Exhibit 10.1

Execution Copy

 

 

 

CREDIT AGREEMENT AND GUARANTY

Dated as of

February 27, 2018

among

MOLECULAR TEMPLATES OPCO, INC.,

as Borrower,

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

and

PERCEPTIVE CREDIT HOLDINGS II, LP

and its successors and assigns party hereto,

as Lenders

$10,000,000

 

 

 

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TABLE OF CONTENTS

 

SECTION   HEADING                                PAGE   ARTICLE 1. DEFINITIONS
   1  

Section 1.01.

 

Certain Defined Terms

     1  

Section 1.02.

 

Accounting Terms and Principles

     23  

Section 1.03.

 

Interpretation

     23   ARTICLE 2. THE COMMITMENTS    24  

Section 2.01.

 

Loans

     24  

Section 2.02.

 

Proportionate Shares

     25  

Section 2.03.

 

Fees

     25  

Section 2.04.

 

Notes

     26  

Section 2.05.

 

Use of Proceeds

     26   ARTICLE 3. PAYMENTS OF PRINCIPAL AND INTEREST    26  

Section 3.01.

 

Repayment

     26  

Section 3.02.

 

Interest

     26  

Section 3.03.

 

Prepayments

     27   ARTICLE 4. PAYMENTS, ETC.    29  

Section 4.01.

 

Payments

     29  

Section 4.02.

 

Computations

     30  

Section 4.03.

 

Notices

     31  

Section 4.04.

 

Set-Off

     31   ARTICLE 5. YIELD PROTECTION, ETC.    31  

Section 5.01.

 

Additional Costs

     31  

Section 5.02.

 

Illegality

     32  

Section 5.03.

 

Taxes

     33   ARTICLE 6. CONDITIONS PRECEDENT    36  

Section 6.01.

 

Conditions to Tranche A Term Loan; Closing Date

     36  

Section 6.02.

 

Conditions to Tranche B Term Loan; Tranche B Term Loan Borrowing Date

     39   ARTICLE 7. REPRESENTATIONS AND WARRANTIES    40  

Section 7.01.

 

Power and Authority

     40  

Section 7.02.

 

Authorization; Enforceability

     40  

Section 7.03.

 

Governmental and Other Approvals; No Conflicts

     40  

Section 7.04.

 

Financial Statements; Projections; Material Adverse Change

     41  

 

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Section 7.05.

 

Properties

     41  

Section 7.06.

 

No Actions or Proceedings

     43  

Section 7.07.

 

Compliance with Laws and Agreements

     44  

Section 7.08.

 

Taxes

     44  

Section 7.09.

 

Full Disclosure

     44  

Section 7.10.

 

Regulation

     45  

Section 7.11.

 

Solvency

     45  

Section 7.12.

 

Subsidiaries

     45  

Section 7.13.

 

Indebtedness and Liens

     45  

Section 7.14.

 

Material Agreements

     45  

Section 7.15.

 

Restrictive Agreements

     46  

Section 7.16.

 

Real Property

     46  

Section 7.17.

 

Pension and Other Plans

     46  

Section 7.18.

 

Collateral; Security Interest

     46  

Section 7.19.

 

Regulatory Approvals

     47  

Section 7.20.

 

Capitalization

     48  

Section 7.21.

 

Insurance

     48  

Section 7.22.

 

Certain Fees

     49  

Section 7.23.

 

Sanctions Laws

     49  

Section 7.24.

 

Anti-Corruption Laws

     49  

Section 7.25.

 

Anti-Terrorism Laws

     49   ARTICLE 8. AFFIRMATIVE COVENANTS    49  

Section 8.01.

 

Financial Statements and Other Information

     49  

Section 8.02.

 

Notices of Material Events

     51  

Section 8.03.

 

Existence; Maintenance of Properties, Etc.

     53  

Section 8.04.

 

Payment of Obligations

     54  

Section 8.05.

 

Insurance

     54  

Section 8.06.

 

Books and Records; Inspection Rights

     55  

Section 8.07.

 

Compliance with Laws and Other Obligations

     55  

Section 8.08.

 

Licenses

     56  

Section 8.09.

 

Action under Environmental Laws

     56  

Section 8.10.

 

Use of Proceeds

     56  

Section 8.11.

 

Certain Obligations Respecting Subsidiaries; Further Assurances

     56  

Section 8.12.

 

Termination of Non-Permitted Liens

     57  

Section 8.13.

 

Non-Consolidation

     58  

Section 8.14.

 

Anti-Terrorism and Anti-Corruption Laws

     58  

Section 8.15.

 

Milestone

     58  

Section 8.16.

 

Minimum Liquidity

     58  

Section 8.17.

 

Accounts

     58   ARTICLE 9. NEGATIVE COVENANTS    59  

Section 9.01.

 

Indebtedness

     59  

Section 9.02.

 

Liens

     60  

 

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Section 9.03.

 

Fundamental Changes and Acquisitions

     61  

Section 9.04.

 

Lines of Business

     62  

Section 9.05.

 

Investments

     62  

Section 9.06.

 

Restricted Payments

     63  

Section 9.07.

 

Payments of Indebtedness

     64  

Section 9.08.

 

Change in Fiscal Year

     64  

Section 9.09.

 

Sales of Assets, Etc.

     64  

Section 9.10.

 

Transactions with Affiliates

     65  

Section 9.11.

 

Restrictive Agreements

     66  

Section 9.12.

 

Organizational Documents, Material Agreements

     66  

Section 9.13.

 

[Reserved]

     66  

Section 9.14.

 

Sales and Leasebacks

     66  

Section 9.15.

 

Hazardous Material

     67  

Section 9.16.

 

Accounting Changes

     67  

Section 9.17.

 

Compliance with ERISA

     67   ARTICLE 10. EVENTS OF DEFAULT    67  

Section 10.01.

 

Events of Default

     67  

Section 10.02.

 

Remedies

     70  

Section 10.03.

 

Exit Fee, Prepayment Premium and Redemption Price

     71   ARTICLE 11. GUARANTEE    71  

Section 11.01.

 

The Guarantee

     71  

Section 11.02.

 

Obligations Unconditional

     72  

Section 11.03.

 

Reinstatement

     73  

Section 11.04.

 

Subrogation

     73  

Section 11.05.

 

Remedies

     73  

Section 11.06.

 

Instrument for the Payment of Money

     73  

Section 11.07.

 

Continuing Guarantee

     73  

Section 11.08.

 

Rights of Contribution

     74  

Section 11.09.

 

General Limitation on Guarantee Obligations

     74   ARTICLE 12. RESERVED    75   ARTICLE 13. MISCELLANEOUS    75  

Section 13.01.

 

No Waiver

     75  

Section 13.02.

 

Notices

     75  

Section 13.03.

 

Expenses, Indemnification, Etc.

     75  

Section 13.04.

 

Amendments, Etc.

     76  

Section 13.05.

 

Successors and Assigns

     77  

Section 13.06.

 

Survival

     79  

Section 13.07.

 

Captions

     80  

Section 13.08.

 

Counterparts

     80  

Section 13.09.

 

GOVERNING LAW

     80  

Section 13.10.

 

JURISDICTION, SERVICE OF PROCESS AND VENUE

     80  

 

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Section 13.11.

 

WAIVER OF JURY TRIAL

     81  

Section 13.12.

 

WAIVER OF IMMUNITY

     81  

Section 13.13.

 

Entire Agreement

     81  

Section 13.14.

 

Severability

     81  

Section 13.15.

 

No Fiduciary Relationship

     81  

Section 13.16.

 

USA PATRIOT Act

     82  

Section 13.17.

 

Treatment of Certain Information; Confidentiality

     82  

Section 13.18.

 

Releases of Guarantees and Liens

     83  

 

SCHEDULES:       SCHEDULE 1    —    Commitments and Warrant Shares
SCHEDULE 7.05(b)    —    Obligor Intellectual Property SCHEDULE 7.08    —   
Taxes SCHEDULE 7.13A    —    Existing Indebtedness SCHEDULE 7.13B    —   
Existing Liens SCHEDULE 7.14    —    Material Agreements SCHEDULE 7.15    —   
Restrictive Agreements SCHEDULE 7.16    —    Real Property SCHEDULE 7.17    —   
Pension Matters SCHEDULE 7.19    —    Regulatory Approvals SCHEDULE 7.20    —   
Capitalization SCHEDULE 9.05    —    Existing Investments SCHEDULE 9.10    —   
Transactions with Affiliates

EXHIBITS:       EXHIBIT A    —    Form of Guarantee Assumption Agreement
EXHIBIT B    —    [Reserved] EXHIBIT C    —    Form of Note EXHIBIT D    —   
Form of U.S. Tax Compliance Certificate EXHIBIT E    —    Form of Compliance
Certificate EXHIBIT F    —    Form of Sources and Uses Certificate EXHIBIT G   
—    Form of Warrant Certificate EXHIBIT H    —    Form of Security Agreement
EXHIBIT I-1    —    Form of Patent & Trademark Security Agreement EXHIBIT I-2   
—    Form of Copyright Security Agreement EXHIBIT J    —    Form of Collateral
Questionnaire EXHIBIT K    —    Form of Borrowing Notice

 

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CREDIT AGREEMENT AND GUARANTY, dated as of February 27, 2018 (this “Agreement”),
among MOLECULAR TEMPLATES OPCO, INC., a Delaware corporation (“Borrower”),
certain Guarantors from time to time parties hereto, PERCEPTIVE CREDIT HOLDINGS
II, LP, a Delaware limited partnership (“Perceptive”), as a lender, and its
successors and assigns party hereto pursuant to Section 13.05, the “Lenders” and
each a “Lender”).

W I T N E S S E T H:

Borrower has requested the Lenders to make term loans to Borrower, and the
Lenders are prepared to make such loans on and subject to the terms and
conditions hereof. Accordingly, the parties agree as follows:

ARTICLE 1.

DEFINITIONS

Section 1.01.    Certain Defined Terms

As used herein, the following terms have the following respective meanings:

“Accounting Change Notice” has the meaning set forth in Section 1.02.

“Acquisition” means any transaction, or any series of related transactions, by
which any Person directly or indirectly, by means of a take-over bid, tender
offer, amalgamation, merger, purchase of assets, or similar transaction having
the same effect as any of the foregoing, (a) acquires any business or all or
substantially all of the assets of any Person engaged in any business,
(b) acquires control of securities of a Person engaged in a business
representing more than 50% of the ordinary voting power for the election of
directors or other governing body if the business affairs of such Person are
managed by a board of directors or other governing body, or (c) acquires control
of more than 50% of the ownership interest in any Person engaged in any business
that is not managed by a board of directors or other governing body.

“Act” has the meaning set forth in Section 13.16.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Agreement” has the meaning set forth in the introduction hereto.

“Anti-Corruption Laws” means all laws, rules, regulations and requirements of
any jurisdiction applicable to the Obligors and their Affiliates concerning or
relating to bribery or corruption, including, without limitation, the Foreign
Corrupt Practices Act of 1977, as amended.

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“Anti-Terrorism Laws” means any laws or regulations relating to terrorism or
money laundering, including, without limitation the Bank Secrecy Act (31 U.S.C.
§§ 5311 et seq.), the Money Laundering Control Act of 1986 (18 U.S.C. §§ 1956 et
seq.), the USA Patriot Act and any similar law enacted in the United States
after the date of this Agreement.

“Applicable Margin” means a rate of 11.00% per annum.

“Asset Sale” has the meaning set forth in Section 9.09.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy.”

“Benefit Plan” means any employee benefit plan as defined in Section 3(3) of
ERISA to which any Obligor or Subsidiary thereof incurs or otherwise has any
obligation or liability, contingent or otherwise.

“Borrower” has the meaning set forth in the introduction hereto.

“Borrower Party” has the meaning set forth in Section 13.03(b).

“Borrowing” means a borrowing consisting of Tranche A Term Loan made by the
Lenders on the Closing Date or the Tranche B Term Loan made by the Lenders on
the Tranche B Term Loan Borrowing Date, as applicable.

“Borrowing Notice” means a notice substantially in the form of attached hereto
as Exhibit K.

“Business Day” means a day (other than a Saturday or Sunday) on which commercial
banks are not authorized or required to close in New York City and, when
determined in connection with notices and determinations in respect of LIBOR or
any Loan or any funding, Interest Period or any payments in respect of the
Loans, that is also a day on which dealings in dollar deposits are carried on in
the London interbank market.

“Capital Lease Obligations” means, as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal Property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP and, for purposes of this Agreement, the amount
of such obligations shall be the capitalized amount thereof, determined
substantially in accordance with GAAP.

“Casualty Event” means any actual or constructive loss, condemnation,
destruction, confiscation, requisition, seizure or forfeiture of all or any
material portion of the assets of Borrower, excluding only those assets
individually or in the aggregate, subject to any such event during any calendar
year with a fair market value as of the date thereof equal to or less than
$500,000.

 

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“Change of Control” means and shall be deemed to have occurred if:

(a)    the acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person or group of Persons acting jointly or otherwise in
concert, other than Management Investors and any Lender or Affiliate thereof, of
capital stock representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Parent; or

(b)    during any period of twelve (12) consecutive calendar months, the
occupation of a majority of the seats (other than vacant seats) on the board of
directors of Parent by Persons who were neither (i) nominated by the board of
directors of Parent, nor (ii) appointed by directors on the board of directors
on the date hereof or so nominated; or

(c)    Parent shall cease to own, directly or indirectly, determined on a fully
diluted basis, 100% of the issued and outstanding capital stock of Borrower.

“Claims” includes claims, demands, complaints, grievances, actions,
applications, suits, causes of action, orders, charges, indictments,
prosecutions, information (brought by a public prosecutor without grand jury
indictment) or other similar processes, assessments or reassessments.

“Closing Date” means the Business Day on which all of the conditions set forth
in Section 6.01 have been satisfied or waived by the Lenders and the Tranche A
Term Loan is made.

“Closing Fee” has the meaning set forth in Section 2.03(a).

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

“Collaboration Agreement” means (i) the Takeda Collaboration Agreements,
(ii) that certain Feasibility Agreement, dated as of September 12, 2016, between
the Borrower and AbbVie, Inc. and (iii) any collaboration or similar agreement
with a pharmaceutical or biotechnology company.

“Collateral” means any Property in which a Lien is purported to be granted under
any of the Security Documents (or all such Property, as the context may
require).

“Collateral Questionnaire” means that certain Collateral Questionnaire and
Certification by Officer of Molecular Templates, Inc. substantially in the form
of attached hereto as Exhibit J.

“Commission” means the Securities and Exchange Commission.

 

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“Commitment” means, with respect to each Lender, such Lender’s Tranche A Term
Loan Commitment and Tranche B Term Loan Commitment, and “Commitments” means all
such commitments of all Lenders. The aggregate Commitments of all Lenders as of
the Closing Date is $10,000,000.

“Commodity Account” has the meaning set forth in the Security Agreement.

“Compliance Certificate” has the meaning set forth in Section 8.01(d).

“Contracts” means contracts, licenses, leases, agreements, obligations,
promises, undertakings, understandings, arrangements, documents, commitments,
entitlements or engagements under which a Person has, or will have, any
liability or contingent liability (in each case, whether written or oral,
express or implied).

“Control” means, in respect of a particular Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ability to exercise voting power,
by contract or otherwise. “Controlling” and “Controlled” have meanings
correlative thereto.

“Control Agent” means the Lender acting as “Control Agent” under the Security
Agreement.

“Control Agreement” has the meaning set forth in the Security Agreement.

“Copyright” has the meaning set forth in the Security Documents.

“Default” means any Event of Default and any event that, upon the giving of
notice, the lapse of time or both, would constitute an Event of Default.

“Default Rate” has the meaning set forth in Section 3.02(b).

“Deposit Account” has the meaning set forth in the Security Agreement and
relates to such accounts located and/or maintained in the United States of
America.

“Designated Account” has the meaning set forth in Section 4.01(a).

“Designated Person” means a person or entity:

(a)    listed in the annex to, or otherwise targeted by the provisions of, the
Executive Order (as disclosed by World-Check or another reputable commercially
available database);

(b)    named as a “Specially Designated National and Blocked Person” on the most
current list published by OFAC at its official website or any replacement
website or other replacement official publication of such list (as disclosed by
World-Check or another reputable commercially available database); or

 

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(c)    with which the Lenders are prohibited from dealing or otherwise engaging
in any transaction by any Economic Sanctions Laws.

“Dollars” and “$” means lawful money of the United States of America.

“Domestic Foreign Holding Company” shall mean any Subsidiary that is organized
or incorporated in the United States, any state or territory thereof or the
District of Columbia and substantially all the assets of which are Equity
Interests and/or Indebtedness treated as Equity Interests for U.S. federal
income tax purposes of one or more Foreign Subsidiaries.

“Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign
Subsidiary.

“Economic Sanctions Laws” means:

(a)    the Executive Order, the International Emergency Economic Powers Act (50
U.S.C. §§ 1701 et seq.), the Trading with the Enemy Act (50 U.S.C. App. §§ 1
et seq.), any other law or regulation promulgated thereunder from time to time
and administered by OFAC and any similar law enacted in the United States after
the date of this Agreement; and

(b)    any other similar applicable law now or hereafter enacted in any other
applicable jurisdiction.

“Environmental Law” means any federal, state, provincial or local governmental
law, rule, regulation, order, writ, judgment, injunction or decree relating to
pollution or protection of the environment or the treatment, storage, disposal,
release, threatened release or handling of hazardous materials, and all local
laws and regulations related to environmental matters and any specific
agreements entered into with any competent authorities which include commitments
related to environmental matters.

“Equity Interest” means, with respect to any Person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or nonvoting), of equity of such Person,
including, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of property of, such partnership, but excluding debt securities
convertible or exchangeable into such equity.

“ERISA” means the United States Employee Retirement Income Security Act of 1974,
as amended.

“ERISA Affiliate” means, collectively, any Obligor, Subsidiary thereof, and any
Person under common control, or treated as a single employer, with any Obligor
or Subsidiary thereof, within the meaning of Section 414(b), (c), (m) or (o) of
the Code.

“ERISA Event” means (i) a reportable event as defined in Section 4043 of ERISA
with respect to a Title IV Plan, excluding, however, such events as to which the
PBGC by regulation

 

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has waived the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event; (ii) the applicability of the
requirements of Section 4043(b) of ERISA with respect to a contributing sponsor,
as defined in Section 4001(a)(13) of ERISA, to any Title IV Plan where an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA
is reasonably expected to occur with respect to such plan within the following
30 days; (iii) a withdrawal by any Obligor or any ERISA Affiliate thereof from a
Title IV Plan or the termination of any Title IV Plan resulting in liability
under Sections 4063 or 4064 of ERISA; (iv) the withdrawal of any Obligor or any
ERISA Affiliate thereof in a complete or partial withdrawal (within the meaning
of Section 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any
potential liability therefore, or the receipt by any Obligor or any ERISA
Affiliate thereof of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA; (v) the
filing of a notice of intent to terminate, the treatment of a plan amendment as
a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Title IV Plan or Multiemployer Plan;
(vi) the imposition of liability on any Obligor or any ERISA Affiliate thereof
pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the failure by any Obligor or any ERISA
Affiliate thereof to make any required contribution to a Plan, or the failure to
meet the minimum funding standard of Section 412 of the Code with respect to any
Title IV Plan (whether or not waived in accordance with Section 412(c) of the
Code) or the failure to make by its due date a required installment under
Section 430 of the Code with respect to any Title IV Plan or the failure to make
any required contribution to a Multiemployer Plan; (viii) the determination that
any Title IV Plan is considered an at-risk plan or a plan in endangered to
critical status within the meaning of Sections 430, 431 and 432 of the Code or
Sections 303, 304 and 305 of ERISA; (ix) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Title IV Plan
or Multiemployer Plan; (x) the imposition of any liability under Title I or
Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon any Obligor or any ERISA Affiliate thereof; (xi) an
application for a funding waiver under Section 303 of ERISA or an extension of
any amortization period pursuant to Section 412 of the Code with respect to any
Title IV Plan; (xii) the occurrence of a non-exempt prohibited transaction under
Sections 406 or 407 of ERISA for which any Obligor or any Subsidiary thereof may
be liable; (xiii) receipt from the IRS of notice of the failure of any Qualified
Plan to qualify under Section 401(a) of the Code, or the failure of any trust
forming part of any Qualified Plan to fail to qualify for exemption from
taxation under Section 501(a) of the Code; (xiv) the imposition of any lien (or
the fulfillment of the conditions for the imposition of any lien) on any of the
rights, properties or assets of any Obligor or any ERISA Affiliate thereof, in
either case pursuant to Title I or IV, including Section 302(f) or 303(k) of
ERISA or to Section 401(a)(29) or 430(k) of the Code; or (xv) the establishment
or amendment by any Obligor or any Subsidiary thereof of any “welfare plan,” as
such term is defined in Section 3(1) of ERISA, that provides post-employment
welfare benefits in a manner that would increase the liability of any Obligor,
other than those benefits required under the Consolidated Omnibus Budget
Reconciliation Act.

 

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“ERISA Funding Rules” means the rules regarding minimum required contributions
(including any installment payment thereof) to Title IV Plans, as set forth in
Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and
305 of ERISA.

“Event of Default” has the meaning set forth in Section 10.01.

“Excess Funding Guarantor” has the meaning set forth in Section 11.08.

“Excess Payment” has the meaning set forth in Section 11.08.

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

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient: (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes and branch profits Taxes in each case (i) imposed as a result of
such Recipient being organized under the laws of, or having its principal office
or, in the case of a Lender, its applicable lending office located in, the
jurisdiction imposing such Tax or (ii) that are Other Connection Taxes, (b) any
U.S. federal withholding Taxes that are imposed on amounts payable to Lender to
the extent that the obligation to withhold amounts existed on the date that
(i) Lender became a “Lender” under this Agreement or (ii) Lender changes its
lending office, except in each case to the extent Lender is a direct or indirect
assignee of any other Lender that was entitled, at the time the assignment of
such other Lender became effective, to receive additional amounts under
Section 5.03 or Lender was entitled to receive additional amounts under
Section 5.03 immediately before it changed its lending office, (c) any Taxes
imposed in connection with FATCA, and (d) Taxes attributable to such Recipient’s
failure to comply with Section 5.03(e).

“Executive Order” means the US Executive Order No. 13224 on Blocking Property
and Prohibiting Transactions with Persons who commit, Threaten to Commit, or
Support Terrorism.

“Existing Indebtedness” means that certain Amended and Restated Loan and
Security Agreement dated as of April 30, 2015, by and between the Borrower and
Silicon Valley Bank, as amended, restated, amended and restated, supplemented
and otherwise modified from time to time.

“Exit Fee” means a one-time fee in an amount equal to $100,000.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreements entered into
pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental
agreement, treaty or convention among Governmental Authorities entered into in
connection with the implementation of the foregoing.

 

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“FD&C Act” means the U.S. Food, Drug and Cosmetic Act of 1938 (or any successor
thereto), as amended from time to time, and the rules and regulations
promulgated thereunder.

“FDA” means the U.S. Food and Drug Administration and any successor entity.

“Foreign Lender” means a Lender that is not a U.S. Person.

“Foreign Subsidiary” shall mean (i) any Subsidiary of any Person that is not
organized or incorporated in the United States, any State or territory thereof
or the District of Columbia and (ii) any Domestic Foreign Holding Company.

“GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time, set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants, in the statements and pronouncements of the
Financial Accounting Standards Board and in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession that are applicable to the circumstances as of the date of
determination. Subject to Section 1.02, all references to “GAAP” shall be to
GAAP applied consistently with the principles used in the preparation of the
financial statements described in Section 7.04(a).

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

“Governmental Authority” means any nation, government, branch of power (whether
executive, legislative or judicial), state, municipality or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
monetary, regulatory or administrative functions of or pertaining to government,
including without limitation Regulatory Authorities, governmental departments,
agencies, commissions, bureaus, officials, ministers, courts, bodies, boards,
tribunals and dispute settlement panels, and other law-, rule- or
regulation-making organizations or entities of any State, territory, county,
city or other political subdivision of the United States.

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include (i) endorsements
for collection or deposit and (ii) guarantees of operating leases, in each case,
in the Ordinary Course of Business.

 

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“Guarantee Assumption Agreement” means a Guarantee Assumption Agreement
substantially in the form of Exhibit A by an entity that, pursuant to
Section 8.11(a), is required to become a “Guarantor”.

“Guaranteed Obligations” has the meaning set forth in Section 11.01.

“Guarantor” means, collectively, Parent and each Domestic Subsidiary of
Borrower.

“Hazardous Material” means any substance, element, chemical, compound, product,
solid, gas, liquid, waste, by-product, pollutant, contaminant or material which
is hazardous or toxic, and includes, without limitation, (a) asbestos,
polychlorinated biphenyls and petroleum (including crude oil or any fraction
thereof) and (b) any material classified or regulated as “hazardous” or “toxic”
or words of like import pursuant to an Environmental Law.

“Hedging Agreement” means any interest rate exchange agreement, foreign currency
exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging arrangement.

“IND” means (x) an investigational new drug application (as defined in the FD&C
Act) that is required to be submitted to the FDA before beginning a clinical
trial in human subjects, and (y) any similar application relating to any
investigational new drug or clinical trial required by any country, jurisdiction
or Governmental Authority other than the FDA.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to Property acquired by such Person, (e) all obligations of such Person in
respect of the deferred purchase price of Property or services (excluding
current accounts payable which are incurred in the Ordinary Course of Business),
(f) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on Property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations, contingent or otherwise, of such Person as an account party
in respect of letters of credit and letters of guaranty, (j) obligations under
any Hedging Agreement, currency swaps, forwards, futures or derivatives
transactions, (k) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances and (l) all obligations, contingent or
otherwise, of such Person arising under indemnity agreements or other agreements
that contain an obligation to indemnify any third party; provided that,
notwithstanding the foregoing, Indebtedness shall not include (x) accrued
expenses, deferred rent, deferred taxes, deferred compensation or customary
obligations under employment agreements or (y) obligations with respect to
operating leases which are subsequently reclassified as capital

 

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leases due to any charges in GAAP. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.

“Indemnified Party” has the meaning set forth in Section 13.03(b).

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any Obligation and (b) to
the extent not otherwise described in clause (a), Other Taxes.

“Industrial Designs” has the meaning set forth in the Security Documents.

“Information” has the meaning set forth in Section 13.17.

“Insolvency Proceeding” means (i) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (ii) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other, similar arrangement
in respect of any Person’s creditors generally or any substantial portion of
such Person’s creditors, in each case undertaken under U.S. Federal, state or
foreign law, including the Bankruptcy Code.

“Intellectual Property” means all Patents, Trademarks, Copyright, Industrial
Designs, Technical Information and other intellectual property, whether
registered or not, domestic and foreign. Intellectual Property shall include
all:

(a)    applications or registrations relating to such Intellectual Property;

(b)    rights and privileges arising under applicable Laws with respect to such
Intellectual Property;

(c)    rights to sue for past, present or future infringements of such
Intellectual Property, in accordance with applicable Laws;

(d)    Product Authorizations;

(e)    Product Agreements; and

(f)    rights of the same or similar effect or nature in any jurisdiction
corresponding to such Intellectual Property throughout the world.

“interest” has the meaning set forth in Section 3.02(d).

 

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“Interest Period” means, (i) initially, the period beginning on (and including)
the Closing Date and ending on (and including) the last day of the first full
calendar quarter of the Borrower ended after the Closing Date, and
(ii) thereafter, the period beginning on (and including) the first day of each
succeeding calendar quarter and ending on the earlier of (and including) (x) the
last day of such calendar quarter and (y) the Maturity Date.

“Invention” means any novel, inventive and useful art, apparatus, method,
process, machine (including article or device), manufacture or composition of
matter, or any novel, inventive and useful improvement in any art, method,
process, machine (including article or device), manufacture or composition of
matter.

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of any
other Person or any agreement to make any such acquisition (including any “short
sale” or any sale of any securities at a time when such securities are not owned
by the Person entering into such sale); (b) the making of any advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person), but excluding
any such advance, loan or extension of credit in the nature of an ordinary
course trade receivable having a term not exceeding 90 days arising in
connection with the sale of inventory or supplies by such Person in the Ordinary
Course of Business; (c) the entering into of any Guarantee with respect to
Indebtedness of any other Person; or (d) the entering into of any Hedging
Agreement. The amount of an Investment will be determined at the time the
Investment is made without giving effect to any subsequent changes in value.

“IRS” means the U.S. Internal Revenue Service or any successor agency, and to
the extent relevant, the U.S. Department of the Treasury.

“Laws” means, collectively, all international, foreign, federal, state,
provincial, territorial, municipal and local statutes, treaties, rules,
guidelines, regulations, ordinances, codes and administrative or judicial
precedents or authorities, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and all applicable administrative
orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case whether or not having
the force of law.

“Lenders” has the meaning set forth in the introduction hereto.

“LIBOR” means, for any Interest Period, the rate per annum equal to the London
interbank offered rate for deposits in Dollars three-months periods appearing on
the Dow Jones Markets Telerate Page 3750 as of 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period; provided, that
in the event that such rate does not appear on the Dow Jones Markets Telerate
Page 3750 (or otherwise on the Dow Jones Markets screen) at such time, “LIBOR”
shall be determined by reference to such other comparable publicly available
service for displaying the offered rate for deposit in Dollars in the London

 

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interbank market as may be selected by the Majority Lenders and, in the absence
of availability, such other method to determine such offered rate as may be
selected by the Majority Lenders in their reasonable discretion; provided,
further, that in no event shall LIBOR be less than 1.00%.

“Lien” means any mortgage, lien, pledge, charge or other security interest, or
any lease, title retention agreement, mortgage, restriction, easement,
right-of-way, option or adverse claim (of ownership or possession) or other
encumbrance of any kind or character whatsoever or any preferential arrangement
that has the practical effect of creating a security interest.

“Liquidity” means the balance of unencumbered cash (other than cash encumbered
by the Liens granted to the Lenders pursuant to the Loan Documents) and
Permitted Cash Equivalent Investments (which for greater certainty shall not
include any undrawn credit lines), in each case, to the extent held in a Deposit
Account over which the Lenders have a first priority perfected security
interest.

“Loan Documents” means, collectively, this Agreement, the Notes, the Security
Documents, any Guarantee Assumption Agreement, each Warrant Certificate and any
subordination agreement, intercreditor agreement or other present or future
document, instrument, agreement or certificate delivered to any Lender in
connection with this Agreement or any of the other Loan Documents, in each case,
as amended, restated, supplemented or otherwise modified.

“Loan Exposure” means, with respect to any Lender, as of any date of
determination, the outstanding principal amount of the Loans of such Lender;
provided, at any time prior to the making of the Loans, the Loan Exposure of any
Lender shall be equal to such Lender’s Commitment.

“Loans” means the Tranche A Term Loan and the Tranche B Term Loan.

“Loss” means judgments, debts, liabilities, expenses, costs, damages or losses,
contingent or otherwise, whether liquidated or unliquidated, matured or
unmatured, disputed or undisputed, contractual, legal or equitable, including
loss of value, professional fees, including fees and disbursements of legal
counsel on a full indemnity basis, and all costs incurred in investigating or
pursuing any Claim or any proceeding relating to any Claim.

“Majority Lenders” means, at any time, one or more Lenders having or holding
Loan Exposure and representing more than 50% of the aggregate Loan Exposure of
all Lenders.

“Management Investors” means any current directors, officers, management and/or
employees of Parent or any of its Subsidiaries and any of their respective
family members, trusts or other estate planning vehicles and any Person owned or
controlled by any of the foregoing, in each case, holding, beneficially or of
record, Equity Interests in the Parent.

“Margin Stock” means “margin stock” within the meaning of Regulations U and X.

 

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“Material Adverse Change” and “Material Adverse Effect” mean a material adverse
change in or effect on (i) the business, financial condition, results of
operations, performance, or the value of the Property of the Obligors, taken as
a whole, (ii) the ability of any Obligor to perform its obligations under any
Loan Document or (iii) the legality, validity, binding effect or enforceability
of the Loan Documents or the rights and remedies of any Lender under any of the
Loan Documents.

“Material Agreements” means (A) the Collaboration Agreements and (B) all other
agreements to which any Obligor or any of its Properties are bound, from time to
time, the absence or termination of any of which would reasonably be expected to
result in a Material Adverse Effect.

“Material Indebtedness” means, at any time, any Indebtedness of any Obligor, the
outstanding principal amount of which, individually or in the aggregate, exceeds
$500,000.

“Material Intellectual Property” means, the Obligor Intellectual Property
described in Schedule 7.05(b) and any other Obligor Intellectual Property the
loss of which would reasonably be expected to have or result in a Material
Adverse Effect.

“Maturity Date” means the earlier to occur of (i) the Stated Maturity Date, and
(ii) the date on which the Loans are accelerated pursuant to Section 10.02.

“Maximum Legal Rate” has the meaning set forth in Section 3.02(d).

“Merger Agreement” means the Agreement and Plan of Merger and Reorganization
among Parent, Trojan Merger Sub, Inc., and the Borrower, dated as of March 16,
2017, as the same may be amended, restated, amended and restated, modified
and/or supplemented from time to time in accordance with the terms hereof and
thereof.

“Multiemployer Plan” means any multiemployer plan, as defined in
Section 400l(a)(3) of ERISA, to which any ERISA Affiliate incurs or otherwise
has any obligation or liability, contingent or otherwise.

“NDA” means (i)(x) a new drug application (as defined in the FD&C Act) or a
biologics license application that must be submitted to the FDA and (y) any
similar application required by any country, jurisdiction or Governmental
Authority other than the FDA that must be approved before a drug can be
marketed, and (ii) all supplements and amendments that may be submitted to
permit any changes to an approved NDA.

“Note” means a promissory note executed and delivered by Borrower to any Lender
in accordance with Section 2.04.

“Obligations” means, with respect to any Obligor, all amounts, obligations
(including, without limitation, Warrant Obligations), liabilities, covenants and
duties of every type and description owing by such Obligor to any Lender, any
other indemnitee hereunder or any participant, arising out of, under, or in
connection with, any Loan Document, whether direct or

 

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indirect (regardless of whether acquired by assignment), absolute or contingent,
due or to become due, whether liquidated or not, now existing or hereafter
arising and however acquired, and whether or not evidenced by any instrument or
for the payment of money, including, without duplication, (i) all Loans,
(ii) all interest, whether or not accruing after the filing of any petition in
bankruptcy or after the commencement of any insolvency, reorganization or
similar proceeding, and whether or not a claim for post-filing or post-petition
interest is allowed in any such proceeding, (iii) the Prepayment Premium,
(iv) the Exit Fee and all other fees, expenses (including, subject to the
limitations contained herein and in the other Loan Documents, reasonable and
documented fees, charges and disbursement of counsel), interest, commissions,
charges, costs, disbursements, indemnities and reimbursement of amounts paid and
other sums chargeable to such Obligor under any Loan Document.

“Obligor Intellectual Property” means Intellectual Property owned by or licensed
to any of the Obligors.

“Obligors” means, collectively, Borrower, each Guarantor and each of their
respective successors and permitted assigns.

“OFAC” means the Office of Foreign Assets Control of the U.S. Department of the
Treasury (or any successor thereto).

“Ordinary Course of Business” means, with respect to the Obligors, the ordinary
course of business consistent with past custom and practice (including with
respect to nature, scope, magnitude, quantity and frequency) that does not
require any board of director or shareholder approval or any other separate or
special authorization of any nature and similar in nature, scope and magnitude
to actions customarily taken in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business.

“Organizational Documents” means (i) with respect to any corporation, its
certificate or articles of incorporation or organization, as amended, and its
by-laws, as amended, (ii) with respect to any limited partnership, its
certificate of limited partnership, as amended, and its partnership agreement,
as amended, (iii) with respect to any general partnership, its partnership
agreement, as amended, and (iv) with respect to any limited liability company,
its articles of organization, as amended, and its operating agreement, as
amended. In the event any term or condition of this Agreement or any other Loan
Document requires any Organizational Document to be certified by a secretary of
state or similar government official, the reference to any such “Organizational
Document” shall only be to a document of a type customarily certified by such
government official.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

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“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made pursuant to Section 5.03(g)).

