Exhibit 10.26

THIRD AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is
entered into this 7th day of April, 2006, by and between SILICON VALLEY BANK
(“Bank”) and THRESHOLD PHARMACEUTICALS, INC., a Delaware corporation
(“Borrower”) whose address is 1300 Seaport Boulevard, Redwood City, California
94063.

RECITALS

A. Bank and Borrower have entered into that certain Loan and Security Agreement
dated as of March 27, 2003, as amended by that certain Loan Modification
Agreement by and between Bank and Borrower dated as of March 31, 2004, and as
further amended by that certain Loan Modification Agreement by and between Bank
and Borrower dated as of March 9, 2005 (as the same may from time to time be
further amended, modified, supplemented or restated, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) add a
supplemental equipment term loan facility, and (ii) make certain other revisions
to the Loan Agreement as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but
only to the extent, in accordance with the terms, subject to the conditions and
in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

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2. Amendments to Loan Agreement.

2.1 Section 2 (LOAN AND TERMS OF PAYMENT). Section 2 is amended by adding the
following section immediately after Section 2.1.2 as Section 2.1.3:

2.1.3 Supplemental Equipment Advances.

(a) Availability. Through March 31, 2007 (the “Supplemental Equipment
Availability End Date”), Bank shall make advances (each, a “Supplemental
Equipment Advance” and, collectively, “Supplemental Equipment Advances”) not
exceeding the Supplemental Equipment Line. Supplemental Equipment Advances will
be available in two (2) tranches of Two Million Dollars ($2,000,000) each
(“Tranche One” and “Tranche Two”, respectively). A single Supplemental Equipment
Advance under Tranche One (the “Tranche One Supplemental Equipment Advance”)
shall be available on the Supplemental Equipment Closing Date. Borrower shall
not be required to submit invoices supporting the Tranche One Supplemental
Equipment Advance. Supplemental Equipment Advances under Tranche Two (the
“Tranche Two Supplemental Equipment Advances”) shall be available through the
Supplemental Equipment Availability End Date. Supplemental Equipment Advances
may only be used to finance Eligible Equipment purchased within ninety (90) days
(determined based upon the applicable invoice date of such Eligible Equipment)
before the date of each Supplemental Equipment Advance, and no Supplemental
Equipment Advance may exceed one hundred percent (100%) of the total invoice for
Eligible Equipment, excluding taxes, shipping, warranty charges, freight
discounts and installation expenses relating to such Eligible Equipment. After
repayment, no Supplemental Equipment Advance may be reborrowed.

(b) Supplemental Equipment Advances. To obtain a Supplemental Equipment Advance,
Borrower must notify Bank (the notice is irrevocable) by facsimile no later than
12:00 p.m. Pacific time one (1) Business Day before the day on which the
Supplemental Equipment Advance is to be made. The notice in the form of Exhibit
B (Payment/Advance Form) must be signed by a Responsible Officer or designee and
include a copy of the invoice for the Eligible Equipment being financed.

(c) Repayment. Each Supplemental Equipment Advance shall be payable in thirty
six (36) consecutive equal monthly installments of principal and accrued
interest, beginning on the first (1st) day of the first (1st) month following
such Supplemental Equipment Advance and continuing on the first (1st) day of
each month thereafter (each a “Supplemental Equipment Payment Date”). The final
payment due on the applicable Supplemental Equipment Maturity Date shall include
all outstanding principal and all accrued unpaid interest.

(d) Final Payment. On the earlier of (i) the final Supplemental Equipment
Payment Date with respect to each Supplemental Equipment Advance, (ii) the
termination of the Supplemental Equipment Line, or (iii) prepayment, Borrower
shall pay, in addition to the outstanding principal, accrued and unpaid
interest, and all other amounts due on such date with respect to such
Supplemental Equipment Advance, an amount equal to the Supplemental Equipment
Final Payment.

(e) Prepayment Upon an Event of Loss. Borrower shall bear the risk of any loss,
theft, destruction, or damage of or to the Financed Equipment. If, during the
term of this Agreement, any item of Financed Equipment becomes obsolete or

 

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is lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit
for use, or seized by a governmental authority for any reason for a period equal
to at least the remainder of the term of this Agreement (an “Event of Loss”),
then, if no Event of Default has occurred or is continuing, within ten (10) days
following such Event of Loss, at Borrower’s option, Borrower shall (i) pay to
Bank on account of the Obligations all accrued interest to the date of the
prepayment, plus all outstanding principal owing with respect to the Financed
Equipment subject to the Event of Loss; or (ii) repair or replace any Financed
Equipment subject to an Event of Loss provided the repaired or replaced Financed
Equipment is of equal or like value to the Financed Equipment subject to an
Event of Loss and provided further that Bank has a first priority perfected
security interest in such repaired or replaced Financed Equipment.

(d) Prepayment. At Borrower’s option, so long as an Event of Default has not
occurred and is not continuing, Borrower shall have the option to prepay all,
but not less than all, of the Supplemental Equipment Loan Amount advanced by
Bank under this Agreement, provided Borrower (a) provides written notice to Bank
of its election to exercise to prepay the Supplemental Equipment Advance at
least thirty (30) days prior to such prepayment, and (b) pays, on the date of
the prepayment (i) all accrued and unpaid interest with respect to the
Supplemental Equipment Advance through the date the prepayment is made; (ii) all
unpaid principal with respect to the Supplemental Equipment Advance; (iii) a
premium equal to the Make-Whole Premium; (iv) the Supplemental Equipment Final
Payment; and (v) all other sums, if any, that shall have become due and payable
hereunder with respect to this Agreement.

