.

 

 

 

+-1->"'--+-- -1------=:........: l..d'-

By_­

Name:-'-'<'=r­

Title:_ ==- - - - - -

 

 

COLLATERAL AGENT AND LENDER:

 

OXFORD FINANCE LLC

 

 

By

Name:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Title:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

 

 

LENDER:

 

SILICON VALLEY BANK

 

By_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Name:_   _   _   _   _   _   _   _   _   _   _   _   _   _   _

Title:

 

[Signature Page to Loan and Security Agreement]

 

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

 

 

 

 

 

 

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

Date.

 

BORROWER:

 

SUTRO BIOPHARMA, INC.

 

B_y _   _   _   _   _   _   _   _   _   _   _   _   _   _   _

Name:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Title:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

 

 

COLLATERAL AGENT AND LENDER:

[g1qggngdd0um000001.jpg]

 

LENDER:

 

SILICON VALLEY BANK

 

By_  _   _   _   _ _ _ _ _ _ _ _ _ _

Nam_e:._   _   _   _   _   _   _   _   _   _   _   _   _   _

Title:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

 

[Signature Page to Loan and Security Agreement]

 

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

 

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

Date.

 

BORROWER:

 

SUTRO BIOPHARMA, INC.

 

 

By

Name:_ _ _ _ _ _ _ _ _ _ _ _ _ _

 

Title: _

 

 

COLLATERAL AGENT AND LENDER:

 

OXFORD FINANCE LLC

 

B_ y_   _   _   _   _   _   _   _   _   _   _   _   _   _   _

Name:_ _ _ _ _ _ _ _ _ _ _ _ _ _

Title:

 

 

LENDER:

 

:.fr:

SILICON VALLEY BANK

 

 

 

Title:V:afu r:4'- ellr

 

[Signature Page to Loan and Security Agreement]

 

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

 

SCHEDULE 1.1

 

Lenders and Commitments

 

Term A Loans

Lender

Term A Loan Commitment

Commitment Percentage

OXFORD FINANCE LLC

$16,666,667

66.67%

SILICON VALLEY BANK

$8,333,333

33.33%

TOTAL

$25,000,000

100.00%

 

Term B Loans

Lender

Term B Loan Commitment

Commitment Percentage

OXFORD FINANCE LLC

$3,333,333

66.67%

SILICON VALLEY BANK

$1,666,667

33.33%

TOTAL

$5,000,000

100.00%

 

Aggregate (all Term Loans)

Lender

Term Loan Commitment

Commitment Percentage

OXFORD FINANCE LLC

$20,000,000

66.67%

SILICON VALLEY BANK

$10,000,000

33.33%

TOTAL

$30,000,000

100.00%

 

41422438v8

 

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EXHIBIT A

 

Description of Collateral

 

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

 

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

 

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

 

Notwithstanding the foregoing, the Collateral does not include (i) any
Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property; provided, further, that if a
judicial authority (including a U.S. Bankruptcy Court) would hold that a
security interest in the underlying Intellectual Property is necessary to have a
security interest in such Accounts and such property that are proceeds of
Intellectual Property, then the Collateral shall automatically, and effective as
of the Effective Date, include the Intellectual Property to the extent necessary
to permit perfection of Collateral Agent’s security interest in such Accounts
and such other property of Borrower that are proceeds of the Intellectual
Property; and (ii) more than 65% of the total combined voting power of all
classes of stock entitled to vote the shares of capital stock (the “Shares”) of
any Foreign Subsidiary, if Borrower demonstrates to Collateral Agent’s
reasonable satisfaction that a pledge of more than sixty five percent (65%) of
the Shares of such Subsidiary creates a present and existing adverse tax
consequence to Borrower under the U.S. Internal Revenue Code; (iii) any license,
lease or contract, in each case if the granting of a Lien in such license, lease
or contract is prohibited by or would constitute a default under the agreement
governing such license, lease or contract (but (A) only to the extent such
prohibition is enforceable under applicable law and (B) other than to the extent
that any such term would be rendered ineffective pursuant to Sections 9-406,
9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that
upon the termination, lapsing or expiration of any such prohibition, such
license, lease or contract, as applicable, shall automatically be subject to the
security interest granted in favor of Collateral Agent hereunder and become part
of the “Collateral”; and (iv) any capital stock of SutroVax, Inc. for so long as
such capital stock is subject to (a) a right of first refusal of the other
equityholders of SutroVax, Inc., or (b) call options awarded to employees and
other service providers of Borrower pursuant to the Sutro Biopharma, Inc. 2017
Call Option Plan adopted by Borrower’s Board of Directors on February 6, 2017,
provided that upon the termination, lapsing or expiration of both such rights of
first refusal and such call options, such capital stock shall automatically be
subject to the security interest granted in favor of Collateral Agent hereunder
and become part of the “Collateral.”