“Parent” means Molecular Templates, Inc.

“Participant” has the meaning set forth in Section 13.05(d).

“Participant Register” has the meaning set forth in Section 13.05(e).

“Patents” has the meaning set forth in the Security Documents.

“Payment Date” means the last day of each Interest Period of the Borrower;
provided that if such last day of such Interest Period is not a Business Day,
then the Payment Date for such Interest Period will be the immediately following
Business Day.

“PBGC” means the United States Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.

“Permits” means all permits, licenses, registrations, certificates, orders,
approvals, authorizations, consents, waivers, franchises, variances and similar
rights issued by or obtained from any Governmental Authority or any other
Person, including, without limitation, those relating to Environmental Laws.

“Permitted Acquisition” means any acquisition by Borrower or any of its
wholly-owned Subsidiaries, by purchase or merger, of all or substantially all of
the assets of, all of the Equity Interests of, or a business line or unit or a
division of, any Person; provided that:

(a)    immediately prior to, and immediately after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing or would
result therefrom;

(b)    all transactions in connection therewith shall be consummated, in all
material respects, in accordance with all applicable Laws and in conformity in
all material respects with all applicable Governmental Approvals;

(c)    in the case of the acquisition of all of the Equity Interests of such
Person, all of the Equity Interests (except for any such securities in the
nature of directors’ qualifying shares required pursuant to applicable Law)
acquired, or otherwise issued by such Person or any newly formed Subsidiary of
Borrower in connection with such acquisition, shall be owned 100% by an Obligor
or any other Subsidiary, and Borrower shall have taken, or caused to be taken,
as of the date such Person becomes a Subsidiary of Borrower, each of the actions
set forth in Section 8.11, if applicable;

 

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(d)    such Person (in the case of an acquisition of Equity Interests) or assets
(in the case of an acquisition of assets or a division) shall be engaged or
used, as the case may be, in the same business or lines of business in which
Borrower and/or its Subsidiaries are engaged or a business reasonably and
substantially similar or related thereto; and

(e)    on a pro forma basis after giving effect to such acquisition, Borrower
and its Subsidiaries shall be in compliance with the minimum Liquidity set forth
in Section 8.16.

“Permitted Cash Equivalent Investments” means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States or any agency or any
State thereof having maturities of not more than two (2) years from the date of
acquisition, (ii) commercial paper having the highest, or second highest, rating
from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.,
(iii) any money market funds or other investment vehicles whose principal
investments are in investments described in clauses (i) or (ii) above, (iv)
certificates of deposit or bankers’ acceptances issued or accepted by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that is at least (A) ”adequately
capitalized” (as defined in the regulations of its primary Federal banking
regulator) and (B) has Tier 1 capital (as defined in such regulations) of not
less than $250,000,000; and (v) investments permitted by the investment policy
approved by the board of directors of Borrower, so long as Borrower provides
written notice to the Lenders of any changes to the investment policy delivered
to the Lenders on the Closing Date and such changes will not adversely affect
the Lenders in any material respect in the determination of the Lenders in their
reasonable discretion.

“Permitted Indebtedness” means any Indebtedness permitted under Section 9.01.

“Permitted Licenses” are (i) licenses of over-the-counter software that is
commercially available to the public, (ii) non-exclusive and exclusive licenses
for the use of the Intellectual Property of any Obligor, in the case of each of
clauses (i) and (ii) entered into in the Ordinary Course of Business or as
otherwise may be approved by Borrower’s board of directors so long as no Event
of Default has occurred and is continuing and (iii) any licenses created by or
in connection with any Collaboration Agreements.

“Permitted Liens” means any Liens permitted under Section 9.02.

“Permitted Refinancing” means, with respect to any Indebtedness, any
refinancing, extensions, renewals and replacements of such Indebtedness;
provided, that such refinancing, extension, renewal or replacement (i) shall not
increase the outstanding principal amount of such Indebtedness except by an
amount equal to accrued interest and a reasonable premium or other amount paid,
and fees and expenses reasonably incurred in connection therewith, (ii) contains
terms relating to outstanding principal amount, amortization, maturity,
collateral (if any) and subordination (if any), and other material terms taken
as a whole no less favorable to Borrower and its Subsidiaries or any Lender than
the terms of any agreement or instrument governing such existing Indebtedness,
(iii) shall have an applicable interest rate which does not exceed the greater
of (A) rate of interest of the Indebtedness being replaced and (B) the then
applicable market interest rate, and (iv) shall not contain any new requirement
to grant any lien or security or to give any guarantee that was not an existing
requirement of such Indebtedness.

 

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“Person” means any individual, corporation, company, voluntary association,
partnership, limited liability company, joint venture, trust, unincorporated
organization or Governmental Authority or other entity of whatever nature.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which Borrower or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069 of ERISA be deemed
to be) an “employer” as defined in Section 3(5) of ERISA.

“Prepayment Premium” has the meaning set forth in Section 3.03(a).

“Product” means any future product developed, manufactured, licensed, marketed,
sold or otherwise commercialized by any Obligor, including any such product in
development or which may be developed, in each case related to Material
Intellectual Property.

“Product Agreement” means each agreement, license, document, instrument,
interest (equity or otherwise) or the like under which one or more Persons
grants or receives any right, title or interest with respect to any Product
Development and Commercialization Activities in respect of one or more Products
specified therein, or receives or is granted the right to exclude any third
parties from engaging in any Product Development and Commercialization
Activities with respect thereto, including each contract or agreement with
suppliers, manufacturers, distributors, clinical research organizations,
wholesalers, pharmacies or with any other Person related to any such entity.

“Product Authorizations” means any and all approvals (including applicable
supplements, amendments, governmental price and reimbursement approvals),
licenses, registrations or authorizations of any Governmental Authority
necessary for the manufacture, development, distribution, use, storage, import,
export, transport, promotion, marketing, sale or other commercialization of a
Product in any country or jurisdiction, including without limitation INDs, NDAs
or similar applications.

“Product Development and Commercialization Activities” means, with respect to
any Product, any combination of research, development, manufacture, importation,
use, sale, storage, design, labeling, marketing, promotion, supply,
distribution, testing, packaging, purchasing or other commercialization
activities, receipt of payment in respect of any of the foregoing, or like
activities the purpose of which is to commercially exploit such Product.

“Projections” has the meaning set forth in Section 7.04(b).

“Property” of any Person means any property or assets, or interest therein, of
such Person.

 

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“Proportionate Share” means, with respect to any Lender, the percentage obtained
by dividing (i) the Loan Exposure of such Lender then in effect by (ii) the
aggregate Loan Exposure of all Lenders then in effect.

“Pro Rata Share” has the meaning set forth in Section 11.08.

“Qualified Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan (i) that is or was at any time maintained
or sponsored by any Obligor or any ERISA Affiliate thereof or to which any
Obligor or any ERISA Affiliate thereof has ever made, or was ever obligated to
make, contributions, and (ii) that is intended to be tax qualified under
Section 401(a) of the Code.

“Recipient” means any Lender or any other recipient of any payment to be made by
or on account of any Obligation.

“Redemption Date” has the meaning set forth in Section 3.03(a).

“Redemption Price” has the meaning set forth in Section 3.03(a).

“Register” has the meaning set forth in Section 13.05(c).

“Regulation T” means Regulation T of the Board of Governors of the Federal
Reserve System, as amended.

“Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System, as amended.

“Regulation X” means Regulation X of the Board of Governors of the Federal
Reserve System, as amended.

“Regulatory Approvals” means (i) any registrations, licenses, authorizations,
permits or approvals issued by any Governmental Authority and (ii) with respect
to any Product, all approvals, clearances, authorizations, orders, exemptions,
registrations, certifications, licenses and Permits granted by any Regulatory
Authorities, including all NDAs and Product Authorizations held by any Obligor
or any of their respective licensors, as applicable, or that are pending before
the FDA or equivalent non-United States Governmental Entity with respect to the
Products.

“Regulatory Authority” means any Governmental Authority that has jurisdiction
over the use, control, manufacturing, marketing, distribution, sale or other
Product Development and Commercialization Activities relating to any Product of
an Obligor, including the FDA and any agencies with the same jurisdiction in
other countries and economic areas.

“Representatives” has the meaning set forth in Section 13.17.

 

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“Requirement of Law” means, as to any Person, any statute, law, treaty, rule or
regulation or determination, order, injunction or judgment of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its Properties or revenues.

“Responsible Officer” of any Person means each of the president, chief executive
officer, chief financial officer, general counsel, vice president and similar
officer of such Person.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interest of Parent,
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such shares of capital stock of Parent, Borrower or any of its
Subsidiaries or any payment to redeem, purchase, repurchase or retire any
outstanding option, warrant or other right to acquire any such shares of capital
stock of Parent, Borrower or any of its Subsidiaries.

“Restrictive Agreement” means any indenture, agreement, instrument or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of Borrower or any Subsidiary to create, incur or permit to exist any
Lien upon any of its Property (other than (i) customary provisions in contracts
(including without limitation leases and in-bound licenses of Intellectual
Property) restricting the assignment thereof, (ii) restrictions or conditions
imposed by any agreement governing secured Permitted Indebtedness permitted
under Section 9.01(g), to the extent that such restrictions or conditions apply
only to the Property securing such Indebtedness and (iii) software and other
Intellectual Property licenses pursuant to which Borrower or a Subsidiary
thereof is the licensee of the relevant software or Intellectual Property, as
the case may be (in which case, any prohibition or limitation shall relate only
to the assets or rights subject to the applicable license and/or the license
itself)), or (b) the ability of any Subsidiary to pay dividends or other
distributions with respect to any shares of its capital stock or to make or
repay loans or advances to Borrower or any other Subsidiary or to Guarantee
Indebtedness of Borrower or any other Subsidiary.

“Revenue” of a Person means all revenue properly recognized under GAAP,
consistently applied, less all rebates, discounts and other price allowances.

“Sanctions” means economic or financial sanctions, requirements or trade
embargoes imposed, administered or enforced from time to time by U.S.
Governmental Authorities (including, but not limited to, OFAC, the U.S.
Department of State and the U.S. Department of Commerce).

“Sanctions Laws” means all laws, rules, regulations and requirements of any
jurisdiction applicable to the Obligors or any party to the Loan Documents
concerning or relating to Sanctions, terrorism or money laundering.

“SEC” means United States Securities and Exchange Commission.

 

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Securities Account” has the meaning set forth in the Security Agreement.

“Security Agreement” means the security agreement, dated as of the date hereof,
in substantially the form of Exhibit H, among the Obligors, the Lenders and the
Control Agent, granting a security interest in the personal Property
constituting Collateral thereunder in favor of the Lenders.

“Security Documents” means, collectively, the Security Agreement, each
Short-Form IP Security Agreement, each Control Agreement and each other security
document and financing statement executed to perfect Liens in favor of the
Lenders.

“Short-Form IP Security Agreements” means short-form copyright, patent or
trademark (as the case may be) security agreements, dated as of the date hereof,
in substantially the form of Exhibits I-1 and I-2, entered into by one or more
Obligors in favor of the Lenders, each in form and substance reasonably
satisfactory to the Majority Lenders.

“Solvent” means, with respect to any Person at any time, that (a) the present
fair saleable value of the Property of such Person is greater than the total
amount of liabilities (including contingent liabilities) of such Person, (b) the
present fair saleable value of the Property of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, and (c) such Person has not incurred
and does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such debts and liabilities
mature.

“Sources and Uses Certificate” means a certificate, required to be delivered
pursuant to Section 6.01(c)(x), duly executed and completed by a Responsible
Officer of Borrower setting forth the sources and uses of the cash and equity
proceeds to be used in connection with the Transactions.

“Stated Maturity Date” means the fourth (4th) anniversary of the Closing Date;
provided that if any such date shall occur on a day that is not a Business Day,
then the Stated Maturity Date shall be the immediately following Business Day.

“Subordinated Indebtedness” means Indebtedness of any Obligor that is
subordinated to all of the Obligations pursuant to a subordination,
intercreditor, or other similar agreement in form satisfactory to the Majority
Lenders in their sole discretion.

“Subsidiary” means, with respect to any Person (the “parent”) at any time of
determination, any other Person of which more than 50% of the outstanding
capital stock of such other Person having ordinary voting powers, determined on
a fully diluted basis, is at the time directly or indirectly owned or controlled
by the parent. Unless the context otherwise specifically requires, the term
“Subsidiary” shall be a reference to a Subsidiary of Borrower.

 

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“Takeda Collaboration Agreements” means those certain Multi-Target Collaboration
and License Agreement, dated as of June 23, 2017; and Research Collaboration and
Option Agreement, dated as of October 31, 2016, each between the Borrower and
Millennium Pharmaceuticals, Inc., as amended, restated, amended and restated,
supplemented and otherwise modified from time to time.

“Tax Distributions” means, dividends and other distributions by Borrower or its
Subsidiaries to Parent or any other entity that files a consolidated, unitary or
combined income tax return that includes Borrower and its Subsidiaries to permit
Parent or such other entity to pay federal, state and local income taxes and
franchise taxes then due and owing; provided, however, that the amount of such
distribution by Borrower and its Subsidiaries shall not be greater than the
amount that would be payable by such Borrower and its Subsidiaries if Borrower
and its Subsidiaries filed such tax return on a stand-alone basis (or as a
consolidated, unitary or combined group) with respect to such taxable period
(taking into account all tax attributes of Borrower and its Subsidiaries,
including, but not limited to, net operating loss carry-forwards from prior
years’ stand-alone pro-forma tax returns).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Technical Information” means all trade secrets and other proprietary or
confidential information, which may include any information of a scientific,
technical, or business nature in any form or medium, standards and
specifications, conceptions, ideas, innovations, discoveries, Invention
disclosures, all documented research, developmental, demonstration or
engineering work, data, plans, specifications, reports, summaries, experimental
data, manuals, models, samples, know-how, technical information, systems,
methodologies, computer programs or information technology.

“Title IV Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan (i) that is or was at any time maintained
or sponsored by any Obligor or any ERISA Affiliate thereof or to which any
Obligor or any ERISA Affiliate thereof has ever made, or was obligated to make,
contributions, and (ii) that is or was subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA.

“Trademarks” has the meaning set forth in the Security Documents.

“Tranche A Term Loan” means each loan advanced by a Lender pursuant to
Section 2.01(a). For purposes of clarification, any calculation of the aggregate
outstanding principal amount of the Tranche A Term Loan on any date of
determination shall mean the aggregate principal amount of the Tranche A Term
Loan made pursuant to Section 2.01(a) that has not yet been repaid as of such
date.

“Tranche A Term Loan Commitment” means the commitment of a Lender to make or
otherwise fund a Tranche A Term Loan and “Tranche A Term Loan Commitments” means

 

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such commitments of all Lenders in the aggregate. The amount of each Lender’s
Tranche A Term Loan Commitment, if any, is set forth on Schedule 1. The
aggregate amount of the Tranche A Term Loan Commitments as of the Closing Date
is $5,000,000.

“Tranche B Term Loan” means each loan advanced by a Lender pursuant to
Section 2.01(b). For purposes of clarification, any calculation of the aggregate
outstanding principal amount of the Tranche B Term Loan on any date of
determination shall mean the aggregate principal amount of the Tranche B Term
Loan made pursuant to Section 2.01(b) that has not yet been repaid as of such
date.

“Tranche B Term Loan Borrowing Date” means with respect to the Tranche B Term
Loan, the date that is six (6) month after the Closing Date; provided that if
any such date shall occur on a day that is not a Business Day, then the Tranche
B Borrowing Date shall be the immediately following Business Day.

“Tranche B Term Loan Commitment” means the commitment of a Lender to make or
otherwise fund a Tranche B Term Loan and “Tranche B Term Loan Commitments” means
such commitments of all Lenders in the aggregate. The amount of each Lender’s
Tranche B Term Loan Commitment, if any, is set forth on Schedule 1. The
aggregate amount of the Tranche B Term Loan Commitments as of the Closing Date
is $5,000,000.

“Transactions” means the execution, delivery and performance by each Obligor of
this Agreement and the other Loan Documents to which such Obligor is a party and
the other transactions contemplated hereby and thereby, including disbursement
and application of the proceeds of the Loans.

“U.S. Person” means a “United States person” within the meaning of
Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning set forth in
Section 5.03(e)(ii)(B)(3).

“Warrant Certificate” means, such Warrant Certificate in substantially the form
of Exhibit G pursuant to which Parent has granted to each Lender the right to
purchase Equity Interests of Parent per the Warrant Shares table on Schedule 1.

“Warrant Obligation” means, with respect to Parent, all of its obligations
arising out of, under or in connection with, any Warrant Certificate.

“Withdrawal Liability” means, at any time, any liability incurred (whether or
not assessed) by any ERISA Affiliate and not yet satisfied or paid in full at
such time with respect to any Multiemployer Plan pursuant to Section 4201 of
ERISA.

 

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Section 1.02.    Accounting Terms and Principles

All accounting determinations required to be made pursuant hereto shall, unless
expressly otherwise provided herein, be made substantially in accordance with
GAAP. If, after the date hereof, any change occurs in GAAP or in the application
thereof and such change would cause any amount required to be determined for the
purposes of the covenants to be maintained or calculated pursuant to Section 8
or 9 to be materially different than the amount that would be determined prior
to such change, then Borrower will provide a detailed notice of such change (an
“Accounting Change Notice”) to the Lenders in conjunction with the next required
delivery of financial statements pursuant to Section 8.01. If Borrower requests
an amendment to any provision hereof to eliminate the effect of any Accounting
Change occurring after the Closing Date or in the application thereof on the
operation of such provision, regardless of whether any Accounting Change Notice
is given before or after such Accounting Change or in the application thereof,
then the Lenders and Borrower agree that they will negotiate in good faith
amendments to the provisions of this Agreement that are directly affected by
such Accounting Change with the intent of having the respective positions of the
Lenders and Borrower after such Accounting Change conform as nearly as possible
to their respective positions as of the date of this Agreement and, until any
such amendments have been agreed upon, (i) the provisions in this Agreement
shall be calculated as if no such Accounting Change had occurred and
(ii) Borrower shall provide to the Lenders a written reconciliation in form and
substance reasonably satisfactory to the Lenders, between calculations of any
baskets and other requirements hereunder before and after giving effect to such
Accounting Change.

All components of financial calculations made to determine compliance with this
Agreement shall be adjusted to include or exclude, as the case may be, without
duplication, such components of such calculations attributable to any
Acquisition or other investment consummated after the first day of the
applicable period of determination and prior to the end of such period, as
determined in good faith by Borrower based on assumptions expressed therein and
that were reasonable based on the information available to Borrower at the time
of preparation of the Compliance Certificate setting forth such calculations.

Section 1.03.    Interpretation

For all purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires, (a) the terms defined in this
Agreement include the plural as well as the singular and vice versa; (b) words
importing gender include all genders; (c) any reference to a Section, Annex,
Schedule or Exhibit refers to a Section of, or Annex, Schedule or Exhibit to,
this Agreement; (d) any reference to “this Agreement” refers to this Agreement,
including all Annexes, Schedules and Exhibits hereto, and the words herein,
hereof, hereto and hereunder and words of similar import refer to this Agreement
and its Annexes, Schedules and Exhibits as a whole and not to any particular
Section, Annex, Schedule, Exhibit or any other subdivision; (e) references to
days, months and years refer to calendar days, months and years, respectively;
(f) all references herein to “include” or “including” shall be deemed to be
followed by the words “without limitation”; (g) the word “from” when used in
connection with a period of time means “from and including” and the word “until”
means “to but not including”; and (h) accounting terms not specifically defined
herein shall be construed substantially in accordance with GAAP (except for the
term “property,” which shall be

 

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interpreted as broadly as possible, including, in any case, cash, securities,
other assets, rights under contractual obligations and permits and any right or
interest in any property, except where otherwise noted). Whenever any provision
in any Loan Document refers to the knowledge (or an analogous phrase) of any
Obligor, such words are intended to signify that such Obligor has actual
knowledge or awareness of a particular fact or circumstance or that such
Obligor, if it had exercised reasonable diligence, would have known or been
aware of such fact or circumstance. Unless otherwise expressly provided herein,
references to organizational documents, agreements (including the Loan
Documents) and other contractual instruments shall be deemed to include all
subsequent amendments, restatements, amendments and restatements, extensions,
supplements and other modifications thereto permitted by the Loan Documents.

If any date of compliance with the terms and conditions of any Loan Document
falls due on a day which is not a Business Day, then such due date shall be
extended to the immediately following Business Day. For purposes of determining
compliance with any covenant (including the computation of any financial
covenant) contained herein, Indebtedness of the Obligors and their Subsidiaries
should be deemed to be equal to 100% of the outstanding principal amount thereof
at the time of determination thereof, or with respect to any Hedging Agreements,
the amount that would be payable if the agreement governing any such Hedging
Agreements were terminated on the date of termination. For purposes of
calculations made pursuant to the terms of this Agreement or otherwise for
purposes of compliance herewith, GAAP will be deemed to treat operating leases
and Capital Lease Obligations in a manner consistent with their current
treatment under generally accepted accounting principles as in effect on the
Closing Date, notwithstanding any modifications or interpretive changes thereto
that may occur thereafter.

ARTICLE 2.

THE COMMITMENTS

Section 2.01.    Loans.

(a)    Tranche A Term Loan.

(i)    Subject to the terms and conditions of this Agreement and relying on the
representations and warranties set forth herein, each Lender, severally and not
jointly, agrees to provide its share of the Tranche A Term Loan to Borrower on
the Closing Date in Dollars in a principal amount equal to such Lender’s Tranche
A Term Loan Commitment. No Lender shall have an obligation to make a Tranche A
Term Loan in excess of such Lender’s Tranche A Term Loan Commitment.

(ii)    Borrower may make one borrowing under the Tranche A Term Loan Commitment
which shall be on the Closing Date. Subject to Section 3.03, all amounts owed
hereunder with respect to the Tranche A Term Loan (other than contingent
indemnification obligations as to which no unsatisfied claim has been asserted)
shall be paid in full no later than the Maturity Date. Each Lender’s Tranche A
Term Loan Commitment shall terminate immediately and without further action on
the Closing Date after giving effect to the funding of such Lender’s Tranche A
Term Loan Commitment on such date.

 

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(b)    Tranche B Term Loan.

(i)    Subject to the terms and conditions of this Agreement and relying on the
representations and warranties set forth herein, each Lender, severally and not
jointly, hereby consents and agrees to provide its share of the Tranche B Term
Loan to Borrower on the Tranche B Term Loan Borrowing Date in Dollars in a
principal amount equal to such Lender’s Tranche B Term Loan Commitment. No
Lender shall have an obligation to make a Tranche B Term Loan in excess of such
Lender’s Tranche B Term Loan Commitment.

(ii)    Borrower shall deliver to the Lenders a fully executed Borrowing Notice
no later than 5 p.m. (New York City time) at least three (3) Business Days in
advance of the proposed Tranche B Term Loan Borrowing Date.

(iii)    Borrower may make one borrowing under the Tranche B Term Loan
Commitment which shall be on the Tranche B Term Loan Borrowing Date. Subject to
Section 3.03, all amounts owed hereunder with respect to the Tranche B Term Loan
(other than contingent indemnification obligations as to which no unsatisfied
claim has been asserted) shall be paid in full no later than the Maturity Date.
Each Lender’s Tranche B Term Loan Commitment shall terminate immediately and
without further action on the Tranche B Term Loan Borrowing Date after giving
effect to the funding of such Lender’s Tranche B Term Loan Commitment on such
date.

(c)    Any principal amount of any Loans borrowed under Section 2.01(a) or
Section 2.01(b) hereof and subsequently repaid or prepaid may not be reborrowed.

Section 2.02.    Proportionate Shares

All Loans shall be made, and all participations purchased, by the Lenders
simultaneously and proportionately to their respective Proportionate Shares, it
being understood that no Lender shall be responsible for any default by any
other Lender in such other Lender’s obligation to make a Loan hereunder or
purchase a participation required hereby nor shall the Commitment of any Lender
be increased or decreased as a result of a default by any other Lender in such
other Lender’s obligation to make a Loan requested hereunder or purchase a
participation required hereby.

Section 2.03.    Fees.

(a)    On the Closing Date, Borrower shall pay out of the proceeds of the
Tranche A Term Loan advanced by the Lenders on the Closing Date a non—refundable
fee in the amount of $200,000 (the “Closing Fee”). Such payment shall be in
addition to such fees, costs and expenses due and payable pursuant to
Section 13.03.

 

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(b)    On the Maturity Date or on the earlier date of repayment of the Loans in
full, Borrower shall pay the Exit Fee to the Lenders.

Section 2.04.    Notes.

Upon the request of any Lender, Borrower shall prepare, execute and deliver to
such Lender one or more promissory note(s) evidencing the Loans payable to such
Lender (or if requested by it, to it and its registered assigns) in the form
attached hereto as Exhibit C (each, a “Note”).

Section 2.05.    Use of Proceeds

Borrower shall use the proceeds of the Loans (i) for general working capital
purposes and corporate purposes permitted hereunder, (ii) to refinance the
Existing Indebtedness on the Closing Date and (iii) to pay fees, costs and
expenses incurred in connection with the Transactions.

ARTICLE 3.

PAYMENTS OF PRINCIPAL AND INTEREST

Section 3.01.    Repayment

The entire outstanding principal amount of the Loans will be due and payable on
the Maturity Date. Commencing with the first Payment Date occurring immediately
after the second (2nd) anniversary of the Closing Date, Borrower shall on each
Payment Date make a repayment of the Loans in the amount of $200,000; provided
that, for the avoidance of doubt, no payment of the principal amount of the
Loans shall be due prior to such commencement date (other than as set forth in
Section 3.03).

Section 3.02.    Interest.

(a)    Interest Generally. Borrower agrees to pay to the Lenders interest in
cash on the outstanding principal amount of the Loans for each Interest Period
at a rate per annum equal to the sum of (i) LIBOR plus (ii) the Applicable
Margin.

(b)    Default Interest. Notwithstanding the foregoing, upon the occurrence and
during the continuance of any Event of Default, the Applicable Margin shall
increase automatically by 4.00% per annum (such aggregate increased rate, the
“Default Rate”). If any Obligation (other than Warrant Obligations) is not paid
when due (giving effect to any applicable grace or cure period) under the
applicable Loan Document, the amount thereof shall accrue interest at a rate
equal to the Default Rate.

(c)    Payment Dates. Accrued interest on the Loans shall be payable in arrears
on each Payment Date with respect to the most recently completed Interest Period
in cash, and upon the payment or prepayment of the Loans (on the principal
amount being so paid or prepaid); provided that interest payable at the Default
Rate shall be payable from time to time on demand by the Lender.

 

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(d)    Maximum Legal Rate. No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
between the Obligors and any Lender or default of the Obligors, or the exercise
by any Lender of the right to accelerate the payment of the maturity of
principal and interest, or to exercise any option whatsoever contained in this
Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle any Lender to contract for, charge, or receive, in any
event, consideration for the use, forbearance or detention of money (“interest”)
at a rate exceeding the maximum rate of interest permitted by applicable state
or federal law in effect from time to time (hereinafter “Maximum Legal Rate”).
In no event shall the Obligors be obligated to pay interest at any rate
exceeding such Maximum Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel the Obligors to pay a rate of interest exceeding the
Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest determined at a rate over
such Maximum Legal Rate. In the event any interest is contracted for, charged or
received at any rate in excess of the Maximum Legal Rate (“Excess”), each
Obligor acknowledges and stipulates that any such contract, charge, or receipt
shall be the result of an accident and bona fide error, and that any Excess
received by any Lender shall be applied, first, to reduce the principal then
unpaid hereunder; second, to reduce the other Obligations; and third, returned
to the Obligors, it being the intention of the parties hereto not to enter at
any time into a usurious or otherwise illegal relationship. Each Obligor
recognizes that, with fluctuations in LIBOR and the Maximum Legal Rate, such a
result could inadvertently occur. By the execution of this Agreement, each
Obligor covenants that (i) the credit or return of any Excess shall constitute
the acceptance by such Obligor of such Excess, and (ii) such Obligor shall not
seek or pursue any other remedy, legal or equitable, against any Lender, based
in whole or in part upon the contracting for, charging or receiving of any
interest in excess of the maximum authorized or the receiving of any interest in
excess of the maximum authorized by applicable law. To the extent applicable,
for the purpose of determining whether or not any Excess has been contracted
for, charged or received by any Lender, all interest at any time contracted for,
charged or received by any Lender in connection with this Agreement shall be
amortized, prorated, allocated and spread in equal parts during the full stated
term of this Agreement and otherwise as provided by applicable Law. If, as a
result of any circumstances whatsoever, fulfillment of any provision hereof or
of any related agreement, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by applicable
usury law, then, ipso facto, the obligation to be fulfilled shall be reduced to
the limit of such validity.

Section 3.03.    Prepayments.

(a)    Optional Prepayments. Borrower shall have the right to optionally prepay
in whole or in part (in a minimum amount of $500,000 and integral multiples of
$100,000 in excess of that amount for each partial prepayment) the outstanding
principal amount of the Loans on any Business Day (a “Redemption Date”) for an
amount equal to the Prepayment Premium plus any accrued but unpaid interest on
the aggregate principal amount of the Loans being prepaid (such aggregate
amount, the “Redemption Price”). The applicable “Prepayment Premium” shall be an
amount calculated pursuant to Section 3.03(a).

 

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If the Redemption Date occurs:

(A)    on or prior to the first anniversary of the Closing Date, the Prepayment
Premium shall be an amount equal to one hundred four percent (104%) of the then
aggregate outstanding principal amount of the Loans being prepaid on such
Redemption Date;

(B)    after the first anniversary of the Closing Date and on or prior to the
second anniversary of the Closing Date, the Prepayment Premium shall be an
amount equal to one hundred two percent (102%) of the then aggregate outstanding
principal amount of the Loans being prepaid on such Redemption Date;

(C)    after the second anniversary of the Closing Date and on or prior to the
third anniversary of the Closing Date, the Prepayment Premium shall be an amount
equal to one hundred one and one-half percent (101.5%) of the then aggregate
outstanding principal amount of the Loans being prepaid on such Redemption Date;
and

(D)    after the third anniversary of the Closing Date and at any time
thereafter, the Prepayment Premium shall be an amount equal to one hundred one
percent (101%) of the then aggregate outstanding principal amount of the Loans
being prepaid on such Redemption Date.

(b)    Mandatory Prepayments. Borrower shall prepay the Loans in amounts as
provided below, plus solely in respect of any event specified in clauses (b)(ii)
and (b)(iii) below, the Prepayment Premium on the then outstanding principal
amount of the Loans being prepaid (calculated in accordance with
Section 3.03(a), it being agreed that the relevant payment date shall be deemed
to be the “Redemption Date” for purposes of such calculation), plus any accrued
but unpaid interest and fees then due and owing, as follows:

(i)    Within three (3) days following receipt by any Obligor of the proceeds of
any Casualty Event, an amount equal to 100% of the net cash insurance or other
proceeds received by Borrower with respect thereto; provided, however, so long
as no Default or Event of Default has occurred and is continuing, within two
hundred and seventy (270) days (with such reinvestment to be subject to a
binding commitment within at least one hundred and eighty (180) days) after
receipt of such proceeds, Borrower may apply such net proceeds toward the
replacement or repair of destroyed or damaged property; provided, further, that
any such replaced or repaired property (i) shall be of equal or like value as
the replaced or repaired Collateral and (ii) to the extent any property so
replaced or repaired was subject to a first priority security interest in favor
of the Lenders at the time of the damage thereto or the destruction thereof
shall be deemed Collateral in which Lenders have been granted a first priority
security interest and Borrower shall take all such actions required to provide
the Lenders with a first priority security interest on such property.

 

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(ii)    In the event Borrower incurs Indebtedness other than Indebtedness that
is permitted by Section 9.01 hereof, 100% of the net cash proceeds thereof
received by Borrower. For the avoidance of doubt, any prepayment made pursuant
to this Section 3.03(b)(ii) shall not be deemed to be a consent to any such
incurrence of Indebtedness or a cure or waiver of any Event of Default which
occurs in connection therewith, it being understood that any such Event of
Default may only be waived with the express consent of the Majority Lenders.

(iii)    Within three (3) days following receipt by any Obligor of the net cash
proceeds of any Asset Sale (excluding any Asset Sale permitted pursuant to
Section 9.09 (other than pursuant to Section 9.09(l)), an amount equal to 100%
of the net cash proceeds received by Borrower with respect thereto; provided,
however, so long as no Default or Event of Default has occurred and is
continuing, within two hundred and seventy (270) days (with such investment to
be subject to a binding commitment within at least one hundred and eighty
(180) days) after receipt of such proceeds, Borrower may invest such net cash
proceeds in assets of the general type used in the business of the Obligors and
their Subsidiaries; provided, further, that to the extent any Property subject
to such Asset Sale was subject to a first priority security interest in favor of
the Lenders at the time of disposition shall be deemed Collateral in which
Lenders have been granted a first priority security interest and Borrower shall
take all such actions required to provide the Lenders with a first priority
security interest on such property. For the avoidance of doubt, any prepayment
made pursuant to this Section 3.03(b)(iii) shall not be deemed to be a consent
to any such Asset Sale or a cure or waiver of any Event of Default which occurs
in connection therewith, it being understood that any such Event of Default may
only be waived with the express consent of the Majority Lenders.

All prepayments made pursuant to this Section 3.03(b) shall be applied pursuant
to Section 4.01(b)(ii).

ARTICLE 4.

PAYMENTS, ETC.

Section 4.01.    Payments.

(a)    Payments Generally. Each payment of principal, interest and other amounts
to be made by the Obligors under this Agreement or any other Loan Document shall
be made in Dollars, in immediately available funds, without deduction, set off
or counterclaim, to the deposit account of such Lender designated by such Lender
by written notice to Borrower (each, a “Designated Account”), not later than
3:00 p.m. (Eastern time) on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).

 

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(b)    Application of Payments. (i) So long as no Event of Default has occurred
and is continuing, each Obligor shall, at the time of making each payment under
this Agreement or any other Loan Document (other than any payment made pursuant
to Section 3.01 and prepayment made pursuant to Section 3.03(b)), specify to the
Lenders the amounts payable by such Obligor hereunder to which such payment is
to be applied (and in the event that Obligors fail to so specify, the Lenders
may apply such payment to the remaining scheduled installments of principal due
in respect of the Loans in inverse order of maturity), and (ii) following the
occurrence and continuance of an Event of Default, all prepayments (including
any prepayment made pursuant to Section 3.03(b)) shall be applied as follows:

(A)    first, to the payment of any unpaid costs and expenses referred to in
Section 13.03(a) that are then due and payable;

(B)    second, in reduction of Borrower’s obligation to pay any unpaid interest
and any fees then due and owing including, without limitation, (x) interest
payable pursuant to Section 3.02(b) and (y) the Prepayment Premium;

(C)    third, in reduction of Borrower’s obligation to pay any Claims or Losses
referred to in Section 13.03(b) then due and owing;

(D)    fourth, in reduction of Borrower’s obligation to pay any amounts due and
owing on account of the unpaid principal amount of the Loans;

(E)    fifth, in reduction of any other Obligation then due and owing; and

(F)    sixth, to Borrower or such other Persons as may lawfully be entitled to
or directed by Borrower to receive the remainder.

Unless otherwise directed by the Majority Lenders, all payments of principal,
interest and fees under this Agreement and the other Loan Documents shall be
made by the Obligors to the Lenders pro rata in accordance with the Lenders’
respective Proportionate Shares of such payments.

(c)    Non-Business Days. If the due date of any payment under this Agreement
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension.

Section 4.02.    Computations

All computations of interest and fees hereunder shall be computed on the basis
of a year of 360 days and actual days elapsed during the period for which
payable.

 

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Section 4.03.    Notices

Each notice of optional prepayment shall be effective only if received by the
Lenders not later than 3:00 p.m. (Eastern time) on the date three (3) Business
Days prior to the date of prepayment. Each notice of optional prepayment shall
specify the amount to be prepaid and the date of prepayment.

Section 4.04.    Set-Off.

