Exhibit 10.4

EXECUTION COPY

CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”), dated as of August 4,
2015 (the “Closing Date”) by and among MIDCAP FINANCIAL TRUST, a Delaware
statutory trust (“MidCap”), as administrative agent (“Agent”), the Lenders
listed on the Credit Facility Schedule attached hereto and otherwise party
hereto from time to time (each a “Lender”, and collectively the “Lenders”), and
FLEXION THERAPEUTICS, INC., a Delaware corporation (“Borrower”), provides the
terms on which Lenders agree to lend to Borrower and Borrower shall repay
Lenders. The parties agree as follows:

1 ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed in accordance
with GAAP. Calculations and determinations must be made in accordance with GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 15. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein. All headings numbered without a decimal
point are herein referred to as “Articles,” and all paragraphs numbered with a
decimal point (and all subparagraphs or subsections thereof) are herein referred
to as “Sections.”

2 CREDIT FACILITIES AND TERMS

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay to each
Lender in accordance with each Lender’s respective Pro Rata Share of each Credit
Facility, the outstanding principal amount of all Credit Extensions made by the
Lenders under such Credit Facility and accrued and unpaid interest thereon and
any other amounts due hereunder as and when due in accordance with this
Agreement.

2.2 Credit Facilities. Subject to the terms and conditions hereof, each Lender,
severally, but not jointly, agrees to make available to Borrower Credit
Extensions in respect of each Credit Facility set forth opposite such Lender’s
name on the Credit Facility Schedule, in each case not to exceed such Lender’s
commitment as identified on the Credit Facility Schedule (such commitment of
each Lender, as it may be amended to reflect assignments made in accordance with
this Agreement or terminated or reduced in accordance with this Agreement, its
“Applicable Commitment”, and the aggregate of all such commitments, the
“Applicable Commitments”).

2.3 Term Credit Facilities.

(a) Nature of Credit Facility; Credit Extension Requests. For any Credit
Facility identified on the Credit Facility Schedule as a term facility (a “Term
Credit Facility”), Credit Extensions in respect of a Term Credit Facility may be
requested by Borrower during the Draw Period for such Term Credit Facility. For
any Credit Extension requested under (i) Credit Facility #1, Agent must receive
the completed Credit Extension Form by 12:00 noon (New York time) one
(1) Business Day prior to the date of the Credit Extension is to be funded, and
(ii) Credit Facility #2, Agent must receive the completed Credit Extension Form
by 12:00 noon (New York time) five (5) Business Day prior to the date of the
Credit Extension is to be funded To the extent any Term Credit Facility proceeds
are repaid for any reason, whether voluntarily or involuntarily (including
repayments from insurance or condemnation proceeds), Agent and Lenders shall
have no obligation to re-advance such sums to Borrower.

(b) Principal Payments. Principal payable on account of a Term Credit Facility
shall be payable by Borrower to Agent immediately upon the earliest of (a) the
date(s) set forth in the Amortization Schedule for such Term Credit Facility (or
if no such Amortization Schedule is attached, then upon Agent’s demand for
payment), or (b) the Maturity Date. Except as this Agreement may specifically
provide otherwise, all prepayments of Credit Extensions under Term Credit
Facilities shall be applied by Agent to the applicable Term Credit Facility in
inverse order of maturity. The monthly payments required under the Amortization
Schedule shall continue in the same amount (for so long as the applicable Term
Credit Facility shall remain outstanding) notwithstanding any partial
prepayment, whether mandatory or optional, of the applicable Term Credit
Facility.

 

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(c) Mandatory Prepayment. If a Term Credit Facility is accelerated following the
occurrence of an Event of Default, Borrower shall immediately pay to Agent, for
payment to each Lender in accordance with its respective Pro Rata Share, an
amount equal to the sum of: (i) all outstanding principal of the Term Credit
Facility and all other Obligations, plus accrued and unpaid interest thereon,
(ii) any fees payable under the Fee Letters by reason of such prepayment,
(iii) the Applicable Prepayment Fee as specified in the Credit Facility Schedule
for the Credit Facility being prepaid, and (iv) all other sums that shall have
become due and payable, including Protective Advances. Additionally, at the
election of Agent, Borrower shall prepay the Term Credit Facilities (to be
allocated pro rata among the outstanding Credit Extensions under all Term Credit
Facilities) in the following amounts: (i) on the date on which any Credit Party
(or Agent as loss payee or assignee) receives any casualty proceeds in excess of
Twenty Five Thousand Dollars ($25,000) for personal property, or in excess of
Fifty Thousand Dollars ($50,000) for real property, in respect of assets upon
which Agent maintained a Lien, an amount equal to one hundred percent (100%) of
such proceeds (net of out-of-pocket expenses and, in the case of personal
property, repayment of any permitted purchase money debt encumbering the
personal property that suffered such casualty), or such lesser portion of such
proceeds as Agent shall elect to apply to the Obligations (unless such Credit
Party applies such proceeds towards the replacement or repair of such personal
property or real property); and (ii) upon receipt by any Credit Party of the
proceeds of any asset disposition of personal property not made in the Ordinary
Course of Business (other than transfers permitted by Section 7.1), an amount
equal to one hundred percent (100%) of the net cash proceeds of such asset
disposition (net of out-of-pocket expenses and repayment of any permitted
purchase money debt encumbering such asset), or such lesser portion as Agent
shall elect to apply to the Obligations.

(d) Permitted Prepayment. After the Closed Period, if any, for the applicable
Term Credit Facility as specified in the Credit Facility Schedule, Borrower
shall have the option to prepay the Prepayable Amount (as defined below) of a
Term Credit Facility advanced by the Lenders under this Agreement, provided
Borrower (i) provides written notice to Agent of its election to prepay the
Prepayable Amount at least fifteen (15) Business Days prior to such prepayment,
and (ii) pays to Agent, for payment to each Lender in accordance with its
respective Pro Rata Share, on the date of such prepayment, an amount equal to
the sum of (A) the Prepayable Amount, plus accrued interest thereon, (B) any
fees payable under the Fee Letters by reason of such prepayment, (C) the
Applicable Prepayment Fee as specified in the Credit Facility Schedule for the
Credit Facility being prepaid, and (D) all Protective Advances. The term
“Prepayable Amount” means all or any portion of the Credit Extensions under the
applicable Term Credit Facility.

2.4 Reserved.

2.5 Reserved.

2.6 Interest and Payments; Administration.

(a) Interest; Computation of Interest. Each Credit Extension shall bear interest
on the outstanding principal amount thereof from the date when made until paid
in full at a rate per annum equal to the Applicable Interest Rate. Each Lender
may, upon the failure of Borrower to pay any fees or interest as required
herein, capitalize such interest and fees and begin to accrue interest thereon
until paid in full, which such interest shall be at a rate per annum equal to
the Applicable Interest Rate unless and until the Default Rate shall otherwise
apply. All other Obligations shall bear interest on the outstanding amount
thereof from the date they first become payable by Borrower under the Financing
Documents until paid in full at a rate per annum equal to the Applicable
Interest Rate unless and until the Default Rate shall otherwise apply. Interest
on the Credit Extensions and all fees payable under the Financing Documents
shall be computed on the basis of a 360-day year and the actual number of days
elapsed in the period during which such interest accrues. In computing interest
on any Credit Extension or other advance, the date of the making of such Credit
Extension or advance shall be included and the date of payment shall be
excluded; provided, however, that if any Credit Extension or advance is repaid
on the same day on which it is made, such day shall be included in computing
interest on such Credit Extension or advance.

(b) Default Rate. Upon the election of Agent following the occurrence and during
the continuance of an Event of Default, Obligations shall bear interest at a
rate per annum which is five hundred basis points (5.00%) above the rate that is
otherwise applicable thereto (the “Default Rate”). Payment or acceptance of the
increased interest rate provided in this subsection is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Agent or
Lenders.