2.2 Section 2.2 (Interest Rate, Payments). Section 2.2(a) is amended by deleting
it in its entirety and replacing it with the following:

(a) Interest Rate. (i) Each Equipment Advance shall continue to accrue interest
on the outstanding principal balance at a fixed per annum rate determined as of
the date of the applicable Funding Date equal to the greater of: (A) the
Treasury Note Rate as of the applicable Funding Date plus three percent
(3.0%) or (B) five and one-half percent (5.50%); and which rate shall remain
fixed for the term of the relevant Equipment Advance. (ii) Each Supplemental
Equipment Advance shall accrue interest on the outstanding principal balance for
each Supplemental Equipment Advance at a fixed per annum rate equal to the Basic
Rate, which shall be payable monthly. After an Event of Default, Obligations
accrue interest at five percent (5.0%) above the rate effective immediately
before the Event of Default. Interest is computed on a 360-day year for the
actual number of days elapsed.

2.3 Section 6.2 (Financial Statements, Reports, Certificates). Section 6.2(a) is
amended by deleting it in its entirety and replacing it with the following:

(a) Borrower will deliver to Bank: (i) as soon as available, but no later than
forty five (45) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower’s consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than one hundred
twenty (120) days after the last day of

 

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Borrower’s fiscal year, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
acceptable to Bank in its reasonable discretion; (iii) within five (5) days of
delivery, copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated Debt; (iv) within
ten (10) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission or a link thereto on Borrower’s or another
website on the Internet; (v) as soon as available, but no later than forty five
(45) days after fiscal year end, Borrower’s financial projections for the
upcoming fiscal year approved by Borrower’s Board of Directors and in form and
substance reasonably satisfactory to Bank; (vi) a prompt report of any legal
actions pending or threatened against Borrower or any of its Subsidiaries that
could result in damages or costs to Borrower or any of its Subsidiaries of One
Hundred Fifty Thousand Dollars ($150,000) or more; and (vii) budgets, sales
projections, operating plans and other financial information reasonably
requested by Bank.

2.4 Section 13 (Definitions).

(a) The following terms and their respective definitions set forth in
Section 13.1 are amended in their entirety and replaced with the following:

“Credit Extension” is any Equipment Advance, Supplemental Equipment Advance, or
any other extension of credit by Bank for Borrower’s benefit.

“Financed Equipment” is all present and future Eligible Equipment in which
Borrower has any interest, the purchase of which is financed by an Equipment
Advance or Supplemental Equipment Advance, as applicable.

(b) The following definitions are added to Section 13.1 of the Loan Agreement:

“Basic Rate” is the per annum rate of interest (based on a year of 360 days)
equal to the sum of (a) U.S. Treasury note yield to maturity for a term equal to
the Treasury Note Maturity as quoted in The Wall Street Journal on the
Supplemental Equipment Funding Date, plus (b) the Loan Margin.

“Loan Margin” is two hundred twenty five (225) basis points.

“Make-Whole Premium” is an amount equal to five percent (5.0%) of the
outstanding Supplemental Equipment Advance if the prepayment is made on or
before the second (2nd) anniversary of the date hereof and three percent
(3.0%) of the outstanding Supplemental Equipment Advance if the prepayment is
made after the second (2nd) anniversary hereof, but before the Supplemental
Equipment Maturity Date.

“Supplemental Equipment Advance” is defined in Section 2.1.3(a).

“Supplemental Equipment Availability End Date” is defined in Section 2.1.3(a).

 

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“Supplemental Equipment Closing Date” is the date of this Amendment.

“Supplemental Equipment Final Payment” is a payment (in addition to and not a
substitution for the regular monthly payments of principal plus accrued
interest) due on the earlier of (a) the final Supplemental Equipment Payment
Date for such Supplemental Equipment Advance or (b) the acceleration of such
Supplemental Equipment Advance, equal to the Supplemental Equipment Loan Amount
for such Supplemental Equipment Advance multiplied by the Final Payment
Percentage.

“Supplemental Equipment Final Payment Percentage” is, for each Supplemental
Equipment Advance, four percent (4.0%).

“Supplemental Equipment Funding Date” is the date a Supplemental Equipment
Advance is made.

“Supplemental Equipment Line” is a Supplemental Equipment Advance or
Supplemental Equipment Advances in an aggregate amount of up to Four Million
Dollars ($4,000,000) outstanding at any time.

“Supplemental Equipment Loan Amount” in respect of each Supplemental Equipment
Advance is the original principal amount of such Supplemental Equipment Advance.

“Supplemental Equipment Maturity Date” is, with respect to each Supplemental
Equipment Advance, the final Supplemental Equipment Payment Date, but no later
than March 31, 2010.

“Supplemental Equipment Payment Date” is defined in Section 2.1.3(c).

“Treasury Note Maturity” is thirty six (36) months.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

 

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4. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete
in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

4.3 The organizational documents of Borrower delivered to Bank on the March 27,
2003 remain true, accurate and complete and have not been amended, supplemented
or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

5. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto,
(b) Borrower’s payment of an amendment fee in an amount equal to Twenty Thousand
Dollars ($20,000) (the “Good Faith Deposit”), and (c) payment of Bank’s legal
fees and expenses in connection with the negotiation and preparation of this
Amendment. Any portion of the Good Faith Deposit not utilized to pay Bank
Expenses will be returned to Borrower.

 

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[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

 

BANK     BORROWER Silicon Valley Bank     Threshold Pharmaceuticals, Inc. By:  

/s/ Jason Hughes

    By:  

/s/ Janet I. Swearson

Name:   Jason Hughes     Name:   Janet I. Swearson Title:   Vice President    
Title:   Chief Financial Officer

 

[Signature Page to Third Amendment to Loan and Security Agreement]