(a)    Set-Off Generally. Upon the occurrence and during the continuance of any
Event of Default, the Lenders and each of their respective Affiliates are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Lenders or such Affiliates to or for the credit or the account
of any Obligor against any and all of the Obligations, whether or not the
Lenders shall have made any demand and although such Obligations may be
unmatured. The Lenders agree promptly to notify Borrower after any such set-off
and application, provided that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of the Lenders and
their respective Affiliates under this Section 4.04 are in addition to other
rights and remedies (including other rights of set-off) that the Lenders and
their respective Affiliates may have.

(b)    Exercise of Rights Not Required. Nothing contained herein shall require
the Lenders to exercise any such right or shall affect the right of such Persons
to exercise, and retain the benefits of exercising, any such right with respect
to any other indebtedness or obligation of any Obligor.

ARTICLE 5.

YIELD PROTECTION, ETC.

Section 5.01.    Additional Costs.

(a)    Change in Requirements of Law Generally. If, on or after the date hereof,
the adoption of any Requirement of Law, or any change in any Requirement of Law,
or any change in the interpretation or administration thereof by any court or
other Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or its lending office) with any request or
directive (whether or not having the force of law) of any such Governmental
Authority, shall impose, modify or deem applicable any reserve (including any
such requirement imposed by the Board of Governors of the Federal Reserve
System), special deposit, contribution, insurance assessment or similar
requirement, in each case that becomes effective after the date hereof, against
assets of, deposits with or for the account of, or credit extended by, a Lender
(or its lending office) or shall impose on a Lender (or its lending office) any
other condition affecting the Loans or the Commitment, not as a result of any
action or inaction on the part of such Lender, and the result of any of the
foregoing is to increase the cost to any Lender of making or maintaining its
Loan, or to reduce the amount of any sum received or receivable by any Lender
under this Agreement or any other Loan Document, by an amount reasonably deemed
by such Lender in good faith to be

 

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material (other than (i) Indemnified Taxes and (ii) Excluded Taxes), then
Borrower shall promptly pay to such Lender on demand such additional amount or
amounts as will compensate such Lender for such increased cost or reduction.
Notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall in each case be deemed to constitute a
change in Requirements of Law for all purposes of this Section 5.01, regardless
of the date enacted, adopted or issued.

(b)    Change in Capital Requirements. If a Lender shall have determined that,
on or after the date hereof, the adoption of any Requirement of Law regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
Governmental Authority, in each case that becomes effective after the date
hereof, has or would have the effect of reducing the rate of return on capital
of a Lender (or its parent) as a consequence of a Lender’s obligations hereunder
or the Loans to a level below that which a Lender (or its parent) could have
achieved but for such adoption, change, request or directive by an amount
reasonably deemed by it to be material, then Borrower shall pay to such Lender
on demand such additional amount or amounts as will compensate such Lender (or
its parent) for such reduction.

(c)    Notification by Lender. The Lenders will promptly notify Borrower of any
event of which it has knowledge, occurring after the date hereof, which will
entitle a Lender to compensation pursuant to this Section 5.01. Before giving
any such notice pursuant to this Section 5.01(c) such Lender shall designate a
different lending office if such designation (x) will, in the reasonable
judgment of such Lender, avoid the need for, or reduce the amount of, such
compensation and (y) will not, in the reasonable judgment of such Lender, be
materially disadvantageous to such Lender. A certificate of the Lender claiming
compensation under this Section 5.01, setting forth the amount or amounts to be
paid to it hereunder, shall be conclusive and binding on Borrower in the absence
of manifest error.

Section 5.02.    Illegality

Notwithstanding any other provision of this Agreement, in the event that on or
after the date hereof the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof by any competent Governmental
Authority shall make it unlawful for a Lender or its lending office to make or
maintain the Loans (and, in the opinion of such Lender, the designation of a
different lending office would either not avoid such unlawfulness or would be
disadvantageous to such Lender), then such Lender shall promptly notify Borrower
thereof following which (a) the Lender’s Commitment shall be suspended until
such time as such Lender may again make and maintain the Loans hereunder and
(b) if such Requirement of Law shall so mandate, the Loans shall be prepaid,
without Prepayment Premium, by Borrower on or before such date as shall be
mandated by such Requirement of Law in an amount equal to the Redemption Price
applicable on the date of such prepayment in accordance with Section 3.03(a).

 

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Section 5.03.    Taxes.

(a)    Payments Free of Taxes. Any and all payments on account of any Obligation
shall be made without deduction or withholding for any Taxes, except as required
by applicable Law. If any applicable Law requires the deduction or withholding
of any Tax from any such payment by an Obligor, then such Obligor shall be
entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable
by such Obligor shall be increased as necessary so that after such deduction or
withholding has been made (including such deductions and withholdings applicable
to additional sums payable under this Section 5.03) the applicable Recipient
receives an amount equal to the sum it would have received had no such deduction
or withholding been made. For purposes of this Section, the term “applicable
Law” includes FATCA.

(b)    Payment of Other Taxes by Borrower. Borrower shall timely pay to the
relevant Governmental Authority in accordance with applicable Law, or at the
option of each Lender, timely reimburse it for, Other Taxes.

(c)    Evidence of Payments. As soon as practicable after any payment of Taxes
by Borrower to a Governmental Authority, as a withholding Tax pursuant to this
Section 5.03, Borrower shall deliver to each Lender the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment,
or a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Lenders.

(d)    Indemnification. Borrower shall reimburse and indemnify each Recipient,
within 10 days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section 5.03) payable or paid by such Recipient or
required to be withheld or deducted from a payment to such Recipient and any
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to Borrower by a Lender shall be conclusive absent
manifest error.

(e)    Status of Lenders.

(i)    Any Lender that is entitled to an exemption from, or reduction of
withholding Tax with respect to payments made under any Loan Document shall
deliver to Borrower at the time or times reasonably requested by Borrower such
properly completed and executed documentation reasonably requested by Borrower
as will permit such payments to be made without withholding or at a reduced rate
of withholding; provided that, other than in the case of U.S. Federal
withholding Taxes, such Lender has received written notice from Borrower
advising it of the availability of such exemption or

 

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reduction and containing all applicable documentation. In addition, any Lender,
if reasonably requested by Borrower, shall deliver such other documentation
prescribed by applicable Law or as reasonably requested by Borrower as will
enable Borrower to determine whether or not such Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to
the contrary in the preceding two sentences, the completion, execution and
submission of such documentation (other than such documentation set forth in
Section 5.03(e)(ii)(A), (B) or (D)) shall not be required if in the Lender’s
reasonable judgment such completion, execution or submission would subject such
Lender to any material unreimbursed cost or expense or would materially
prejudice the legal or commercial position of such Lender.

(ii)    Without limiting the generality of the foregoing:

(A)    any Lender that is a U.S. Person shall deliver to Borrower on or prior to
the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter upon the reasonable request of Borrower), duly
completed, valid, executed copies of IRS Form W-9 (or successor form) certifying
that such Lender is exempt from U.S. Federal backup withholding Tax;

(B)    any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrower (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of Borrower), whichever of the following is applicable:

(1)    in the case of a Foreign Lender claiming the benefits of an income Tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, duly completed, valid executed copies of IRS
Form W-8BEN (or successor form) or IRS Form W-8BEN-E (or successor form)
establishing an exemption from, or reduction of, U.S. Federal withholding Tax
pursuant to the “interest” article of such Tax treaty and (y) with respect to
any other applicable payments under any Loan Document, duly completed, valid,
executed originals of IRS Form W-8BEN (or successor form) or IRS Form W-8BEN-E
(or successor form) establishing an exemption from, or reduction of, U.S.
Federal withholding Tax pursuant to the “business profits” or “other income”
article of such Tax treaty;

(2)    duly completed, valid, executed copies of IRS Form W-8ECI (or successor
form);

(3)    in the case of a Foreign Lender claiming the benefits of the exemption
for portfolio interest under Section 881(c) of the Code, (x) a certificate
substantially in the form of Exhibit D to the effect that such Foreign Lender is
not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a
“10 percent shareholder” of the

 

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applicable Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code
(a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN
(or successor form) or IRS Form 8-BEN-E (or successor form); or

(4)    to the extent a Foreign Lender is not the beneficial owner, duly
completed, valid, executed copies of IRS Form W-8IMY (or successor form),
accompanied by IRS Form W-8ECI (or successor form), IRS Form W-8BEN (or
successor form), IRS Form W-8BEN-E (or successor form), a U.S. Tax Compliance
Certificate, IRS Form W-9 (or successor form), and/or other certification
documents from each beneficial owner, as applicable; provided that if the
Foreign Lender is a partnership and one or more direct or indirect partners of
such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate on behalf of each such
direct and indirect partner;

(C)    any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrower (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of Borrower), executed copies of any other form prescribed by applicable
Law as a basis for claiming exemption from or a reduction in U.S. Federal
withholding Tax, duly completed, together with such supplementary documentation
as may be prescribed by applicable Law to permit Borrower to determine the
withholding or deduction required to be made; and

(D)    if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to Borrower at the time or times prescribed by law and at such
time or times reasonably requested by Borrower such documentation prescribed by
applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code)
and such additional documentation reasonably requested by Borrower as may be
necessary for Borrower to comply with its obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount, if any, to deduct and withhold from such
payment. Solely for purposes of this clause (D), “FATCA” shall include any
amendments made to FATCA after the date of this Agreement.

Each Recipient agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall promptly
update such form or certification or promptly notify Borrower in writing of its
legal inability to do so.

 

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(f)    Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 5.03 (including by
the payment of additional amounts pursuant to this Section 5.03), it shall pay
to the indemnifying party an amount equal to such refund (but only to the extent
of indemnity payments made under this Section with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying
party, upon the written request of such indemnified party, shall repay to such
indemnified party the amount paid over pursuant to this paragraph (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this Section 5.03(f), in no event will the indemnified party be required to
pay any amount to an indemnifying party pursuant to this Section 5.03(f) the
payment of which would place the indemnified party in a less favorable net
after-Tax position than the indemnified party would have been in if the Tax
subject to indemnification and giving rise to such refund had not been deducted,
withheld or otherwise imposed and the indemnification payments or additional
amounts giving rise to such refund had never been paid. This Section 5.03(f)
shall not be construed to require any indemnified party to make available its
Tax returns (or any other information relating to its Taxes that it deems
confidential) to the indemnifying party or any other Person.

(g)    Mitigation Obligations. If Borrower is required to pay any Indemnified
Taxes or additional amounts to any Lender or to any Governmental Authority for
the account of any Lender pursuant to Section 5.01 or this Section 5.03, then
such Lender shall (at the request of Borrower) use commercially reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign and delegate its rights and obligations hereunder to
another of its offices, branches or Affiliates if, in the sole reasonable
judgment of such Lender, such designation or assignment and delegation would
(i) eliminate or reduce amounts payable pursuant to Section 5.01 or this
Section 5.03, as the case may be, in the future, (ii) not subject such Lender to
any unreimbursed cost or expense and (iii) not otherwise be disadvantageous to
such Lender. Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment and
delegation.

(h)    Allocation of Issue Price. The Notes and the Warrant Certificates, taken
together, constitute an “investment unit” for purposes of Section 1273(c)(2) of
the Code.

ARTICLE 6.

CONDITIONS PRECEDENT

Section 6.01.    Conditions to Tranche A Term Loan; Closing Date

The obligation of each Lender to make the Tranche A Term Loan shall not become
effective until the following conditions precedent shall have been reasonably
satisfied or

 

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waived in writing by the Lenders (which satisfaction or waiver may be made
simultaneously with the making of the Tranche A Term Loan hereunder):

(a)    Organization and Capitalization. The organizational structure and
capitalization of the Obligors, after giving effect to the Transactions, as set
forth on Schedule 7.20 shall be satisfactory to the Lenders.

(b)    Lien Searches. The Lenders shall be satisfied with Lien searches
regarding the Obligors made prior to the Closing Date.

(c)    Documentary Deliveries. The Lenders shall have received the following
documents, each of which shall be in form and substance reasonably satisfactory
to the Lenders:

(i)    Agreement. This Agreement duly executed and delivered by Borrower and
each of the other parties hereto.

(ii)    Security Documents.

(A)    The Security Documents, including, without limitation, the Security
Agreement, each Short-Form IP Security Agreement, each Control Agreement and
financing statements, each in form and substance reasonably satisfactory to the
Lenders and duly executed and delivered by each of the Obligors.

(B)    The Collateral Questionnaire, duly executed and delivered by a
Responsible Officer of Borrower, substantially in the form of Exhibit J hereto
and otherwise in form and substance reasonably satisfactory to the Lenders.

(C)    Original share certificates or other documents or other evidence of title
with regard to all Equity Interests owned by the Obligors (to the extent that
such Equity Interests are certificated), together with share transfer documents,
undated and executed in blank.

(D)    Without limitation, all other documents and instruments reasonably
required to perfect the Lenders’ Lien on, and security interest in, the
Collateral required to be delivered on or prior to the Closing Date shall have
been duly executed and delivered and be in proper form for filing, and shall
create in favor of the Lenders, a perfected Lien on, and security interest in,
the Collateral, subject to no Liens other than Permitted Liens.

(iii)    Note. Any Notes requested in accordance with Section 2.04.

(iv)    Approvals. Borrower shall have obtained all material third-party
consents and approvals, necessary in connection with the execution, delivery and
performance by the Obligors of the Loan Documents and the Transactions.

 

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(v)    Organizational Documents. (a) Certified copies of the Organizational
Documents of each Obligor and of resolutions of the Board of Directors (or
similar governing body) of each Obligor approving and authorizing the execution,
delivery and performance of this Agreement and each of the other Loan Documents
to which it is a party, certified as of the Closing Date by its secretary or
assistant secretary as being in full force and effect without modification or
amendment and (b) a good standing certificate and/or compliance certificate from
the applicable Governmental Body of each Obligor’s jurisdiction of incorporation
and in each jurisdiction in which it is qualified as a foreign corporation or
other entity to do business, each dated a recent date prior to the Closing Date.

(vi)    Incumbency Certificate. A certificate of each Obligor as to the
authority, incumbency and specimen signatures of the persons who have executed
the Loan Documents and any other documents in connection herewith on behalf of
the Obligors.

(vii)    Officer’s Certificate. A certificate, dated as of the Closing Date and
signed by a Responsible Officer of Borrower, confirming compliance with the
conditions set forth in Section 6.01.

(viii)    Opinion of Counsel. A favorable opinion, dated as of the Closing Date,
of Mintz Levin Cohn Ferris Glovsky and Popeo PC, counsel to each Obligor in form
reasonably acceptable to the Lenders and their counsel.

(ix)    Evidence of Insurance. Certificates from Borrower’s insurance broker or
other evidence reasonably satisfactory to the Lenders that all insurance
required to be maintained pursuant to Section 8.05 is in full force and effect,
together with endorsements naming the Lenders as additional insureds and loss
payees, as applicable, under Borrower’s liability and casualty insurance
policies.

(x)    Sources and Uses Certificate. The Lenders shall have received the Sources
and Uses Certificate duly executed and delivered by a Responsible Officer of
Borrower, substantially in the form of Exhibit F hereto and otherwise in form
and substance reasonably satisfactory to the Lenders.

(d)    Indebtedness. All amounts due or outstanding in respect of the Existing
Indebtedness shall have been repaid in full (other than contingent
indemnification obligations as to which no unsatisfied claim has been asserted),
all commitments (if any) in respect thereof terminated, all guarantees (if any)
thereof discharged and released and all security therefor (if any) released,
together with all fees and other amounts owing thereon, or documentation in form
and substance reasonably satisfactory to the Lenders to effect such release upon
such repayment and termination shall have been delivered to the Lenders.

(e)    Closing Fees, Expenses, Etc. The Lenders and their Affiliates shall have
received for their own account, the Closing Fee and all fees, costs and expenses
due (including the reasonable and documented out-of-pocket fees and expenses of
counsel to the Lenders) and payable pursuant to Section 13.03 and invoiced one
(1) Business Day prior to the Closing Date.

 

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(f)    Minimum Liquidity. The Obligors shall have aggregate Liquidity of not
less than $2,000,000 on the Closing Date.

(g)    Warrants. Parent shall have delivered to each Lender a duly executed
Warrant Certificate.

(h)    Representations and Warranties. The representations and warranties of the
Obligors contained in Article VII or any other Loan Document shall be true and
correct in all material respects on and as of the Closing Date; provided that to
the extent that such representations and warranties specifically refer to an
earlier date, they shall be true and correct in all material respects as of such
earlier date; provided further that any representation and warranty that is
qualified as to “materiality”, “Material Adverse Effect” or similar language
shall be true and correct (after giving effect to any qualification therein) in
all respects.

(i)    No Default. No Default or Event of Default shall exist, or would result
from such proposed Borrowing or from the application of the proceeds therefrom.

Section 6.02.    Conditions to Tranche B Term Loan; Tranche B Term Loan
Borrowing Date.

The obligation of each Lender to make the Tranche B Term Loan on the Tranche B
Term Loan Borrowing Date shall not become effective until the following
conditions precedent shall have been satisfied or waived in writing by the
Lenders (which satisfaction or waiver may be made simultaneously with the making
of the Tranche B Term Loan hereunder):

(a)    Borrowing Certificate. The Lenders shall have received a Borrowing Notice
duly executed by a Responsible Officer of Borrower and Borrower’s updated
Schedules to this Agreement (if any). Notwithstanding anything to the contrary
contained herein, no Event of Default shall occur as a result of the delivery of
a Borrowing Notice pursuant to this clause (a).

(b)    Representations and Warranties. The representations and warranties of the
Obligors contained in Article VII or any other Loan Document shall be true and
correct in all material respects on and as of the Tranche B Term Loan Borrowing
Date; provided that to the extent that such representations and warranties
specifically refer to an earlier date, they shall be true and correct in all
material respects as of such earlier date; provided further that any
representation and warranty that is qualified as to “materiality”, “Material
Adverse Effect” or similar language shall be true and correct (after giving
effect to any qualification therein) in all respects.

(c)    No Default. No Default or Event of Default shall exist, or would result
from such proposed Borrowing or from the application of the proceeds therefrom.

The borrowing of the Loans shall constitute a certification by Borrower to the
effect that the conditions set forth in Section 6.01 and Section 6.02, as
applicable, have been fulfilled as of the Closing Date or the Tranche B Term
Loan Borrowing Date, as applicable.

 

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ARTICLE 7.

REPRESENTATIONS AND WARRANTIES

In order to induce the Lenders to enter into this Agreement and to extend the
Loans hereunder, each Obligor represents and warrants to the Lenders, on the
Closing Date and on the Tranche B Term Loan Borrowing Date, that the following
statements are true and correct:

Section 7.01.    Power and Authority

Each Obligor and each of its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted except to the extent that failure to have the same would not
reasonably be expected to have a Material Adverse Effect, (c) is qualified to do
business and is in good standing in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary except where failure
to so qualify would not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect, and (d) has full power, authority
and legal right to make and perform each of the Loan Documents to which it is a
party and, in the case of Borrower, to borrow the Loans hereunder.

Section 7.02.    Authorization; Enforceability

The Transactions are within each Obligor’s corporate or other organizational
powers and have been duly authorized by all necessary corporate or other
organizational action and, if required, by all necessary shareholder or other
equity holder action. The Loan Documents have been duly executed and delivered
by each Obligor party thereto and constitutes, and each of the other Loan
Documents to which it is a party when executed and delivered by such Obligor
will constitute, a legal, valid and binding obligation of such Obligor,
enforceable against each Obligor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors’ rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

Section 7.03.    Governmental and Other Approvals; No Conflicts

The Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority or any third
party, except for (i) such as have been obtained or made and are in full force
and effect and (ii) filings and recordings in respect of the Liens created
pursuant to the Security Documents, (b) will not violate any applicable Law or
regulation or the Organizational Documents of any Obligor or any order of any
Governmental Authority, other than any such violations that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect, (c) will not violate in any material respect or result in a default
under any material indenture, agreement or

 

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other instrument binding upon any Obligor or assets (including any Material
Agreement or agreement creating or evidencing any Material Indebtedness), or
give rise to a right thereunder to require any material payment to be made by
any such Person, and (d) will not result in the creation or imposition of any
Lien (other than Permitted Liens) on any asset of any Obligor.

Section 7.04.    Financial Statements; Projections; Material Adverse Change.

(a)    Financial Statements. Borrower has heretofore furnished to the Lenders
certain financial statements as provided for in Section 8.01. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Obligors as of such dates and for
such periods substantially in accordance with GAAP, subject to quarterly or
year-end adjustments and the absence of footnotes. No Obligor has any material
contingent liabilities or liabilities for taxes, long-term lease or unusual
forward or long-term commitments not disclosed in the aforementioned financial
statements.

(b)    Projections. On and as of the Closing Date, the projections of the
Obligors (collectively, the “Projections”) are based on good faith estimates and
assumptions made by the management of Borrower; provided, the Projections and
all other forward looking information are not to be viewed as facts and that
actual results during the period or periods covered by the Projections may
differ from such Projections and that the differences may be material.

(c)    No Material Adverse Change. Since December 31, 2016, other than the
execution, delivery, announcement or performance of the Merger Agreement or the
Loan Documents or the consummation of any transaction contemplated thereby or
hereby, no event, circumstance or change has occurred that has caused or
evidences, either in individually or in the aggregate, a Material Adverse
Change.

Section 7.05.    Properties.

(a)    Property Generally. Each Obligor has good and marketable fee simple title
to, or valid leasehold interests in, all its real and personal Property material
to its business, subject only to Permitted Liens and except as would not
reasonably be expected to materially interfere with its ability to conduct its
business as currently conducted or to utilize such properties for their intended
purposes.

(b)    Intellectual Property.

(i)    Schedule 7.05(b) (as such Schedule may be updated by Borrower from time
to time) lists all United States and foreign registrations of and applications
for Patents, Trademarks, Copyrights, and Industrial Designs, Technical
Information, Product Authorization and Product Agreements that are Obligor
Intellectual Property, including the applicable jurisdiction, registration or
application number and date, as applicable thereto, and a designation as to
whether it is licensed or owned by an Obligor.

 

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(ii)    Obligors own or possess all legal and beneficial rights, title and
interest in and to Obligor Intellectual Property designated on Schedule 7.05(b)
(as such Schedule may be updated by Borrower from time to time) as being owned
by that Obligor and has the right to use the Obligor Intellectual Property
licensed to that Obligor, in each case with good and marketable title, free and
clear of any Liens or Claims of any kind whatsoever other than Permitted Liens.

(iii)    To Obligors’ knowledge, Borrower’s Material Intellectual Property does
not violate any license or infringe any valid and enforceable Intellectual
Property right of third parties in any material respect.

(iv)    Other than with respect to the Material Agreements or as permitted by
Section 9.09, the Obligors have not assigned or otherwise transferred ownership
of, or agreed to assign or otherwise transfer ownership of, any Material
Intellectual Property, in whole or in part, to any Person who is not an Obligor.

(v)    Other than as set forth on Schedule 7.05(b) (as such Schedule may be
updated by Borrower from time to time) to Obligors’ knowledge, Obligors have not
received any written communications, nor is there any pending or threatened
action in writing, suit, proceeding or claim in writing by another, alleging
that any of the Obligors has violated, infringed, diluted or misappropriated any
Material Intellectual Property of another, and to Obligors’ knowledge, there is
no basis for such an allegation.

(vi)    There is no pending or threatened action in writing, suit, proceeding or
claim in writing by another (a) challenging Obligors’ rights in or to any
Material Intellectual Property owned by, or licensed to, Obligors, and Obligors
have no knowledge of any facts which could form a reasonable basis for any such
action, suit, proceeding or claim; or (b) challenging the validity,
enforceability or scope of any Material Intellectual Property owned by, or
licensed to, Obligors, and Obligors have no knowledge of any facts which could
form a reasonable basis for any such action, suit, proceeding or claim.

(vii)    Obligors have taken reasonable precautions to protect the secrecy,
confidentiality and value of the Obligor Intellectual Property, including
without limitation, by requiring that all relevant current and former employees,
contractors and consultants of Obligors execute written confidentiality
agreements.

(viii)    Obligors have complied with the material terms of each Material
Agreement pursuant to which Intellectual Property has been licensed to Obligors
(which material terms shall include, but not be limited to, pricing and duration
of the agreement), and all such Material Agreements are in full force and
effect, and Obligors have no knowledge of any facts which could form a
reasonable basis for any claims of breach or default under such Material
Agreements.

(ix)    Other than those permitted by Section 9.09 or as set forth on
Schedule 7.05(b) (as such Schedule may be updated by Borrower from time to
time), (a) there are no outstanding options, licenses, agreements, claims,
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ownership interests of any kind relating to the Intellectual Property owned by,
or licensed to, Obligors and (b) nor are Obligors bound by, or a party to, any
options, licenses or agreements of any kind with respect to any Intellectual
Property of another.

(x)    All maintenance fees, annuities, and the like due or payable on the
Patents have been timely paid or the failure to so pay was the result of an
intentional decision by the applicable Obligor, which would not reasonably be
expected to result in a Material Adverse Change. All documents and instruments
necessary to register or apply for or renew registration of all Patents,
Trademarks and Copyrights have been validly executed, delivered and filed in a
timely manner with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable.

(xi)    To Obligors’ knowledge, there are no material defects in any of the
Patents that constitute the Material Intellectual Property and no such Patents
have ever been finally adjudicated to be invalid, unpatentable or unenforceable
for any reason in any administrative, arbitration, judicial or other proceeding.

(xii)    Obligors have not received any notice asserting that the Patents
constituting Material Intellectual Property are invalid, unpatentable or
unenforceable and, to Obligors’ knowledge, neither they nor any current or prior
owner of such Patents or their respective agents or representatives, have
engaged in any conduct, or omitted to perform any necessary act, the result of
which would invalidate or render unpatentable or unenforceable any such Patent.

(xiii)    To Obligors’ knowledge, other than as set forth in Schedule 7.05(b)
(as such Schedule may be updated by Borrower from time to time), Obligors are
not obligated to make any payment by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any Obligor Intellectual Property,
with respect to the use thereof or in connection with the conduct of its
business or otherwise.

(xiv)    To Obligors’ knowledge, other than as set forth in Schedule 7.05(b) (as
such Schedule may be updated by Borrower from time to time), no employee of
Obligors is or has been in violation of any term of any employment contract,
patent disclosure agreement, invention assignment agreement, non-competition
agreement, non-solicitation agreement, nondisclosure agreement or any
restrictive covenant to or with a former employer where the basis of such
violation relates to such employee’s employment with Obligors.

Section 7.06.    No Actions or Proceedings.

(a)    Litigation. There is no litigation, investigation or proceeding pending
or, to the knowledge of Obligors, threatened in writing with respect to any
Obligor by or before any Governmental Authority or arbitrator (i) that either
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect or (ii) that involves this Agreement or the Transactions.

 

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(b)    Environmental Matters. The operations and the real Property of the
Obligors comply with all applicable Environmental Laws, except to the extent the
failure to so comply, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. There have been no
conditions, occurrences or release of Hazardous Materials which would reasonably
be expected to form the basis of any environmental liability claim under
applicable Environmental Laws with respect to Obligors’ and their Subsidiaries’
businesses, operations or properties, except to the extent such conditions,
occurrences or release would reasonably be expected to have a Material Adverse
Effect.

(c)    Labor Matters. No Obligor has engaged in an unfair labor practice as
defined in 29 U.S.C. §§152(8) and 158 of the National Labor Relations Act and
there are no pending or threatened in writing labor actions, disputes, grievance
or arbitration proceeding involving the employees of any Obligor, in each case
that would reasonably be expected to have a Material Adverse Effect. There is no
strike or work stoppage in existence or threatened in writing against any
Obligor and to the knowledge of such Obligor, no union organization activity is
taking place.

Section 7.07.    Compliance with Laws and Agreements

Each Obligor is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its Property and all indentures,
agreements and other instruments binding upon it or its Property, except where
the failure to do so, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.

Section 7.08.    Taxes

Except as set forth on Schedule 7.08, each Obligor has timely filed or caused to
be filed all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except Taxes that
are being contested in good faith by appropriate proceedings and for which such
Obligor has set aside on its books adequate reserves with respect thereto
substantially in accordance with GAAP.

Section 7.09.    Full Disclosure.

Borrower has disclosed to the Lenders all Material Agreements to which any
Obligor is subject, and all other matters to its knowledge, that, individually
or in the aggregate, would reasonably be expected to result in a Material
Adverse Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of the Obligors to the Lenders in
connection with the negotiation of this Agreement and the other Loan Documents
or delivered hereunder or thereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of material fact or
to the Obligors’ knowledge omits to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time, and it being
understood that such projected financial information and all other forward
looking information are not to be viewed as facts and that actual results during
the period or periods covered thereby may differ from such projected results and
that the differences may be material.

 

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Section 7.10.    Regulation.

(a)    Investment Company Act. No Obligor is an “investment company” as defined
in, or subject to regulation under, the Investment Company Act of 1940.

(b)    Margin Stock. No Obligor is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock,
and no part of the proceeds of the Loans will be used to buy or carry any Margin
Stock in violation of Regulation T, U or X.

Section 7.11.    Solvency.

The Obligors, on a consolidated basis, are and, immediately after giving effect
to the Borrowings, the use of proceeds thereof, and the consummation of the
Transactions, will be, Solvent.

Section 7.12.    Subsidiaries.

As of the Closing Date, after giving effect to the Transactions, (a) Borrower is
the only Domestic Subsidiary of Parent and (b) Borrower has no Subsidiaries.

Section 7.13.    Indebtedness and Liens

Set forth on Schedule 7.13A is a complete and correct list of all Indebtedness
of each Obligor outstanding as of the date hereof. Set forth on Schedule 7.13B
is a complete and correct list of all Liens granted by Borrower and other
Obligors with respect to their respective Property and outstanding as of the
date hereof.

Section 7.14.    Material Agreements

Set forth on Schedule 7.14 (as such Schedule may be updated by Borrower from
time to time) is a complete and correct list, as of the Closing Date, of
(i) each Material Agreement and (ii) each agreement creating or evidencing any
Material Indebtedness. No Obligor is in material default under any such Material
Agreement or agreement creating or evidencing any Material Indebtedness. Except
as otherwise disclosed on Schedule 7.14 (as such Schedule may be updated by
Borrower from time to time), all material vendor purchase agreements and
supplier contracts of the Obligors existing on the Closing Date are in full
force and effect without material modification from the form in which the same
were disclosed to the Lenders, except for such modifications as would not
reasonably be expected to be adverse to the interests of the Lenders.

 

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Section 7.15.    Restrictive Agreements.

None of the Obligors is subject to any Restrictive Agreement, except (i) those
listed on Schedule 7.15 or otherwise permitted under Section 9.11, (ii)
restrictions and conditions imposed by Law or by this Agreement, (iii) any
stockholder agreement, charter, by laws or other organizational documents of an
Obligor as in effect on the date hereof and (iv) limitations associated with
Permitted Liens.

Section 7.16.    Real Property.

No Obligor or any of its Subsidiaries owns or leases (as tenant thereof) any
real Property on the date hereof, except as described on Schedule 7.16.

Section 7.17.    Pension and Other Plans.

Schedule 7.17 sets forth, as of the date hereof, a complete and correct list of,
and that separately identifies, (a) all Title IV Plans, (b) all Multiemployer
Plans and (c) all material Benefit Plans. Each Benefit Plan, and each trust
thereunder, intended to qualify for Tax exempt status under Section 401 or 501
of the Code or other Requirements of Law so qualifies. Except for those that
would not have a Material Adverse Effect, (x) each Benefit Plan is in compliance
with applicable provisions of ERISA, the Code and other Requirements of Law,
(y) there are no existing or pending (or to the knowledge of any Obligor or
Subsidiary thereof, threatened) claims (other than routine claims for benefits
in the normal course), sanctions, actions, lawsuits or other proceedings or
investigation involving any Benefit Plan to which any Obligor or Subsidiary
thereof incurs or otherwise has or would have an obligation or any liability or
Claim and (z) no ERISA Event is reasonably expected to occur. Except as would
not reasonably be expected to have a Material Adverse Effect, Borrower and each
of its ERISA Affiliates has met all applicable requirements under the ERISA
Funding Rules with respect to each Title IV Plan, and no waiver of the minimum
funding standards under the ERISA Funding Rules has been applied for or
obtained. As of the most recent valuation date for any Title IV Plan, the
funding target attainment percentage (as defined in Section 430(d)(2) of the
Code) is at least 60%, and neither Borrower nor any of its ERISA Affiliates
knows of any facts or circumstances that would reasonably be expected to cause
the funding target attainment percentage to fall below 60% as of the most recent
valuation date. As of the date hereof, no ERISA Event has occurred in connection
with which obligations and liabilities (contingent or otherwise) remain
outstanding. Except as would not reasonably be expected to have a Material
Adverse Effect, no ERISA Affiliate would have any Withdrawal Liability as a
result of a complete withdrawal from any Multiemployer Plan on the date this
representation is made.

Section 7.18.    Collateral; Security Interest

Each Security Document is effective to create in favor of the Lenders a legal,
valid and enforceable security interest in the Collateral subject thereto and
each such security interest is perfected to the extent required by (and has the
priority required by) the applicable Security Document. The Security Documents
collectively are effective to create in favor of the Lenders a legal, valid and
enforceable security interest in the Collateral, which upon the filing of
financing statements and other similar statements filed in the appropriate
offices, such security interests are first-priority security interests (subject
only to Permitted Liens).

 

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Section 7.19.    Regulatory Approvals.

(a)    Each Obligor and each of its Subsidiaries holds either directly or
through licensees and agents, all material Regulatory Approvals, licenses,
permits and similar governmental authorizations of a Governmental Authority
necessary or required for each Obligor and its Subsidiaries to conduct their
operations and business substantially in the manner currently conducted.

(b)    Set forth on Schedule 7.19(b) (as such Schedule may be updated by
Borrower from time to time) is a complete and accurate list of all material
Regulatory Approvals relating to the Obligors, the conduct of their business and
the Products (on a per Product basis). All material Regulatory Approvals are
(i) legally and beneficially owned exclusively by the Obligors, free and clear
of all Liens other than Permitted Liens, (ii) validly registered and on file
with the applicable Governmental Authority, in material compliance with all
registration, filing and maintenance requirements (including any fee
requirements) thereof, and (iii) in good standing, valid and enforceable with
the applicable Regulatory Authority in all material respects. All required and
material notices, registrations and listings, supplemental applications or
notifications, reports (including field alerts or other reports of adverse
experiences) and other required and material filings with respect to the
Products have been filed with the FDA and all other applicable Governmental
Authorities.

(c)    (i) All material regulatory filings required by any Regulatory Authority
or in respect of any Regulatory Approval or Product Authorization with respect
to any Product or any Product Development and Commercialization Activities have
been made, and all such filings are complete with respect to the stage of
development of the Product to which it applies and correct in all material
respects and have complied in all material respects with all applicable Laws and
regulations, (ii) all clinical trials and pre-clinical studies, if any, of
investigational Products have been and are being conducted by each Obligor
according to all applicable Laws and regulations in all material respects along
with appropriate monitoring of clinical investigator trial sites for their
compliance, and (iii) each Obligor has disclosed to the Lenders all such
material regulatory filings and all material communications between
representatives of each Obligor and any Regulatory Authority.

(d)    Each Obligor and each of its agents are in compliance in all material
respects with all applicable statutes, rules and regulations (including all
Regulatory Approvals and Product Authorizations) of all applicable Governmental
Authorities, including the FDA and all other Regulatory Authorities, with
respect to each Product and all Product Development and Commercialization
Activities related thereto. Each Obligor has and maintains in full force and
effect all the necessary and requisite Regulatory Approvals and Product
Authorizations. Each Obligor is in compliance in all material respects with all
material applicable registration and listing requirements set forth in the FD&C
Act or equivalent regulation of each other Governmental Authority having
jurisdiction over such Person. Each Obligor adheres in all material respects to
all applicable material regulations of all Regulatory Authorities with respect
to the Products and all Product Development and Commercialization Activities
related thereto.