 

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(c) Payments Generally. Except as otherwise provided in this Section 2.6(c), all
payments in respect of the Obligations shall be made to Agent for the account of
the applicable Lenders. All fees payable under the Financing Documents shall be
deemed non-refundable as of the date paid. Any payment required to be made to
Agent or a Lender under this Agreement may be made by debit or automated
clearing house payment initiated by Agent or such Lender from any of Borrower’s
deposit accounts, including the Designated Funding Account, and Borrower shall
tender to Agent and Lenders such authorization forms as Agent or such Lender may
require to implement such debit or automated clearing house payment. These
debits or automated clearing house payments shall not constitute a set-off.
Payments of principal and/or interest received after 12:00 noon New York time
are considered received at the opening of business on the next Business Day.
When a payment is due on a day that is not a Business Day, the payment is due
the next Business Day and additional fees or interest, as applicable, shall
continue to accrue until paid. All payments to be made by Borrower under any
Financing Document shall be made without set-off, recoupment or counterclaim, in
lawful money of the United States and in immediately available funds. The
balance of the Obligations, as recorded in Agent’s books and records at any
time, shall be conclusive and binding evidence of the amounts due and owing to
Agent and Lenders by each Borrower absent manifest error; provided, however,
that any failure to so record or any error in so recording shall not limit or
otherwise affect any Borrower’s duty to pay all amounts owing hereunder or under
any Financing Document. Agent shall endeavor to provide Borrower with a monthly
statement regarding the Credit Extensions (but neither Agent nor any Lender
shall have any liability if Agent shall fail to provide any such statement).
Unless Borrower notifies Agent of any objection to any such statement
(specifically describing the basis for such objection) within ninety (90) days
after the date of receipt thereof, it shall be deemed final, binding and
conclusive upon Borrower in all respects as to all matters reflected therein.

(d) Interest Payments; Maturity Date. Commencing on the first (1st) Payment Date
following the funding of a Credit Extension, and continuing on the Payment Date
of each successive month thereafter through and including the Maturity Date,
Borrower shall make monthly payments of interest, in arrears, calculated as set
forth in this Section 2.6. All unpaid principal and accrued interest is due and
payable in full on the Maturity Date or any earlier date specified herein. If
the Obligations are not paid in full on or before the Maturity Date, all
interest thereafter accruing shall be payable immediately upon accrual.

(e) Fees. Borrower shall pay, as and when due and payable under the terms of the
Fee Letters, to Agent and each Lender, for their own accounts and not for the
benefit of any other Lenders, the fees set forth in the Fee Letters.

(f) Protective Advances. Borrower shall pay to Agent for the account of Lenders
all Protective Advances (including reasonable attorneys’ fees and expenses for
documentation and negotiation of this Agreement) when due under any Financing
Document (and in the absence of any other due date specified herein, such
Protective Advances shall be due upon demand). Borrower has paid to Lenders a
deposit of Fifty Thousand Dollars ($50,000) (the “Good Faith Deposit”) to
initiate the Agent’s due diligence review process and Agent shall apply such
Good Faith Deposit towards any Protective Advances to the extent such Good Faith
Deposit has not already been utilized.

(g) Maximum Lawful Rate. In no event shall the interest charged hereunder with
respect to the Obligations exceed the maximum amount permitted under the Laws of
the State of Maryland. Notwithstanding anything to the contrary in any Financing
Document, if at any time the rate of interest payable hereunder (the “Stated
Rate”) would exceed the highest rate of interest permitted under any applicable
Law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Lawful Rate, Borrower shall, to the extent
permitted by Law, continue to pay interest at the Maximum Lawful Rate until such
time as the total interest received is equal to the total interest which would
have been received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Lawful Rate, in which event this provision shall again apply. In no
event shall the total interest received by any Lender exceed the amount which it
could lawfully have received, had the interest

 

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been calculated for the full term hereof at the Maximum Lawful Rate. If,
notwithstanding the prior sentence, any Lender has received interest hereunder
in excess of the Maximum Lawful Rate, such excess amount shall be applied to the
reduction of the principal balance of such Lender’s Credit Extensions or to
other amounts (other than interest) payable hereunder, and if no such Credit
Extensions or other amounts are then outstanding, such excess or part thereof
remaining shall be paid to Borrower. In computing interest payable with
reference to the Maximum Lawful Rate applicable to any Lender, such interest
shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made.

(h) Taxes; Additional Costs.

(i) All payments of principal and interest on the Obligations and all other
amounts payable hereunder shall be made free and clear of and without deduction
for any present or future income, excise, stamp, documentary, payroll,
employment, property or franchise taxes and other taxes, fees, duties, levies,
assessments, withholdings or other charges of any nature whatsoever (including
interest and penalties thereon) imposed by any taxing authority, excluding
(i) taxes imposed on or measured by Agent’s or any Lender’s net income (or
franchise taxes imposed in lieu of net income tax) by the jurisdictions under
which Agent or such Lender is organized or conducts business (other than solely
as the result of entering into any of the Financing Documents or taking any
action thereunder) (ii) branch profits Taxes under Section 884(a) of the IRC or
any similar Taxes (iii) any U.S. federal withholding Taxes imposed on or with
respect to amounts payable to a Lender by a law in effect on the date on which
such Lender becomes a party hereto (or designates a new lending office),
(iv) any U.S. federal withholding Taxes attributable to such recipient’s failure
to comply with Section 2.6(h)(iii), (v) any taxes imposed under FATCA and
(vi) any United States backup withholding pursuant to Section 3406 of the IRC
(all non-excluded items being called “Taxes”). If any withholding or deduction
from any payment to be made by any Borrower hereunder is required in respect of
any Taxes pursuant to any applicable Law, then Borrower will: (i) pay directly
to the relevant authority the full amount required to be so withheld or
deducted; (ii) promptly forward to Agent an official receipt or other
documentation satisfactory to Agent evidencing such payment to such authority;
and (iii) pay to Agent for the account of Agent and Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by Agent and each Lender will equal the full amount Agent and such
Lender would have received had no such withholding or deduction been required.
If any Taxes are directly asserted against Agent or any Lender with respect to
any payment received by Agent or such Lender hereunder, Agent or such Lender may
pay such Taxes and Borrower will promptly pay such additional amounts (including
any penalty, interest or expense) as is necessary in order that the net amount
received by such Person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such Person would have received
had such Taxes not been asserted so long as such amounts have accrued on or
after the day which is two hundred seventy (270) days prior to the date on which
Agent or such Lender first made written demand therefor.

(ii) If any Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Agent, for the account of Agent and the
respective Lenders, the required receipts or other required documentary
evidence, Borrower shall indemnify Agent and Lenders for any incremental Taxes,
interest or penalties that may become payable by Agent or any Lender as a result
of any such failure.

(iii) Each Lender that (i) is organized under the laws of a jurisdiction other
than the United States, and (ii)(A) is a party hereto on the Closing Date or
(B) purports to become an assignee of an interest as a Lender under this
Agreement after the Closing Date (unless such Lender was already a Lender
hereunder immediately prior to such assignment) (each such Lender a “Foreign
Lender”) shall execute and deliver to each of Borrowers and Agent one or more
(as Borrower or Agent may reasonably request) United States Internal Revenue
Service Forms W-8ECI, W-8BEN, W-8BEN-E, W-8IMY (as applicable) and other
applicable forms, certificates or documents prescribed by the United States
Internal Revenue Service or reasonably requested by Borrower or Agent certifying
as to such Lender’s entitlement to a complete exemption from withholding or
deduction of Taxes. Each Lender that (1) is organized under the laws of the
United States, and (2)(I) is a party hereto on the Closing Date or (II) purports
to become an assignee of an interest as a Lender under this Agreement after the
Closing Date (unless such Lender was already a Lender hereunder immediately
prior to such assignment) shall execute and deliver to each of Borrower and
Agent one or more (as Borrower or Agent may reasonably request) United States
Internal Revenue Service Forms W-9, and other applicable forms, certificates or
documents prescribed by the United States Internal Revenue Service or reasonably
requested by Borrower or Agent certifying that such Lender is not subject to

 

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United States backup withholding. Borrower shall not be required to pay
additional amounts to any Lender pursuant to this subsection (h) with respect to
United States withholding and income Taxes to the extent that the obligation to
pay such additional amounts would not have arisen but for the failure of such
Lender to comply with this paragraph other than as a result of a change in law.

(iv) If a payment made to a Lender would be subject to U.S. federal withholding
Tax imposed under FATCA, such Lender shall deliver to the Agent and the Borrower
at the time or times prescribed by law, and at such other time or times
reasonably requested by the Agent or the Borrower, the documentation prescribed
by applicable law, including the FATCA, and such additional documentation
reasonably requested by the Agent or the Borrower as may be necessary for the
Agent or the Borrower to comply with its obligations under FATCA and to
determine whether the Lender has complied with the Lender obligations under
FATCA, or to determine the amount to deduct and withhold from the payment.