 

Pursuant to the terms of a certain negative pledge arrangement with Collateral
Agent and the Lenders, Borrower has agreed not to encumber any of its
Intellectual Property.

 

41422438v8

 

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EXHIBIT B-1

 

Form of Disbursement Letter

 

[see attached]

 

41422438v8

 

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DISBURSEMENT LETTER

 

February     , 2020

 

The undersigned, being the duly elected and acting of Sutro Biopharma, Inc., a
Delaware corporation with offices located at 310 Utah Avenue, Suite 150, South
San Francisco, CA 94080 (“Borrower”), does hereby certify, solely in his or her
capacity as an officer of the Borrower, and not in any personal capacity, to
OXFORD FINANCE LLC (“Oxford” and “Lender”), as collateral agent (the “Collateral
Agent”) in connection with that certain Loan and Security Agreement dated as of
February 28, 2020, by and among Borrower, Collateral Agent and the Lenders from
time to time party thereto (the “Loan Agreement”; with other capitalized terms
used below having the meanings ascribed thereto in the Loan Agreement) that:

 

 

1.

The representations and warranties made by Borrower in Section 5 of the Loan
Agreement and in the other Loan Documents are true and correct in all material
respects as of the date hereof.

 

 

 

2.

No event or condition has occurred that would constitute an Event of Default
under the Loan Agreement or any other Loan Document.

 

 

 

3.

Borrower is in compliance with the covenants and requirements contained in
Sections 4, 6 and 7 of the Loan Agreement.

 

 

 

4.

All conditions referred to in Section 3 of the Loan Agreement to the making of
the Loan to be made on or about the date hereof have been satisfied or waived by
Collateral Agent.

 

 

 

5.

No Material Adverse Change has occurred.

 

 

6.

The undersigned is a Responsible Officer.

 

 

[Balance of Page Intentionally Left Blank]

 

41422438v8

 

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

 

 

7.

The proceeds of the Term [A][B] Loan shall be disbursed as follows:

 

Disbursement from Oxford:

Loan Amount$25,000,000

Plus:

--Deposit Received$50,000

 

Less:

--Interim Interest($ )

--Lender’s Legal Fees($ )*

 

Net Proceeds due from Oxford:$

 

 

TOTAL TERM [A][B] LOAN NET PROCEEDS FROM

LENDERS$

 

 

8.

The [initial][Term Loan][Term A Loan] shall amortize in accordance with the
Amortization Table attached hereto.

 

 

 

9.

The aggregate net proceeds of the Term Loans shall be transferred to the
Designated Deposit Account as follows:

 

 

Account Name:Sutro Biopharma, Inc.

Bank Name:[Silicon Valley Bank]

Bank Address:[3003 Tasman Drive

Santa Clara, California 95054]

Account Number: ABA Number:[121140399]

 

 

[Balance of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Legal fees and costs are through the Effective Date. Post-closing legal fees
and costs, payable after the Effective

Date, to be invoiced and paid post-closing.

 

41422438v8

 

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

 

Dated as of the date first set forth above.

 

BORROWER:

 

SUTRO BIOPHARMA, INC.

 

 

By Name: Title:

 

 

COLLATERAL AGENT AND LENDER:

 

OXFORD FINANCE LLC

 

 

By Name: Title:

 

LENDER:

 

SILICON VALLEY BANK

 

 

By Name: Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Disbursement Letter]

 

41422438v8

 

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AMORTIZATION TABLE

(Term [A][B] Loan) [see attached]

 

41422438v8

 

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EXHIBIT B-2

 

Loan Payment/Advance Request Form

 

DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME*

 

Fax To:Date:

Phone Number:

Authorized Signature:

Print Name/Title:

To Account #

(Loan Account #)

and/or Interest $

From Account #

(Deposit Account #)

Principal $

Sutro Biopharma, Inc.