 

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(e)    Except as set forth on Schedule 7.19(e) (as such Schedule may be updated
by Borrower from time to time), no Obligor has received from any Regulatory
Authority any written notice of adverse findings with respect to any material
Product or any Product Development and Commercialization Activities related
thereto, including any FDA Form 483 inspectional observations, notices of
violations, Warning Letters, criminal proceeding notices under Section 305 of
the FD&C Act, or any other similar written communication from any Regulatory
Authority. There have been no seizures conducted or, to each Obligor’s
knowledge, threatened by any Regulatory Authority with respect to any material
Product, and no recalls, market withdrawals, field notifications, written
notifications of alleged misbranding or adulteration or safety alerts conducted,
requested or, to Borrower’s knowledge, threatened by any Regulatory Authority
with respect to any material Product, and no recalls, market withdrawals, field
notifications, written notifications of alleged misbranding or adulteration or
safety alerts have been conducted, requested or, to each Obligor’s knowledge,
threatened by any Regulatory Authority relating to any material Products.

(f)    Neither any Obligor nor any officer, employee or agent thereof, has made
an untrue statement of a material fact that was not subsequently corrected or
fraudulent statements to the FDA or any other Regulatory Authority, failed to
disclose a material fact required to be disclosed to the FDA or any other
Regulatory Authority that was not subsequently corrected, or committed an act,
made a statement, or failed to make a statement that, at the time such
disclosure was made (or was not made), would reasonably be expected to provide a
basis for the FDA or any other Regulatory Authority to invoke its policy
respecting Fraud, Untrue Statements of Material Facts, Bribery and Illegal
Gratuities, set forth in 56 Fed. Reg. 46191 (September 10, 1991).

Section 7.20.    Capitalization

All of the issued and outstanding securities of each Obligor have been duly
authorized, are validly issued, fully paid, and non-assessable. As of the
Closing Date and except as set forth on Schedule 7.20, there are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require the Obligors to issue, sell, or otherwise cause to become outstanding
any of their ownership interests. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Obligors. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the ownership
interests of the Borrower. None of the Equity Interests in the Borrower have
been mortgaged, assigned or pledged in favor of any Person, other than pursuant
to the Security Agreement.

Section 7.21.    Insurance

Each Obligor has obtained (and is maintaining), insurance for its assets
(including the Collateral) and business as required under the Loan Documents.

 

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Section 7.22.    Certain Fees

No broker’s or finder’s fee or commission will be payable in connection with
this Agreement or any of the Transactions contemplated hereby.

Section 7.23.    Sanctions Laws

Obligors and, to the knowledge of the Obligors, any director, officer, agent,
employee or other Person acting on behalf of the Obligors are in compliance with
the Sanctions Laws.

Section 7.24.    Anti-Corruption Laws

None of the Obligors nor, to the knowledge of the Obligors, any director,
officer, agent, employee or other Person acting on behalf of the Obligors has
taken any action, directly or indirectly, that would result in a violation by
such Persons of the Anti-Corruption Laws.

Section 7.25.    Anti-Terrorism Laws

The Obligors have taken reasonable measures to ensure compliance with applicable
Economic Sanctions Laws and Anti-Terrorism Laws; are not Designated Persons; and
have not used any part of the proceeds from any advance on behalf of any
Designated Person or has not used, directly by it or indirectly through any
Subsidiary, such proceeds in connection with any investment in, or any
transactions or dealings with, any Designated Person.

ARTICLE 8.

AFFIRMATIVE COVENANTS

Each Obligor covenants and agrees with the Lenders that, until the Commitments
have expired or been terminated and all Obligations (other than Warrant
Obligations and contingent indemnification obligations as to which no
unsatisfied claim has been asserted) have been paid in full in cash:

Section 8.01.    Financial Statements and Other Information

Borrower will furnish to the Lenders:

(a)    [reserved];

(b)    as soon as available and in any event within five (5) days following the
date Parent files its Quarterly Report on Form 10-Q with the SEC, the
consolidated balance sheets of Parent and its Subsidiaries as of the end of such
fiscal quarter of Parent, and the related consolidated statements of operations
and cash flows of Parent and its Subsidiaries for such quarter and the portion
of the fiscal year through the end of such quarter, all in reasonable detail and
setting forth in comparative form the figures for the corresponding period in
the preceding fiscal year, together with a certificate of a Responsible Officer
of Borrower stating that such financial statements fairly present in all
material respects the financial condition of Parent and its Subsidiaries as at
such date and the results of operations of Parent and its

 

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Subsidiaries for the period ended on such date and have been prepared
substantially in accordance with GAAP consistently applied, subject to changes
resulting from normal quarterly or year-end adjustments and except for the
absence of notes; provided, that the obligation in this Section 8.01(b) may be
satisfied by providing notice to the Control Agent of any posting and/or links
on Parent’s website without any additional requirement to furnish information to
the Lenders; provided further that delivery of the Compliance Certificate shall
satisfy the foregoing notice requirement;

(c)    within five (5) days following the date Parent files its Annual Report on
Form 10-K with the SEC, the consolidated balance sheets of Parent and its
Subsidiaries as of the end of such fiscal year of Parent, and the related
consolidated statements of operations and cash flows of Parent and its
Subsidiaries for such fiscal year, prepared substantially in accordance with
GAAP consistently applied, all in reasonable detail and setting forth in
comparative form the figures for the previous fiscal year, accompanied by a
report and opinion thereon of Ernst & Young LLP or another firm of independent
certified public accountants of recognized national standing, which report and
opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to any “going concern” or like qualification
or exception or any qualification or exception as to the scope of such audit;
provided, that the obligation in this Section 8.01(c) may be satisfied by
providing notice to the Control Agent of any posting and/or links on Parent’s
website without any additional requirement to furnish information to the
Lenders; provided further that delivery of the Compliance Certificate shall
satisfy the foregoing notice requirement;

(d)    within forty-five (45) days after the end of each fiscal quarter of
Parent, a compliance certificate of a Responsible Officer as of the end of the
applicable accounting period (which delivery may be by electronic communication
including fax or email and shall be deemed to be an original authentic
counterpart thereof for all purposes) in the form of Exhibit E (a “Compliance
Certificate,” which, for purposes of clarification, shall demonstrate Borrower’s
compliance with Section 8.16 in respect of each month in such quarter;

(e)    promptly, and in any event within five (5) Business Days after receipt
thereof by an Obligor thereof, copies of each notice or other correspondence
received from any securities regulator or exchange to the authority of which an
Obligor may become subject from time to time concerning any investigation or
possible investigation or other inquiry by such agency regarding financial or
other operational results of such Obligor;

(f)    the information regarding insurance maintained by Obligors as required
under Section 8.05;

(g)    a financial forecast for Parent and its Subsidiaries for each fiscal
year, including forecasted statements of income and cash flows of Parent and its
Subsidiaries, all of which shall be prepared on a consolidated basis and
delivered not later than February 28 of such fiscal year;

 

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(h)    [reserved]; and

(i)    such other information respecting the operations, properties, business or
financial condition of the Obligors (including with respect to the Collateral)
as the Lenders may from time to time reasonably request;

provided, Borrower covenants and agrees that neither Borrower, nor any other
Person acting on its behalf, will provide any Lender or its Representatives with
any information that Borrower believes constitutes material non-public
information, unless prior thereto such Lender shall have confirmed to Borrower
in writing that it consents to receive such information. Borrower understands
and confirms that each Lender shall be relying on the foregoing covenant in
effecting transactions in securities of Borrower.

Section 8.02.    Notices of Material Events

Borrower will furnish to the Lenders written notice (which delivery may be made
by electronic communication (including fax or email)) of the following promptly
(but in any event within five (5) Business Days) after a Responsible Officer
first learns of the existence of:

(a)    the occurrence of any Default;

(b)    the occurrence of any event with respect to any Obligor’s Property
resulting in a Loss, to the extent not covered by insurance, aggregating
$500,000 or more;

(c)    (i) any proposed Acquisition by any Obligor that would reasonably be
expected to result in environmental liability in excess of $500,000 under
Environmental Laws, and (ii)(A) spillage, leakage, discharge, disposal,
leaching, migration or release of any Hazardous Material required to be reported
to any Governmental Authority under applicable Environmental Laws, and (B) all
actions, suits, claims, notices of violation, hearings, investigations or
proceedings pending, or to the Obligors’ knowledge, threatened in writing
against or affecting any Obligor or any of its Subsidiaries or with respect to
the ownership, use, maintenance and operation of their respective businesses,
operations or properties, relating to Environmental Laws or Hazardous Material;

(d)    the assertion of any environmental matter by any Person against, or with
respect to the activities of, any Obligor or any of its Subsidiaries and any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations which would reasonably be expected to
involve damages in excess of $500,000 other than any environmental matter or
alleged violation that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect;

(e)    the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or directly affecting any
Obligor or any of its Subsidiaries that, would reasonably be expected to result
in a Material Adverse Effect;

(f)    (i) on or prior to any filing by any ERISA Affiliate of any notice of
intent to terminate any Title IV Plan, a copy of such notice and (ii) promptly,
and in any event within 10 days, after any Responsible Officer of any ERISA
Affiliate knows or has reason to know that a

 

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request for a minimum funding waiver under Section 412 of the Code has been
filed with respect to any Title IV Plan or Multiemployer Plan, a notice (which
may be made by telephone if promptly confirmed in writing) describing such
waiver request and any action that any ERISA Affiliate proposes to take with
respect thereto, together with a copy of any notice filed with the PBGC or the
IRS pertaining thereto;

(g)    (i) the termination of any Material Agreement; (ii) the receipt by any
Obligor or any of its Subsidiaries of a notice under any Material Agreement (and
a copy thereof) asserting a default by such Obligor or any of its Subsidiaries
where such alleged default would permit such counterparty to terminate such
Material Agreement; (iii) the entering into any new Material Agreement by an
Obligor (and a copy thereof); or (iv) any material amendment to a Material
Agreement that would be adverse in any material respect to the Lenders (and a
copy thereof) (which includes, but is not limited to, any amendments to
provisions relating to pricing and term), provided that notices required under
this subsection (g) may be delivered with Borrower’s quarterly Compliance
Certificate unless any of the foregoing events would reasonably be expected to
have a Material Adverse Effect;

(h)    any material product recalls, safety alerts, corrections, withdrawals,
marketing suspensions, removals or the like conducted, to be undertaken or
issued by any Obligor or any of its Subsidiaries or its suppliers, whether or
not at the request, demand or order of any Governmental Authority or otherwise
with respect to any Product, or any basis for undertaking or issuing any such
action or item;

(i)    any infringement or other violation by any Person of any Obligor
Intellectual Property that would reasonably be expected to result in a Material
Adverse Effect;

(j)    receipt of any written notice that a licensing agreement or arrangement
entered into by any Obligor or any of its Subsidiaries infringes or allegedly
infringes on the Intellectual Property of another Person;

(k)    any claim by any Person that the conduct of any Obligor’s (or any
Subsidiary thereof) business, including the development, manufacture, use, sale
or other commercialization of any Product, infringes any Intellectual Property
of such Person, except to the extent any such claim would not reasonably be
expected to result in a Material Adverse Effect;

(l)    [reserved];

(m)    within 45 days of the date thereof, or, if earlier, on the date of
delivery of any financial statements pursuant to Section 8.01, notice of any
material change in accounting policies or financial reporting practices by the
Obligors, in each case, other than those disclosed in any such financial
statements;

(n)    promptly after the occurrence thereof, notice of any labor controversy
resulting in or threatening to result in any strike, work stoppage, boycott,
shutdown or other material labor disruption against or involving an Obligor;

 

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(o)    any other development that results in, or would reasonably be expected to
result in, a Material Adverse Effect;

(p)    concurrently with the delivery of financial statements under
Section 8.01(b) or (c), the creation or other acquisition of any Material
Intellectual Property by any Obligor or any Subsidiary after the date hereof and
during such prior fiscal year which is registered or becomes registered or the
subject of an application for registration with the United States Copyright
Office or the United States Patent and Trademark Office, as applicable, or with
any other equivalent foreign Governmental Authority; and

(q)    any change to any Obligor’s ownership of Deposit Accounts, Securities
Accounts and Commodity Accounts (in each case, other than Excluded Accounts (as
defined in the Security Agreement)), by delivering to the Lenders an updated
Annex 7 to the Security Documents setting forth a complete and correct list of
all such accounts as of the date of such change.

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer of Borrower setting forth in reasonable
detail the event or development requiring such notice and any action taken or
proposed to be taken with respect thereto.

Section 8.03.    Existence; Maintenance of Properties, Etc.

(a)    It will, and will cause each of its Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence; provided that the foregoing shall not prohibit any merger,
amalgamation, consolidation, liquidation or dissolution permitted under
Section 9.03.

(b)    It shall, and shall cause each of its Subsidiaries to, maintain and
preserve all rights, licenses, permits, privileges and franchises material to
the conduct of its business, and maintain and preserve all of its properties
necessary to the conduct of its business in good working order and condition,
ordinary wear and tear and damage from casualty or condemnation excepted.

(c)    Except as otherwise permitted hereunder, it shall, and shall cause each
of its Subsidiaries to, (i) maintain in full force and effect, and pay all costs
and expenses relating to, all Material Intellectual Property owned or controlled
by it or such Subsidiary and all Material Agreements, (ii) pursue any
infringement or other violation by any Person of its Material Intellectual
Property, except in any specific circumstances where both (x) it or such
Subsidiary is able to demonstrate that it is not commercially reasonable to do
so and (y) where not doing so does not materially adversely affect any Product,
and (iii) use commercially reasonable efforts to pursue and maintain in full
force and effect legal protection for all new Material Intellectual Property
developed or controlled by it.

(d)    It shall, and shall cause each of its Subsidiaries to, take all actions
reasonably necessary to obtain, maintain in full force and effect and preserve,
and take all necessary action to timely renew, (i) all material Regulatory
Authorizations for each Product and (ii) all other Permits and accreditations
that are necessary in the proper conduct of its business.

 

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(e)    It shall, and shall cause each of its Subsidiaries to, use commercially
reasonable efforts to cause each new employee and contractor to execute and
deliver a customary confidentiality, non-disclosure and Intellectual Property
assignment agreement.

Section 8.04.    Payment of Obligations

It will, and will cause each of its Subsidiaries to, pay and discharge (i) all
federal income and other material Taxes, fees, assessments and governmental
charges or levies imposed upon it or upon its properties or assets prior to the
date on which penalties attach thereto, and all lawful claims for labor,
materials and supplies which, if unpaid, might become a Lien (other than a
Permitted Lien) upon any properties or assets of any Obligor, except to the
extent such material Taxes, fees, assessments or governmental charges or levies,
or such claims are being contested in good faith by appropriate proceedings and
are adequately reserved against substantially in accordance with GAAP, (ii) all
lawful claims which, if unpaid, would by Law become a Lien upon its Property not
constituting a Permitted Lien and (iii) all other obligations if the failure to
discharge such obligation would reasonably be expected to result in a Material
Adverse Effect.

Section 8.05.    Insurance

At its own cost and expense, it will, and will cause each of its Subsidiaries,
to obtain and maintain insurance of the kinds, and in the amounts, customarily
carried or maintained by corporations of engaged in substantially similar
businesses, it being understood and agreed that the insurance held by Borrower
on the Closing Date is deemed to fulfill this requirement on the date hereof:

(a)    All Risks of Physical Loss Insurance. Insurance against loss, destruction
or damage to its properties and assets (including the Collateral) as determined
in its good faith business judgment to be customary for companies similar to
Borrower.

(b)    Commercial General Liability Insurance. Commercial general liability
insurance covering bodily injury, death, property damage, products liability in
such amounts as are customary for businesses and assets comparable to the
business and assets of Borrower.

(c)    Workers Compensation Insurance. Workers’ compensation insurance with
respect to any work performed on or about the property or assets of Borrower.

(d)    General Requirements. All of the insurance policies required pursuant to
this Section 8.05 will (i) be issued by financially sound and reputable insurers
with a rating of at least “A” or better by both Standard & Poor’s Ratings
Service and Moody’s Investors Service (or such other credit rating agencies as
may be designated by the Control Agent) or a general policy rating of “A-” or
better and a financial class of VIII or better by A.M. Best Company, Inc.,
(ii) name the Lenders as a “loss payee,” “additional insured” or “mortgagee,” as

 

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applicable, and (iii) provide for 30 days’ prior written notice (10 days’ prior
written notice from Borrower for nonpayment of premium), or such shorter period
as reasonably agreed by the Control Agent, to the Lenders before such policy is
canceled or terminated. Receipt of notice of termination or cancellation of any
such insurance policies or reduction of coverages or amounts thereunder shall
entitle the Lenders to renew any such policies, cause the coverages and amounts
thereof to be maintained at levels required pursuant to this Section 8.05 or
otherwise to obtain similar insurance in place of such policies, and in each
case, Borrower will be responsible for the reasonable and documented cost of
such insurance (payable on demand); provided, that Borrower shall have the
opportunity to cure such noncompliance within five (5) Business Days of
receiving written notice from the Control Agent that it intends to renew or
purchase such insurance. The amount of any such reasonable and documented
expenses shall accrue interest at the Default Rate if not paid on demand after
giving effect to any applicable grace or cure period, and shall constitute
“Obligations.” All of the insurance policies required hereby will be evidenced
by one or more certificates of insurance, together with appropriate loss payee
or additional insured clauses or endorsements in favor of the Lenders as
required by this Section, delivered to the Lenders on or before the Closing Date
and at such other times as the Lenders may request from time to time.

Section 8.06.    Books and Records; Inspection Rights

It will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. It will, and will cause
each of its Subsidiaries to, permit any representatives designated by the
Lenders, upon reasonable prior notice, but no less than five (5) days’ prior
written notice, and at reasonable times, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
during normal business hours (but not more often than once a year unless an
Event of Default has occurred and is continuing); provided that such
representative shall use its commercially reasonable efforts to minimize
disruptions to the business and affairs of the Borrower as a result of any such
visit, inspection, examination or discussion. It will, and will cause each of
its Subsidiaries to, pay all reasonable and documented costs of all such
inspections. Notwithstanding anything to the contrary contained herein, no
Obligor will be required to disclose or permit the inspection or discussion of,
any document, information or other matter (i) that constitutes trade secrets or
proprietary information, (ii) in respect of which disclosure to any Lender (or
their respective representatives or contractors) is prohibited by any applicable
Law or regulation or any binding agreement with a third party or (iii) that is
subject to attorney client or similar privilege or constitutes attorney work
product.

Section 8.07.    Compliance with Laws and Other Obligations.

It will, and will cause each of its Subsidiaries to, (i) comply in all material
respects with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its Property (including Environmental Laws) and
(ii) comply in all material respects with all terms of Indebtedness and all
other Material Agreements, except where the failure to do so, individually or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect.

 

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Section 8.08.    Licenses.

It will, and will cause each of its Subsidiaries to, obtain and maintain all
licenses, authorizations, consents, filings, exemptions, registrations and other
Governmental Approvals necessary in connection with the execution, delivery and
performance of the Loan Documents, the consummation of the Transactions or the
operation and conduct of its business and ownership of its properties, except
where failure to do so would not reasonably be expected to have a Material
Adverse Effect.

Section 8.09.    Action under Environmental Laws.

Except as would not be reasonably expected to result in a Material Adverse
Effect, it will, and will cause each of its Subsidiaries to, upon becoming aware
of the release of any Hazardous Materials or the existence of any environmental
liability under applicable Environmental Laws with respect to their respective
businesses, operations or properties, take all actions, at their cost and
expense, as shall be necessary or advisable to investigate and clean up the
condition of their respective businesses, operations or properties, including
all required removal, containment and remedial actions, and restore their
respective businesses, operations or properties to a condition, in each case in
material compliance with applicable Environmental Laws.

Section 8.10.    Use of Proceeds.

The proceeds of the Loans will be used only as provided in Section 2.05. No part
of the proceeds of the Loans will be used, whether directly or indirectly, for
any purpose that entails a violation of any of the Regulations of the Board of
Governors of the Federal Reserve System, including Regulations T, U and X.

Section 8.11.    Certain Obligations Respecting Subsidiaries; Further
Assurances.

(a)    Subsidiaries. The Borrower will take such action, and will cause each of
its Domestic Subsidiaries to take such action, from time to time as shall be
necessary to ensure that all wholly-owned Domestic Subsidiaries are “Guarantors”
hereunder. Without limiting the generality of the foregoing, in the event that
Borrower or any of its Domestic Subsidiaries shall form or acquire any new
wholly-owned Domestic Subsidiary, it and its Domestic Subsidiaries will promptly
and in any event within 30 days (or such longer time as consented to by the
Majority Lenders in writing) of the formation or acquisition of such Domestic
Subsidiary:

(i)    cause such new wholly-owned Domestic Subsidiary to become a “Guarantor”
hereunder, and a “Grantor” under the Security Documents, pursuant to a Guarantee
Assumption Agreement;

 

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(ii)    take such action or cause such wholly-owned Domestic Subsidiary to take
such action (including delivering such shares of stock together with undated
transfer powers executed in blank) as shall be necessary to create and perfect
valid and enforceable first priority (subject to Permitted Liens) Liens on
substantially all of the personal Property of such new Domestic Subsidiary as
collateral security for the obligations of such new Domestic Subsidiary
hereunder;

(iii)    cause the parent of such wholly-owned Domestic Subsidiary to execute
and deliver a pledge agreement in favor of the Lenders, in respect of all
outstanding issued shares of such Domestic Subsidiary; and

(iv)    deliver such proof of corporate action, incumbency of officers and other
documents as is consistent with those delivered by each Obligor pursuant to
Section 6.01 or as the Majority Lenders shall have reasonably requested.

Notwithstanding anything to the contrary in this Agreement or any of the other
Loan Documents, no Foreign Subsidiary shall be a Guarantor, or be required to
become a Guarantor, nor shall any of the assets of any Foreign Subsidiary be
pledged, subjected to a Lien or the Security Documents or otherwise used to
secure any of the Obligations; provided, however, the Equity Interests of a
Subsidiary of the Borrower that is a Domestic Foreign Holding Company or a
first-tier Foreign Subsidiary, that is treated as a “controlled foreign
corporation” (within the meaning of Section 957 of the Code), of Borrower, any
Domestic Subsidiary or any Domestic Foreign Holding Company shall pledge (i)
100% of such issued and outstanding Equity Interests not entitled to vote
(within the meaning of Treasury Regulation Section 1.956-2(c)(2)) and (ii) 65%
of such issued and outstanding Equity Interests entitled to vote (within the
meaning of Treasury Regulation Section 1.956-2(c)(2)).

(b)    Further Assurances. Subject to the limitations contained in the Loan
Documents, it will, and will cause each of its Domestic Subsidiaries to, take
such action from time to time as shall reasonably be requested in writing by the
Majority Lenders to effectuate the purposes and objectives of this Agreement.

Without limiting the generality of the foregoing, it will, and will cause each
Person that is required to be a Guarantor to, take such action from time to time
(including executing and delivering such assignments, security agreements,
control agreements and other instruments) as shall be reasonably requested in
writing by the Majority Lenders to create, in favor of the Lenders, perfected
security interests and Liens in substantially all of the personal Property of
such Obligor as collateral security for the Obligations; provided that any such
security interest or Lien shall be subject to the relevant requirements of the
Security Documents.

Section 8.12.    Termination of Non-Permitted Liens

In the event that any Obligor shall become aware or be notified by the Lenders
of the existence of any outstanding Lien against any Property of any Obligor,
which Lien is not a Permitted Lien, such Obligor shall use commercially
reasonable efforts to promptly terminate or cause the termination of such Lien.

 

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Section 8.13.    Non-Consolidation

Parent will, and will cause each of its Subsidiaries to, (i) maintain entity
records and books of account separate from those of any other entity which is an
Affiliate of such entity; (ii) not commingle its funds or assets with those of
any other entity which is an Affiliate of such entity; and (iii) provide that
its board of directors or other analogous governing body will hold all
appropriate meetings to authorize and approve such entity’s actions, which
meetings will be separate from those of other entities.

Section 8.14.    Anti-Terrorism and Anti-Corruption Laws

No Obligor shall engage in any transaction that violates any of the applicable
prohibitions set forth in any Economic Sanctions Law, Anti-Terrorism Law, the US
Foreign Corrupt Practices Act of 1977 (15 USC. §§ 78dd-1 et seq.) or any other
Laws applicable to such Obligor. None of the funds or assets of such Obligor or
any Subsidiary that are used to repay the Loans shall constitute property of, or
shall be beneficially owned by, any Designated Person or be the direct proceeds
derived from any transactions that violate the prohibitions set forth in any
applicable Economic Sanctions Law, and no Designated Person shall have any
direct or indirect interest in such Obligor insofar as such interest would
violate any Economic Sanctions Laws applicable to such Obligor.

Section 8.15.    Milestone

During calendar year 2018, either (a) product development candidate MT-4019
targeting CD38 will be the subject of an investigational new drug application
for multiple myeloma; or (b) a business transaction relating to MT-4019 or
another product development candidate targeting CD38 will occur.

Section 8.16.    Minimum Liquidity

Borrower shall ensure that the Obligors have aggregate Liquidity of not less
than $2,000,000 as of the last day of each calendar month ended after the
Closing Date.

Section 8.17.    Accounts

Each Obligor shall maintain all Deposit Accounts, Securities Accounts, Commodity
Accounts and lockboxes (in each case, other than Excluded Accounts (as defined
in the Security Agreement)) located in the United States with a bank or
financial institution that has executed and delivered to the Lenders a Control
Agreement.

 

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ARTICLE 9.

NEGATIVE COVENANTS

Each Obligor covenants and agrees with the Lenders that, until the Commitments
have expired or been terminated and all Obligations (other than Warrant
Obligations and contingent indemnification obligations as to which no
unsatisfied claim has been asserted) have been paid in full in cash:

Section 9.01.    Indebtedness

It will not, and will not permit any of its Subsidiaries to, create, incur,
assume or permit to exist any Indebtedness, whether directly or indirectly,
except:

(a)    the Obligations;

(b)    Indebtedness existing on the date hereof and set forth in Schedule 7.13A
and Permitted Refinancings thereof;

(c)    accounts payable to trade creditors for goods and services and current
operating liabilities (not the result of the borrowing of money) incurred in the
Ordinary Course of Business in accordance with customary terms and paid within
the specified time, unless contested in good faith by appropriate proceedings
and reserved for substantially in accordance with GAAP;

(d)    Indebtedness consisting of guarantees resulting from endorsement of
negotiable instruments for collection by it or any of its Subsidiaries in the
Ordinary Course of Business;

(e)    any other Indebtedness of an Obligor (other than Parent) to any other
Obligor (other than Parent);

(f)    Guarantees by any Obligor of Indebtedness of any other Obligor;

(g)    Purchase money and capital lease financing; provided that (i) if secured,
the collateral therefor consists solely of the assets being financed, the
products and proceeds thereof and books and records related thereto, and
(ii) the aggregate outstanding principal amount of such Indebtedness does not
exceed $1,000,000 at any time;

(h)    unsecured workers’ compensation claims, payment obligations in connection
with health, disability or other types of social security benefits, unemployment
or other insurance obligations, reclamation and statutory obligations, in each
case incurred in the Ordinary Course of Business;

(i)    Indebtedness under (i) Hedging Agreements entered into in the ordinary
course of Borrower’s financial planning solely to hedge interest rate risks (and
not for speculative purposes) and (ii) other Hedging Agreements providing
protection against fluctuations in currency values or commodity prices in
connection with Borrower’s, any of its Subsidiaries’ or any other Obligor’s
operations, so long as the purpose of any such agreement is a bona fide hedging
activity (and is not for speculative purposes);

(j)    Indebtedness in respect of netting services, overdraft protections and
other like services;

 

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(k)    Indebtedness arising with respect to indemnification obligations,
adjustment of purchase price, “earn-outs” and similar payment obligations in
favor of purchasers in connection with Asset Sales and Investments (including
Permitted Acquisitions) permitted hereunder;

(l)    Indebtedness in connection with the financing of insurance premiums, in
the ordinary course of business, in respect of premiums payable on insurance
policies maintained by any Obligor;

(m)    Indebtedness of a Person or Indebtedness attaching to assets of a Person
that, in either case, becomes a Subsidiary, or Indebtedness attaching to assets
that are acquired by Borrower or any of the Subsidiaries, in each case, after
the Closing Date, as a result of any Permitted Acquisition or any other
Investment, and any Permitted Refinancings thereof, in an aggregate amount not
to exceed $250,000 during the term of this Agreement, provided that, (i) such
original Indebtedness existed at the time such Person became a Subsidiary or at
the time such assets were acquired and, in each case, was not created in
anticipation thereof, and (ii) such Indebtedness is not guaranteed in any
respect by Holdings, the Borrower or any Subsidiary (other than by any such
Person that so becomes a Subsidiary);

(n)    Subordinated Indebtedness in an aggregate principal amount not to exceed
$5,000,000 at any time outstanding;

(o)    other Indebtedness in an aggregate outstanding amount not to exceed
$750,000 at any time; and

(p)    Indebtedness approved in advance in writing by the Majority Lenders.

Section 9.02.    Liens

It will not, and will not permit any of its Subsidiaries to, create, incur,
assume or permit to exist any Lien on any Property now owned by it, except:

(a)    Liens securing the Obligations;

(b)    any Lien on any Property of any Obligor existing on the date hereof and
set forth in Schedule 7.13B and renewals, extensions and Permitted Refinancings
thereof; provided that (i) no such Lien shall extend to any other Property of
such Obligor and (ii) any such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;

(c)    Liens securing Indebtedness permitted under Section 9.01(g); provided
that such Liens are restricted solely to the collateral described in
Section 9.01(g);

(d)    Liens imposed by law which were incurred in the Ordinary Course of
Business, including (but not limited to) carriers’, warehousemen’s, landlords’
and mechanics’ liens, liens

 

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relating to leasehold improvements and other similar liens arising in the
Ordinary Course of Business and which (i) do not materially detract from the
value of the Property subject thereto or materially impair the use thereof in
the operations of the business of such Person or (ii) are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such liens and for
which adequate reserves have been made if required substantially in accordance
with GAAP;

(e)    Liens, pledges or deposits made in the Ordinary Course of Business in
connection with bids, contracts, leases, appeal bonds, workers’ compensation,
unemployment insurance or other similar social security legislation;

(f)    Liens securing Taxes, assessments and other governmental charges, the
payment of which is not yet due or is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and for
which such reserve or other appropriate provisions, if any, as shall be required
by GAAP shall have been made;

(g)    servitudes, easements, rights of way, restrictions and other similar
encumbrances on real Property imposed by applicable Laws and encumbrances
consisting of zoning or building restrictions, easements, licenses, restrictions
on the use of Property or minor imperfections in title thereto which, in the
aggregate, are not material, and which do not in any case materially detract
from the value of the Property subject thereto or interfere with the ordinary
conduct of the business of any of the Obligors;

(h)    bankers liens, rights of setoff and similar Liens incurred on deposits
made in the Ordinary Course of Business;

(i)    Liens in connection with transfers permitted under Section 9.09;

(j)    any judgment lien or lien arising from decrees or attachments not
constituting an Event of Default;

(k)    Liens arising from precautionary UCC financing statement filings
regarding leases and consignment arrangements entered into in the ordinary
course of business;

(l)    other Liens which secure obligations in an aggregate amount not to exceed
$500,000 at any time outstanding; and

(m)    (i) Permitted Licenses to the extent that such Permitted License or any
terms thereof would constitute a Lien and (ii) Liens granted under Collaboration
Agreements.

Section 9.03.    Fundamental Changes and Acquisitions

It will not, and will not permit any of its Subsidiaries to, (i) enter into any
transaction of merger, amalgamation or consolidation, including without
limitation, a reverse-triangular merger, or other similar transaction or series
of related transactions, (ii) liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution), or (iii) make any Acquisition, except:

(a)    Investments permitted under Section 9.05(e);

 

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(b)    the sale, lease, transfer or other disposition by any Subsidiary of any
or all of its Property (upon voluntary liquidation or otherwise) to Borrower or
any other Obligor;

(c)    the sale, transfer or other disposition of the capital stock of any
Subsidiary Guarantor to Borrower or any other Obligor;

(d)    Permitted Acquisitions for an aggregate consideration not to exceed the
sum of $10,000,000 in the aggregate for the duration of this Agreement,
including any consideration in the form of Subordinated Indebtedness but
excluding any consideration in the form of equity contributions and/or equity
issuances; and

(e)    (i) any merger, amalgamation or consolidation of any Obligor (other than
Parent) with or into any other Obligor (other than Parent), provided that if
Borrower is a party to such merger, amalgamation or consolidation, Borrower
shall be the surviving entity, and (ii) any merger, amalgamation or
consolidation of any non-Obligor Subsidiary with or into any other non-Obligor
Subsidiary.

Section 9.04.    Lines of Business

It will not, and will not permit any of its Subsidiaries to, engage to any
material extent in any business other than the business engaged in on the date
hereof by such Obligor, or a business reasonably related, incidental or
complimentary thereto or reasonable extensions thereof.

Section 9.05.    Investments

It will not, and will not permit any of its Subsidiaries to, make, directly or
indirectly, or permit to remain outstanding any Investments except:

(a)    Investments outstanding on the date hereof and identified in
Schedule 9.05 and any renewals, amendments and replacements thereof that do not
increase the amount thereof;

(b)    operating deposit accounts with banks;

(c)    extensions of credit in the nature of accounts receivable or notes
receivable arising from the sales of goods or services in the Ordinary Course of
Business;

(d)    Permitted Cash Equivalent Investments;

(e)    Investments (i) consisting of 100% of the ownership of the Equity
Interests of its Subsidiaries, (ii) by Borrower or a Subsidiary in any
Subsidiary Guarantor or (iii) in connection with a Permitted Acquisition;

 

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(f)    (i) Hedging Agreements entered into in the ordinary course of Borrower’s
financial planning solely to hedge interest rate risks (and not for speculative
purposes) and (ii) other Hedging Agreements providing protection against
fluctuations in currency values or commodity prices in connection with
Borrower’s, any of its Subsidiaries’ or any other Obligor’s operations, so long
as the purpose of any such agreement is a bona fide hedging activity (and is not
for speculative purposes);

(g)    Investments consisting of prepaid expenses, negotiable instruments held
for collection or deposit, security deposits with utilities, landlords and other
like Persons, and deposits in connection with workers’ compensation and similar
deposits, in each case made in the Ordinary Course of Business;

(h)    Investments received in connection with any Insolvency Proceedings in
respect of any customers, suppliers or clients and in settlement of delinquent
obligations of, and other disputes with, customers, suppliers or clients;

(i)    Investments consisting of loans made in lieu of Restricted Payments which
are otherwise permitted under Section 9.06;

(j)    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 Parent, Borrower or their Subsidiaries pursuant to employee
stock purchase plans or agreements approved by Parent’s board of directors not
to exceed $500,000 at any time outstanding;

(k)    the increase in the value of any Investment permitted pursuant to this
Section 9.05;

(l)    Investments permitted under Section 9.03; and

(m)    other Investments in an aggregate amount not to exceed $1,000,000 in any
Fiscal Year.

Section 9.06.    Restricted Payments

It will not, and will not permit any of its Subsidiaries to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, other
than:

(a)    dividends with respect to any capital stock of Parent or any of its
Subsidiaries payable solely in additional shares of its common stock;

(b)    any purchase, redemption, retirement, or other acquisition by Parent or
any of its Subsidiaries of shares of its capital stock or other Equity Interests
with the proceeds received from a substantially concurrent issue of new shares
of its capital stock or other Equity Interests;

 

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(c)    any purchase, redemption, retirement, or other acquisition of Equity
Interests of Parent held by officers, directors and employees or former
officers, directors or employees (or their transferees, estates or beneficiaries
under their estates) of Parent and its Subsidiaries not to exceed $500,000 in
any Fiscal Year;

(d)    dividends paid by any Subsidiary to any Parent or any of its
Subsidiaries;

(e)    cashless exercises of options and warrants;

(f)    cash payment made to redeem, purchase, repurchase or retire the
obligations under warrants of the Obligors in accordance with the terms thereof;

(g)    any Tax Distributions; and

(h)    so long as no Default or Event of Default has occurred and is continuing,
other Restricted Payments in an aggregate amount not to exceed $250,000 in any
Fiscal Year.