(v) Each Lender shall, whenever a lapse in time or change in circumstances
renders any documentation provided by a Lender pursuant to this Section 2.6(h),
expired or inaccurate in any material respect, deliver promptly to the Borrower
and the Agent updated or other appropriate documentation (including any new
documentation reasonably requested by the Borrower or the Agent) or promptly
notify the Borrower and the Agent in writing of its inability to do so.

(vi) [reserved]

(vii) If any Lender shall determine in its commercially reasonable judgment that
the adoption or taking effect of, or any change in, any applicable Law regarding
capital adequacy, in each instance, after the Closing Date, or any change after
the Closing Date in the interpretation, administration or application thereof by
any Governmental Authority, central bank or comparable agency charged with the
interpretation, administration or application thereof, or the compliance by any
Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency adopted or
otherwise taking effect after the Closing Date, has or would have the effect of
reducing the rate of return on such Lender’s or such controlling Person’s
capital as a consequence of such Lender’s obligations hereunder to a level below
that which such Lender or such controlling Person could have achieved but for
such adoption, taking effect, change, interpretation, administration,
application or compliance (taking into consideration such Lender’s or such
controlling Person’s policies with respect to capital adequacy) then from time
to time, upon written demand by such Lender (which demand shall be accompanied
by a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Agent), Borrowers shall promptly pay to such Lender such additional amount as
will compensate such Lender or such controlling Person for such reduction, so
long as such amounts have accrued on or after the day which is two hundred
seventy (270) days prior to the date on which such Lender first made demand
therefor; provided, however, that notwithstanding anything in this Agreement to
the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act
and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (ii) 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 be a “change in applicable Law”, regardless of the date
enacted, adopted or issued.

(viii) If any Lender requires compensation under this subsection (h), or
requires any Borrower to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to this subsection
(h), then, upon the written request of Borrower, such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Credit Extensions hereunder or to assign its rights and obligations
hereunder (subject to the terms of this Agreement) to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or materially reduce amounts payable pursuant to
any such subsection, as the case may be, in the future, and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be materially disadvantageous to such Lender (as determined in its sole
discretion). Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.

 

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(i) Administrative Fees and Charges.

(i) Borrower shall pay to Agent, for its own account and not for the benefit of
any other Lenders, all reasonable fees and expenses in connection with audits
and inspections of the books and records of the Credit Parties, audits,
valuations or appraisals of the Collateral, audits of Borrower’s compliance with
applicable Laws and such other matters as Agent shall deem appropriate, which
shall be due and payable on the first Business Day of the month following the
date of issuance by Agent of a written request for payment thereof to any
Borrower; provided, that, as long as no Event of Default has occurred and is
then continuing, Agent shall be entitled to such reimbursement for no more than
two audits and inspections per calendar year.

(ii) If payments of principal or interest due on the Obligations, or any other
amounts due hereunder or under the other Financing Documents, are not timely
made and remain overdue for a period of five (5) days, Borrower, without notice
or demand by Agent, promptly shall pay to Agent, for its own account and not for
the benefit of any other Lenders, as additional compensation to Agent in
administering the Obligations, an amount equal to five percent (5.0%) of each
delinquent payment.

2.7 Secured Promissory Notes. At the election of any Lender made as to each
Credit Facility for which it has made Credit Extensions, each Credit Facility
shall be evidenced by one or more secured promissory notes in form and substance
satisfactory to Agent and Lenders (each a “Secured Promissory Note”). Upon
receipt of an affidavit of an officer of a Lender as to the loss, theft,
destruction, or mutilation of its Secured Promissory Note, Borrower shall issue,
in lieu thereof, a replacement Secured Promissory Note in the same principal
amount thereof and of like tenor.

3 CONDITIONS OF CREDIT EXTENSIONS

3.1 Conditions Precedent to Initial Credit Extension. Each Lender’s obligation
to make an advance in respect of a Credit Facility is subject to the condition
precedent that Agent shall consent to or shall have received, in form and
substance satisfactory to Agent, such documents, and completion of such other
matters, as Agent may reasonably deem necessary or appropriate, including,
without limitation, all items listed on the Closing Deliveries Schedule attached
hereto.

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

(a) timely receipt by the Agent of an executed Credit Extension Form in the form
attached hereto;

(b) the representations and warranties in Article 5 shall be true, correct and
complete in all material respects on the date of the Credit Extension Form and
on the Funding Date of each Credit Extension; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date. Each Credit Extension is Borrower’s
representation and warranty on that date that the representations and warranties
in Article 5 remain true, accurate and complete in all material respects;
provided, however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

(c) no Default or Event of Default shall have occurred and be continuing or
result from the Credit Extension;

(d) Agent shall be satisfied with the results of any searches conducted under
Section 3.5; and

(e) in such Lender’s sole discretion, there has not been any Material Adverse
Change or any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Agent.

 

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3.3 Method of Borrowing. Each Credit Extension in respect of each Credit
Facility shall be in an amount at least equal to the applicable Minimum Credit
Extension Amount for such Credit Facility as set forth in the Credit Facility
Schedule or such lesser amount as shall remain undisbursed under the Applicable
Commitments for such Credit Facility. The date of funding for any requested
Credit Extension shall be a Business Day. To obtain a Credit Extension, Borrower
shall deliver to Agent a completed Credit Extension Form executed by a
Responsible Officer. Agent may rely on any notice given by a person whom Agent
reasonably believes is a Responsible Officer or designee. Agent and Lenders
shall have no duty to verify the authenticity of any such notice.

3.4 Funding of Credit Facilities. Upon the terms and subject to the conditions
set forth herein, each Lender, severally and not jointly, shall make available
to Agent its Pro Rata Share of the requested Credit Extension, in lawful money
of the United States of America in immediately available funds, prior to 11:00
a.m. (New York time) on the specified date for the Credit Extension. Agent
shall, unless it shall have determined that one of the conditions set forth in
Section 3.1 or 3.2, as applicable, has not been satisfied, by 2:00 p.m. (New
York time) on such day, credit the amounts received by it in like funds to
Borrower by wire transfer to the Designated Funding Account (or to the account
of Borrower in respect of the Obligations, if the Credit Extension is being made
to pay an Obligation of Borrower). A Credit Extension made prior to the
satisfaction of any conditions set forth in Section 3.1 or 3.2 shall not
constitute a waiver by Agent or Lenders of Borrower’s obligation to satisfy such
conditions, and any such Credit Extension made in the absence of such
satisfaction shall be made in Agent’s discretion.

3.5 Searches. Before the Closing Date, and thereafter (as and when determined by
Agent in its discretion), Agent shall have the right to perform, all at
Borrower’s expense, the searches described in clauses (a), (b), and (c) below
against Borrower and any other Credit Party, the results of which are to be
consistent with Borrower’s representations and warranties under this Agreement
and the reasonably satisfactory results of which shall be a condition precedent
to all Credit Extension requested by Borrower: (a) UCC searches with the
Secretary of State of the jurisdiction in which the applicable Person is
organized; (b) judgment, pending litigation, federal tax lien, personal property
tax lien, and corporate and partnership tax lien searches, in each jurisdiction
searched under clause (a) above; and (c) searches of applicable corporate,
limited liability company, partnership and related records to confirm the
continued existence, organization and good standing of the applicable Person and
the exact legal name under which such Person is organized.

4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Agent, for the ratable
benefit of the Lenders, to secure the payment and performance in full of all of
the Obligations, a continuing security interest in, and pledges to Agent, for
the ratable benefit of the Lenders, the Collateral, wherever located, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof. Borrower represents, warrants, and covenants that the security interest
granted herein is and shall at all times continue to be a first priority
perfected security interest in the Collateral, subject only to Permitted Liens
that may have priority by operation of applicable Law or by the terms of a
written intercreditor or subordination agreement entered into by Agent. Subject
to Section 13.16, if this Agreement is terminated, Agent’s Lien in the
Collateral shall continue until the Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) are repaid in full in cash and all obligations of
the Lenders to make Credit Extensions have been terminated. Subject to
Section 13.16, upon payment in full in cash of the Obligations (other than
inchoate indemnity obligations and any other obligations which, by their terms,
are to survive the termination of this Agreement) and termination of all
obligations of the Lenders to make Credit Extensions, Agent shall, at Borrower’s
sole cost and expense, release its Liens in the Collateral and all rights
therein shall revert to Borrower.