LOAN PAYMENT:

Phone Number:

Authorized Signature:

Print Name/Title:

Amount of Advance $

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date

shall be true, accurate and complete in all material respects as of such date:

To Account #

(Deposit Account #)

From Account #

(Loan Account #)

LOAN ADVANCE:

 

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

2nd  Signature (if required): Print Name/Title:

Telephone #: ]

Authorized Signature: Print Name/Title:

Telephone #:

For Further Credit to:

 

Special Instruction:

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

Beneficiary Bank Code (Swift, Sort, Chip, etc.):

(For International Wire Only)

Transit (ABA) #:

Beneficiary Bank Transit (ABA) #:

 

Intermediary Bank:

Amount of Wire: $

Account Number:

Beneficiary Name:

Beneficiary Bank: City and State:

OUTGOING WIRE REQUEST:

Complete only if all or a portion of funds from the loan advance above is to be
wired.

Deadline for same day processing is noon, Pacific Time

 

 

 

 

41422438v8

 

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

 

EXHIBIT C

 

Compliance Certificate

 

 

TO:

OXFORD FINANCE LLC, as Collateral Agent and Lender SILICON VALLEY BANK, as
Lender

 

 

FROM:SUTRO BIOPHARMA, INC.

 

The undersigned authorized officer (“Officer”) of Sutro Biopharma, Inc.
(“Borrower”), hereby certifies that in accordance with the terms and conditions
of the Loan and Security Agreement by and among Borrower, Collateral Agent, and
the Lenders from time to time party thereto (the “Loan Agreement;” capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Loan Agreement),

 

 

(a)

Borrower is in complete compliance for the period ending with all required
covenants except as noted below;

 

 

 

(b)

There are no Events of Default, except as noted below;

 

 

(c)

Except as noted below, all representations and warranties of Borrower stated in
the Loan Documents are true and correct in all material respects on this date
and for the period described in (a), above; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date;

 

 

 

(d)

Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax
returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely
paid all foreign, federal, state, and local taxes, assessments, deposits and
contributions owed by Borrower, or Subsidiary, except as otherwise permitted
pursuant to the terms of Section 5.8 of the Loan Agreement; and

 

 

 

(e)

No Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Collateral Agent and the
Lenders.

 

 

Attached are the required documents, if any, supporting our certification(s).
The Officer, on behalf of Borrower, further certifies that the attached
financial statements are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes and except, in
the case of unaudited financial statements, for the absence of footnotes and
subject to year-end GAAP and audit adjustments as to the interim financial
statements.

 

Please indicate compliance status since the last Compliance Certificate by
circling Yes, No, or N/A under “Complies” column.

 

Reporting CovenantRequirementActualComplies

 

1)

Financial statementsQuarterly within 40 daysYesNoN/A

 

2)

Annual (CPA Audited) statementsWithin 90 days after FYEYesNoN/A

 

 

Annual Financial

 

3)

Projections/Budget (prepared on a monthly basis)

Annually (within 30 days of FYE), and when revised

YesNoN/A

 

 

4)

A/R & A/P agingsIf applicableYesNoN/A

 

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5)

8-K, 10-K and 10-Q FilingsIf applicable, within 5 days of filingYesNoN/A

 

6)

Compliance CertificateMonthly within 30 daysYesNoN/A

 

7)

IP ReportWhen requiredYesNoN/A Total amount of Borrower’s and

 

Borrower’s Subsidiaries

 

8)

 

 

 

 

9)

 

 

 

 

10)

unrestricted cash and cash equivalents at the last day of the prior measurement
period

Net change in Borrower’s and Borrower’s Subsidiaries’ unrestricted cash and cash
equivalents since the last day of the prior measurement period

Total amount of Borrower’s and Borrower’s Subsidiaries’ unrestricted cash and
cash equivalents at the last day of the measurement period

$ YesNoN/A

 

 

 

 

$ YesNoN/A

 

 

 

 

$ YesNoN/A

 

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

Institution NameAccount NumberNew Account?Account Control Agreement in place?

 

1)Yes

No

Yes

No

2)Yes

No

Yes

No

3)Yes

No

Yes

No

4)Yes

No

Yes

No

 

Financial Covenants

 

CovenantRequirementActualCompliance

 

1)

None.