Section 9.07.    Payments of Indebtedness

It will not, and will not permit any of its Subsidiaries to, make any payments
in respect of any Material Indebtedness other than (i) payments of the
Obligations, (ii) scheduled payments of other Permitted Indebtedness (other than
any Subordinated Indebtedness) and (iii) scheduled payments of the Subordinated
Indebtedness to the extent permitted pursuant to the terms of the subordination,
intercreditor, or other similar agreement to which such Subordinated
Indebtedness is subject.

Section 9.08.    Change in Fiscal Year

It will not, and will not permit any of its Subsidiaries to, change the last day
of its fiscal year from that in effect on the date hereof, except to change the
fiscal year of a Subsidiary acquired in connection with an Acquisition to
conform its fiscal year to that of Borrower.

Section 9.09.    Sales of Assets, Etc.

It will not, and will not permit any of its Subsidiaries to, sell, lease or
exclusively license (in terms of geography or field of use), as a licensor,
transfer or otherwise dispose of any of its Property (including accounts
receivable and capital stock of Subsidiaries), in each case, in one transaction
or series of transactions (any thereof, an “Asset Sale”), except:

(a)    transfers of cash in the Ordinary Course of Business for equivalent
value;

(b)    sales or leases of inventory in the Ordinary Course of Business;

(c)    sales, transfers and other dispositions of receivables in connection with
the compromise, settlement or collection thereof in the Ordinary Course of
Business;

 

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(d)    the forgiveness, release or compromise of any amount owed to Borrower or
any of its Subsidiaries in the Ordinary Course of Business;

(e)    entering into, or becoming bound, by a Permitted License to the extent
not otherwise prohibited by this Agreement;

(f)    [reserved];

(g)    transfers of Property between Obligors (other than Parent) and from a
non-Obligor to an Obligor;

(h)    a sale, lease, exclusive license, transfer or other disposition
(including by way of abandonment or cancellation) of any Property that is
obsolete or worn out or no longer used or useful in connection with the business
of the Obligors;

(i)    dispositions resulting from Casualty Events;

(j)    any transaction permitted under Section 9.02, 9.03 and 9.05;

(k)    the unwinding of any Hedging Agreement permitted by Section 9.05 pursuant
to its terms; and

(l)    so long as no Event of Default has occurred and is continuing, other
Asset Sales with a fair market value not in excess of $500,000 in the aggregate
in any Fiscal Year.

The Lenders acknowledge and agree that this Section 9.09 permits the Obligors to
make decisions in the Ordinary Course of Business regarding the registration of
any of its Intellectual Property, including without limitation, any decisions
regarding application, prosecution, abandonment, or cancellation of any such
Intellectual Property, without the consent of any Lender.

Section 9.10.    Transactions with Affiliates

It will not, and will not permit any of its Subsidiaries to, sell, lease,
license or otherwise transfer any assets to, or purchase, lease, license or
otherwise acquire any assets from, or otherwise engage in any other transactions
with, any of its Affiliates, except:

(a)    transactions between or among the Obligors;

(b)    any transaction permitted under Section 9.01, 9.03, 9.05, 9.06, 9.07 or
9.09;

(c)    customary compensation and indemnification of, and other employment
arrangements with, directors, officers and employees of any Obligor in the
Ordinary Course of Business;

 

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(d)    transactions upon fair and reasonable terms that are no less favorable to
any Obligor than would be obtained in a comparable arm’s-length transaction with
a Person not an Affiliate;

(e)    the Obligors and their Subsidiaries may pay fees, expense reimbursements
and indemnification payments to officers and directors and pay insurance
premiums on behalf of officers and directors, in each case in the Ordinary
Course of Business; and

(f)    the transactions set forth on Schedule 9.10.

Section 9.11.    Restrictive Agreements

It will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into, incur or permit to exist any Restrictive Agreement other
than (i) restrictions and conditions imposed by law or by the Loan Documents or
any joint venture or similar agreement, (ii) Restrictive Agreements listed on
Schedule 7.15, (iii) restrictions and conditions contained in any Collaboration
Agreement, (iv) any stockholder agreement, charter, by laws or other
organizational documents of an Obligor as in effect on the date hereof or
(v) limitations associated with Permitted Liens.

Section 9.12.    Organizational Documents, Material Agreements.

(a)    It will not, and will not permit any of its Subsidiaries to, enter into
any amendment to or modification of any Organizational Document that is
materially adverse to the interests of the Lenders without the prior written
consent of the Majority Lenders, which consent shall not be unreasonably
withheld, conditioned or delayed.

(b)    It will not, and will not permit any of its Subsidiaries to, enter into
any waiver, amendment or modification of any Material Agreement (including, but
not limited to, any amendments to provisions relating to pricing and term) that
would be reasonably expected to adversely affect the Lenders in any material
respect or result in a Material Adverse Effect.

Section 9.13.    [Reserved]

Section 9.14.    Sales and Leasebacks

Except as permitted by Section 9.01(g), it will not, and will not permit any of
its Subsidiaries to, become liable, directly or indirectly, with respect to any
lease, whether an operating lease or a Capital Lease Obligation, of any Property
(whether real, personal, or mixed), whether now owned or hereafter acquired,
(i) which Borrower or such Subsidiary has sold or transferred or is to sell or
transfer to any other Person and (ii) which Borrower or such Subsidiary intends
to use for substantially the same purposes as Property which has been or is to
be sold or transferred.

 

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Section 9.15.    Hazardous Material

It will not, and will not permit any of its Subsidiaries to, use, generate,
manufacture, install, treat, release, store or dispose of any Hazardous
Material, except in compliance with all applicable Environmental Laws or where
the failure to comply would not reasonably be expected to result in a Material
Adverse Change.

Section 9.16.    Accounting Changes

It will not, and will not permit any of its Subsidiaries to, make any
significant change in accounting treatment or reporting practices, except as
required or permitted by GAAP.

Section 9.17.    Compliance with ERISA

No ERISA Affiliate shall cause or suffer to exist (a) any event that would
result in the imposition of a Lien with respect to any Title IV Plan or
Multiemployer Plan or (b) any other ERISA Event, that would, in the aggregate,
have a Material Adverse Effect. No Obligor or any Subsidiary thereof shall cause
or suffer to exist any event that could result in the imposition of a Lien with
respect to any Benefit Plan that would have a Material Adverse Effect.

ARTICLE 10.

EVENTS OF DEFAULT

Section 10.01.    Events of Default

Until the Commitments have expired or been terminated and all Obligations (other
than Warrant Obligations and contingent indemnification obligations as to which
no unsatisfied claim has been asserted) have been paid in full in cash, each of
the following events shall constitute an “Event of Default”:

(a)    Borrower shall fail to pay any principal of any Loan when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise; or

(b)    any Obligor shall fail to pay any Obligation (other than an amount
referred to in Section 10.01(a)) when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of five
(5) Business Days; or

(c)    any representation or warranty made by or on behalf of Borrower or any of
its Subsidiaries in or in connection with this Agreement or any other Loan
Document or any amendment or modification hereof or thereof, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any other Loan Document or any amendment or
modification hereof or thereof, shall: (i) prove to have been incorrect when
made or deemed made to the extent that such representation or warranty contains
any materiality or Material Adverse Effect qualifier; or (ii) prove to have been
incorrect in any material respect when made or deemed made to the extent that
such representation or warranty does not otherwise contain any materiality or
Material Adverse Effect qualifier; or

 

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(d)    any Obligor shall fail to observe or perform any covenant, condition or
agreement contained in Section 8.02, 8.03(a) (with respect to such Obligor’s
existence), 8.10, 8.11, 8.13, 8.14, 8.15, 8.16 or 9; or

(e)    any Obligor shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in
Section 10.01(a), (b) or (d)) or any other Loan Document, and, in the case of
any failure that is capable of cure, if such failure shall continue unremedied
for a period of 30 or more days; or

(f)    any Obligor shall fail to make any payment of principal or interest
(regardless of amount) in respect of any Material Indebtedness, when and as the
same shall become due and payable after giving effect to any applicable grace or
cure period as originally provided by the terms of such Indebtedness; or

(g)    [reserved]; or

(h)    (i) any material breach of, or “event of default” or similar event under,
the documentation governing any Material Indebtedness shall occur and such
breach or “event of default” or similar event shall continue unremedied, uncured
or unwaived after a period of five (5) Business Days after the expiration of any
grace or cure period thereunder, or (ii) any event or condition occurs (A) that
results in any Material Indebtedness becoming due prior to its scheduled
maturity or (B) that enables or permits (with or without the giving of notice,
the lapse of time or both) the holder or holders of such Material Indebtedness
or any trustee or agent on its or their behalf to cause such Material
Indebtedness to become due, or to require the prepayment, repurchase, redemption
or defeasance thereof, prior to its scheduled maturity; provided that this
Section 10.01(h) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the Property securing such Material
Indebtedness; or

(i)    any Obligor:

(i)    becomes insolvent, or generally does not or becomes unable to pay its
debts or meet its liabilities as the same become due, or admits in writing its
inability to pay its debts generally, or declares any general moratorium on its
indebtedness, or proposes a compromise or arrangement or deed of company
arrangement between it and any class of its creditors;

(ii)    commits an act of bankruptcy or makes an assignment of its Property for
the general benefit of its creditors or makes a proposal (or files a notice of
its intention to do so);

(iii)    institutes any proceeding seeking to adjudicate it an insolvent, or
seeking liquidation, dissolution, winding-up, reorganization, compromise,
arrangement, adjustment, protection, moratorium, relief, stay of proceedings of
creditors generally (or

 

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any class of creditors), or composition of it or its debts or any other relief,
under any federal, provincial or foreign Law now or hereafter in effect relating
to bankruptcy, winding-up, insolvency, reorganization, receivership, plans of
arrangement or relief or protection of debtors or at common law or in equity, or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding;

(iv)    applies for the appointment of, or the taking of possession by, a
receiver, interim receiver, receiver/manager, sequestrator, conservator,
custodian, administrator, trustee, liquidator, voluntary administrator, receiver
and manager or other similar official for it or any substantial part of its
Property; or

(v)    takes any action, corporate or otherwise, to approve, effect, consent to
or authorize any of the actions described in this Section 10.01(i) or
Section 10.01(j), or otherwise acts in furtherance thereof or fails to act in a
timely and appropriate manner in defense thereof; or

(j)    any petition is filed, application made or other proceeding instituted
against or in respect of any Obligor or any Subsidiary thereof:

(i)    seeking to adjudicate it as insolvent;

(ii)    seeking a receiving order against it;

(iii)    seeking liquidation, dissolution, winding-up, reorganization,
compromise, arrangement, adjustment, protection, moratorium, relief, stay of
proceedings of creditors generally (or any class of creditors), deed of company
arrangement or composition of it or its debts or any other relief under any
federal, provincial or foreign law now or hereafter in effect relating to
bankruptcy, winding-up, insolvency, reorganization, receivership, plans of
arrangement or relief or protection of debtors or at common law or in equity; or

(iv)    seeking the entry of an order for relief or the appointment of, or the
taking of possession by, a receiver, interim receiver, receiver/manager,
sequestrator, conservator, custodian, administrator, trustee, liquidator,
voluntary administrator, receiver and manager or other similar official for it
or any substantial part of its Property, and such petition, application or
proceeding continues undismissed, or unstayed and in effect, for a period of 60
days after the institution thereof; provided that if an order, decree or
judgment is granted or entered (whether or not entered or subject to appeal)
against any Obligor or such Subsidiary thereunder in the interim, such grace
period will cease to apply; provided, further, that if any Obligor or such
Subsidiary files an answer admitting the material allegations of a petition
filed against it in any such proceeding, such grace period will cease to apply;
or

(k)    one or more judgments for the payment of money in an aggregate amount in
excess of $1,000,000 (excluding any amounts covered by insurance as to which the
applicable carrier has not denied) shall be rendered against any Obligor or any
combination thereof and

 

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the same shall remain undischarged for a period of 60 consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of any Obligor to
enforce any such judgment; or

(l)    an ERISA Event shall have occurred that, in the opinion of the Lenders,
when taken together with all other ERISA Events that have occurred, would
reasonably be expected to result in a Material Adverse Effect; or

(m)    a Change of Control shall have occurred; or

(n)    any event of circumstance occurs that results in a Material Adverse
Change; or

(o)    (i) any Lien created by any of the Security Documents shall at any time
not constitute a valid and perfected Lien on the applicable Collateral (to the
extent perfection by filing, registration, recordation or possession is required
herein or therein) in favor of the Lenders, free and clear of all other Liens
(other than Permitted Liens) except due to the action or inaction of the
Lenders, (ii) except for expiration in accordance with its terms, the Security
Documents or any Guarantee of any of the Obligations shall for whatever reason
cease to be in full force and effect, or (iii) any of the Security Documents or
any Guarantee of any of the Obligations, or the enforceability thereof, shall be
repudiated or contested by any Obligor; or

(p)    any injunction, whether temporary or permanent, shall be rendered against
any Obligor that prevents the Obligors from selling or manufacturing the Product
or its commercially available successors, or any of their other material and
commercially available products in the United States for more than 45
consecutive calendar days that results in a Material Adverse Effect; or

(q)    any Obligor or Subsidiary thereof enters into a settlement agreement with
the FDA or any other Governmental Authority that, as to any single or related
series of transactions, incidents or conditions, results in a Material Adverse
Effect.

Section 10.02.    Remedies.

(a)    Upon the occurrence of any Event of Default, then, and in every such
event (other than an Event of Default described in Section 10.01 (i) or (j)),
and at any time thereafter during the continuance of such event, the Majority
Lenders may, by notice to Borrower, take either or both of the following
actions, at the same or different times: (i) terminate the Commitments, and
thereupon the Commitments shall terminate immediately, and (ii) declare the
Loans then outstanding to be due and payable in whole (or in part, in which case
any principal not so declared to be due and payable may thereafter be declared
to be due and payable), and thereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and all fees and
other Obligations, shall become due and payable immediately (in the case of the
Loans, at the Redemption Price therefor), without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by each Obligor.

 

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(b)    Upon the occurrence of any Event of Default described in Section 10.01(i)
or (j), the Commitments shall automatically terminate and the principal amount
of the Loans then outstanding, together with accrued interest thereon and all
fees and other Obligations, shall automatically become due and payable
immediately (in the case of the Loans, at the Redemption Price therefor),
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Obligor.

(c)    If any Lender collects any money or property pursuant to this Article 10,
they shall pay out the money or property in the order set forth in
Section 4.01(b)(ii).

Section 10.03.    Exit Fee, Prepayment Premium and Redemption Price

For the avoidance of doubt, but subject to the limitations contained in
Section 3.03, the Exit Fee and the Prepayment Premium (as a component of the
Redemption Price) shall be due and payable at any time the Loans become due and
payable prior to the Stated Maturity Date in accordance with the terms hereof,
whether due to acceleration pursuant to the terms of this Agreement (in which
case it shall be due immediately, upon the giving of notice to Borrower in
accordance with Section 10.02(a), or automatically, in accordance with
Section 10.02(b)), by operation of law or otherwise (including, without
limitation, on account of any bankruptcy filing). In view of the
impracticability and extreme difficulty of ascertaining the actual amount of
damages to the Lenders or profits lost by the Lenders as a result of such
acceleration, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of the Lenders, the
Exit Fee and the Prepayment Premium shall be due and payable upon such date.
Each Obligor hereby waives any defense to payment, whether such defense may be
based in public policy, ambiguity, or otherwise. The Obligors and the Lenders
acknowledge and agree that neither the Exit Fee nor any Prepayment Premium due
and payable in accordance with this Agreement shall not constitute unmatured
interest, whether under Section 5.02(b)(3) of the Bankruptcy Code or otherwise.
Each Obligor further acknowledges and agrees, and waives any argument to the
contrary, that payment of such amount does not constitute a penalty or an
otherwise unenforceable or invalid obligation.

ARTICLE 11.

GUARANTEE

Section 11.01.    The Guarantee

Until the Commitments have expired or been terminated and all Obligations (other
than Warrant Obligations and contingent indemnification obligations as to which
no unsatisfied claim has been asserted) have been paid in full in cash, the
Guarantors hereby jointly and severally guarantee to each Lender, and its
successors and assigns, the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest on the
Loans, all fees and other amounts and Obligations from time to time owing to any
Lender by Borrower under this Agreement or under any other Loan Document and by
any other Obligor under any of the Loan Documents, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the “Guaranteed

 

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Obligations”). The Guarantors hereby further jointly and severally agree that if
Borrower shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors
will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.

Section 11.02.    Obligations Unconditional

The obligations of the Guarantors under Section 11.01 are absolute and
unconditional, joint and several, irrespective of the value, genuineness,
validity, regularity or enforceability of the obligations of Borrower under this
Agreement or any other agreement or instrument referred to herein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable Law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
Guarantor, it being the intent of this Section 11.02 that the obligations of the
Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder, which shall
remain absolute and unconditional as described above:

(a)    at any time or from time to time, without notice to the Guarantors, the
time for any performance of or compliance with any of the Guaranteed Obligations
shall be extended, or such performance or compliance shall be waived;

(b)    any of the acts mentioned in any of the provisions of this Agreement or
any other agreement or instrument referred to herein shall be done or omitted;

(c)    the maturity of any of the Guaranteed Obligations shall be accelerated,
or any of the Guaranteed Obligations shall be modified, supplemented or amended
in any respect, or any right under this Agreement or any other agreement or
instrument referred to herein shall be waived or any other guarantee of any of
the Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or

(d)    any lien or security interest granted to, or in favor of, any Lender as
security for any of the Guaranteed Obligations shall fail to be perfected.

The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that any Lender exhaust
any right, power or remedy or proceed against Borrower under this Agreement or
any other agreement or instrument referred to herein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.

 

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Section 11.03.    Reinstatement

The obligations of the Guarantors under this Section 11 shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of Borrower in respect of the Guaranteed Obligations is rescinded or must be
otherwise restored by any holder of any of the Guaranteed Obligations, whether
as a result of any proceedings in bankruptcy or reorganization or otherwise, and
the Guarantors jointly and severally agree that they will indemnify each Lender
on demand for all reasonable costs and expenses (including fees of counsel)
incurred by such Persons in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.

Section 11.04.    Subrogation

The Guarantors hereby jointly and severally agree that, until the payment and
satisfaction in full of all Guaranteed Obligations (other than Warrant
Obligations) and the expiration and termination of the Commitments, they shall
not exercise any right or remedy arising by reason of any performance by them of
their guarantee in Section 11.01, whether by subrogation or otherwise, against
Borrower or any other guarantor of any of the Guaranteed Obligations or any
security for any of the Guaranteed Obligations.

Section 11.05.    Remedies

The Guarantors jointly and severally agree that, as between the Guarantors, on
one hand, and the Lenders, on the other hand, the obligations of Borrower under
this Agreement and under the other Loan Documents may be declared to be
forthwith due and payable as provided in Section 10 (and shall be deemed to have
become automatically due and payable in the circumstances provided in
Section 10) for purposes of Section 11.01 notwithstanding any stay, injunction
or other prohibition preventing such declaration (or such obligations from
becoming automatically due and payable) as against Borrower and that, in the
event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by Borrower) shall forthwith become due and payable by the Guarantors for
purposes of Section 11.01.

Section 11.06.    Instrument for the Payment of Money

Each Guarantor hereby acknowledges that the guarantee in this Section 11
constitutes an instrument for the payment of money, and consents and agrees that
each Lender, at its sole option, in the event of a dispute by such Guarantor in
the payment of any moneys due hereunder, shall have the right to proceed by
motion for summary judgment in lieu of complaint pursuant to N.Y. Civ. Prac. L&R
§ 3213.

Section 11.07.    Continuing Guarantee

The guarantee in this Section 11 is a continuing guarantee, and shall apply to
all Guaranteed Obligations (other than Warrant Obligations) whenever arising.

 

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Section 11.08.    Rights of Contribution

The Guarantors hereby agree, as between themselves, that if any Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the payment
by such Guarantor of any Guaranteed Obligations, each other Guarantor shall, on
demand of such Excess Funding Guarantor (but subject to the next sentence), pay
to such Excess Funding Guarantor an amount equal to such Guarantor’s Pro Rata
Share (as defined below and determined, for this purpose, without reference to
the properties, debts and liabilities of such Excess Funding Guarantor) of the
Excess Payment (as defined below) in respect of such Guaranteed Obligations. The
payment obligation of a Guarantor to any Excess Funding Guarantor under this
Section 11.08 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Guarantor under the other provisions
of this Section 11 and such Excess Funding Guarantor shall not exercise any
right or remedy with respect to such excess until payment and satisfaction in
full of all of such obligations.

For purposes of this Section 11.08, (i) “Excess Funding Guarantor” means, in
respect of any Guaranteed Obligations, a Guarantor that has paid an amount in
excess of its Pro Rata Share of such Guaranteed Obligations, (ii) “Excess
Payment” means, in respect of any Guaranteed Obligations, the amount paid by an
Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed
Obligations and (iii) “Pro Rata Share” means, for any Guarantor, the ratio
(expressed as a percentage) of (x) the amount by which the aggregate present
fair saleable value of all properties of such Guarantor (excluding any shares of
stock of any other Guarantor) exceeds the amount of all the debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder and any obligations of any other Guarantor that have been Guaranteed
by such Guarantor) to (y) the amount by which the aggregate fair saleable value
of all properties of all of the Guarantors exceeds the amount of all the debts
and liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding the obligations of Borrower and the Guarantors
hereunder and under the other Loan Documents) of all of the Guarantors,
determined (A) with respect to any Guarantor that is a party hereto on the
Closing Date, as of such date, and (B) with respect to any other Guarantor, as
of the date such Guarantor becomes a Guarantor hereunder.

Section 11.09.    General Limitation on Guarantee Obligations

In any action or proceeding involving any provincial, territorial or state
corporate law, or any state or federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of any
Guarantor under Section 11.01 would otherwise, taking into account the
provisions of Section 11.08, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 11.01, then, notwithstanding any
other provision hereof to the contrary, the amount of such liability shall,
without any further action by such Guarantor, the Lenders or any other Person,
be automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

 

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ARTICLE 12.

RESERVED

ARTICLE 13.

MISCELLANEOUS

Section 13.01.    No Waiver

No failure on the part of the Lenders to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power or privilege under
any Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

Section 13.02.    Notices

All notices, requests, instructions, directions and other communications
provided for herein (including any modifications of, or waivers, requests or
consents under, this Agreement) shall be given or made in writing (including by
telecopy or electronic mail) delivered, if to Borrower, another Obligor or the
Lenders, to its address specified on the signature pages hereto or its Guarantee
Assumption Agreement, as the case may be, or at such other address as shall be
designated by such party in a notice to the other parties. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given upon receipt of a legible copy thereof, in each case given or
addressed as aforesaid. All such communications provided for herein by telecopy
or electronic mail shall be confirmed in writing promptly after the delivery of
such communication (it being understood that non-receipt of written confirmation
of such communication shall not invalidate such communication). Notwithstanding
anything to the contrary in this Agreement, notices, documents, certificates and
other deliverables to the Lenders by any Obligor may be made solely to the
Control Agent and the Control Agent shall promptly deliver such notices,
documents, certificates and other deliverables to the other Lenders.

Section 13.03.    Expenses, Indemnification, Etc.

(a)    Expenses. Borrower agrees to pay or reimburse (i) the Lenders for all of
their reasonable and documented out of pocket costs and expenses (including the
reasonable and documented out of pocket fees and expenses of Chapman and Cutler
LLP, counsel to the Lenders (provided, that, unless an Event of Default has
occurred and is continuing, limited to one legal counsel for the Lenders, taken
as a whole), and any sales, goods and services or other similar Taxes applicable
thereto, and reasonable and documented printing, reproduction, document
delivery, communication and travel costs) in connection with (x) the
negotiation, preparation, execution and delivery of this Agreement and the other
Loan Documents and the making of the Loans; and (y) the negotiation or
preparation of any modification, supplement or

 

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waiver of any of the terms of this Agreement or any of the other Loan Documents
(whether or not consummated) and (ii) the Lenders for all of their documented
out of pocket costs and expenses (including fees and expenses of legal counsel
for the Lenders) in connection with any enforcement or collection proceedings
resulting from the occurrence of an Event of Default.

(b)    Indemnification. Borrower hereby indemnifies the Lenders, their
Affiliates, and their respective directors, officers, employees, attorneys,
agents, advisors and controlling parties (each, an “Indemnified Party”) from and
against, and agrees to hold them harmless against, any and all Claims and Losses
of any kind (including reasonable and documented out of pocket fees and
disbursements of counsel for the Lenders (unless an Event of Default has
occurred and is continuing, limited to one legal counsel for the Lenders, taken
as a whole)), joint or several, that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or relating to any investigation, litigation or proceeding or the preparation of
any defense with respect thereto arising out of or in connection with or
relating to this Agreement or any of the other Loan Documents or the
transactions contemplated hereby or thereby or any use made or proposed to be
made with the proceeds of the Loans, whether or not such investigation,
litigation or proceeding is brought by Borrower, any of its shareholders or
creditors, an Indemnified Party or any other Person, or an Indemnified Party is
otherwise a party thereto, and whether or not any of the conditions precedent
set forth in Section 6 are satisfied or the other transactions contemplated by
this Agreement are consummated, except to the extent such Claim or Loss is found
in a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party’s gross negligence or willful misconduct.
No Obligor shall assert any claim against any Indemnified Party, on any theory
of liability, for consequential, indirect, special or punitive damages arising
out of or otherwise relating to this Agreement or any of the other Loan
Documents or any of the transactions contemplated hereby or thereby or the
actual or proposed use of the proceeds of the Loans. Borrower, Borrower’s
Subsidiaries and all Affiliates of the foregoing and their respective directors,
officers, employees, attorneys, agents, advisors and controlling parties are
each sometimes referred to in this Agreement as a “Borrower Party.” No Lender
shall assert any claim against any Borrower Party, on any theory of liability,
for consequential, indirect, special or punitive damages arising out of or
otherwise relating to this Agreement or any of the other Loan Documents or any
of the transactions contemplated hereby or thereby or the actual or proposed use
of the proceeds of the Loans. This Section shall not apply to Taxes other than
Taxes relating to a non-Tax Claim or Loss governed by this Section 13.03(b).

Section 13.04.    Amendments, Etc.

Except as otherwise expressly provided in this Agreement, any provision of this
Agreement or any other Loan Document (except for the Warrant Certificates, which
may be amended, modified, waived or supplemented in accordance with the terms
thereof) may be amended, modified, waived or supplemented only by an instrument
in writing signed by Borrower and the Majority Lenders; provided that:

(a)    no amendment, waiver or consent shall, unless in writing and signed by
all of the Lenders, do any of the following at any time:

(i)    change the number of Lenders or the percentage of (x) the Commitments or
(y) the aggregate unpaid principal amount of Loans that, in each case, shall be
required for the Lenders or any of them to take any action hereunder (including
pursuant to any change to the definition of “Majority Lenders”);

 

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(ii)    release one or more Guarantors (or otherwise limit such Guarantors’
liability with respect to the Obligations owing to the Lenders under the
Guarantees) if such release or limitation is in respect of all or substantially
all of the value represented by the Guaranties to the Lenders;

(iii)    release, or subordinate the Lenders’ Liens in, all or substantially all
of the Collateral in any transaction or series of related transactions (other
than in connection with any sale of Collateral permitted herein); or

(iv)    amend any provision of this Section 13.04;

(b)    no amendment, waiver or consent shall, unless in writing and signed by
each Lender specified below for such amendment, waiver or consent:

(i)    increase the Commitments of a Lender without the consent of such Lender;

(ii)    reduce the principal of, or stated rate of interest on, or stated
Prepayment Premium payable on, the Loans owed to a Lender or any fees or other
amounts stated to be payable hereunder or under the other Loan Documents to such
Lender without the consent of such Lender;

(iii)    postpone any date scheduled for any payment of principal of, or
interest on, the Loans, any date scheduled for payment or for any date fixed for
any payment of fees hereunder in each case payable to a Lender without the
consent of such Lender;

(iv)    change the order of application of prepayment of Loans from the
application thereof set forth in the applicable provisions of
Section 4.01(b)(ii) in any manner that adversely affects the Lenders without the
consent of holders of a majority of the Commitments or Loans outstanding or
otherwise change any provision requiring the pro rata distributions hereunder
among the Lenders without all Lenders’ consent; or

(v)    modify Section 2.02 without the consent of each Lender directly and
adversely affected thereby.

Section 13.05.    Successors and Assigns.

(a)    General. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that no Obligor may, unless otherwise permitted by Section 9.03, assign
or transfer its rights or obligations hereunder or under any other Loan Document
to which it is a party without the consent of the Lenders.

 

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(b)    Amendments to Loan Documents; Majority Lender Vote. Each of the Lenders
and the Obligors agrees to enter into such amendments to the Loan Documents, and
such additional Security Documents and other instruments and agreements, in each
case in form and substance reasonably acceptable to the Lenders and the
Obligors, as shall reasonably be necessary to implement and give effect to any
assignment made by any Lender (or any direct or indirect assignee thereof) from
time to time under this Section 13.05; provided that, so long as no Event of
Default has occurred and is continuing at the time of any such assignment, each
Lender agrees to provide three (3) Business Days’ prior written notice of such
assignment to Borrower.

(c)    Register. In the event of any assignment pursuant to this Section 13.05,
each Lender, acting solely for this purpose as an agent of Borrower, shall
maintain at one of its offices a register for the recordation of the name and
address of any assignee of any Lender and the Commitment and outstanding
principal amount (and stated interest) of the Loans owing thereto (the
“Register”). The entries in the Register shall be conclusive, absent manifest
error, and Borrower shall treat each Person whose name is recorded in the
Register pursuant to the terms hereof as the “Lender” hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by Borrower, at any reasonable time and from time to
time upon reasonable prior notice. Notwithstanding anything herein to the
contrary, any assignment of the Loans shall be effective only upon appropriate
entries with respect thereto being made in the Register.

(d)    Participations and Other Exposure Transfers. Any of Lenders may at any
time, without the consent of, or notice to, Borrower, sell participations or to
otherwise transfer its Loan Exposure to any Person (other than a natural person
or Borrower or any of Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations
under this Agreement (including all or a portion of the Commitment and/or the
Loans owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) Borrower shall continue to deal solely and directly with Lenders in
connection therewith.

(e)    Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver that would (i) increase or extend the
term of such Lender’s Commitment, (ii) extend the date fixed for the payment of
principal of or interest on the Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, or (iv) reduce the rate at which interest is payable thereon to a
level below the rate at which the Participant is entitled to receive such
interest. Borrower agrees that each Participant shall be entitled to the
benefits of Section 5.03 (subject to the requirements and limitations therein,
including the requirements

 

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under Section 5.03(e) (it being understood that the documentation required under
Section 5.03(e) shall be delivered to Borrower and the participating Lender)) to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 13.05(a), provided that such Participant
(A) agrees to be subject to the provisions of Section 5.03(g) as if it were an
assignee under Section 13.05(a); and (B) shall not be entitled to receive any
greater payment under Section 5.03, with respect to any participation, than its
participating Lender would have been entitled to receive, unless the sale of the
participation to such Participant is made with Borrower’s prior written consent.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 4.04(a) as though it were a Lender. Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of
Borrower, maintain a register on which it enters the name and address of each
Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan
Documents (the “Participant Register”); provided that no Lender shall have any
obligation to disclose all or any portion of the Participant Register (including
the identity of any Participant or any information relating to a Participant’s
interest in any commitments, loans, letters of credit or its other obligations
under any Loan Document) to any Person except to the extent that such disclosure
is necessary to establish that such commitment, loan, letter of credit or other
obligation is in registered form under Section 5f.103-1(c) of the United States
Treasury Regulations. The entries in the Participant Register shall be
conclusive absent manifest error, and such Lender shall treat each Person whose
name is recorded in the Participant Register as the owner of such participation
for all purposes of this Agreement notwithstanding any notice to the contrary.

(f)    Certain Pledges. Subject to Section 13.05(d), the Lenders may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement and any other Loan Document to secure obligations of the Lenders,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank or another central bank; provided that no such pledge or assignment shall
release the Lenders from any of their obligations hereunder or substitute any
such pledgee or assignee for the Lenders as a party hereto.

Section 13.06.    Survival

The obligations of Borrower under Sections 5.01, 5.02, 5.03, 13.03, 13.05,
13.09, 13.10, 13.11, 13.12, 13.13, 13.14 and Section 11 (solely to the extent
guaranteeing any of the obligations under the foregoing Sections) shall survive
the repayment of the Obligations and the termination of the Commitment and, in
the case of any Lender’s assignment of any interest in the Commitment or the
Loans hereunder, shall survive, in the case of any event or circumstance that
occurred prior to the effective date of such assignment, the making of such
assignment, notwithstanding that such Lenders may cease to be a “Lender”
hereunder. In addition, each representation and warranty made, or deemed to be
made by a notice of the Loans, herein or pursuant hereto shall survive the
making of such representation and warranty.

 

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Section 13.07.    Captions

The table of contents and captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

Section 13.08.    Counterparts

This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such counterpart.

Section 13.09.    GOVERNING LAW

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER, AND ALL CLAIMS, DISPUTES AND MATTERS ARISING
HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE, WITHOUT
REFERENCE TO CONFLICTS OF LAWS PROVISIONS.

Section 13.10.    JURISDICTION, SERVICE OF PROCESS AND VENUE.

(a)    SUBMISSION TO JURISDICTION. EACH PARTY HERETO AGREES THAT ANY SUIT,
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
TO WHICH IT IS A PARTY OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF
MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK
COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF EACH SUCH COURT
FOR THE PURPOSE OF ANY SUCH SUIT, ACTION, PROCEEDING OR JUDGMENT.

(b)    Alternative Process. Nothing herein shall in any way be deemed to limit
the ability of the Lenders to serve any such process or summonses in any other
manner permitted by applicable Law.

(c)    WAIVER OF VENUE, ETC. EACH PARTY HERETO IRREVOCABLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY LAW ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND HEREBY FURTHER IRREVOCABLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. A FINAL JUDGMENT (IN RESPECT OF WHICH TIME FOR ALL APPEALS
HAS ELAPSED) IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY
BE ENFORCED IN ANY COURT TO THE JURISDICTION OF WHICH SUCH PARTY IS OR MAY BE
SUBJECT, BY SUIT UPON JUDGMENT.

 

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Section 13.11.    WAIVER OF JURY TRIAL

EACH OBLIGOR AND EACH LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 13.12.    WAIVER OF IMMUNITY

TO THE EXTENT THAT ANY OBLIGOR MAY BE OR BECOME ENTITLED TO CLAIM FOR ITSELF OR
ITS PROPERTY OR REVENUES ANY IMMUNITY ON THE GROUND OF SOVEREIGNTY OR THE LIKE
FROM SUIT, COURT JURISDICTION, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION OF A JUDGMENT OR EXECUTION OF A JUDGMENT, AND TO THE EXTENT THAT IN
ANY SUCH JURISDICTION THERE MAY BE ATTRIBUTED SUCH AN IMMUNITY (WHETHER OR NOT
CLAIMED), SUCH OBLIGOR HEREBY IRREVOCABLY AGREES NOT TO CLAIM AND HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

Section 13.13.    Entire Agreement

This Agreement and the other Loan Documents constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Each Obligor acknowledges, represents and
warrants that in deciding to enter into this Agreement and the other Loan
Documents or in taking or not taking any action hereunder or thereunder, it has
not relied, and will not rely, on any statement, representation, warranty,
covenant, Agreement or understanding, whether written or oral, of or with the
Lenders other than those expressly set forth in this Agreement and the other
Loan Documents.

Section 13.14.    Severability

If any provision hereof is found by a court to be invalid or unenforceable, to
the fullest extent permitted by applicable Law the parties agree that such
invalidity or unenforceability shall not impair the validity or enforceability
of any other provision hereof.