4.2 Representations and Covenants.

(a) As of the Closing Date, Borrower has no ownership interest in any Chattel
Paper, letter of credit rights, commercial tort claims, Instruments, documents
or investment property (other than equity interests in any Subsidiaries of such
Borrower disclosed on the Disclosure Schedule attached hereto).

 

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(b) Borrower shall deliver to Agent all tangible Chattel Paper and all
Instruments and Documents owned by any Borrower and constituting part of the
Collateral duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Agent.
Borrower shall provide Agent with “control” (as in the Code) of all electronic
Chattel Paper owned by any Borrower and constituting part of the Collateral by
having Agent identified as the assignee on the records pertaining to the single
authoritative copy thereof and otherwise complying with the applicable elements
of control set forth in the UCC. Borrower also shall deliver to Agent all
security agreements securing any such Chattel Paper and securing any such
Instruments. Borrower will mark conspicuously all such Chattel Paper and all
such Instruments and Documents with a legend, in form and substance satisfactory
to Agent, indicating that such Chattel Paper and such Instruments and Documents
are subject to the security interests and Liens in favor of Agent created
pursuant to this Agreement and the Financing Documents.

(c) Borrower shall deliver to Agent all letters of credit on which any Borrower
is the beneficiary and which give rise to letter of credit rights owned by such
Borrower which constitute part of the Collateral in each case duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Agent. Borrower shall take any and all actions as
may be necessary or desirable, or that Agent may request, from time to time, to
cause Agent to obtain exclusive “control” (as defined in the Code) of any such
letter of credit rights in a manner acceptable to Agent.

(d) Borrower shall promptly advise Agent upon any Borrower becoming aware that
it has any interests in any commercial tort claim that constitutes part of the
Collateral, which such notice shall include descriptions of the events and
circumstances giving rise to such commercial tort claim and the dates such
events and circumstances occurred, the potential defendants with respect such
commercial tort claim and any court proceedings that have been instituted with
respect to such commercial tort claims, and Borrower shall, with respect to any
such commercial tort claim, execute and deliver to Agent such documents as Agent
shall request to perfect, preserve or protect the Liens, rights and remedies of
Agent with respect to any such commercial tort claim.

(e) Except for Accounts and Inventory in an aggregate amount of Fifty Thousand
Dollars ($50,000), and excluding any drug Products or drug substances, no
Accounts or Inventory or other Collateral shall at any time be in the possession
or control of any warehouse, consignee, bailee or any of Borrower’s agents or
processors without prior written notice to Agent and the receipt by Agent, if
Agent has so requested, of warehouse receipts, consignment agreements or bailee
lien waivers (as applicable) satisfactory to Agent prior to the commencement of
such possession or control. Borrower shall, upon the request of Agent, notify
any such warehouse, consignee, bailee, agent or processor of the security
interests and Liens in favor of Agent created pursuant to this Agreement and the
Financing Documents, instruct such Person to hold all such Collateral for
Agent’s account subject to Agent’s instructions and shall obtain an
acknowledgement from such Person that such Person holds the Collateral for
Agent’s benefit.

(f) Upon request of Agent, Borrower shall promptly deliver to Agent any and all
certificates of title, applications for title or similar evidence of ownership
of all such tangible personal property and shall cause Agent to be named as
lienholder on any such certificate of title or other evidence of ownership.
Borrower shall not permit any such tangible personal property to become fixtures
to real estate unless such real estate is subject to a Lien in favor of Agent.

(g) Each Borrower hereby authorizes Agent to file without the signature of such
Borrower one or more UCC financing statements relating to liens on personal
property relating to all or any part of the Collateral, which financing
statements may list Agent as the “secured party” and such Borrower as the
“debtor” and which describe and indicate the collateral covered thereby as all
or any part of the Collateral under the Financing Documents in such
jurisdictions as Agent from time to time determines are appropriate, and to file
without the signature of such Borrower any continuations of or corrective
amendments to any such financing statements, in any such case in order for Agent
to perfect, preserve or protect the Liens, rights and remedies of Agent with
respect to the Collateral. Each Borrower also ratifies its authorization for
Agent to have filed in any jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof. Any financing statement
may include a notice that any disposition of the Collateral, by either Borrower
or any other Person, shall be deemed to violate the rights of Agent and the
Lenders under the UCC.

(h) As of the Closing Date, no Borrower holds, and after the Closing Date
Borrower shall promptly notify Agent in writing upon creation or acquisition by
any Borrower of, any Collateral which constitutes a claim against any
Governmental Authority, including, without limitation, the federal government of
the United States or any instrumentality or

 

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agency thereof, the assignment of which claim is restricted by any applicable
Law, including, without limitation, the federal Assignment of Claims Act and any
other comparable Law. Upon the request of Agent, Borrower shall take such steps
as may be necessary or desirable, or that Agent may request, to comply with any
such applicable Law.

(i) Borrower shall furnish to Agent from time to time any statements and
schedules further identifying or describing the Collateral and any other
information, reports or evidence concerning the Collateral as Agent may
reasonably request from time to time.

5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows at all times unless expressly
provided below:

5.1 Due Organization, Authorization: Power and Authority.

(a) Each Credit Party is duly existing and in good standing, as a Registered
Organization in its respective jurisdiction of formation. Each Credit Party is
qualified and licensed to do business and is in good standing in any
jurisdiction in which the conduct of its business or its ownership of property
requires that it be qualified except where the failure to do so could not
reasonably be expected to have a Material Adverse Change. The Financing
Documents have been duly authorized, executed and delivered by each Credit Party
and constitute legal, valid and binding agreements enforceable in accordance
with their terms. The execution, delivery and performance by each Credit Party
of each Financing Document executed or to be executed by it is in each case
within such Credit Party’s powers.

(b) The execution, delivery and performance by each Credit Party of the
Financing Documents to which it is a party do not (i) conflict with any of such
Credit Party’s organizational documents; (ii) contravene, conflict with,
constitute a default under or violate any Law; (iii) contravene, conflict or
violate any applicable order, writ, judgment, injunction, decree, determination
or award of any Governmental Authority by which such Credit Party or any of its
property or assets may be bound or affected; (iv) require any action by, filing,
registration, or qualification with, or Required Permit from, any Governmental
Authority (except such Required Permits which have already been obtained and are
in full force and effect); or (v) constitute a default under any Material
Agreement. No Credit Party is in default under any agreement to which it is a
party or by which it is bound in which the default could reasonably be expected
to have a Material Adverse Change.

5.2 Litigation. Except as disclosed on the Disclosure Schedule or in the
Disclosure Letter or, after the Closing Date, pursuant to Section 6.7, there are
no actions, suits, proceedings or investigations pending or, to the knowledge of
the Responsible Officers, threatened in writing by or against any Credit Party
which involves the possibility of any judgment or liability of more than Fifty
Thousand Dollars ($50,000.00) or that could result in a Material Adverse Change,
or which questions the validity of the Financing Documents, or the other
documents required thereby or any action to be taken pursuant to any of the
foregoing, nor does any Credit Party have reason to believe that any such
actions, suits, proceedings or investigations are threatened.

5.3 No Material Deterioration in Financial Condition; Financial Statements. All
financial statements for the Credit Parties delivered to Agent fairly present,
in conformity with GAAP, in all material respects the consolidated financial
condition and consolidated results of operations of such Credit Party as of the
dates and for the periods presented. There has been no material deterioration in
the consolidated financial condition of any Credit Party from the most recent
financial statements and projections submitted to Agent. There has been no
material adverse deviation from the most recent annual operating plan of
Borrower delivered to Agent and Lenders.

5.4 Solvency. The fair salable value of each Credit Party’s assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities.
After giving effect to the transactions described in this Agreement, (a) no
Credit Party is left with unreasonably small capital in relation to its business
as presently conducted, and (b) each Credit Party is able to pay its debts
(including trade debts) as they mature.

5.5 Subsidiaries; Investments. Borrower and its Subsidiaries do not own any
stock, partnership interest or other equity securities, except for Permitted
Investments.