 

 

Other Matters

 

 

1)

Have there been any changes in management since the last Compliance
Certificate?YesNo

 

 

 

2)

Have there been any transfers/sales/disposals/retirement of Collateral or IP
prohibited by the Loan Agreement?

YesNo

 

 

 

 

3)

Have there been any new or pending claims or causes of action against Borrower
that involve more than Two Hundred Fifty Thousand Dollars ($250,000.00)?

 

YesNo

 

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

 

Have there been any material amendments of or other material changes to the
capitalization table of Borrower and any amendments of or other changes to the
Operating

 

4)

Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any
such

amendments or changes with this Compliance Certificate.

YesNo

 

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

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions.” Attach separate sheet if additional
space needed.)

 

 

SUTRO BIOPHARMA, INC.

 

By Name: Title:  

 

Date:

 

LENDER USE ONLY

 

Received by: Date:  

 

Verified by: Date:  

 

Compliance Status:YesNo

 

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EXHIBIT D

 

Form of Secured Promissory Note

 

[see attached]

 

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SECURED PROMISSORY NOTE

(Term [A][B] Loan)

 

$ Dated: [DATE]

 

FOR VALUE RECEIVED, the undersigned, Sutro Biopharma, Inc., a Delaware
corporation with offices located at 310 Utah Avenue, Suite 150, South San
Francisco, CA 94080 (“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD
FINANCE LLC][SILICON VALLEY BANK] (“Lender”) the principal amount of  [
]  MILLION DOLLARS ($ ) or such lesser amount as shall equal the outstanding
principal balance of the Term [A][B] Loan made to Borrower by Lender, plus
interest on the aggregate unpaid principal amount of such Term [A][B] Loan, at
the rates and in accordance with the terms of the Loan and Security Agreement
dated February 28, 2020 by and among Borrower, Lender, Oxford Finance LLC, as
Collateral Agent, and the other Lenders from time to time party thereto (as
amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”). If not sooner paid, the entire principal amount and all
accrued and unpaid interest hereunder shall be due and payable on the Maturity
Date as set forth in the Loan Agreement. Any capitalized term not otherwise
defined herein shall have the meaning attributed to such term in the Loan
Agreement.

 

Principal, interest and all other amounts due with respect to the Term [A][B]
Loan, are payable in lawful money of the United States of America to Lender as
set forth in the Loan Agreement and this Secured Promissory Note (this “Note”).
The principal amount of this Note and the interest rate applicable thereto, and
all payments made with respect thereto, shall be recorded by Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto which is part of
this Note.

 

The Loan Agreement, among other things, (a) provides for the making of a secured
Term[A][B] Loan by Lender to Borrower, and (b) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events.

 

This Note may not be prepaid except as set forth in Section 2.2 (c) and Section
2.2(d) of the Loan Agreement.

 

This Note and the obligation of Borrower to repay the unpaid principal amount of
the Term[A][B] Loan, interest on the Term [A][B] Loan and all other amounts due
Lender under the Loan Agreement is secured under the Loan Agreement.

 

Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.

 

Borrower shall pay all out-of-pocket fees and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower’s obligations hereunder not
performed when due.

 

This Note shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of California.

 

The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Lender or its agent. Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation. Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.

 

 

 

[Balance of Page Intentionally Left Blank]

 

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

 

BORROWER:

 

SUTRO BIOPHARMA, INC.

 

 

By Name: Title:

 

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LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

 

 

Date

 

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

Principal

Amount Interest Rate

Scheduled

Payment Amount Notation By

 

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CORPORATE BORROWING CERTIFICATE

 

BORROWER:SUTRO BIOPHARMA, INC.DATE: February , 2020

 

LENDERS:

OXFORD FINANCE LLC, as Collateral Agent and Lender SILICON VALLEY BANK, as
Lender

 

 

I hereby certify, solely in my capacity as an officer of the Borrower, and not
in any personal capacity, as follows, as of the date set forth above:

 

 

1.

I am the Secretary, Assistant Secretary or other officer of Borrower. My title
is as set forth below.

 

2.Borrower’s exact legal name is set forth above. Borrower is a corporation
existing under the laws of the State of Delaware.

 

 

3.

Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and
complete copies of

(i) Borrower’s Restated Certificate of Incorporation, as filed with the
Secretary of State of the state in which Borrower is incorporated as set forth
in paragraph 2 above; and (ii) Borrower’s Restated Bylaws. Neither such
Certificate of Incorporation nor such Bylaws have been further amended,
annulled, rescinded, revoked or supplemented, and such Certificate of
Incorporation and such Bylaws remain in full force and effect as of the date
hereof.