Section 13.15.    No Fiduciary Relationship

Borrower acknowledges that the Lenders have no fiduciary relationship with, or
fiduciary duty to, Borrower arising out of or in connection with this Agreement
or the other Loan Documents, and the relationship between the Lenders and
Borrower is solely that of creditor and debtor. This Agreement and the other
Loan Documents do not create a joint venture among the parties.

 

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Section 13.16.    USA PATRIOT Act

The Lenders hereby notify Borrower that pursuant to the requirements of the USA
PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), they are required to obtain, verify and record information that
identifies Borrower, which information includes the name and address of Borrower
and other information that will allow such Lender to identify Borrower in
accordance with the Act.

Section 13.17.    Treatment of Certain Information; Confidentiality

The Lenders agree to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed to (a) its Affiliates and to
its and its Affiliates’ respective partners, directors, officers, employees,
agents, trustees, advisors and representatives (collectively, “Representatives”)
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any self-regulatory
authority, such as FINRA or the National Association of Insurance Commissioners)
or any exchange, (c) to the extent required by the applicable Laws or by any
subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other
Loan Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those in this
Section, to (i) any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to Borrower or any Guarantor and its obligation,
(g) with the consent of Borrower or (h) to the extent such Information
(x) becomes publicly available other than as a result of a breach of this
Section or (y) becomes available to the Lender, or any of its respective
Representatives on a nonconfidential basis from a source other than Borrower.
For purposes of this Section, “Information” means all information received from
Borrower or its Subsidiary relating to Borrower or its Subsidiary or any of
their respective businesses, except that the term “Information” shall not
include, and the Lenders shall not be subject to any confidentiality obligation
with respect to any information that (i) is or becomes available to the Lender
or any of its Representatives on a nonconfidential basis prior to disclosure by
Borrower or its Subsidiary, (ii) becomes available to a Lender or any of its
Representatives after disclosure by Borrower from a source that, to the
knowledge of such Lender, is not subject to a confidentiality obligation to
Borrower (iii) is or becomes publicly available other than as a result of a
breach by such Lender, or (iv) is developed by a Lender or any of its
Representatives. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.

 

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In the case of any Lender that has elected to receive material non-public
information pursuant to Section 8.01, such Lender acknowledges that (a) the
Information may include material non-public information concerning Borrower or
its Subsidiary, as the case may be, (b) it has developed compliance procedures
regarding the use of material non-public information and (c) it will handle such
material non-public information in accordance with applicable Law, including
United States federal and state securities Laws.

Section 13.18.    Releases of Guarantees and Liens.

(a)    Notwithstanding anything to the contrary contained herein or in any other
Loan Document, each Lender agrees, and the Control Agent is hereby irrevocably
authorized by each Lender and given a limited power of attorney by each lender
to perform the actions described hereafter in this Section 13.18 (without
requirement of notice to or consent of any Lender except as expressly required
by Section 13.04) to take any action reasonably requested by Borrower having the
effect of releasing any Collateral or Obligations (i) to the extent necessary to
permit consummation of any transaction not prohibited by any Loan Document or
that has been consented to by the Lenders or (ii) under the circumstances
described in paragraph (b) below.

(b)    At such time as the Loans and the other Obligations (other than Warrant
Obligations and contingent indemnification obligations as to which no
unsatisfied claim has been asserted) under the Loan Documents shall have been
paid in full and the Commitments have been terminated, the Collateral shall be
released from the Liens created by the Security Documents, and the Security
Documents and all obligations (other than those expressly stated to survive such
termination) of the Control Agent and each Obligor under the Security Documents
shall terminate, all without delivery of any instrument or performance of any
act by any Person.

[Signature Pages Follow]

 

-83-

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

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

 

BORROWER: MOLECULAR TEMPLATES OPCO, INC. By  

/s/ Eric E. Poma

  Name: Eric E. Poma   Title: Chief Executive Officer GUARANTOR: MOLECULAR
TEMPLATES, INC. By  

/s/ Eric E. Poma

  Name: Eric E. Poma   Title: Chief Executive Officer Address for Notices:

Molecular Templates, Inc.

9301 Amberglen Boulevard, Suite 100

Austin, TX Attn: Jason Kim, President and CFO Tel.: Email: with a copy to:
Mintz, Levin, Cohn, Ferris,

Glovsky and Popeo, P.C.

666 Third Avenue

New York, NY 10017 Attn: Joseph Price Tel.: (212) 692-6785 Email:
JWPrice@mintz.com

 

[Signature Page to Credit Agreement and Guaranty]

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

LENDERS: PERCEPTIVE CREDIT HOLDINGS II, LP By:  

Perceptive Credit Opportunities GP, LLC,

its general partner

By:  

/s/ Sandeep Dixit

  Name: Sandeep Dixit   Title: Authorized Officer

By:

 

/s/ Sam Chawla

  Name: Sam Chawla   Title: Authorized Officer Address for Notices:

Perceptive Credit Holdings II, LP

c/o Perceptive Advisors LLC

51 Astor Place

10th Floor

New York, New York 10003 Attention: Sandeep Dixit E-mail: with a copy to:

Chapman and Cutler LLP

1270 Avenue of the Americas

30th Floor

New York, New York 10020-1708 Attention: Nicholas Whitney E-mail:
Whitney@chapman.com

 

[Signature Page to Credit Agreement and Guaranty]

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

SCHEDULE 1

TO

CREDIT AGREEMENT

TRANCHE A TERM LOAN COMMITMENTS

 

LENDER    TRANCHE TERM LOAN A COMMITMENT  

PERCEPTIVE CREDIT HOLDINGS II, LP

   $ 5,000,000  

TOTAL

   $ 5,000,000  

TRANCHE B TERM LOAN COMMITMENTS

 

LENDER    TRANCHE TERM LOAN B COMMITMENT  

PERCEPTIVE CREDIT HOLDINGS II, LP

   $ 5,000,000  

TOTAL

   $ 5,000,000  

WARRANT SHARES

 

LENDER    NUMBER OF WARRANT SHARES  

PERCEPTIVE CREDIT HOLDINGS II, LP

     190,000  

TOTAL

     190,000  

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

Exhibit A

to Credit Agreement

FORM OF GUARANTEE ASSUMPTION AGREEMENT

GUARANTEE ASSUMPTION AGREEMENT dated as of [DATE] (this “Agreement”) by [NAME OF
ADDITIONAL GUARANTOR], a                      [corporation] (the “Additional
Guarantor”), under that certain Credit Agreement and Guaranty, dated as of
February 27, 2018 (as from time to time amended, restated, amended and restated,
supplemented or otherwise modified, the “Credit Agreement”), among MOLECULAR
TEMPLATES OPCO, INC., a Delaware corporation (“Borrower”), MOLECULAR TEMPLATES,
INC., a Delaware corporation, as a guarantor, PERCEPTIVE CREDIT HOLDINGS II, LP,
a Delaware limited partnership (“Perceptive”), as a lender (together with its
successors and assigns party thereto, the “Lenders” and each a “Lender”). The
terms defined in the Credit Agreement are herein used as therein defined.

Pursuant to Section 8.11(a) of the Credit Agreement, the Additional Guarantor
hereby agrees to become a “Guarantor” for all purposes of the Credit Agreement,
and a “Grantor” for all purposes of the Security Agreement. Without limiting the
foregoing, the Additional Guarantor hereby, jointly and severally with the other
Guarantors, guarantees to each Lender and its successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of all Guaranteed Obligations (as defined in Section 11.01 of the
Credit Agreement) in the same manner and to the same extent as is provided in
Section 11 of the Credit Agreement. In addition, as of the date hereof, the
Additional Guarantor hereby makes the representations and warranties set forth
in Section 7 of the Credit Agreement, and in Section 2 of the Security
Agreement, with respect to itself and its obligations under this Agreement and
the other Loan Documents, to the extent applicable, as if each reference in such
Sections to the Loan Documents included reference to this Agreement, such
representations and warranties to be made as of the date hereof.

THIS GUARANTEE AND ASSUMPTION AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS THAT
WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION; PROVIDED,
THAT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY.

[signature to follow]

 

Exhibit A-1

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

IN WITNESS WHEREOF, the Additional Guarantor has caused this Guarantee
Assumption Agreement to be duly executed and delivered as of the day and year
first above written.

 

 

[ADDITIONAL GUARANTOR] By:  

 

  Name:   Title:

 

Exhibit A-2

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

Exhibit B

to Credit Agreement

[RESERVED]

 

Exhibit B-1

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

Exhibit C

to Credit Agreement

FORM OF NOTE

 

U.S. $[                    ]    [DATE]

FOR VALUE RECEIVED, the undersigned, MOLECULAR TEMPLATES OPCO, INC., a Delaware
corporation (“Borrower”), hereby promises to pay to [INSERT NAME OF LENDER] or
its assigns (the “Lender”) at Lender’s principal office in
[                    ], in immediately available funds, the aggregate principal
sum set forth above, or, if less, the aggregate unpaid principal amount of the
Loans made by Lender pursuant to Section 2.01 of the Credit Agreement and
Guaranty, dated as of February 27, 2018 (as from time to time amended, restated,
amended and restated, supplemented or otherwise modified, the “Credit
Agreement”), among Borrower, MOLECULAR TEMPLATES, INC., a Delaware corporation,
as a guarantor, PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware limited
partnership (“Perceptive”), as a lender (together with its successors and
assigns party thereto, the “Lenders” and each a “Lender”), on the date or dates
specified in the Credit Agreement, together with interest on the principal
amount of the Loans from time to time outstanding thereunder at the rates, and
payable in the manner and on the dates, specified in the Credit Agreement.

This Note is a Note issued pursuant to the terms of Section 2.04 of the Credit
Agreement, and this Note and the holder hereof are entitled to all the benefits
and security provided for thereby or referred to therein, to which Credit
Agreement reference is hereby made for a statement thereof. All defined terms
used in this Note, except terms otherwise defined herein, shall have the same
meaning as in the Credit Agreement.

THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD RESULT IN THE
APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION; PROVIDED THAT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY.

Borrower hereby waives demand, presentment, protest or notice of any kind
hereunder, other than notices provided for in the Loan Documents. The
non-exercise by the holder hereof of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in such particular or
any subsequent instance.

 

Exhibit C-1

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

THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE
CREDIT AGREEMENT.

 

MOLECULAR TEMPLATES OPCO, INC. By:  

                                          

  Name:   Title:

 

Exhibit C-2

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

Exhibit D

to Credit Agreement

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

Reference is made to the Credit Agreement and Guaranty, dated as of February 27,
2018 (as from time to time amended, restated, amended and restated, supplemented
or otherwise modified, the “Credit Agreement”), among MOLECULAR TEMPLATES OPCO,
INC., a Delaware corporation (“Borrower”), MOLECULAR TEMPLATES, INC., a Delaware
corporation, as a guarantor, PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware
limited partnership (“Perceptive”), as a lender (together with its successors
and assigns party thereto, the “Lenders” and each a “Lender”). The terms defined
in the Credit Agreement are herein used as therein defined.

[                    ] (the “Foreign Lender”) is providing this certificate
pursuant to Section 5.03(e)(ii)(B) of the Credit Agreement. The Foreign Lender
hereby represents and warrants that:

1.    The Foreign Lender is the sole record owner of the Loans as well as any
obligations evidenced by any Note(s) in respect of which it is providing this
certificate;

2.    The Foreign Lender’s direct or indirect partners/members are the sole
beneficial owners of the Loans as well as any obligations evidenced by any
Note(s) in respect of which it is providing this certificate;

3.    Neither the Foreign Lender nor its direct or indirect partners/members is
a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of
1986, as amended (the “Code”). In this regard, the Foreign Lender further
represents and warrants that:

(a)    neither the Foreign Lender nor its direct or indirect partners/members is
subject to regulatory or other legal requirements as a bank in any jurisdiction;
and

(b)    neither the Foreign Lender nor its direct or indirect partners/members
has been treated as a bank for purposes of any Tax, securities law or other
filing or submission made to any Governmental Authority, any application made to
a rating agency or qualification for any exemption from Tax, securities law or
other legal requirements;

3.    Neither the Foreign Lender nor its direct or indirect partners/members is
a 10-percent shareholder of Borrower within the meaning of Section 881(c)(3)(B)
of the Code; and

4.    Neither the Foreign Lender nor its direct or indirect partners/members is
a controlled foreign corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Code.

[Signature follows]

 

Exhibit D-1

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

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly
executed and delivered as of the date indicated below.

 

[NAME OF NON-U.S. LENDER] By:  

                                          

  Name:   Title:

Date:                     

 

Exhibit D-2

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

Exhibit E

to Credit Agreement

FORM OF COMPLIANCE CERTIFICATE

[DATE]

This certificate is delivered pursuant to Section 8.01(d) of, and in connection
with the consummation of the transactions contemplated in, the Credit Agreement
and Guaranty, dated as of February 27, 2018 (as from time to time amended,
restated, amended and restated, supplemented or otherwise modified, the “Credit
Agreement”), among MOLECULAR TEMPLATES OPCO, INC., a Delaware corporation
(“Borrower”), MOLECULAR TEMPLATES, INC., a Delaware corporation (“Parent”), as a
guarantor, PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware limited partnership
(“Perceptive”), as a lender (together with its successors and assigns party
thereto, the “Lenders” and each a “Lender”). Capitalized terms used herein and
not otherwise defined herein are used herein as defined in the Credit Agreement.

The undersigned, a duly authorized Responsible Officer of Borrower having the
name and title set forth below under his signature, hereby certifies solely in
his capacity as an officer of Borrower and not in any individual capacity, on
behalf of Borrower for the benefit of the Lenders and pursuant to
Section 8.01(d) of the Credit Agreement that such Responsible Officer of
Borrower is familiar with the Credit Agreement and that, in accordance with each
of the following sections of the Credit Agreement, each of the following is true
on the date hereof, both before and after giving effect to the Loans to be made
on or before the date hereof, to the extent applicable:

In accordance with Section 8.01[(b)/(c)] of the Credit Agreement, Borrower
certifies that Parent has filed with the SEC its consolidated financial
statements for the [fiscal quarter/fiscal year] ended [                    ]
required to be delivered pursuant to Section 8.01[(b)/(c)] of the Credit
Agreement. Such financial statements fairly present in all material respects the
consolidated financial position, results of operations and cash flow of Parent
and its Subsidiaries as at the dates indicated therein and for the periods
indicated therein substantially in accordance with GAAP [(subject to the absence
of footnote disclosure and normal quarterly or year end audit adjustments)]1.

Attached hereto as Annex A are the calculations used to determine compliance
with the financial covenant contained in Section 8.16 of the Credit Agreement.

No Default or Event of Default is continuing as of the date hereof[, except as
provided for on Annex B attached hereto, with respect to each of which Borrower
proposes to take the actions set forth on Annex B].

[Signature follows]

 

 

1  Insert language in brackets only for certificates delivered under Section
8.01(b).

 

Exhibit E-1

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

IN WITNESS WHEREOF, the undersigned has executed this certificate on the date
first written above.

 

MOLECULAR TEMPLATES, INC. By:  

                                          

  Name:   Title:

 

Exhibit E-2

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

Annex A

to Compliance Certificate

CALCULATIONS OF FINANCIAL COVENANT COMPLIANCE

 

I.   Section 8.16: Minimum Liquidity    A.   Amount of unencumbered cash (other
than cash encumbered by the Liens granted to the Lenders pursuant to the Loan
Documents) and Permitted Cash Equivalent Investments (which for greater
certainty shall not include any undrawn credit lines) of the Obligors as of the
last day of the calendar months ended [    ], [    ], and [    ]2 in each case,
to the extent held in a Deposit Account over which the Lenders have a first
priority perfected security interest:    $                       Is Line IA
greater than $2,000,000?:   

Yes: In compliance;

No: Not in compliance

 

 

2  [FN: Include the last day of each calendar month ended during the most
recently ended fiscal quarter of Parent (beginning with the fiscal quarter of
Parent ended March 31, 2018).]

 

Exhibit E-3

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

Annex B

to Compliance Certificate

DEFAULT OR EVENT OF DEFAULT

 

Exhibit E-4

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

Exhibit F

to Credit Agreement

FORM OF SOURCES AND USES CERTIFICATE

[DATE]

Reference is made to that certain Credit Agreement and Guaranty, dated as of
February 27, 2018 (as from time to time amended, restated, amended and restated,
supplemented or otherwise modified, the “Credit Agreement”), among MOLECULAR
TEMPLATES OPCO, INC., a Delaware corporation (“Borrower”), MOLECULAR TEMPLATES,
INC., a Delaware corporation, as a guarantor, PERCEPTIVE CREDIT HOLDINGS II, LP,
a Delaware limited partnership (“Perceptive”), as a lender (together with its
successors and assigns party thereto, the “Lenders” and each a “Lender”).
Capitalized terms used herein without being herein defined have the meanings
ascribed to them in the Credit Agreement.

Borrower hereby instructs and authorizes the Lenders to deliver and distribute
funds pursuant to the attached Annex A, in immediately available same-day funds
on the date hereof upon the satisfaction or waiver in writing by the Lenders of
the conditions precedent set forth in Section 6.01 of the Credit Agreement
(which satisfaction or waiver may be made simultaneously with the making of the
Loans hereunder).

[signature page follows]

 

Exhibit F-1

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

IN WITNESS WHEREOF, the undersigned has executed this certificate on the date
first written above.

 

MOLECULAR TEMPLATES OPCO, INC. By:  

                                          

  Name:   Title:

 

Exhibit F-2

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

Exhibit G

to Credit Agreement

FORM OF WARRANT CERTIFICATE

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

MOLECULAR TEMPLATES, INC.

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No. 18    Original Issue Date: February 27, 2018

Molecular Templates, Inc., a Delaware corporation (the “Company”), hereby
certifies that, for value received, Perceptive Credit Holdings II, LP, or its
permitted registered assigns (the “Holder”), is entitled to purchase from the
Company up to a total of 190,000 shares of common stock, $0.001 par value per
share (the “Common Stock”), of the Company (the “Warrant Shares”) at an exercise
price equal to $9.5792 per share (as adjusted from time to time as provided in
Section 9, the “Exercise Price”), at any time and from time to time on or after
the date hereof (the “Original Issue Date”) and through and including 5:30 p.m.,
New York City time, on February 27, 2025 (the “Expiration Date”), and subject to
the following terms and conditions:

This Warrant (this “Warrant”) is issued pursuant to that certain Credit
Agreement and Guaranty dated as of the Original Issue Date by and among the
Company and the Holder (the “Credit Agreement”).

1.     Definitions. In addition to the terms defined elsewhere in this Warrant,
for the purposes of this Warrant, the following terms shall have the meanings
set forth below:

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified.

 

Exhibit G-1

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

“Law” or “Laws” means any federal, state, local, municipal, foreign or other
law, statute, constitution, principle of common law, resolution, ordinance,
code, edict, decree, rule, regulation, ruling or requirement issued, enacted,
adopted, promulgated, implemented or otherwise put into effect by or under the
authority of any governmental authority.

“Order” means any order, writ, injunction, judgment or decree.

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

“SEC Filings” means all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Exchange Act for the
three (3)-year period preceding the Original Issue Date (or such shorter period
as the Company was required by Law to file such material), including the
exhibits thereto and documents incorporated by reference therein.

2.    Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose, which may be a
third-party transfer agent (the “Warrant Register”), in the name of the record
Holder (which shall include the initial Holder or, as the case may be, any
registered assignee to which this Warrant is permissibly assigned hereunder)
from time to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual notice
to the contrary.

3.     Registration of Transfers. Subject to compliance with all applicable
securities laws, the Company shall register the transfer of all or any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached as Schedule 2 hereto duly completed and signed,
to the Company’s transfer agent or to the Company at its address specified on
the signature pages hereto and (x) delivery, at the request of the Company, of
an opinion of counsel reasonably satisfactory to the Company to the effect that
the transfer of such portion of this Warrant may be made pursuant to an
available exemption from the registration requirements of the Securities Act and
all applicable state securities or blue sky laws (provided that such opinion
shall not be required in connection with any transfer (i) pursuant to an
effective registration statement, (ii) to the Company, (iii) pursuant to Rule
144 (provided that such Holder provides the Company with reasonable assurances
(in the form of seller and, if applicable, broker representation letters) that
the securities may be sold pursuant to such rule) (iv) in connection with a bona
fide pledge or (v) to an Affiliate of the Holder) and (y) delivery by the
transferee of a written statement to the Company certifying that the transferee
is an “accredited investor” as defined in Rule 501(a) under the Securities Act
and making the representations and certifications set forth in Section 4(c) of
this Warrant, to the Company at its address specified on the signature pages
hereto. Upon any such registration or transfer, a new warrant to purchase Common
Stock

 

Exhibit G-2

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

in substantially the form of this Warrant (any such new warrant, a “New
Warrant”) evidencing the portion of this Warrant so transferred shall be issued
to the transferee, and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations in respect of
the New Warrant that the Holder has in respect of this Warrant. The Company
shall prepare, issue and deliver at its own expense any New Warrant under this
Section 3.

4.     Exercise and Duration of Warrant.

(a)     All or any part of this Warrant shall be exercisable by the registered
Holder in the manner permitted by Section 10 at any time and from time to time
on or after the Original Issue Date and through and including 5:30 p.m. New York
City time, on the Expiration Date.

(b)    The Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached as Schedule 1 hereto (the “Exercise
Notice”), completed and duly signed, and (ii) payment of the Exercise Price for
the number of Warrant Shares as to which this Warrant is being exercised, and
the date on which the Exercise Notice is delivered to the Company (as determined
in accordance with the notice provisions hereof) is an “Exercise Date.” The
delivery by (or on behalf of) the Holder of the Exercise Notice and the
applicable Exercise Price as provided above shall constitute the Holder’s
certification to the Company that its representations contained in Section 4(c)
are true and correct as of the Exercise Date and the date on which Holder pays
the Company the Exercise Price as if remade in their entirety (or, in the case
of any transferee Holder that is not a party to this Warrant, such transferee
Holder’s certification to the Company that such representations are true and
correct as to such assignee Holder as of the Exercise Date). The Holder shall
not be required to deliver the original Warrant in order to effect an exercise
hereunder, but if it is not so delivered then such exercise shall constitute an
agreement by the Holder to deliver the original Warrant to the Company as soon
as practicable thereafter. Execution and delivery of the Exercise Notice shall
have the same effect as cancellation of the original Warrant and issuance of a
New Warrant evidencing the right to purchase the remaining number of Warrant
Shares.

(c)    The Holder represents and warrants to the Company that, as of the
Original Issue Date:

(i)    No Conflict, Breach, Violation or Default. The execution, delivery and
performance of this Warrant by the Holder will not (A) conflict with or result
in a material breach or material violation of (1) any of the terms and
provisions of, or constitute a material default under, its organizational
documents, as in effect as of the Original Issue Date, or (2) any Law or Order
of any governmental agency or body or any court, domestic or foreign, in each
case having jurisdiction over the Holder or any of its assets or properties, or
(B) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any lien, encumbrance or other adverse claim upon any of the properties or
assets of the Holder or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any material agreement, indenture or instrument to which the Holder is a party;
except in the case of clauses (A)(2) and (B) such as would not have a material
adverse effect on the ability of the Holder to perform its obligations
hereunder.

 

Exhibit G-3

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

(ii)    Purchase Entirely for Own Account. The Warrant Shares to be received by
the Holder upon exercise of this Warrant will be acquired for the Holder’s own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and the
Holder has no present agreement, understanding or intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act without prejudice, subject, however, to the Holder’s right at all
times to sell or otherwise dispose of all or any part of such Warrant Shares in
compliance with applicable federal and state securities Laws.

(iii)    Investment Experience. The Holder acknowledges that it can bear the
economic risk and complete loss of its investment in this Warrant and the
Warrant Shares and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby.

(iv)    Disclosure of Information. The Holder has had an opportunity to review
all information related to the Company requested by it and to ask questions of
and receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of this Warrant and the Warrant Shares. The
Holder acknowledges that copies of the SEC Filings have been made available to
it, including, without limitation, copies of the definitive proxy statement
filed by the Company on June 30, 2017. The Holder has sought such accounting,
legal and tax advice as it has considered necessary to make an informed decision
with respect to its acquisition of this Warrant and the Warrant Shares.

(v)    Investor Status. At the time the Holder was offered this Warrant, it was,
and on the Original Issue Date it is, and on the date on which it exercises this
Warrant it will be, an “accredited investor” as defined in Rule 501(a) under the
Securities Act.

(vi)    Reliance on Exemptions. The Holder understands that this Warrant and the
Warrant Shares are being offered and sold to it in reliance on specific
exemptions from the registration requirements of federal and state securities
Laws and that the Company is relying in part upon the truth and accuracy of, and
the Holder’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Holder set forth in this Warrant in
order to determine the availability of such exemptions and the eligibility of
the Holder to acquire this Warrant and the Warrant Shares.

5.     Delivery of Warrant Shares.

(a)    Upon exercise of this Warrant and delivery of the Exercise Price, the
Company shall promptly (but in no event later than three Trading Days after the
later of the Exercise Date and delivery of the Exercise Price) issue or cause to
be issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate (provided that, if the
Holder directs the Company to deliver a certificate for the Warrant Shares in a
name other than that of the Holder or an Affiliate of the Holder, if reasonably
requested by

 

Exhibit G-4

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

the Company it shall deliver to the Company on the Exercise Date an opinion of
counsel reasonably satisfactory to the Company to the effect that the issuance
of such Warrant Shares in such other name may be made pursuant to an available
exemption from the registration requirements of the Securities Act and all
applicable state securities or blue sky laws), (i) a certificate for the Warrant
Shares issuable upon such exercise, free of restrictive legends, or (ii) an
electronic delivery of the Warrant Shares to the Holder’s account at the
Depository Trust Company (“DTC”) or a similar organization, unless in the case
of clause (i) and (ii) a registration statement covering the resale of the
Warrant Shares and naming the Holder as a selling stockholder thereunder is not
then effective or the Warrant Shares are not freely transferable without
restriction under Rule 144 by Holders who are not affiliates of the Company, in
which case such Holder shall receive a certificate for the Warrant Shares
issuable upon such exercise with appropriate restrictive legends. The Holder, or
any Person permissibly so designated by the Holder to receive Warrant Shares,
shall be deemed to have become the holder of record of such Warrant Shares as of
the Exercise Date. Notwithstanding anything contained herein to the contrary, if
the Holder fails to deliver the documents required to register a transferee as
set forth in Section 3 or to provide the documents required under this
Section 5(a) to issue a certificate or electronic delivery of the Warrant Shares
to any Person(s) other than the Holder, then determination of the three Trading
Days shall be tolled until such documents have been delivered to the Company. If
the Warrant Shares are to be issued free of all restrictive legends, the Company
shall, upon the written request of the Holder, use its reasonable best efforts
to deliver, or cause to be delivered, Warrant Shares hereunder electronically
through DTC or another established clearing corporation performing similar
functions, if available; provided, that, the Company may, but will not be
required to, change its transfer agent if its current transfer agent cannot
deliver Warrant Shares electronically through such a clearing corporation.
“Trading Day” means any day on which the Common Stock are traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock are suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

(b)      If by the close of the third Trading Day after delivery of a properly
completed Exercise Notice and the payment of the aggregate Exercise Price in the
manner permitted by Section 10, the Company fails to deliver to the Holder a
certificate representing the required number of Warrant Shares or such Warrant
Shares in electronic form in the manner required pursuant to Section 5(a), and
if after such third Trading Day and prior to the receipt of such Warrant Shares,
the Holder is required to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall, in its sole discretion, within three Trading
Days after the Holder’s request for payment, either (1) pay in cash to the
Holder an amount equal to the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased, at which point
the number of Warrant Shares underlying this Warrant equal to the number of
shares of Common Stock so purchased shall be forfeited and the Company’s
obligation to deliver such certificate

 

Exhibit G-5

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

(and to issue such Warrant Shares in certificate or electronic form) shall
terminate or (2) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Warrant Shares or such Warrant
Shares in electronic form and pay cash to the Holder in an amount equal to the
excess (if any) of Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased in the Buy-In
over the product of (A) the number of shares of Common Stock purchased in the
Buy-In, multiplied by (B) the closing bid price of a share of Common Stock on
the Exercise Date. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Company.

(c)     To the extent permitted by law, the Company’s obligations to issue and
deliver Warrant Shares in accordance with and subject to the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company (other than breaches related to this Warrant or the Credit
Agreement) or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance that might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Warrant Shares. Nothing herein shall limit the Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

6.     Charges, Taxes and Expenses. Issuance and delivery of certificates or
electronic form for shares of Common Stock upon exercise of this Warrant shall
be made without charge to the Holder for any issue or transfer tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or this Warrant in a name other than that of the
Holder or an Affiliate thereof. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.

7.     Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction (in such case)
and, in each case, a customary and reasonable indemnity and surety bond, if
requested by the Company. Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may prescribe. If a New
Warrant is requested as a result of a mutilation of this Warrant, then the
Holder shall deliver such mutilated Warrant to the Company as a condition
precedent to the Company’s obligation to issue the New Warrant.

 

Exhibit G-6

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

8.     Reservation of Warrant Shares. The Company represents and warrants that
on the date hereof, it has duly authorized and reserved, and covenants that it
will at all times during the period this Warrant is outstanding reserve and keep
available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares that are initially issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant Shares so
issuable and deliverable shall, upon issuance and the payment of the applicable
Exercise Price in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable and free from all taxes,
liens and charges created by the Company in respect of the original issuance
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue). The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights
under this Warrant. The Company represents and warrants that the Warrant Shares,
when issued and paid for in accordance with the terms of this Warrant, will be
issued free and clear of all security interests, claims, liens and other
encumbrances other than restrictions imposed by applicable securities laws. The
Company will take all such action as may be reasonably necessary to assure that
such shares of Common Stock may be issued as provided herein without violation
of any applicable law or regulation, or of any requirements of any securities
exchange or automated quotation system upon which the Common Stock may be
listed.

9.     Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

(a)    Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock
into a larger number of shares, (iii) combines (by combination, reverse stock
split or otherwise) its outstanding shares of Common Stock into a smaller number
of shares or (iv) issues by reclassification of shares of Common Stock any
shares of capital stock of the Company, then in each such case the Exercise
Price shall be adjusted to a price determined by multiplying the Exercise Price
in effect immediately prior to the effective date of such event by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on such effective date immediately before giving effect to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such event. Any adjustment made pursuant to
this Section 9(a) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii), (iii) or (iv) of this
Section 9(a) shall become effective immediately after the effective date of such
subdivision, combination or reclassification.

 

Exhibit G-7

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

(b)     Pro Rata Distributions. If the Company, at any time while this Warrant
is outstanding, distributes to all holders of Common Stock for no consideration
(i) evidences of its indebtedness, (ii) any security (other than a distribution
of Common Stock covered by Section 9(a)) or (iii) rights or warrants to
subscribe for or purchase any security, or (iv) any other asset, including cash
(in each case, “Distributed Property”), except for any distributions pursuant to
a shareholders’ rights plan or similar takeover defense agreement or plan
adopted by the Company, then, upon any exercise of this Warrant that occurs
after the record date fixed for determination of stockholders entitled to
receive such distribution, the Holder shall be entitled to receive, in addition
to the Warrant Shares otherwise issuable upon such exercise (if applicable), the
Distributed Property that such Holder would have been entitled to receive in
respect of such number of Warrant Shares had the Holder been the record holder
of such Warrant Shares immediately prior to such record date.

(c)    Fundamental Transactions. If, at any time while this Warrant is
outstanding (i) the Company effects (A) any merger of the Company with (but not
into) another Person, in which stockholders of the Company immediately prior to
such transaction own less than a majority of the outstanding stock of the
surviving entity, or (B) any merger or consolidation of the Company into another
Person, (ii) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender offer or
exchange offer approved or authorized by the Company’s Board of Directors is
completed pursuant to which holders of at least a majority of the outstanding
Common Stock tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a)) (in any such case, a “Fundamental Transaction”),
then the Holder shall have the right thereafter to receive, upon exercise of
this Warrant, the same amount and kind of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant without regard to any limitations on exercise contained herein
(the “Alternate Consideration”), and the Holder shall no longer have the right
to receive Warrant Shares upon exercise of this Warrant. The Company shall not
effect any such Fundamental Transaction unless prior to or simultaneously with
the consummation thereof, any successor to the Company, surviving entity or the
corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or Person shall assume the obligation to deliver to the Holder, such
Alternate Consideration as, in accordance with the foregoing provisions, the
Holder may be entitled to receive, and the other obligations under this Warrant.
The provisions of this Section 9(c) shall similarly apply to subsequent
transactions of an analogous type to any Fundamental Transaction.

    (d)    Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to Section 9(a), the number of Warrant Shares that may
be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the increased or decreased number of Warrant Shares shall
be the same as the aggregate Exercise Price in effect immediately prior to such
adjustment.

 

Exhibit G-8

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

(e)    Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest share, as applicable.

(f)     Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment, in good faith, in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment, including a statement of
the adjusted Exercise Price and adjusted number or type of Warrant Shares or
other securities issuable upon exercise of this Warrant (as applicable),
describing the transactions giving rise to such adjustments and showing in
reasonable detail the facts upon which such adjustment is based. The Company
will promptly deliver a copy of each such certificate to the Holder and to the
Company’s transfer agent.

(g)     Notice of Corporate Events. If, while this Warrant is outstanding, the
Company (i) declares a dividend or any other distribution of cash, securities or
other property in respect of its Common Stock, including, without limitation,
any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then, except if such notice and the contents thereof
shall be deemed to constitute material non-public information, the Company shall
deliver to the Holder a notice of such transaction at least ten (10) Trading
Days prior to the applicable record or effective date on which a Person would
need to hold Common Stock in order to participate in or vote with respect to
such transaction; provided, however, that the failure to deliver such notice or
any defect therein shall not affect the validity of the corporate action
required to be described in such notice.

10.     Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds.

11.    Limitations on Exercise. Notwithstanding anything to the contrary
contained herein, the number of Warrant Shares that may be acquired by the
Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall
be limited to the extent necessary to ensure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by the Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 9.99% of the total number of
then issued and outstanding shares of Common Stock (including for such purpose
the shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to such Holder
that such calculation is in compliance with Section 13(d) of the Exchange Act
and such Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 11 applies, the determination of whether this Warrant is exercisable (in
relation to other securities owned by such Holder) and of which a portion of
this Warrant is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which portion of this

 

Exhibit G-9

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

Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 11, in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock outstanding.
Upon the written request of the Holder, the Company shall within three Trading
Days confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding. This provision shall not restrict the number of shares
of Common Stock which a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as contemplated in Section 9.

12.    No Fractional Shares. No fractional Warrant Shares will be issued in
connection with any exercise of this Warrant. In lieu of any fractional shares
that would otherwise be issuable, the number of Warrant Shares to be issued
shall be rounded down to the next whole number and the Company shall pay the
Holder in cash the fair market value (based on the Closing Bid Price) for any
such fractional shares.

13.     Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile or
email at the facsimile number or email address specified on the signature pages
hereto prior to 5:30 p.m., New York City time, on a Trading Day, (ii) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or via email at the email
address specified on the signature pages hereto on a day that is not a Trading
Day or later than 5:30 p.m., New York City time, on any Trading Day, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service specifying next business day delivery, or (iv) upon
actual receipt by the Person to whom such notice is required to be given, if by
hand delivery. The mailing address, email address and facsimile number of a
Person for such notices or communications shall be as set forth on the signature
pages hereto unless changed by such Person by two Trading Days’ prior notice to
the other Person(s) in accordance with this Section 13.

14.     Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 15 days’ notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last
address as shown on the Warrant Register.

 

Exhibit G-10

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

15.     Miscellaneous.

(a)    No Rights as a Stockholder. Without limiting the express provisions of
this Warrant, the Holder, solely in such Person’s capacity as a holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person’s capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive
notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities, whether such liabilities are asserted
by the Company or by creditors of the Company.

(b)    Authorized Shares.

(i)    The Company will take all such reasonable action as may be necessary to
assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation or of any requirements of the
Trading Market upon which the Common Stock may be listed.