 

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5.6 Tax Returns and Payments; Pension Contributions. Each Credit Party has
timely filed or has obtained extensions for filing all required foreign, federal
and state, and all material local, tax returns and reports, and each Credit
Party has timely paid all foreign, federal, state and material local taxes,
assessments, deposits and contributions owed by such Credit Party, subject to
such Credit Party’s right to defer payment of any contested taxes in accordance
with Section 6.4 of this Agreement. Borrower is unaware of any claims or
adjustments proposed for any of prior tax years of any Credit Party which could
result in additional taxes becoming due and payable by such Credit Party. Each
Credit Party has paid all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms, and no
Credit Party has withdrawn from participation in, or has permitted partial or
complete termination of, or permitted the occurrence of any other event with
respect to, any such plan which could reasonably be expected to result in any
liability of such Credit Party, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.

5.7 Disclosure Schedule. All information set forth in the Disclosure Schedule is
true, accurate and complete as of the date hereof. All information set forth in
the Perfection Certificate is true, accurate and complete as of the date hereof.

6 AFFIRMATIVE COVENANTS

Borrower covenants and agrees as follows:

6.1 Organization and Existence; Government Compliance.

(a) Each Credit Party shall maintain its legal existence and good standing in
its respective jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have a Material Adverse Change. If a Credit Party is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Agent of such
occurrence and provide Agent with such Credit Party’s organizational
identification number.

(b) Each Credit Party shall comply with all Laws, ordinances and regulations to
which it or its business locations is subject, the noncompliance with which
could reasonably be expected to result in a Material Adverse Change. Each Credit
Party shall obtain and keep in full force and effect and comply with all of the
Required Permits, except where failure to have or maintain compliance with or
effectiveness of such Required Permit could not reasonably be expected to result
in a Material Adverse Change. Each Credit Party shall promptly provide copies of
any such obtained Required Permits to Agent. Borrower shall notify Agent within
three (3) Business Days (but in any event prior to Borrower submitting any
requests for Credit Extensions or release of any reserves) of the occurrence of
any facts, events or circumstances known to a Borrower, whether threatened,
existing or pending, that could cause any Required Permit to become limited,
suspended or revoked or that makes Borrower subject to or requires Borrower to
file a plan of correction with respect to any accreditation survey.

6.2 Financial Statements, Reports, Certificates.

(a) Each Credit Party shall deliver to Agent: (i) as soon as available, but no
later than forty-five (45) days after the last day of each quarter, a company
prepared consolidated and consolidating balance sheet, income statement and cash
flow statement covering such Credit Party’s consolidated operations for such
quarter certified by a Responsible Officer and in a form acceptable to Agent;
(ii) as soon as available, but no later than one hundred eighty (180) days after
the last day of a Credit Party’s fiscal year, audited consolidated and
consolidating financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm acceptable to Agent in its
reasonable discretion; (iii) as soon as available after approval thereof by such
Credit Party’s governing board, but no later than March 31 of each calendar
year, and as amended and/or updated, such Credit Party’s financial projections
for current fiscal year (and updated notice of any material changes within ten
(10) days of approval by such Credit Party’s governing board); (iv) within five
(5) days of delivery, copies of all statements, reports and notices made
generally available to all of such Credit Party’s security holders or to any
holders of Subordinated Debt; (v) within five (5) days of filing, all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission or a
link thereto on such Credit Party’s or another website on the Internet;
(vi) budgets, sales projections, operating plans and

 

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other financial information reasonably requested by Agent; (vii) as soon as
available, but no later than forty-five (45) days after the last day of each
month, copies of the month-end account statements for each Collateral Account
maintained by a Credit Party (including without limitation and for the avoidance
of doubt, the Securities Subsidiary), which statements may be provided to Agent
and each Lender by Borrower or directly from the applicable institution(s); and
(viii) such additional information, reports or statements regarding the Credit
Parties or their respective businesses, contractors and subcontractors as Agent
may from time to time reasonably request.

(b) Within forty-five (45) days after the last day of each month, Borrower shall
deliver to Agent a duly completed Compliance Certificate signed by a Responsible
Officer.

(c) Borrower shall cause each Credit Party to keep proper books of record and
account in accordance with GAAP in which full, true and correct entries shall be
made of all dealings and transactions in relation to its business and
activities. Borrower shall allow, and cause each Credit Party to allow, during
normal business hours and given reasonable notice provided no Default then
exists or has occurred during the preceding 30 days, Agent and Lenders to visit
and inspect any properties of a Credit Party, to examine and make abstracts or
copies from any Credit Party’s books, to conduct a collateral audit and analysis
of its operations and the Collateral to verify the amount and age of the
accounts, the identity and credit of the respective account debtors, to review
the billing practices of the Credit Party and to discuss its respective affairs,
finances and accounts with their respective officers, employees and independent
public accountants as often as may reasonably be desired. Borrower shall
reimburse Agent for all reasonable costs and expenses associated with such
visits and inspections; provided, however, that Borrower shall be required to
reimburse Agent for such costs and expenses for no more than two (2) such visits
and inspections per twelve (12) month period unless a Default or Event of
Default has occurred during such period.

(d) Borrower shall, and shall cause each Credit Party to, deliver to Agent,
within five (5) Business Days after the same are sent or received, copies of all
material correspondence, reports, documents and other filings with any
Governmental Authority that could reasonably be expected to have a material
effect on any of the Required Permits material to Borrower’s business or
otherwise on the operations of Borrower or any of its Subsidiaries.

6.3 Maintenance of Property. Borrower shall cause all equipment and other
tangible personal property other than Inventory to be maintained and preserved
in the same condition, repair and in working order as when new, ordinary wear
and tear excepted, and shall promptly make or cause to be made all repairs,
replacements and other improvements in connection therewith that are necessary
or desirable to such end. Borrower shall cause each Credit Party to keep all
Inventory in good and marketable condition, free from material defects. Returns
and allowances between a Credit Party and its Account Debtors shall follow the
Credit Party’s customary practices as they exist at the Closing Date. Borrower
shall promptly notify Agent of all returns, recoveries, disputes and claims that
involve more than One Hundred Thousand Dollars ($100,000) of Inventory
collectively among all Credit Parties.

6.4 Taxes; Pensions. Borrower shall timely file and cause each Credit Party to
timely file, all required tax returns and reports and timely pay, and cause each
Credit Party to timely pay, all foreign, federal, state, and material local
taxes, assessments, deposits and contributions owed, and shall deliver to Agent,
on demand, appropriate certificates attesting to such payments. Borrower shall
pay, and cause each Credit Party to pay, all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms. Notwithstanding the foregoing, a Credit Party may defer
payment of any contested taxes, provided, however, that such Credit Party (a) in
good faith contests its obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (b) notifies Agent in writing
of the commencement of, and any material development in, the proceedings, and
(c) posts bonds or takes any other steps required to prevent the governmental
authority levying such contested taxes from obtaining a Lien upon any of the
Collateral.

6.5 Insurance. Borrower shall, and shall cause each Credit Party to, keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Agent may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to Agent. All property policies shall have a lender’s loss
payable endorsement showing Agent as sole lender’s loss payee and waive
subrogation against Agent, and all liability policies shall show, or have
endorsements showing, Agent as an additional insured. No other loss payees may
be shown on the policies unless Agent shall otherwise consent in writing. If
required by Agent, all policies (or

 

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the loss payable and additional insured endorsements) shall provide that the
insurer shall endeavor to give Agent at least thirty (30) days’ (ten (10) days
for nonpayment of premium) notice before canceling, amending, or declining to
renew its policy. At Agent’s request, Borrower shall deliver certified copies of
all such Credit Party insurance policies and evidence of all premium payments.
If any Credit Party fails to obtain insurance as required under this Section 6.5
or to pay any amount or furnish any required proof of payment to third persons
and Agent, Agent may make all or part of such payment or obtain such insurance
policies required in this Section 6.5, and take any action under the policies
Agent deems prudent.