 

4.The following resolutions were duly and validly adopted by the Borrower’s
Board of Directors at a duly held meeting of such directors. Such resolutions
are in full force and effect as of the date hereof and have not been in any way
modified, repealed, rescinded, amended or revoked, and the Lenders may rely on
them until each Lender receives written notice of revocation from Borrower.

 

[Balance of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29581/00600/FW/9686981.2

 

41422438v8

 

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

 

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

 

 

 

NameTitleSignature

Authorized to Add or Remove Signatories

 

 

William NewellChief Executive Officer X

Edward C. AlbiniChief Financial Officer X

□

□

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

 

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

 

Borrow Money. Borrow money from the Lenders.

Execute Loan Documents. Execute any loan documents any Lender requires.

Grant Security. Grant Collateral Agent a security interest in any of Borrower’s
assets.

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

Issue Warrants. Issue warrants for Borrower’s capital stock.

Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effectuate such resolutions.

 

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

 

[Balance of Page Intentionally Left Blank]

 

41422438v8

 

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5.The persons listed above are Borrower’s officers or employees with their
titles and signatures shown next to their names.

 

By:

 

Name: Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Corporate Borrowing Certificate]

 

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

 

EXHIBIT A

 

Restated Certificate of Incorporation

 

[see attached]

 

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

 

EXHIBIT B

 

Restated Bylaws

 

[see attached]

 

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

 

DEBTOR:SUTRO BIOPHARMA, INC. SECURED PARTY:OXFORD FINANCE LLC,

as Collateral Agent

 

EXHIBIT A TO UCC FINANCING STATEMENT

 

Description of Collateral

 

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

 

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

 

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

 

Notwithstanding the foregoing, the Collateral does not include (i) any
Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property; provided, further, that if a
judicial authority (including a U.S. Bankruptcy Court) would hold that a
security interest in the underlying Intellectual Property is necessary to have a
security interest in such Accounts and such property that are proceeds of
Intellectual Property, then the Collateral shall automatically, and effective as
of the Effective Date, include the Intellectual Property to the extent necessary
to permit perfection of Secured Party’s security interest in such Accounts and
such other property of Debtor that are proceeds of the Intellectual Property;
and (ii) more than 65% of the total combined voting power of all classes of
stock entitled to vote the shares of capital stock (the “Shares”) of any Foreign
Subsidiary, if Debtor demonstrates to Secured Party’s reasonable satisfaction
that a pledge of more than sixty five percent (65%) of the Shares of such
Subsidiary creates a present and existing adverse tax consequence to Debtor
under the U.S. Internal Revenue Code; (iii) any license, lease or contract, in
each case if the granting of a Lien in such license, lease or contract is
prohibited by or would constitute a default under the agreement governing such
license, lease or contract (but (A) only to the extent such prohibition is
enforceable under applicable law and (B) other than to the extent that any such
term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409
(or any other Section) of Division 9 of the Code); provided that upon the
termination, lapsing or expiration of any such prohibition, such license, lease
or contract, as applicable, shall automatically be subject to the security
interest granted in favor of Secured Party hereunder and become part of the
“Collateral”; and (iv) any capital stock of SutroVax, Inc. for so long as such
capital stock is subject to (a) a right of first refusal of the other
equityholders of SutroVax, Inc., or (b) call options awarded to employees and
other service providers of Borrower pursuant to the Sutro Biopharma, Inc. 2017
Call Option Plan adopted by Debtor’s Board of Directors on February 6, 2017,
provided that upon the termination, lapsing or expiration of both such rights of
first refusal and such call options, such capital stock shall automatically be
subject to the security interest granted in favor of Secured Party hereunder and
become part of the “Collateral.”

 

Pursuant to the terms of a certain negative pledge arrangement with Secured
Party and the Lenders, Debtor has agreed not to encumber any of its Intellectual
Property.

 

Capitalized terms used but not defined herein have the meanings ascribed in the
Uniform Commercial Code in effect in the State of California as in effect from
time to time (the “Code”) or, if not defined in the Code, then in the Loan and
Security Agreement by and between Debtor, Secured Party and the other Lenders
party thereto (as modified, amended and/or restated from time to time).

41422438v8