(ii)     Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

(iii)     Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

 

Exhibit G-11

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

(c)    No Impairment. Except to the extent as may be waived by the holder of
this Warrant, the Company will not, by amendment of its charter or through a
Fundamental Transaction, dissolution, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder against impairment.

(d)    Successors and Assigns. Subject to the restrictions on transfer set forth
in this Warrant and compliance with applicable securities laws, this Warrant may
be assigned by the Holder. This Warrant may not be assigned by the Company
without the written consent of the Holder except to a successor in the event of
a Fundamental Transaction. This Warrant shall be binding on and inure to the
benefit of the Company and the Holder and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Warrant.

(e)    Amendment and Waiver. Except as otherwise provided herein, the provisions
of this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder.

(f)    Acceptance. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.

(g)    Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF THE
COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE COURTS OF THE DELAWARE COURT OF CHANCERY AND ANY STATE APPELLATE COURT
THEREOF WITHIN THE STATE OF DELAWARE (OR, IF THE DELAWARE COURT OF CHANCERY
DECLINES TO ACCEPT JURISDICTION OVER A PARTICULAR MATER, ANY STATE OR FEDERAL
COURT WITHIN THE STATE OF DELAWARE) FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT. EACH OF THE COMPANY AND THE HOLDER HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA
REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY)
TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS WARRANT AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS
AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH OF THE COMPANY
AND THE HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

 

Exhibit G-12

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

(h)     Headings. The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

(i)     Severability. In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby, and the Company and the Holder will
attempt in good faith to agree upon a valid and enforceable provision which as
closely as possible reflects the intent of the parties hereto, and upon so
agreeing, shall incorporate such substitute provision in this Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

 

Exhibit G-13

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

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.

 

MOLECULAR TEMPLATES, INC. By:  

 

 

Eric E. Poma

Chief Executive Officer

Address for Notices:

Molecular Templates, Inc.

9301 Amberglen Boulevard, Suite 100

Austin, TX Attn: Jason Kim, President and CFO Tel.:

Email:

 

with a copy to:

Mintz, Levin, Cohn, Ferris,

Glovsky and Popeo, P.C.

666 Third Avenue

New York, NY 10017 Attn: Joseph Price Tel.: (212) 692-6785 Email:
JWPrice@mintz.com

 

Exhibit G-14

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

Accepted and Agreed: PERCEPTIVE CREDIT HOLDINGS II, LP By:   Perceptive Credit
Opportunities GP, LLC, its general partner By:  

                                          

Name:   Sandeep Dixit Title:   Authorized Officer By:  

 

Name:   Sam Chawla Title:   Authorized Officer Address for Notices:

Perceptive Credit Holdings II, LP

c/o Perceptive Advisors LLC

51 Astor Place

10th Floor

New York, New York 10003 Attention: Sandeep Dixit

E-mail:

 

with a copy to:

Chapman and Cutler LLP

1270 Avenue of the Americas

30th Floor

New York, New York 10020-1708 Attention: Nicholas Whitney E-mail:
Whitney@chapman.com

 

Exhibit G-15

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

SCHEDULE 1

MOLECULAR TEMPLATES, INC.

FORM OF EXERCISE NOTICE

[To be executed by the Holder to purchase shares of Common Stock under the
Warrant]

Ladies and Gentlemen:

(1)    The undersigned is the Holder of Warrant No.                      (the
“Warrant”) issued by Molecular Templates, Inc., a Delaware corporation (the
“Company”). Capitalized terms used herein and not otherwise defined herein have
the respective meanings set forth in the Warrant.

(2)    The undersigned hereby exercises its right to purchase
                     Warrant Shares pursuant to the Warrant.

(3)    The Holder shall pay the sum of $         in immediately available funds
to the Company in accordance with the terms of the Warrant.

(5)    Pursuant to this Exercise Notice, the Company shall deliver to the Holder
Warrant Shares determined in accordance with the terms of the Warrant. Please
issue (check applicable box):

A certificate of certificates representing the Holder Warrant Shares in the
                     name of the undersigned or in such other name as is
specified below:

 

                                                                 
                                                   

The Holder Warrant Shares in electronic form to the following account:

Name and Contact for Broker:                                          
                                    

Broker no:                                          
                                                        

Account no:                                          
                                                      

Account holder:                                          
                                                            

 

Dated:             ,          Name of Holder:                                
                                                  

 

By:  

                                          

Name:  

 

Title:  

 

(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)

 

Exhibit G-16

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

SCHEDULE 2

MOLECULAR TEMPLATES, INC.

FORM OF ASSIGNMENT

[To be completed and executed by the Holder only upon transfer of the Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                     (the “Transferee”) the right represented by the within
Warrant to purchase              shares of Common Stock of Molecular Templates,
Inc., a Delaware corporation (the “Company”) to which the within Warrant relates
and appoints                      attorney to transfer said right on the books
of the Company with full power of substitution in the premises. In connection
therewith, the undersigned represents, warrants, covenants and agrees to and
with the Company that:

 

(a) the offer and sale of the Warrant contemplated hereby is being made in
compliance with Section 4(1) of the United States Securities Act of 1933, as
amended (the “Securities Act”), or another valid exemption from the registration
requirements of Section 5 of the Securities Act and in compliance with all
applicable securities laws of the states of the United States;

 

(b) the undersigned has not offered to sell the Warrant by any form of general
solicitation or general advertising, including, but not limited to, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;

 

(c) the undersigned has read the Transferee’s investment letter included
herewith, and to its actual knowledge, the statements made therein are true and
correct; and

 

(d) the undersigned understands that the Company may condition the transfer of
the Warrant contemplated hereby upon the delivery to the Company by the
undersigned or the Transferee, as the case may be, of a written opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such transfer
may be made without registration under the Securities Act and under applicable
securities laws of the states of the United States.

 

Dated:                     ,               

 

      (Signature must conform in all respects to name of holder as specified on
the face of the Warrant)      

 

      Address of Transferee In the presence of:      

 

 

Exhibit G-17

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

Exhibit H

to Credit Agreement

FORM OF SECURITY AGREEMENT

 

 

 

SECURITY AGREEMENT

Dated as of

February 27, 2018

among

MOLECULAR TEMPLATES OPCO, INC.

and

MOLECULAR TEMPLATES, INC.,

as Grantors,

THE GRANTORS FROM TIME TO TIME PARTY HERETO

and

PERCEPTIVE CREDIT HOLDINGS II, LP,

as Control Agent

 

 

 

 

Exhibit H-1

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

TABLE OF CONTENTS

 

SECTION    HEADING                                  PAGE  

SECTION 1. DEFINITIONS, ETC.

     4  

Section 1.01.

  

Certain Uniform Commercial Code Terms

     4  

Section 1.02.

  

Additional Definitions

     4  

Section 1.03.

  

Other Defined Terms

     8  

SECTION 2. REPRESENTATIONS AND WARRANTIES

     8  

Section 2.01.

  

Title

     8  

Section 2.02.

  

Names, Etc.

     8  

Section 2.03.

  

Changes in Circumstances

     9  

Section 2.04.

  

Pledged Shares

     9  

Section 2.05.

  

Promissory Notes

     9  

Section 2.06.

  

Intellectual Property

     9  

Section 2.07.

  

Deposit Accounts, Securities Accounts and Commodity Accounts

     10  

Section 2.08.

  

Commercial Tort Claims

     10  

Section 2.09.

  

Update of Schedules

     10  

SECTION 3. COLLATERAL

     10  

Section 3.01.

  

Granting Clause

     10  

SECTION 4. FURTHER ASSURANCES; REMEDIES

     12  

Section 4.01.

  

Delivery and Other Perfection

     12  

Section 4.02.

  

Other Financing Statements or Control

     13  

Section 4.03.

  

Preservation of Rights

     14  

Section 4.04.

  

Special Provisions Relating to Certain Collateral

     14  

Section 4.05.

  

Remedies

     15  

Section 4.06.

  

Deficiency

     18  

Section 4.07.

  

Locations; Names, Etc.

     18  

Section 4.08.

  

Private Sale

     18  

Section 4.09.

  

Application of Proceeds

     18  

Section 4.10.

  

Attorney in Fact and Proxy

     18  

Section 4.11.

  

Perfection and Recordation

     19  

Section 4.12.

  

Termination

     19  

Section 4.13.

  

Further Assurances

     19  

SECTION 5. MISCELLANEOUS

     20  

Section 5.01.

  

Notices

     20  

Section 5.02.

  

No Waiver

     20  

Section 5.03.

  

Amendments, Etc.

     20  

Section 5.04.

  

Expenses

     20  

 

Exhibit H-2

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

Section 5.05.

  

Successors and Assigns

     20  

Section 5.06.

  

Counterparts

     21  

Section 5.07.

  

Governing Law; Submission to Jurisdiction; Etc.

     21  

Section 5.08.

  

Waiver of Jury Trial

     22  

Section 5.09.

  

Captions

     22  

Section 5.10.

  

Agents and Attorneys in Fact

     22  

Section 5.11.

  

Severability

     22  

Section 5.12.

  

Additional Grantors

     22  

Section 5.13.

  

Limited Agency for Perfection

     22  

 

EXHIBITS:

    

EXHIBIT A

    —     

Form of Joinder

SCHEDULES:

    

SCHEDULE 1

    —     

Certain Grantor Information

SCHEDULE 2

    —     

Pledged Shares

SCHEDULE 3

    —     

Promissory Notes

SCHEDULE 4

    —     

Copyrights, Copyright Registrations and Applications for Copyright Registrations

SCHEDULE 5

    —     

Patents and Patent Applications

SCHEDULE 6

    —     

Trade Names, Trademarks, Services Marks, Trademark and Service Mark
Registrations and Applications for Trademark and Service Mark Registrations

SCHEDULE 7

    —     

Deposit Accounts, Securities Accounts and Commodity Accounts

SCHEDULE 8

    —     

Commercial Tort Claims

 

Exhibit H-3

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

SECURITY AGREEMENT

SECURITY AGREEMENT dated as of February 27, 2018 among MOLECULAR TEMPLATES OPCO,
INC., a Delaware corporation (“Borrower”, and MOLECULAR TEMPLATES, INC., a
Delaware corporation (“Parent” and collectively with Borrower and each entity
that becomes a “Grantor” hereunder as contemplated by Section 5.12, each, a
“Grantor”, and collectively, the “Grantors”), PERCEPTIVE CREDIT HOLDINGS II, LP,
a Delaware limited partnership (“Perceptive” and together with its successors
and assigns, the “Lenders” and each, a “Lender”), and Perceptive, as control
agent for Secured Parties (in such capacity, the “Control Agent” and, together
with the Lenders, the “Secured Parties” and each, a “Secured Party”).

The Secured Parties have agreed to provide term loans to Borrower, as provided
in the Credit Agreement (as defined below).

Each Grantor (other than Borrower) has guaranteed the obligations of Borrower to
Secured Parties under the Credit Agreement.

To induce the Secured Parties to extend credit under the Credit Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each Grantor has agreed to grant a security interest in
the Collateral (as defined below) of such Grantor as security for the Secured
Obligations (as defined below).

Accordingly, the parties hereto agree as follows:

SECTION 1.    DEFINITIONS, ETC.

Section 1.01.    Certain Uniform Commercial Code Terms.

As used herein, the terms “Accession”, “Account”, “Account Debtor”, “Cash
Proceeds”, “Certificate of Title”, “Certificated Security”, “Chattel Paper”,
“Check,” “Commercial Tort Claim”, “Commodity Account”, “Commodity Contract”,
“Deposit Account”, “Document”, “Electronic Chattel Paper”, “Encumbrance,”
“Entitlement Holder”, “Equipment”, “Financial Asset”, “Fixture”, “General
Intangible”, “Goods”, “Instrument”, “Inventory”, “Investment Property”, “Letter
of Credit Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds,”
“Promissory Note,” “Record”, “Securities Account”, “Security”, “Security
Entitlement”, “Software”, “Supporting Obligation” and “Uncertificated Security”
have the respective meanings set forth in the UCC.

Section 1.02.    Additional Definitions.

In addition, as used herein:

“Collateral” has the meaning assigned to such term in Section 3.01.

“Control Agent” has the meaning assigned to such term in the preamble.

 

Exhibit H-4

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

“Copyrights” means all copyrights, copyright registrations and applications for
copyright registrations, including all renewals and extensions thereof, all
rights to recover for past, present or future infringements thereof and all
other rights whatsoever accruing thereunder or pertaining thereto.

“Credit Agreement” means that certain Credit Agreement and Guaranty, dated as of
the date hereof, among Borrower, the other Grantors from time to time party
thereto and the Lenders from time to time party thereto, as such agreement is
amended, supplemented, or otherwise modified, restated, amended and restated,
extended, renewed, or replaced from time to time.

“Excluded Accounts” means (a) any Deposit Account of the Grantor that is used by
such Grantor solely as a payroll account for the employees of Borrower or its
Subsidiaries or the funds in which consist solely of funds held by the Grantor
in trust for any director, officer or employee of the Grantor or any employee
benefit plan maintained by the Grantor or funds representing deferred
compensation for the directors and employees of the Grantor, (b) escrow
accounts, Deposit Accounts, Securities Accounts and trust accounts, in each case
holding assets that are pledged or otherwise encumbered pursuant to Permitted
Liens (other than Liens securing the Secured Obligations), (c) Deposit Accounts
and Securities Accounts not located in the United States or any of its States or
territories and (d) any Deposit Accounts or Securities Accounts with a daily
average balance of less than $250,000 on an individual basis.

“Excluded Asset” means:

(a)    any Trademark that would be rendered invalid, abandoned, void or
unenforceable by reason of it being included as part of the Collateral;
provided, however, that the Proceeds, substitutions or replacements of the
foregoing shall not constitute an Excluded Asset;

(b)    Excluded Accounts;

(c)     any assets (including intangibles) not located in the United States to
the extent a grant of security interest therein is restricted or prohibited by
applicable law (after giving effect to applicable anti-assignment provisions of
the UCC or other applicable law);

(d)    any (x) lease, license, permit, state or local franchises, charters,
authorizations, property rights, contract or agreement to which any Grantor is a
party, or (y) Intellectual Property or Regulatory Documentation (the latter, as
defined in the Takeda Collaboration Agreements), subject to or otherwise
governed by a Collaboration Agreement, in each case, if and only if, and solely
to the extent that, (i) the grant of a security interest therein shall
constitute or result in a breach, termination or default or abandonment,
voiding, unenforceability or invalidity of any right or interest thereunder or
thereof (other than to the extent that any such term would be rendered
ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any
relevant jurisdiction or any other applicable law or principles of equity) or
(ii) such lease, license, contract or agreement is an “off the shelf” license of
intellectual property that is not material to the operation of the business of
the applicable Grantor or which can be replaced without a material expenditure;
provided that immediately upon the time at which the consequences described in
the foregoing clause (i) shall no longer exist, the Collateral shall

 

Exhibit H-5

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

include, and the applicable Grantor shall be deemed to have granted a security
interest in, all of such Grantor’s right, title and interest in such lease,
license, contract or agreement, or such Intellectual Property governed by such
Collaboration Agreement; provided, however, that the Proceeds of the foregoing
shall not constitute an Excluded Asset;

(e)    any application for registration of a trademark filed on an intent-to-use
(or equivalent) basis solely to the extent that the grant of a security interest
in any such trademark application would materially adversely affect the validity
or enforceability of the resulting trademark registration or result in
cancellation of such trademark application;

(f)    any asset that is subject to a Lien securing a purchase money obligation
or capital lease obligation permitted to be incurred pursuant to the provisions
of the Credit Agreement if the contract or other agreement in which such Lien is
granted (or the documentation providing for such purchase money obligation or
capital lease obligation) prohibits the creation of any other Lien on such
asset;

(g)    any interests in joint ventures and similar investments which restrict
pledges or assignments of any Grantor’s interests therein, provided that the
terms of such joint venture agreement or similar contract shall not have been
adopted in contemplation of this provision, but only to the extent and while
such prohibition is not terminated or rendered unenforceable or otherwise deemed
ineffective by the UCC or any other requirement of law;

(h)    any Excluded Equity; and

(j)     motor vehicles and other assets subject to certificates of title.

“Excluded Equity” means any voting stock of any Subsidiary which is a Domestic
Foreign Holding Company or a first-tier controlled foreign corporation (as
defined in Section 957(a) of the Code) representing 35% of the outstanding
voting stock of such Subsidiary and voting stock of any other Subsidiary which
is a controlled foreign corporation (as defined in Section 957(a) of the Code)
representing 100% of the outstanding voting stock of such Subsidiary. For the
purposes of this definition, “voting stock” means, with respect to any issuer,
the issued and outstanding shares of each class of stock of such issuer entitled
to vote (within the meaning of Treasury Regulations § 1.956-2(c)(2)).

“Initial Pledged Shares” means the Shares of each Issuer beneficially owned by
any Grantor on the date hereof and identified in Schedule 2.

“Issuers” means, collectively, (a) the respective Persons identified on Schedule
2 under the caption “Issuer”, (b) any other Person that shall at any time be
required to become a Grantor pursuant to the terms of the Loan Documents, and
(c) the issuer of any equity securities hereafter owned by any Grantor.

“Joinder” has the meaning specified in Section 5.12.

 

Exhibit H-6

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

“Patents” means all patents and patent applications, including the inventions
and improvements described and claimed therein together with the reissues,
divisions, continuations, renewals, extensions and continuations in part
thereof, all income, royalties, damages and payments now or hereafter due and/or
payable with respect thereto, all damages and payments for past or future
infringements thereof and rights to sue therefor, and all rights corresponding
thereto throughout the world.

“Pledged Property” means the Deposit Accounts, the Pledged Shares, the
Securities Accounts, the Commodity Accounts and all or any part of any other
present or future interests of any Grantors in Investment Property, including
all of the present or future Security Entitlements of such Grantor as
Entitlement Holders in respect of such Security Entitlements, all of the present
or future Commodity Contracts of such Grantor as commodity customers in respect
of such Commodity Contracts, all credit balances relating to such property, all
Chattel Paper, Electronic Chattel Paper, Instruments and Letter of Credit Rights
of Grantors, and all other rights and benefits accruing to or arising in
connection with such property, and all Proceeds of such property; provided that
the Excluded Assets shall not constituted Pledged Property.

“Pledged Shares” means, collectively, (i) the Initial Pledged Shares, (ii) all
other Shares of any Issuer now or hereafter owned by any Grantor with a fair
market value in excess of $250,000, together in each case with (a) all
certificates representing the same and (b) without prejudice to any provision of
any of the Loan Documents prohibiting any merger or consolidation by an Issuer,
all Shares of any successor entity of any such merger or consolidation,
(iii) all dividends, distributions, and sums distributable or payable from, upon
or in respect of each of the foregoing and (iv) all other rights and privileges
incident to the each of the foregoing; provided that the Excluded Equity shall
not constitute Pledged Shares.

“Secured Obligations” means, with respect to each Grantor, the Obligations of
such Grantor (other than contingent indemnification obligations or other
obligations which, by their terms, survive termination of the Credit Agreement
or the Warrant Obligations).

“Secured Parties” means each of the Persons listed on the signature pages hereto
as “Secured Party” and their successors and assigns as Lenders or Control Agent,
as applicable, under the Credit Agreement.

“Secured Parties Representative” has the meaning specified in Section 4.05.

“Shares” means shares of capital stock of a corporation, limited liability
company interests, partnership interests and other ownership or equity interests
of any class in any Person.

“Trademarks” means all trade names, trademarks and service marks, logos,
trademark and service mark registrations, and applications for trademark and
service mark registrations, including all renewals of trademark and service mark
registrations, all rights to recover for all past, present and future
infringements thereof and all rights to sue therefor, and all rights
corresponding thereto throughout the world, together, in each case, with the
product lines and goodwill of the business connected with the use thereof.

 

Exhibit H-7

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

“UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in
the State of New York; provided, however, that if by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of the
Control Agent’s and the Secured Parties’ security interest in any item or
portion of the Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term “UCC” shall
mean the Uniform Commercial Code as in effect on the date hereof in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions relating to such
provisions.

Section 1.03.    Other Defined Terms.

All other capitalized terms used and not defined herein have the meanings
ascribed to them in the Credit Agreement.

SECTION 2.    REPRESENTATIONS AND WARRANTIES

Each Grantor represents and warrants to Secured Parties that as of the Closing
Date and as of the Tranche B Term Loan Borrowing Date:

Section 2.01.    Title.

(a)    Such Grantor is the sole beneficial owner of the Collateral in which it
purports to grant a Lien hereunder, and no Lien exists upon such Collateral (and
no right or option to acquire the same exists in favor of any other Person)
other than Permitted Liens.

(b)    The security interest created or provided for herein constitutes a valid
first-priority (subject to Permitted Liens) perfected lien on such Collateral,
subject, for the following Collateral, to the occurrence of the following:
(i) in the case of Collateral in which a security interest may be perfected by
filing a financing statement under the UCC, the filing of a UCC financing
statement naming such Grantor as debtor, Secured Parties as secured parties, and
listing all personal property as collateral, (ii) with respect to any Deposit
Account or Securities Account, the execution of agreements among such Grantor,
the applicable financial institution and Control Agent, effective to grant
“control” (as defined in the UCC) over such Deposit Account or Securities
Account to Control Agent, (iii) with respect to any Intellectual Property not
described in the foregoing clause (i), the filing of this Security Agreement or
a short-form security agreement properly evidencing this Security Agreement with
the applicable Intellectual Property office of the applicable government for
such Intellectual Property, (iv) in the case of all certificated Shares, the
delivery thereof to Control Agent, properly endorsed for transfer to Control
Agent or in blank, and (v) in the case of any other type of Collateral, take
such actions as set forth in Section 4.01 with respect thereto.

Section 2.02.    Names, Etc.

The full and correct legal name, type of organization, jurisdiction of
organization, organizational ID number (if applicable) and mailing address of
such Grantor as of the date hereof are correctly set forth in Schedule 1.
Schedule 1 correctly specifies the place of business of such Grantor or, if such
Grantor has more than one place of business, the location of the chief executive
office of such Grantor.

 

Exhibit H-8

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

Section 2.03.    Changes in Circumstances.

Such Grantor has not (a) within the period of four months prior to the date
hereof, changed its location (as defined in Section 9-307 of the UCC), or
(b) except as specified in Schedule 1, heretofore changed its name within the
period of five years prior to the date hereof.

Section 2.04.    Pledged Shares.

(a)    The Initial Pledged Shares constitute 100% of the issued and outstanding
Shares of each Issuer beneficially owned by such Grantor on the Closing Date,
whether or not registered in the name of such Grantor. Schedule 2 correctly
identifies, as at the date hereof, the respective Issuers of the Initial Pledged
Shares and (in the case of any corporate Issuer) the par value of such Shares
and the respective number of such Shares (and registered owner thereof)
represented by each such certificate.

(b)    The Initial Pledged Shares and all other Pledged Shares are (i) duly
authorized, validly existing, fully paid and non-assessable (in the case of any
Shares issued by a corporation) and (ii) duly issued and outstanding (in the
case of any equity interest in any other entity). None of such Pledged Shares
are or will be subject to any contractual restriction, or any restriction under
the charter, bylaws, partnership agreement or other organizational instrument of
the respective Issuer thereof, upon the transfer of such Pledged Shares (except
for any such restriction (i) contained in any Loan Document, (ii) contained in
any Restrictive Agreement permitted under Section 9.11 of the Credit Agreement,
or (iii) affecting the offering and sale of securities generally or in any
jurisdiction outside the United States).

Section 2.05.    Promissory Notes.

Schedule 3 sets forth a complete and correct list of all Promissory Notes held
by such Grantor on the date hereof.

Section 2.06.    Intellectual Property.

(a)    Schedules 4, 5 and 6 (as such Schedules may be updated by Borrower from
time to time), respectively, set forth a complete and correct list of all of the
following owned by such Grantor: (i) material applied for or registered
Copyrights, (ii) material applied for or registered Patents, including the
jurisdiction and patent number, (iii) material applied for or registered
Trademarks, including the jurisdiction, trademark application or registration
number and the application or registration date and (iv) trade names.

(b)    Except as permitted by Section 9.09 of the Credit Agreement or pursuant
to (i) material licenses and other material user agreements entered into by such
Grantor in the Ordinary Course of Business that are listed in said Schedules 4,
5 and 6 and (ii) non-exclusive licenses, such Grantor has done nothing to
authorize or enable any other Person to use any Copyright, Patent or Trademark
listed in said Schedules 4, 5 and 6, and all registrations listed in said
Schedules 4, 5 and 6 are, except as noted therein, in full force and effect.

 

Exhibit H-9

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

(c)    Such Grantor owns and possesses the right to use all Copyrights, Patents
and Trademarks listed on Schedules 4, 5 and 6, respectively. To such Grantor’s
knowledge, as of the date hereof, (i) except as set forth on Schedule 4, 5 or 6,
there is no material violation by others of any right of such Grantor with
respect to any Copyright, Patent or Trademark listed on Schedule 4, 5 or 6,
respectively and (ii) such Grantor is not infringing in any respect upon any
Copyright, Patent or Trademark of any other Person, in any material respect. To
such Grantor’s knowledge, as of the date hereof, no material proceedings
alleging such infringement have been instituted or are pending against such
Grantor and no written claim against such Grantor has been received by such
Grantor, alleging any such violation, except as may be set forth on Schedule 4,
5 or 6.

Section 2.07.    Deposit Accounts, Securities Accounts and Commodity Accounts.

Schedule 7 sets forth a complete and correct list of all Deposit Accounts,
Securities Accounts and Commodity Accounts, in each case indicating any Excluded
Accounts, of such Grantor on the date hereof.

Section 2.08.    Commercial Tort Claims.

Schedule 8 sets forth a complete and correct list of all Commercial Tort Claims
of such Grantor having a value reasonably believed by such Grantor to be in
excess of $500,000 on the date hereof.

Section 2.09.    Update of Schedules.

Each of Schedules 1 through 8 may be updated by Grantors from time to time to
insure the continued accuracy of the representations and warranties set forth in
this Section 2 to be made on the Tranche B Term Loan Borrowing Date, by Borrower
providing notice (attaching an amended and restated version of such Schedule) in
accordance with Section 13.02 of the Credit Agreement.

SECTION 3.    COLLATERAL

Section 3.01.    Granting Clause.

As collateral security for the payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations, each Grantor
hereby pledges and grants to Secured Parties as hereinafter provided a Lien in
all of such Grantor’s right, title and interest in, to and under all of its
property, in each case whether tangible or intangible, wherever located, and
whether now owned by such Grantor or hereafter acquired and whether now existing
or hereafter coming into existence, including without limitation all of the
following, but excluding all Excluded Assets (collectively, and subject to the
proviso at the end of this Section 3.01, “Collateral”):

(a)    all Accounts (including all trade receivables);

 

Exhibit H-10

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

(b)    all Chattel Paper and other Records;

(c)    all Checks;

(d)    all Commercial Tort Claims;

(e)    all Deposit Accounts, all cash, and all other property from time to time
deposited therein or otherwise credited thereto and the monies and property in
the possession or under the control of Control Agent or any Grantor or any of
its Affiliates, representative, agent or correspondent of Control Agent or any
Grantor;

(f)    all Documents;

(g)    all Encumbrances;

(h)    all Equipment;

(i)    all Fixtures;

(j)    all General Intangibles (including in respect of any intercompany
Indebtedness);

(k)    all Goods not otherwise described in this Section 3;

(l)    all Instruments, including all Promissory Notes and any Instrument
evidencing any intercompany Indebtedness;

(m)    all Intellectual Property;

(n)    all Inventory;

(o)    all Letters of Credit and all Supporting Obligations;

(p)    all Investment Property not otherwise described in this Section 3,
including all Securities, all Securities Accounts and all Security Entitlements
with respect thereto and Financial Assets carried therein, and all Commodity
Accounts and Commodity Contracts;

(q)    all Pledged Shares;

(r)    all other tangible and intangible personal property of such Grantor
(whether or not subject to the UCC), including, without limitation, all bank and
other accounts and all cash and all investments therein, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any

 

Exhibit H-11

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

of the property of such Grantor described in the preceding clauses of this
Section 3.01 (including, without limitation, any proceeds of insurance thereon
and all causes of action, claims and warranties now or hereafter held by such
Grantor in respect of any of the items listed above), and all books,
correspondence, files, invoices and other Records, including, without
limitation, all tapes, disks, cards, Software, data and computer programs in the
possession or under the control of such Grantor or any other Person from time to
time acting for such Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 3.01 or are otherwise necessary or helpful in the collection or
realization thereof; and

(s)    all Proceeds, including all Cash Proceeds and Noncash Proceeds, of any
and all of the foregoing Collateral;

in each case howsoever such Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise); provided,
however, that, nothing set forth in this Section 3.01 or any other provision of
this Agreement or any other Loan Document shall at any time constitute the grant
of a security interest in, or a Lien on, any Excluded Asset, none of which shall
constitute Collateral. For the avoidance of doubt, Secured Parties agree that
with respect to the Intellectual Property, the rights of the licensees under the
Permitted Licenses (including those granted in connection with any Collaboration
Agreements) will not be terminated, limited or otherwise adversely affected by
(i) the execution of or (ii) the exercise of Secured Parties’ rights under this
Agreement or any other Loan Document.

SECTION 4.    FURTHER ASSURANCES; REMEDIES

In furtherance of the grant of the security interest pursuant to Section 3,
Grantors hereby jointly and severally agree with Secured Parties as follows:

Section 4.01.    Delivery and Other Perfection.

Subject to the limitations set forth in this Agreement and the other Loan
Documents, each Grantor shall promptly from time to time give, execute, deliver,
file, record, authorize or obtain all such financing statements, continuation
statements, notices, instruments, documents, agreements or consents or other
papers as may be necessary or appropriate in the reasonable judgment of the
Majority Lenders to create, preserve, perfect, maintain the perfection of or
validate the security interest granted pursuant hereto or to enable Secured
Parties to exercise and enforce their rights hereunder with respect to such
security interest, and without limiting the foregoing, shall:

(a)    if any of the Pledged Shares, Investment Property or Financial Assets
constituting part of the Collateral are received by Grantor, within 30 days
following receipt (x) deliver to Control Agent the certificates or instruments
representing or evidencing the same, duly endorsed in blank or accompanied by
such instruments of assignment and transfer in such form and substance as
Control Agent may request, all of which thereafter shall be held by Control
Agent, pursuant to the terms of this Agreement, as part of the Collateral and
(y) take such other action as Control Agent may deem reasonably necessary or
appropriate to duly record or otherwise perfect the security interest created
hereunder in such Collateral;

 

Exhibit H-12

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(b)    deliver to Control Agent any and all Instruments constituting part of the
Collateral, endorsed and/or accompanied by such instruments of assignment and
transfer in such form and substance as Control Agent may reasonably request;
provided, that (other than in the case of the Promissory Notes described in
Schedule 3) until the occurrence of an Event of Default that has not been waived
in writing by the Majority Lenders and the Control Agent has provided
contemporaneous notice to the Borrower of its exercise of remedies and in each
case, in accordance with the Credit Agreement, such Grantor may retain for
collection in the ordinary course any Instruments received by such Grantor in
the Ordinary Course of Business and Control Agent shall, promptly upon request
of such Grantor, make appropriate arrangements for making any Instrument
delivered by such Grantor available to such Grantor for purposes of
presentation, collection or renewal (any such arrangement to be effected, to the
extent requested by Control Agent, against trust receipt or like document);

(c)    promptly from time to time enter into such control agreements, each in
form reasonably acceptable to the Majority Lenders, as may be required to
perfect the security interest created hereby in any and all (i) Deposit Accounts
and Securities Accounts owned by the Obligors in the United States (other than
Excluded Accounts), and (ii) Investment Property, Electronic Chattel Paper and
Letter of Credit Rights (except with respect to Pledged Shares, other than any
such property described in this subclause (ii) that does not exceed $250,000 in
value at any time, unless the aggregate value of such property exceeds
$500,000), and will promptly furnish to Control Agent true copies thereof; and

(d)    promptly from time to time upon the written request of Control
Agent, take such other action as the Majority Lenders may reasonably deem
necessary to duly record or otherwise perfect the security interest created
hereunder in that portion of the Collateral consisting of Intellectual Property.

Section 4.02.    Other Financing Statements or Control.

Except as otherwise permitted under the Loan Documents, no Grantor shall
(a) file or suffer to be on file, or authorize or permit to be filed or to be on
file, in any jurisdiction, any financing statement or like instrument with
respect to any of the Collateral in which the Secured Parties are not named as
the sole secured parties (except to the extent that such financing statement or
instrument relates to a Permitted Lien), or (b) cause or permit any Person other
than Control Agent, the Secured Parties or any holder of a Permitted Lien to
have “control” (as defined in Section 9-104, 9-105, 9-106 or 9-107 of the UCC)
of any Deposit Account, Securities Account or Commodity Account (in each case
other than Excluded Accounts), Electronic Chattel Paper, Investment Property or
Letter of Credit Right constituting part of the Collateral.

 

Exhibit H-13

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

Section 4.03.    Preservation of Rights.

Except for the safe custody of any Collateral in their actual possession and the
accounting for moneys actually received hereunder, Secured Parties shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.

Section 4.04.    Special Provisions Relating to Certain Collateral.

(a)    Pledged Shares. (i) Grantors will cause the Pledged Shares to constitute
100% of the total number of Shares of each Issuer outstanding owned by Grantors.

(ii)    Until the occurrence of an Event of Default that has not been waived in
writing by the Majority Lenders in accordance with the Credit Agreement and with
contemporaneous written notice to the Borrower of the exercise of remedies by
the Control Agent in accordance with the terms of the Credit Agreement, Grantors
shall have the right to exercise all voting, consensual and other powers of
ownership pertaining to the Pledged Shares for all purposes, and Control Agent
and the Secured Parties shall execute and deliver to Grantors or cause to be
executed and delivered to Grantors all such proxies, powers of attorney,
dividend and other orders, and all such instruments, without recourse, as
Grantors may reasonably request for the purpose of enabling Grantors to exercise
the rights and powers that it is entitled to exercise pursuant to this
Section 4.04(a)(ii).

(iii)    Until the occurrence of an Event of Default that has not been waived in
writing by the Majority Lenders in accordance with the Credit Agreement and with
contemporaneous written notice to the Borrower of the exercise of remedies by
the Control Agent in accordance with the terms of the Credit Agreement, Grantors
shall be entitled to receive and retain any dividends, distributions or proceeds
on the Pledged Shares paid in cash out of earned surplus.

(iv)    After the occurrence of an Event of Default that has not been waived in
writing by the Majority Lenders in accordance with the Credit Agreement and with
contemporaneous written notice to the Borrower of the exercise of remedies by
the Control Agent in accordance with the terms of the Credit Agreement, whether
or not Secured Parties or any of them exercises any available right to declare
any Secured Obligations due and payable or seeks or pursues any other relief or
remedy available to them under applicable law or under this Agreement, the other
Loan Documents or any other agreement relating to such Secured Obligation, all
dividends and other distributions on the Pledged Shares shall be paid directly
to Secured Parties Representative for distribution to Secured Parties for
application to the Secured Obligations in accordance with the Credit Agreement,
provided, that if such Event of Default is waived in writing by the Majority
Lenders in accordance with the Credit Agreement, any such dividend or
distribution theretofore paid to Secured Parties Representative shall, upon
request of Grantors (except to the extent theretofore applied to the Secured
Obligations), be returned by Secured Parties Representative to Grantors.

(b)    Intellectual Property. (i) For the purpose of enabling the Secured
Parties to exercise rights and remedies under Section 4.05 at such time as the
Secured Parties shall be lawfully entitled to exercise such rights and remedies
after the occurrence of an Event of Default that has not been waived in writing
by the Majority Lenders in accordance with the Credit Agreement and with
contemporaneous written notice to the Borrower of the exercise of remedies

 

Exhibit H-14

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

by the Control Agent in accordance with the terms of the Credit Agreement, and
for no other purpose, each Grantor hereby grants to Secured Parties
Representative to the extent assignable and not otherwise prohibited by the
documentation governing such Intellectual Property, not otherwise constituting
an Excluded Asset, a non-exclusive license (exercisable without payment of
royalty or other compensation to such Grantor) to use, and the right to assign,
license or sublicense, any of the Intellectual Property now owned or hereafter
acquired by such Grantor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.