6.6 Collateral Accounts. Borrower shall, and shall cause each Credit Party to,
provide Agent five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution. In addition,
for each Collateral Account that any Credit Party at any time maintains (other
than Collateral Accounts in connection with any letter of credit permitted in
clause (f) of the definition of “Permitted Contingent Obligations”), Borrower
shall, and shall cause each Credit Party to, cause the applicable bank or
financial institution at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Agent’s Lien in such Collateral
Account in accordance with the terms hereunder, which Control Agreement may not
be terminated without prior written consent of Agent. The provisions of the
previous sentence shall not apply to (i) deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of a Credit Party’s employees and identified to Agent by Borrower as
such (provided, however, that at all times Borrower shall maintain one or more
separate Deposit Accounts to hold any and all amounts to be used for payroll,
payroll taxes and other employee wage and benefit payments, and shall not
commingle any monies allocated for such purposes with funds in any other Deposit
Account) or (ii) any Collateral Account owned by the Securities Subsidiary so
long as the Securities Subsidiary continues to qualify as a “Security
Corporation” as defined in 830 Code of Mass. Regulations 63.38B.1. Borrower
shall at all times maintain in a Collateral Account owned by Borrower and
subject to a Control Agreement an amount of cash and/or cash equivalents equal
to not less than either (i) the sum of (A) the outstanding amount of the
Obligations plus (B) five percent (5%) of the Obligations plus (C) the amount
necessary to maintain the minimum balance requirement of all Collateral
Accounts, or (ii) if the following amount pursuant to this clause (ii) is less
than the amount that is determined pursuant to clause (i) at any given time, the
amount of any and all remaining cash and cash equivalents of Borrower and its
Subsidiaries on a consolidated basis (provided, that, to the extent that the
amount required by this provision is being determined based upon clause
(ii) hereof, it is understood and agreed that Borrower may, from time to time,
deposit and maintain cash in any Deposit Account referenced in clause (i) of the
immediately preceding sentence (e.g. the payroll and employee benefits accounts)
to the extent so deposited and maintained in the Ordinary Course of Business and
such Deposit Account need not be subject to a Control Agreement). Subject to
Section 6.13, Borrower shall, and shall cause each Credit Party to, maintain its
primary operating and other Collateral Accounts with Silicon Valley Bank and its
affiliates; provided however, that Borrower may invest up to fifty (50%) percent
of its cash and cash equivalents with another bank or financial institution
subject to the terms and conditions of this Agreement.

6.7 Notices of Material Agreements, Litigation and Defaults; Cooperation in
Litigation. Promptly (and in any event within five (5) Business Days), (i) upon
Borrower becoming aware of the existence of any Event of Default or event which,
with the giving of notice or passage of time, or both, would constitute an Event
of Default or (ii) upon the execution and delivery of any Material Agreement and
each amendment to, and copies of all statements, reports and notices delivered
to or by a Credit Party in connection with, any Material Agreement, or
(iii) upon Borrower becoming aware of (or having reason to believe any of the
following are pending or threatened in writing) any action, suit, proceeding or
investigation by or against Borrower or any Credit Party which involves the
possibility of any judgment or liability of more than Fifty Thousand Dollars
($50,000) or that could result in a Material Adverse Change, or which questions
the validity of any of the Financing Documents, or the other documents required
thereby or any action to be taken pursuant to any of the foregoing, Borrower
shall give written notice to Agent of such occurrence, and such further
information as Agent shall reasonably request. From the date hereof and
continuing through the termination of this Agreement, Borrower shall, and shall
cause each Credit Party to, make available to Agent, without expense to Agent,
each Credit Party’s officers, employees and agents and books, to the extent that
Agent may deem them reasonably necessary to prosecute or defend any third-party
suit or proceeding instituted by or against Agent with respect to any Collateral
or relating to a Credit Party.

 

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6.8 Creation/Acquisition of Subsidiaries. In the event Borrower or any
Subsidiary creates or, to the extent permitted hereunder, acquires any
Subsidiary, Borrower and such Subsidiary shall promptly (and in any event within
five (5) Business Days of such creation or acquisition) notify Agent of the
creation or acquisition of such new Subsidiary and take all such action as may
be reasonably required by Agent to cause each such Subsidiary to become a
co-Borrower hereunder or to guarantee the Obligations of Borrower under the
Financing Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower shall grant and pledge to Agent, for the ratable
benefit of the Lenders, a perfected security interest in the stock, units or
other evidence of ownership of each Subsidiary (the foregoing collectively, the
“Joinder Requirements”); provided, that Borrower shall not be permitted to make
any Investment in such Subsidiary until such time as Borrower has satisfied the
Joinder Requirements. Notwithstanding the foregoing, so long as the Securities
Subsidiary continues to qualify as a “Security Corporation” as defined in 830
Code of Mass. Regulations 63.38B.1, such Securities Subsidiary shall not be
subject to the Joinder Requirements (other than except as set forth in clause
(ii) below); provided, that, (i) Borrower shall not be permitted to make any
Investment in such Securities Subsidiary other than pursuant to clause (g) of
the definition of Permitted Investments and (ii) the Securities Subsidiary shall
be subject to a pledge by Borrower of 100% of the Securities Subsidiary’s equity
interests.

6.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely for (a) transaction fees incurred in connection with the Financing
Documents, and (b) for working capital needs of Borrower and its Subsidiaries.
No portion of the proceeds of the Credit Extensions will be used for family,
personal, agricultural or household use.

6.10 Hazardous Materials; Remediation.

(a) If any release or disposal of Hazardous Materials shall occur or shall have
occurred on any real property or any other assets of any Borrower or any other
Credit Party, such Borrower will cause, or direct the applicable Credit Party to
cause, the prompt containment and removal of such Hazardous Materials and the
remediation of such real property or other assets as is necessary to comply with
all Laws and to preserve the value of such real property or other assets.
Without limiting the generality of the foregoing, each Borrower shall, and shall
cause each other Credit Party to, comply with each Law requiring the performance
at any real property by any Borrower or any other Credit Party of activities in
response to the release or threatened release of a Hazardous Material.

(b) Borrower will provide Agent within thirty (30) days after written demand
therefor with a bond, letter of credit or similar financial assurance evidencing
to the reasonable satisfaction of Agent that sufficient funds are available to
pay the cost of removing, treating and disposing of any Hazardous Materials or
Hazardous Materials Contamination and discharging any assessment which may be
established on any property as a result thereof, such demand to be made, if at
all, upon Agent’s determination that the failure to remove, treat or dispose of
any Hazardous Materials or Hazardous Materials Contamination, or the failure to
discharge any such assessment could reasonably be expected to have a Material
Adverse Change.

(c) If there is any conflict between this Section and any environmental
indemnity agreement which is a Financing Document, the environmental indemnity
agreement shall govern and control.

6.11 Power of Attorney. Each of the officers of Agent is hereby irrevocably
made, constituted and appointed the true and lawful attorney for each Borrower
(without requiring any of them to act as such) with full power of substitution
to do the following: (a) endorse the name of any Borrower upon any and all
checks, drafts, money orders, and other instruments for the payment of money
that are payable to Borrower; (b) make, settle, and adjust all claims under
Borrower’s insurance policies; (c) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or
any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (d) so long as Agent has provided not less than three
(3) Business Days’ prior written notice to Borrower to perform the same and
Borrower has failed to take such action, (i) execute in the name of any Borrower
any schedules, assignments, instruments, documents, and statements that
Borrowers are obligated to give Agent under this Agreement or that Agent or any
Lender deems necessary to perfect or better perfect Agent’s security interest or
Lien in any Collateral, and (ii) do such other and further acts and deeds in the
name of Borrower that Agent may deem necessary or desirable to enforce, protect
or preserve any Collateral or its rights therein, including, but not limited to,
to sign Borrower’s name on any invoice or bill of lading for any Account or
drafts against Account Debtors; (e) after the occurrence and during the
continuance of an Event of Default, (i) take any action any Credit Party is
required to take under this Agreement or any other Financing Document,
(ii) transfer the Collateral into the name of Agent or a third party as the Code
permits, (iii) exercise any rights and remedies described in this Agreement or
the other Financing Documents, and (iv) do such other and further acts and deeds
in the name of Borrower that Agent may deem necessary or desirable to enforce
its rights with regard to any Collateral.

 

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6.12 Further Assurances. Borrower shall, and shall cause each Credit Party to,
promptly execute any further instruments and take further action as Agent
reasonably requests to perfect or better perfect or continue Agent’s Lien in the
Collateral or to effect the purposes of this Agreement or any other Financing
Document.

6.13 Post-Closing Obligations. Borrower shall, and shall cause each Credit Party
to, complete each of the post-closing obligations and/or deliver to Agent each
of the documents, instruments, agreements and information listed on the
Post-Closing Obligations Schedule attached hereto, on or before the date set
forth for each such item thereon, each of which shall be completed or provided
in form and substance satisfactory to Agent and Lenders.

6.14 Disclosure Schedule. Borrower shall, contemporaneously with delivery of
each Compliance Certificate required by Section 6.2(b), deliver to Agent a
proposed update to the Disclosure Schedule correcting all outdated, inaccurate,
incomplete or misleading information. With respect to any proposed updates to
the Disclosure Schedule involving Permitted Liens, Permitted Indebtedness or
Permitted Investments, Agent will replace the Disclosure Schedule attached
hereto with such proposed update only if such updated information is consistent
with the definitions of and limitations herein pertaining to Permitted Liens,
Permitted Indebtedness or Permitted Investments. With respect to any proposed
updates to the Disclosure Schedule involving other matters, Agent will replace
the applicable portion of the Disclosure Schedule attached hereto with such
proposed update upon Agent’s approval thereof.

7 NEGATIVE COVENANTS

Borrower shall not do, nor shall it permit any Credit Party to do, any of the
following without the prior written consent of Agent and the Required Lenders:

7.1 Dispositions. Convey, sell, abandon, lease, license, transfer, assign or
otherwise dispose of (collectively, “Transfer”) all or any part of its business
or property, except for (a) sales of Inventory in the Ordinary Course of
Business; (b) sales or abandonment of worn-out or obsolete Equipment;
(c) Permitted Liens; (d) Permitted Licenses; or (e) Transfers to a third party
in connection with any rights which a Credit Party jointly holds with such third
party in Intellectual Property which is developed after the date of this
Agreement and which is permitted by clause (l) of the definition of Permitted
Liens.

7.2 Changes in Business, Management, Ownership or Business Locations. (a) Engage
in any business other than the businesses currently engaged in by Borrower or
such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or
dissolve; (c) enter into any transaction or series of related transactions which
would result in a Change in Control; (d) add any new offices or business
locations, including warehouses (unless such new offices or business locations
contain less than Fifty Thousand Dollars ($50,000) in Borrower’s assets or
property and do not contain any of Borrower’s Books) without first delivering a
fully-executed Access Agreement to Agent with respect to such new location that
contains assets or property of Borrower in excess of Fifty Thousand Dollars
($50,000) or any of Borrower’s Books; (e) change its jurisdiction of
organization; (f) change its organizational structure or type; (g) change its
legal name; or (h) change any organizational number (if any) assigned by its
jurisdiction of organization.

7.3 Mergers or Acquisitions. Merge or consolidate with any other Person, or
acquire all or substantially all of the capital stock or property of another
Person; provided, however, that a Subsidiary of Borrower may merge or
consolidate into another Subsidiary that is a Borrower , so long as (a) Borrower
has provided Agent with prior written notice of such transaction, (b) a Borrower
shall be the surviving legal entity, (c) Borrower’s tangible net worth is not
thereby reduced, and (d) no Event of Default is occurring prior thereto or
arises as a result therefrom.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness other
than Permitted Indebtedness.

7.5 Encumbrance. (a) Create, incur, allow, or suffer any Lien on any of its
property, except for Permitted Liens, (b) permit any Collateral to fail to be
subject to the first priority security interest granted herein, except Permitted
Liens that may have priority by operation of applicable Law or by the terms of a
written intercreditor or subordination

 

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agreement entered into by Agent, or (c) enter into any agreement, document,
instrument or other arrangement (except with or in favor of Agent) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s Collateral or Intellectual Property, except as is otherwise
permitted in the definition of “Permitted Liens” herein or by customary
restrictions on the assignment of leases, licenses and other agreements that
otherwise do not restrict the grant of security interests.

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

7.7 Distributions; Investments. (a) Pay any dividends (other than dividends
payable solely in common stock) or make any distribution or payment with respect
to or redeem, retire or purchase or repurchase any of its equity interests
(other than repurchases pursuant to the terms of employee stock purchase plans,
employee restricted stock agreements or similar plans), or (b) directly or
indirectly make any Investment (including, without limitation, any additional
Investment in any Subsidiary) other than Permitted Investments.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of any Credit Party, except
for (a) transactions that are in the Ordinary Course of Business, upon fair and
reasonable terms that are no less favorable to Borrower than would be obtained
in an arm’s length transaction with a non-affiliated Person; (b) transactions
with Subsidiaries that are designated as a Borrower hereunder and that are not
otherwise prohibited by Section 7 of this Agreement; (c) transactions permitted
by Section 7.7 of this Agreement; and (d) bona fide equity or bridge financings
with Borrower’s investors, provided that any such bridge financings must satisfy
the requirements of Subordinated Debt.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt other than as may be expressly
permitted pursuant to the terms of any applicable subordination, intercreditor
or similar agreement to which such Subordinated Debt is subject.

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

7.11 Amendments to Organization Documents and Material Agreements. Amend, modify
or waive any provision of (a) any Material Agreement, or (b) any of its
organizational documents (other than a change in registered agents), in each
case, without the prior written consent of Agent and Required Lenders if such
amendment, modification or waiver would be materially adverse to the Lenders or
would otherwise breach any provision of the Financing Documents. Borrower shall
provide to Agent copies of all such amendments, waivers and modifications.

7.12 Compliance with Anti-Terrorism Laws. Directly or indirectly, knowingly
enter into any documents, instruments, agreements or contracts with any Person
listed on the OFAC Lists. Borrower shall immediately notify Agent if Borrower
has knowledge that Borrower or any Subsidiary or Affiliate is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering. Borrower will not, nor will Borrower
permit any Subsidiary or Affiliate to, directly or indirectly, (i) conduct any
business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked

 

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Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law. Agent hereby
notifies Borrower that pursuant to the requirements of Anti-Terrorism Laws, and
Agent’s policies and practices, Agent is required to obtain, verify and record
certain information and documentation that identifies Borrower and its
principals, which information includes the name and address of Borrower and its
principals and such other information that will allow Agent to identify such
party in accordance with Anti-Terrorism Laws.

8 ADDITIONAL COVENANTS.

8.1 Life Sciences Covenants.

(a) As used in this Agreement, the following terms have the following meanings:

“DEA” means the Drug Enforcement Administration of the United States of America,
and any successor agency thereof.

“Drug Application” means a new drug application, an abbreviated drug
application, or a product license application for any Product, as appropriate,
as those terms are defined in the FDCA.

“FDA” means the Food and Drug Administration of the United States of America, or
any successor entity thereto.

“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C.
Section 301 et seq., and all regulations promulgated thereunder.

“Material Intellectual Property” means all of Borrower’s Intellectual Property
and license or sublicense agreements or other agreements with respect to rights
in Intellectual Property that are material to the condition (financial or
other), business or operations of Borrower, as reasonably determined by Agent.

“Patheon License Agreement” means that certain Manufacturing and Supply
Agreement, dated as of July 31, 2015 by and between the Borrower and Patheon UK
Limited, as in effect on the Closing Date without giving effect to any
amendments, supplements or modifications thereof (i) that are not permitted
pursuant to the terms of this Agreement or (ii) which expand the scope of the
exclusive license rights granted by Borrower thereunder unless expressly
consented to in writing by Agent and the Required Lenders.

“Permitted License” means (a) any non-exclusive license of Intellectual Property
of Borrower or its Subsidiaries granted to third parties in the Ordinary Course
of Business and that does not result in a legal transfer of title to the
licensed property, and (b)(i) the Patheon License Agreement (subject to the
terms set forth in the definition thereof) and (ii) any exclusive license of
Intellectual Property of Borrower or its Subsidiaries that does not result in a
legal transfer of title to the licensed property and is exclusive as to discrete
geographical areas outside of the United States, and in each of (a) and (b) is
for fair value consideration.

“Products” means any products manufactured, sold, developed, tested or marketed
by any Borrower or any of its Subsidiaries, including without limitation, those
products set forth on the Products Schedule attached hereto (as updated from
time to time in accordance with Section 8.1(d)); provided, however, that if
Borrower shall fail to comply with the obligations under Section 8.1(d) to give
notice to Agent and update the Products Schedule prior to manufacturing,
selling, developing, testing or marketing any new Product, any such improperly
undisclosed Product shall be deemed to be included in this definition.