(ii)    Notwithstanding anything contained herein to the contrary, but subject
to any provision of the Loan Documents that limits the rights of any Grantor to
dispose of its property, until the occurrence of an Event of Default that has
not been waived in writing by the Majority Lenders in accordance with the Credit
Agreement and with contemporaneous written notice to the Borrower of the
exercise of remedies by the Control Agent in accordance with the terms of the
Credit Agreement, Grantors will be permitted to exploit, use, enjoy, protect,
defend, enforce, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property, not otherwise constituting an
Excluded Asset, in the Ordinary Course of Business of Grantors. In furtherance
of the foregoing, until the occurrence of an Event of Default that has not been
waived in writing by the Majority Lenders in accordance with the Credit
Agreement and with contemporaneous written notice to the Borrower, Secured
Parties or Secured Parties Representative shall from time to time, upon the
request of the respective Grantor, execute and deliver any instruments,
certificates or other documents, in the form so requested, that such Grantor
shall have certified are appropriate in its judgment to allow it to take any
action permitted above (including relinquishment of the license provided
pursuant to Section 4.04(b)(i) as to any specific Intellectual Property).
Further, upon the payment in full of all of the Secured Obligations (other than
contingent indemnification obligations for which no claim has been made or other
obligations which, by their terms, survive termination of the Credit Agreement)
or earlier expiration of this Agreement or release of the Collateral, Secured
Parties Representative shall grant back to Grantors the license granted pursuant
to Section 4.04(b)(i). The exercise of rights and remedies under Section 4.05 by
the Secured Parties shall not apply to any Excluded Assets or terminate the
rights of the holders of any licenses, covenants not to sue or sublicenses
theretofore granted by Grantors in accordance with the first sentence of this
Section 4.04(b)(ii).

(c)    Chattel Paper. Grantors will deliver to Control Agent each original of
each item of Chattel Paper, with a value in excess of $250,000, at any time
constituting part of the Collateral.

Section 4.05.    Remedies.

(a)    Rights and Remedies Generally upon Event of Default. Upon the occurrence
of an Event of Default that has not been waived in writing by the Majority
Lenders in accordance with the Credit Agreement, the Secured Parties shall have
all of the rights and remedies with respect to the Collateral of a secured party
under the UCC (whether or not the Uniform Commercial Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such additional
rights and remedies to which a secured party is entitled under the Law in effect
in

 

Exhibit H-15

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

any jurisdiction where any rights and remedies hereunder may be asserted,
including the right, to the fullest extent permitted by Law, to exercise all
voting, consensual and other powers of ownership pertaining to the Collateral as
if the Secured Parties were the sole and absolute owner thereof (and each
Grantor agrees to take all such action as may be appropriate to give effect to
such right), subject to the terms and limitations contained herein and in the
other Loan Documents. Upon the occurrence of an Event of Default that has not
been waived in writing by the Majority Lenders in accordance with the terms of
the Credit Agreement, the Majority Lenders shall appoint one of Secured Parties
to act as a representative of all Secured Parties (such Person, the “Secured
Parties Representative”) to exercise, on behalf of all Secured Parties, such
rights and remedies of Secured Parties described above; and without limiting the
foregoing, in each case subject to the terms and limitations contained herein
and in the other Loan Documents:

(i)    Secured Parties Representative may, in its name or in the name of any
Grantor or otherwise, demand, sue for, collect or receive any money or other
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so;

(ii)    Secured Parties Representative may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;

(iii)    Secured Parties Representative may require Grantors to notify (and each
Grantor hereby authorizes Secured Parties Representative to so notify) each
account debtor in respect of any Account, Chattel Paper or General Intangible,
and each obligor on any Instrument, constituting part of the Collateral that
such Collateral has been assigned to Secured Parties hereunder, and to instruct
that any payments due or to become due in respect of such Collateral shall be
made directly to Secured Parties Representative or as it may direct (and if any
such payments, or any other Proceeds of Collateral, are received by any Grantor
they shall be held in trust by such Grantor for the benefit of Secured Parties
and as promptly as possible remitted or delivered to Secured Parties
Representative for application as provided herein);

(iv)    Secured Parties Representative may require Grantors to use commercially
reasonable efforts to assemble the Collateral at such place or places,
convenient to Secured Parties and Grantors, as Secured Parties Representative
may direct;

(v)    Secured Parties Representative may require Grantors to cause the Pledged
Shares to be transferred of record into the name of Secured Parties
Representative or its nominee (and Secured Parties Representative agrees that if
any of such Pledged Shares is transferred into its name or the name of its
nominee, Secured Parties Representative will thereafter promptly give to the
respective Grantor copies of any notices and communications received by it with
respect to such Pledged Shares);

 

Exhibit H-16

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

(vi)    Secured Parties Representative may sell, lease, assign or otherwise
dispose of all or any part of the Collateral, at such place or places as Secured
Parties Representative deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is required
by applicable statute and cannot be waived), and the Secured Parties, Secured
Parties Representative or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public sale (or,
to the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Grantors, any such
demand, notice and right or equity being hereby expressly waived and released.
In the event of any sale, assignment, or other disposition of any of the
Collateral consisting of Trademarks, the goodwill connected with and symbolized
by the Trademarks subject to such disposition shall be included. Secured Parties
Representative may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the sale may be so adjourned; and

(vii)    the Proceeds of each collection, sale or other disposition under this
Section 4.05, including by virtue of the exercise of any license granted to
Secured Parties Representative in Section 4.04(b), shall be applied in
accordance with Section 4.09.

(b)    Certain Securities Act Limitations. Grantors recognize that, by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, Secured Parties Representative may be
compelled, with respect to any sale of all or any part of the Collateral, to
limit purchasers to those who will agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Grantors acknowledge that any such private sales
may be at prices and on terms less favorable to Secured Parties Representative
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that Secured
Parties Representative shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the issuer thereof to register it for public sale.

(c)    Notice. Grantors agree that to the extent Secured Parties Representative
is required by applicable law to give reasonable prior notice of any sale or
other disposition of any Collateral, ten business days’ notice shall be deemed
to constitute reasonable prior notice.

(d)    No Assumption of Obligations. Notwithstanding any provision in this
Agreement or any other Loan Document to the contrary, Secured Parties are not
assuming any liability or obligation of any Grantor or any of its Affiliates of
whatever nature, whether presently in existence or arising or asserted
hereafter. All such liabilities and obligations shall be retained by and remain
obligations and liabilities of the applicable Grantor and/or its Affiliates, as
the case may be. Without limiting the foregoing, Secured Parties are not
assuming and shall not be

 

Exhibit H-17

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

responsible for any liabilities or Claims of any Grantor or its Affiliates,
whether present or future, absolute or contingent and whether or not relating to
a Grantor, the Obligor Intellectual Property and/or the Material Agreements, and
each Grantor shall indemnify and save harmless Secured Parties from and against
all such liabilities, Claims and Liens.

Section 4.06.    Deficiency.

If the proceeds of sale, collection or other realization of or upon the
Collateral pursuant to Section 4.05 are insufficient to cover the costs and
expenses of such realization and the payment in full in cash of the Secured
Obligations (other than contingent indemnification obligations or other
obligations which, by their terms, survive termination of the Credit Agreement),
Grantors shall remain liable for any deficiency.

Section 4.07.    Locations; Names, Etc.

No Grantor shall (i) change its location (as defined in Section 9-307 of the
UCC), or (ii) change its name from the name shown as its current legal name on
Schedule 1, unless in each case five (5) Business Days prior written notice
shall have been given to the Control Agent (or such shorter period as may be
acceptable to Control Agent in its sole discretion.

Section 4.08.    Private Sale.

The Secured Parties shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private sale pursuant to Section 4.05
conducted in a commercially reasonable manner. Each Grantor hereby waives any
claims against Secured Parties Representative, the Secured Parties or any of
them arising by reason of the fact that the price at which the Collateral may
have been sold at such a private sale was less than the price that might have
been obtained at a public sale or was less than the aggregate amount of the
Secured Obligations, even if Secured Parties Representative, the Secured Parties
or any of them accepts the first offer received and does not offer the
Collateral to more than one offeree.

Section 4.09.    Application of Proceeds.

The Proceeds of any collection, sale or other realization of all or any part of
the Collateral pursuant hereto, and any other cash at the time held by Secured
Parties Representative, Control Agent or Secured Parties under this Section 4,
shall be applied by Control Agent or the Secured Parties (as the case may be) in
accordance with Section 4.01(b) of the Credit Agreement.

Section 4.10.    Attorney in Fact and Proxy.

Without limiting any rights or powers granted by this Agreement to the Secured
Parties, upon the occurrence of an Event of Default that has not been waived in
writing by the Majority Lenders in accordance with the Credit Agreement and with
contemporaneous written notice to the Borrower of the exercise of remedies by
the Control Agent in accordance with the terms of the Credit Agreement, Secured
Parties Representative (and any of its officers, employees or agents) hereby is
appointed the attorney in fact and proxy of each Grantor for the purpose of

 

Exhibit H-18

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

carrying out the provisions of this Section 4 and taking any action and
executing any instruments that Secured Parties Representative may deem necessary
or advisable to accomplish the purposes hereof. THIS POWER AND PROXY IS COUPLED
WITH AN INTEREST AND IS IRREVOCABLE UNTIL THE PAYMENT IN FULL OF THE SECURED
OBLIGATIONS. THIS POWER AND PROXY SHALL BE EFFECTIVE AUTOMATICALLY AND WITHOUT
THE NECESSITY OF ANY ACTION BY ANY PERSON. Without limiting the generality of
the foregoing, so long as Secured Parties Representative shall be entitled under
this Section 4 to make collections in respect of the Collateral, Secured Parties
Representative shall have the right and power to receive, endorse and collect
all checks made payable to the order of any Grantor representing any dividend,
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same. Notwithstanding anything to the
contrary contained herein, the Secured Parties agree not to exercise any rights
under the power of attorney and proxy provided for herein unless an Event of
Default has occurred and is continuing.

Section 4.11.    Perfection and Recordation.

Each Grantor authorizes the Secured Parties to file Uniform Commercial Code
financing statements describing the Collateral as “all assets” or “all personal
property and fixtures” of such Grantor (provided that no such description shall
be deemed to modify the description of Collateral set forth in Section 3).

Section 4.12.    Termination.

When all Secured Obligations (other than contingent indemnification obligations
for which no claim has been made or other obligations which, by their terms,
survive termination of the Credit Agreement) shall have been paid in full in
cash, this Agreement automatically shall terminate, and the Secured Parties
shall, upon request of Grantors, promptly cause to be assigned, transferred and
delivered any remaining Collateral and money received in respect thereof, to or
on the order of the respective Grantor and to be released and canceled all
licenses and rights referred to in Section 4.04(b), in each case, at Grantors’
sole expense. The Secured Parties shall also, at the expense of such Grantor,
promptly execute and deliver to such Grantor upon such termination such Uniform
Commercial Code termination statements, certificates for terminating the liens
on the intellectual property filings and such other documentation as shall be
reasonably requested by the respective Grantor to effect the termination and
release of the liens on the Collateral as required by this Section 4.12 and
deliver all possessory Collateral in the Secured Parties’ possession, custody or
control to be released to the applicable Grantor (or designee), in each case, at
Grantors’ sole expense. If any of the Collateral shall be sold, transferred or
otherwise disposed of by Grantor in a transaction permitted by the Credit
Agreement or if such Collateral otherwise becomes Excluded Assets, then Secured
Parties, at Grantors’ sole expense, shall execute and deliver to such Grantor
all releases or other documents reasonably necessary or desirable for the
release of the Liens created hereby on such Collateral.

Section 4.13.    Further Assurances.

Each Grantor agrees that, from time to time upon the written request of the
Majority Lenders, such Grantor will execute and deliver such further documents
and do such other acts and things

 

Exhibit H-19

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

as the Majority Lenders may reasonably request in order fully to effectuate the
purposes and objectives of this Agreement, in all cases subject to the terms and
limitations of the Credit Agreement and the other Loan Documents (including this
Agreement) and excluding such documents, acts and things where the cost of
obtaining or perfecting a security interest exceeds the practical benefit to the
Lenders afforded thereby as reasonably determined by the Control Agent (in its
sole discretion after consultation with Borrower or the applicable Grantor). The
Secured Parties shall release any Lien covering any asset that has been disposed
of in accordance with Section 4.12 and the other provisions of the Loan
Documents.

SECTION 5.    MISCELLANEOUS

Section 5.01.    Notices.

All notices, requests, consents and demands hereunder shall be delivered in
accordance with Section 13.02 of the Credit Agreement.

Section 5.02.    No Waiver.

No failure on the part of any Secured Party to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by any Secured Party of any right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.

Section 5.03.    Amendments, Etc.

The terms of this Agreement may be waived, altered or amended only by an
instrument in writing duly executed by each Grantor and the Majority Lenders
(unless the consent of each Lender is required in accordance with Section 13.04
of the Credit Agreement).

Section 5.04.    Expenses.

(a)    Grantors shall pay or reimburse Control Agent and the Secured Parties for
reasonable and documented out-of-pocket costs and expenses in accordance with
Section 13.03 of the Credit Agreement.

(b)    Grantors shall hereby indemnify the Secured Parties, their Affiliates,
and their respective directors, officers, employees, attorneys, agents, advisors
and controlling parties in accordance with Section 13.03(b) of the Credit
Agreement.

Section 5.05.    Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of each Grantor, Control Agent, Secured Parties
Representative and the Secured Parties (provided, that no Grantor shall assign
or transfer its rights or obligations hereunder except in accordance with the
terms of the Credit Agreement).

 

Exhibit H-20

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

Section 5.06.    Counterparts.

This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such counterpart.

Section 5.07.    Governing Law; Submission to Jurisdiction; Etc.

(a)    Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed in accordance with, the
law of the State of New York, without regard to principles of conflicts of laws
that would result in the application of the laws of any other jurisdiction;
provided, that Section 5-1401 of the New York General Obligations Law shall
apply.

(b)    Submission to Jurisdiction. Each party hereto agrees that any suit,
action or proceeding with respect to this Agreement or any other Loan Document
to which it is a party or any judgment entered by any court in respect thereof
may be brought in the Supreme Court of the State of New York sitting in New York
County or in the United States District Court for the Southern District of New
York and irrevocably submits to the exclusive jurisdiction of each such court
for the purpose of any such suit, action, proceeding or judgment; provided, that
any suit seeking enforcement against any Collateral or other property may be
brought, at the Secured Parties Representative’s option, in the courts of any
jurisdiction where the Secured Parties Representative elects to bring such
action or where such Collateral or other property may be found. To the extent
allowed by applicable Laws, the Secured Parties may take concurrent proceedings
in any number of jurisdictions.

(c)    Waiver of Venue. Each party hereto irrevocably waives to the fullest
extent permitted by law any objection that it may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or relating
to this Agreement and hereby further irrevocably waives to the fullest extent
permitted by law any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. A final judgment (in
respect of which time for all appeals has elapsed) in any such suit, action or
proceeding shall be conclusive and may be enforced in any court to the
jurisdiction of which such Person is or may be subject, by suit upon judgment.

(d)    Service of Process. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 5.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by applicable law.

 

Exhibit H-21

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

Section 5.08.    Waiver of Jury Trial.

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

Section 5.09.    Captions.

The table of contents, captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

Section 5.10.    Agents and Attorneys in Fact.

The Secured Parties may employ agents and attorneys in fact in connection
herewith and shall not be responsible for the negligence or misconduct of any
such agents or attorneys in fact selected by it in good faith.

Section 5.11.    Severability.

If any provision hereof is found by a court to be invalid or unenforceable, to
the fullest extent permitted by applicable law the parties agree that such
invalidity or unenforceability shall not impair the validity or enforceability
of any other provision hereof.

Section 5.12.    Additional Grantors.

Additional Persons may from time to time after the date of this Agreement become
Grantors under this Agreement by executing and delivering to Control Agent a
supplemental agreement (together with all schedules thereto, a “Joinder”) to
this Agreement, in substantially the form attached hereto as Exhibit A.
Accordingly, upon the execution and delivery of any such Joinder by any such
Person, such Person shall automatically and immediately, and without any further
action on the part of any Person, become a “Grantor” under and for all purposes
of this Agreement, and each of the Schedules hereto shall be supplemented in the
manner specified in such Joinder. In addition, upon the execution and delivery
of any such Joinder, the new Grantor makes the representations and warranties
set forth in Section 2, as applicable, except to the extent that such
representation or warranty expressly relates to an earlier date (in which case
such representation or warranty shall be made as of such earlier date).

Section 5.13.    Limited Agency for Perfection.

(a)    The Secured Parties each hereby appoint Perceptive as their collateral
agent (in such capacity, together with any successor in such capacity appointed
by Perceptive and consented to in writing by the Majority Lenders in accordance
with the Credit Agreement (such consent not to be unreasonably withheld or
delayed), the “Control Agent”) for the limited purposes of (i) acting as the
agent on behalf of the Secured Parties with respect to the Pledged Property for
purposes of the perfecting of the Liens of the Secured Parties on the Pledged
Property and (ii) taking any action requested by Borrower having the effect of
releasing any

 

Exhibit H-22

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

Collateral or Obligations in accordance with the Credit Agreement. Control Agent
accepts such appointment and agrees to hold or to have control of, as
applicable, the Pledged Property for the benefit of itself and the other Secured
Parties and any permitted assignee of any thereof solely for the purpose of
perfecting the security interest granted to such parties in such Pledged
Property, subject to the terms and conditions of this Section 5.13. All Secured
Parties hereby agree that Control Agent shall have the sole and exclusive right
and authority to give instructions to, and otherwise direct, Grantors in respect
of the Pledged Property and otherwise enforce rights and remedies under the Loan
Documents and no other Secured Party will hinder, delay or interfere with the
exercise of such rights by Control Agent in any respect. Grantors hereby agree
to pay, reimburse, indemnify and hold harmless Control Agent for any claims or
losses related to its acting in such role except to the extent due to the gross
negligence or willful misconduct of Control Agent. Except as specifically
prescribed herein, Control Agent shall have no obligation whatsoever to the
other Secured Parties including any obligation to assure that the Pledged
Property is genuine or owned by a Grantor or to preserve rights or benefits of
any Person except as expressly set forth in this Section 5.13. In acting on
behalf of the other Secured Parties, the duties or responsibilities of Control
Agent under this Section 5.13 shall be limited solely to physically holding the
Pledged Property delivered to Control Agent by Grantors, and entering into
control agreements for the benefit of Secured Parties, in each case, for
purposes of perfecting the Lien held by Secured Parties.

(b)    Control Agent shall not have by reason of any document including this
Agreement a fiduciary relationship in respect of any other Secured Party.

(c)    Control Agent may perform any of its duties under this Agreement by or
through its officers, directors, agents, employees, affiliates or other
designees.

[Signature Pages Follow]

 

Exhibit H-23

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

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the day and year first above written.

 

GRANTORS: MOLECULAR TEMPLATES OPCO, INC. By:  

                                          

  Name:   Title: MOLECULAR TEMPLATES, INC. By:  

                                          

  Name:   Title:

 

Exhibit H-24

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

SECURED PARTIES:

PERCEPTIVE CREDIT HOLDINGS II, LP as Control Agent and Lender

By:  

Perceptive Credit Opportunities GP, LLC,

its general partner

By:  

                                          

  Name:  

                                          

  Title:  

                                          

By:  

                                          

  Name:  

                                          

  Title:  

                                          

 

Exhibit H-25

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

EXHIBIT A

TO SECURITY AGREEMENT

FORM OF JOINDER AGREEMENT

JOINDER AGREEMENT dated as of [                    ] by [NAME OF ADDITIONAL
GRANTOR], a [                    ] corporation (the “Additional Grantor”), in
favor of PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware limited partnership
(“Perceptive” and together with its respective successors and assigns, the
“Lenders” and each, a “Lender”), and Perceptive, as control agent for Secured
Parties (in such capacity, the “Control Agent” and, together with the Lenders,
the “Secured Parties” and each, a “Secured Party”).

A.    Reference is made to (i) the Credit Agreement (as amended, supplemented,
restated, amended and restated, extended, renewed or replaced from time to time,
the “Credit Agreement”), dated as of February 27, 2018 among MOLECULAR TEMPLATES
OPCO, INC., a Delaware corporation (“Borrower”), certain Grantors party thereto
and certain Lenders party thereto, and (ii) the Security Agreement (as amended,
supplemented, restated, amended and restated, extended, renewed or replaced from
time to time, the “Security Agreement”; capitalized terms used herein but not
defined shall have the meaning ascribed to such terms therein), dated as of
February 27, 2018, among certain Grantors party thereto, the Secured Parties and
the Control Agent.

B.    Section 5.12 of the Security Agreement provides that additional Persons
may from time to time after the date of the Security Agreement become Grantors
under the Security Agreement by executing and delivering to the Secured Parties
a supplemental agreement to the Security Agreement in the form of this Joinder.

C.    To induce the Secured Parties to maintain the term loans pursuant to the
Credit Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Additional Grantor has agreed
to execute and deliver (i) a Guarantee Assumption Agreement under the Credit
Agreement, and (ii) this Joinder to Secured Parties.

The Additional Grantor hereby agrees to become a “Grantor” for all purposes of
the Security Agreement (and hereby supplements each of the Schedules to the
Security Agreement in the manner specified in Appendix A hereto). Without
limitation, as collateral security for the payment in full when due (whether at
stated maturity, by acceleration or otherwise) of the Secured Obligations (other
than contingent indemnification obligations and other obligations which, by
their terms, survive termination of the Credit Agreement), the Additional
Grantor hereby pledges and grants to the Secured Parties as provided in
Section 3 of the Security Agreement a security interest in all of the Additional
Grantor’s right, title and interest in, to and under the Collateral of the
Additional Grantor, in each case whether tangible or intangible, wherever
located, and whether now owned by the Additional Grantor or hereafter acquired
and whether now existing or hereafter coming into existence. In addition, the
Additional Grantor hereby makes the representations and warranties set forth in
Section 2 of the Security

 

Exhibit H-26

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

Agreement, with respect to itself and its obligations under this Agreement, as
if each reference in such Sections to the Loan Documents included reference to
this Agreement, except to the extent that such representation or warranty
expressly relates to an earlier date (in which case such representation or
warranty shall be made as of such earlier date).

[SIGNATURE PAGES FOLLOW]

 

Exhibit H-27

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

IN WITNESS WHEREOF, the Additional Grantor has caused this Joinder Agreement to
be duly executed and delivered as of the day and year first above written.

 

[INSERT NAME OF ADDITIONAL GRANTOR], as Grantor By:  

                                                              

Name:   Title:  

 

PERCEPTIVE CREDIT HOLDINGS II, LP, as Control Agent and Lender By:  

                                          

Name:   Title:   By:  

                                          

Name:   Title:  

 

Exhibit H-28

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

Exhibit I-1

to Credit Agreement

FORM OF PATENT & TRADEMARK SECURITY AGREEMENT

PATENT AND TRADEMARK SECURITY AGREEMENT

February 27, 2018

WHEREAS, MOLECULAR TEMPLATES OPCO, INC., a Delaware corporation (“Borrower”) and
MOLECULAR TEMPLATES, INC., a Delaware corporation (“Parent” and together with
Borrower, the “Grantors” and each, a “Grantor”) are parties to that certain
Security Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the “Security Agreement”;
capitalized terms used herein without definition shall have the meanings set
forth in the Security Agreement), among certain Grantors party thereto from time
to time, PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware limited partnership
(“Perceptive”), as a lender (together with each of its successors and assigns
party thereto, the “Lenders” and each a “Lender”) and Perceptive, as control
agent for the Secured Parties (in such capacity, the “Control Agent” and,
together with the Lenders, the “Secured Parties” and each, a “Secured Party”),
pursuant to which Grantors have granted in favor of Secured Parties a lien on
certain of their personal property, including without limitation the patents and
patent applications listed on Schedule A hereto, and the trademarks and
trademark applications listed on Schedule B hereto; and

WHEREAS, it is a condition to the advance of the loans and other obligations
secured by the Security Agreement, that each Grantor execute and deliver, and
cause to be filed in the U.S. Patent and Trademark Office, this Patent and
Trademark Security Agreement;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged:

As collateral security for the prompt and complete payment in full and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations, each Grantor hereby pledges and grants to the
Secured Parties a security interest in all of such Grantor’s right, title and
interest in, to and under all of the following:

(i)    all patents and patent applications, in each case whether now owned by
Grantor or hereafter acquired and whether now existing or hereafter coming into
existence, listed on Schedule A hereto, and all related patents and applications
thereto, including all reissuances, continuations, continuations-in-part,
revisions, extensions, re-examinations thereof, any patents and patent
applications claiming priority to said patents and patent applications or from
which said patents and patent applications claim priority, and pending
applications associated therewith; and

(ii)    all of the trademarks, whether now owned or at any time hereafter
acquired, of Grantor that are registered with, or for which applications for
registration have been filed with, the United States Patent and Trademark
Office, listed on Schedule B hereto, and all registrations and pending
applications associated therewith (excluding any application for

 

Exhibit I-1-1

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

registration of a trademark filed on an intent-to-use basis solely to the extent
that the grant of a security interest in any such trademark application would
materially adversely affect the validity or enforceability of the resulting
trademark registration or result in cancellation of such trademark application).

Notwithstanding the foregoing, in the event of any conflict between this Patent
and Trademark Security Agreement and the Security Agreement, the Security
Agreement shall control.

This Patent and Trademark Security Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed in accordance with,
the law of the State of New York, without regard to principles of conflicts of
laws that would result in the application of the laws of any other jurisdiction;
provided, that Section 5-1401 of the New York General Obligations Law shall
apply.

[Signature to follow]

 

Exhibit I-1-2

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

IN WITNESS WHEREOF, the Grantors have caused this Patent and Trademark Security
Agreement to be duly executed and delivered as of the day and year first above
written.

 

MOLECULAR TEMPLATES OPCO, INC.,

    as Grantor

By:  

 

  Name:   Title:

MOLECULAR TEMPLATES, INC.,

    as Grantor

By:  

 

  Name:   Title:

 

Exhibit I-1-3

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

Exhibit I-2

to Credit Agreement

FORM OF COPYRIGHT SECURITY AGREEMENT

COPYRIGHT SECURITY AGREEMENT

February 27, 2018

WHEREAS, MOLECULAR TEMPLATES OPCO, INC., a Delaware corporation (“Borrower”) and
MOLECULAR TEMPLATES, INC., a Delaware corporation (“Parent” and together with
Borrower, the “Grantors” and each, a “Grantor”) are parties to that certain
Security Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the “Security Agreement”;
capitalized terms used herein without definition shall have the meanings set
forth in the Security Agreement), among certain Grantors party thereto from time
to time, PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware limited partnership
(“Perceptive”), as a lender (together with each of its successors and assigns
party thereto, the “Lenders” and each a “Lender”) and Perceptive, as control
agent for the Secured Parties (in such capacity, the “Control Agent” and,
together with the Lenders, the “Secured Parties” and each, a “Secured Party”),
pursuant to which Grantors have granted in favor of Secured Parties a lien on
certain of their personal property, including without limitation the copyrights
and copyright applications listed on Schedule A hereto; and

WHEREAS, it is a condition to the advance of the loans and other obligations
secured by the Security Agreement, that each Grantor execute and deliver, and
cause to be filed in the U.S. Copyright Office, this Copyright Security
Agreement;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged:

As collateral security for the prompt and complete payment in full and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations, each Grantor hereby pledges and grants to the
Secured Parties a security interest in all of such Grantor’s right, title and
interest in, to and under all copyrights, whether now owned or at any time
hereafter acquired, of the Grantor that are registered with, or for which
applications for registration have been filed with, the United States Copyright
Office, listed on Schedule A hereto, and all registrations and pending
applications associated therewith (excluding any application for registration of
a copyright filed on an intent-to-use basis solely to the extent that the grant
of a security interest in any such copyright application would materially
adversely affect the validity or enforceability of the resulting copyright
registration or result in cancellation of such copyright application).

Notwithstanding the foregoing, in the event of any conflict between this
Copyright Security Agreement and the Security Agreement, the Security Agreement
shall control.

This Copyright Security Agreement and the rights and obligations of the parties
hereunder shall be governed by, and construed in accordance with, the law of the
State of New York, without regard to principles of conflicts of laws that would
result in the application of the laws of any other jurisdiction; provided, that
Section 5-1401 of the New York General Obligations Law shall apply.

 

Exhibit I-2-1

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

[Signature to follow]

 

Exhibit I-2-2

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

IN WITNESS WHEREOF, the Grantors have caused this Copyright Security Agreement
to be duly executed and delivered as of the day and year first above written.

 

MOLECULAR TEMPLATES OPCO, INC.,

    as Grantor

By:  

 

  Name:   Title:

MOLECULAR TEMPLATES, INC.,

    as Grantor

By:  

 

  Name:   Title:

 

Exhibit I-2-3

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

Exhibit J

to Credit Agreement

FORM OF COLLATERAL QUESTIONNAIRE

Collateral Questionnaire, dated as of [            ], 2018, is delivered
pursuant to that certain Credit Agreement and Guaranty, dated as of
[            ], 2018 (the “Credit Agreement”), by and among Molecular Templates
OpCo, Inc., a Delaware corporation (“Borrower”), Molecular Templates, Inc., a
Delaware corporation (“Guarantor”), and Perceptive Credit Holdings II, LP (the
“Lender”). Capitalized terms used but not defined herein shall have the meanings
as assigned to them in the Credit Agreement. As used herein, the term “Loan
Party” means the Borrower and each Guarantor.

I.    Current Information

A.    Legal Names, Organizations, Jurisdictions of Organization and
Organizational Identification Numbers. The full and exact legal name (as it
appears in each respective certificate or articles of incorporation, limited
liability membership agreement or similar organizational documents, in each case
as amended to date), the type of organization (or if a particular Loan Party is
an individual, please indicate so), the jurisdiction of organization (or
formation, as applicable), and the organizational identification number (not tax
i.d. number) of each Loan Party are as follows:

 

Name of Loan Party

   Type of
Organization (e.g.
corporation, limited liability
company, limited partnership)    Jurisdiction of
Organization/
Formation    Organizational Identification
Number

Molecular Templates, Inc.

   Corporation    Delaware    3436590

Molecular Templates OpCo, Inc.

   Corporation    Delaware    4657282

B.    Chief Executive Offices and Mailing Addresses. The chief executive office
address (or the principal residence if a particular Loan Party is a natural
person) and the preferred mailing address (if different than chief executive
office or residence) of each Loan Party are as follows:

 

Name of Loan Party

  

Address of Chief Executive Office (or
for natural persons, residence)

   Mailing Address (if different than
CEO or residence)   Molecular Templates, Inc.   

9301 Amber Glen Blvd., Suite 100

Austin, Texas 78729

   Molecular Templates OpCo, Inc.    9301 Amber Glen Blvd., Suite 100 Austin,
Texas 78729   

 

Exhibit J-1

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

C.    Changes in Names, Jurisdiction of Organization or Corporate Structure.

Except as set forth below, no Loan Party has changed its name, jurisdiction of
organization or its corporate structure in any way (e.g. by merger,
consolidation, change in corporate form, change in jurisdiction of organization
or otherwise) within the past five (5) years:

 

Loan Party

   Date of Change      Description of Change  

None.

     

D.    Prior Addresses.

Except as set forth below, no Loan Party has changed its chief executive office,
or principal residence if a particular Loan Party is a natural person, within
the past five (5) years:

 

Loan Party

  

Prior Address/City/State/Zip Code

Molecular Templates, Inc.   

170 Harbor Way, Suite 300

South San Francisco, California 94080

Molecular Templates OpCo, Inc.    111 West Cooperative Way, Suite 201,
Georgetown, Texas 78626

E.    Acquisitions of Equity Interests or Assets.

Except as set forth below, no Loan Party has acquired the equity interests of
another entity or substantially all the assets of another entity within the past
five (5) years:

 

Loan Party

   Date of Acquisition      Description of Acquisition  

None.

     

 

Exhibit J-2

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

II.    ADDITIONAL INFORMATION.

Tangible Personal Property. Set forth below are all the locations where any Loan
Party currently maintains or has maintained any material amount (fair market
value of $200,000 or more) of its tangible personal property (including goods,
inventory and equipment) of such Loan Party (whether or not in the possession of
such Loan Party) within the past five (5) years:

 

Loan Party

  

Address/City/State/Zip Code

Molecular Templates OpCo, Inc.   

Catalent Pharma Solutions

Clinical Supply Services,

10381 Decatur Road

Philadelphia PA 19114

Molecular Templates OpCo, Inc.   

Catalent Pharma Solutions

Lancaster Way

Wingates Industrial Park

Westhoughton, Bolton

Lancashire. BL5 3XX, UK

Molecular Templates OpCo, Inc.

  

SciSafe, Inc.

7 Corporate Drive, Unit D

Cranbury, NJ 08512

Molecular Templates OpCo, Inc.   

The Coghlan Group, Inc.

1500-B Business Park Drive

Bastrop, TX 78602

 

Exhibit J-3

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

IN WITNESS WHEREOF, the undersigned hereto has caused this Collateral
Questionnaire to be executed as of the date first above written.

 

MOLECULAR TEMPLATES OPCO, INC.,

as Borrower

By:  

                                                              

Name:   Title:  

MOLECULAR TEMPLATES, INC.,

as Guarantor

By:  

                                                                               

Name:   Title:  

 

Exhibit J-4

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

Exhibit K

to Credit Agreement

FORM OF NOTICE OF BORROWING

Date:    [                          ]

To:    [INSERT NAME OF LENDER], as Lender

[                               ]

Attn: [                     ]

Fax: [                      ]

Email: [                  ]

Re: Borrowing under Credit Agreement

Ladies and Gentlemen:

The undersigned, MOLECULAR TEMPLATES OPCO, INC., a Delaware corporation
(“Borrower”), refers to the Credit Agreement and Guaranty, dated as of
February 27, 2018 (as from time to time amended, restated, amended and restated,
supplemented or otherwise modified, the “Credit Agreement”), among Borrower,
MOLECULAR TEMPLATES, INC., a Delaware corporation, as a guarantor, and
PERCEPTIVE CREDIT HOLDINGS II, LP, a Delaware limited partnership, as a lender.
The terms defined in the Credit Agreement are herein used as therein defined.

Borrower hereby gives you notice irrevocably, pursuant to Section 2.01(b) of the
Credit Agreement, of the borrowing of the Loans specified herein:

1.    The proposed Borrowing Date is [                    ].

2.    The amount of the proposed Borrowing is $[                    ].

3.    The payment instructions with respect to the funds to be made available to
Borrower are as follows:

Bank name: [                                        ]

Bank Address: [                                        ]

Routing Number: [                                        ]

Account Number: [                                        ]

Swift Code: [                                        ]

Borrower hereby certifies that the following statements are true on the date
hereof, and will be true on the date of the proposed borrowing of the Loans,
before and after giving effect thereto and to the application of the proceeds
therefrom:

 

Exhibit K-1

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

a)    the representations and warranties made by the Obligors in Section 7 of
the Credit Agreement are true and correct in all material respects (except that
such materiality qualifier shall not be applicable to any representation or
warranty that already is qualified or modified as to “materiality” or “Material
Adverse Effect” in the text thereof, which representation or warranty shall be
true and correct in all respects subject to such qualification) on and as of the
Borrowing Date and immediately after giving effect to the application of the
proceeds of the Borrowing, with the same force and effect as if made on and as
of such date except that to the extent that any such representation or warranty
refers to a specific earlier date in which case such representation or warranty
shall be true and correct on and as of such earlier date; and

c)    no Default exists or would result from the proposed borrowing.

[signature to follow]

 

Exhibit K-2

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

IN WITNESS WHEREOF, Borrower has caused this Notice of Borrowing to be duly
executed and delivered as of the day and year first above written.

BORROWER:

 

MOLECULAR TEMPLATES OPCO, INC. By:  

                                                                       

Name:   Title:  

 

Exhibit K-3