(b) Notwithstanding the terms of Section 7.1 of this Agreement to the contrary,
Borrower shall be permitted to make Transfers in the form of Permitted Licenses.

 

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(c) Borrower represents and warrants as follows at all times unless expressly
provided below:

(i) Intellectual Property and License Agreements. A list of all of Material
Intellectual Property (including Material Intellectual Property constituting
Permitted Licenses) of each Credit Party, as of the Closing Date and, as updated
pursuant to Section 8.1(d), is set forth on the Intellectual Property Schedule
attached hereto, which indicates, for each item of property: (i) the name of the
Credit Party owning such Intellectual Property or licensee to such license
agreement; (ii) the Credit Party’s identifier for such property (i.e., name of
patent, license, etc.), (iii) whether such property is Intellectual Property (or
application therefor) owned by a Credit Party or is property to which a Credit
Party has rights pursuant to a license agreement, and (iv) the issue date,
application date, or filing-registration date of such Intellectual Property. In
the case of any Material Intellectual Property that is a license agreement, the
Intellectual Property Schedule further indicates, for each: (A) the name and
address of the licensor and licensee, (B) the name and date of the agreement
pursuant to which such item of Material Intellectual Property is licensed, and
(C) whether or not such license agreement grants an exclusive license to a
Credit Party or, in the case of an out-license, to another Person. Except as
noted on the Intellectual Property Schedule, each Credit Party is the sole owner
of its Intellectual Property, except for Permitted Licenses granted to its
customers in the Ordinary Course of Business. To Borrower’s knowledge, each
Patent is valid and enforceable and no part of the Intellectual Property has
been judged invalid or unenforceable, in whole or in part, and to the best of
Borrower’s knowledge, no claim has been made that any part of the Intellectual
Property violates the rights of any third party.

(ii) Regulatory Status.

(A) All Products and all Required Permits are listed on the Products Schedule
and Required Permits Schedule attached hereto (as updated from time to time
pursuant to Section 8.1(d)), and Borrower has delivered to Agent a copy of all
Required Permits as of the date hereof and to the extent requested by Agent
pursuant to Section 8.1(d).

(B) Without limiting the generality of Section 8.1 above, with respect to any
Product being tested or manufactured, Borrower and its Subsidiaries have
received, and such Product is the subject of, all Required Permits needed in
connection with the testing or manufacture of such Product as such testing is
currently being conducted by or on behalf of Borrower, and Borrower and its
Subsidiaries have not received any notice from any applicable Governmental
Authority, specifically including the FDA, that such Governmental Authority is
conducting an investigation or review of (i) Borrower’s or such Subsidiary’s
manufacturing facilities and processes for such Product which have disclosed any
material deficiencies or violations of Laws and/or the Required Permits related
to the manufacture of such Product, or (ii) any such Required Permit or that any
such Required Permit has been revoked or withdrawn, nor has any such
Governmental Authority issued any order or recommendation stating that the
development, testing and/or manufacturing of such Product should cease.

(C) Without limiting the generality of Section 8.1 above, with respect to any
Product marketed or sold by Borrower or its Subsidiaries, Borrower and its
Subsidiaries have received, and such Product is the subject of, all Required
Permits needed in connection with the marketing and sales of such Product as
currently being marketed or sold by Borrower or its Subsidiaries, and Borrower
and its Subsidiaries have not received any notice from any applicable
Governmental Authority, specifically including the FDA, that such Governmental
Authority is conducting an investigation or review of any such Required Permit
or approval or that any such Required Permit has been revoked or withdrawn, nor
has any such Governmental Authority issued any order or recommendation stating
that such marketing or sales of such Product cease or that such Product be
withdrawn from the marketplace.

(D) Without limiting the generality of Section 8.1 above, (i) there have been no
adverse clinical test results in connection with a Product which have or could
reasonably be expected to result in a Material Adverse Change, and (ii) there
have been no Product recalls or voluntary Product withdrawals from any market.

(E) Borrower and its Subsidiaries have not experienced any significant failures
in its manufacturing of any Product such that the amount of such Product
successfully manufactured by Borrower or its Subsidiaries in accordance with all
specifications thereof and the required payments related thereto in any month
shall decrease significantly with respect to the quantities of such Product
produced in the prior month.

 

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(d) Borrower covenants and agrees as follows:

(i) Borrower shall own, or be licensed to use or otherwise have the right to
use, all Material Intellectual Property. All Intellectual Property of Borrower
is and shall be fully protected and/or duly and properly registered, filed or
issued in the appropriate office and jurisdictions for such registrations,
filings or issuances, except where the failure to do so would not reasonably be
expected to result in a Material Adverse Change. Borrower shall not become a
party to, nor become bound by, any material license or other agreement with
respect to which Borrower is the licensee that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or other property, it being understood that Borrower shall
be permitted to enter into such licenses or other agreements containing
customary anti-assignment provisions that otherwise do not restrict the grant of
security interests. Borrower shall at all times conduct its business without
infringement or claim of infringement of any Intellectual Property rights of
others. Borrower shall do the following, to the extent it determines, in the
exercise of its reasonable business judgment, that it is prudent to do so:
(a) protect, defend and maintain the validity and enforceability of its
Intellectual Property; (b) promptly advise Agent in writing of material
infringements of its Intellectual Property; and (c) not allow any Material
Intellectual Property to be abandoned, invalidated, forfeited or dedicated to
the public or to become unenforceable without Agent’s written consent, which
consent shall not be unreasonably withheld if Borrower’s board of directors
determines that such Intellectual Property is no longer material to Borrower’s
business and that abandonment is in the best interest of the Borrower and
provided no Event of Default has occurred and is continuing or would exist at
the time of such abandonment. On a quarterly basis Borrower shall provide Agent
and each Lender with an updated list of all Intellectual Property acquired by
any Credit Party during the quarter then ending. Notwithstanding the foregoing,
except as provided below, the Collateral shall not include any Intellectual
Property of any Credit Party, whether now owned or hereafter acquired, except to
the extent that it is necessary under applicable law to have a Lien and security
interest in any such Intellectual Property in order to have a perfected Lien and
security interest in and to IP Proceeds (as defined in Exhibit A), and for the
avoidance of any doubt, the Collateral shall include, and Agent shall have a
Lien and security interest in, (x) all IP Proceeds, and (y) all payments with
respect to IP Proceeds that are received after the commencement of a bankruptcy
or insolvency proceeding. .

(ii) In connection with the development, testing, manufacture, marketing or sale
of each and any Product by a Credit Party, such Credit Party shall comply fully
and completely in all respects with all Required Permits at all times issued by
any Governmental Authority the noncompliance with which could have a Material
Adverse Change, specifically including the FDA, with respect to such
development, testing, manufacture, marketing or sales of such Product by such
Credit Party as such activities are at any such time being conducted by such
Credit Party.

(iii) Contemporaneously with delivery of each Compliance Certificate required
pursuant to Section 6.2(b), upon (i) acquiring and/or developing any new
Intellectual Property that constitutes Material Intellectual Property, or
(ii) entering or becoming bound by any additional license or sublicense
agreement or other agreement that constitutes Material Intellectual Property,
deliver to Agent an updated Intellectual Property Schedule reflecting same, and
upon any other material change in Borrower’s Material Intellectual Property from
that listed on the Intellectual Property Schedule. Borrower shall take such
commercially reasonable steps as Agent requests to obtain the consent of, or
waiver by, any person whose consent or waiver is necessary for (x) all licenses
or agreements to be deemed “Collateral” and for Agent to have a security
interest in it that might otherwise be restricted or prohibited by Law or by the
terms of any such license or agreement, whether now existing or entered into in
the future, and (y) Agent to have the ability in the event of a liquidation of
any Collateral to dispose of such Collateral in accordance with Agent’s rights
and remedies under this Agreement and the other Financing Documents.

(iv) If, after the Closing Date, Borrower determines to manufacture, sell,
develop, test or market any new Product (excluding FX005, FX006 and FX007),
Borrower shall give prior written notice to Agent of such determination (which
shall include a brief description of such Product, plus a list of all Required
Permits relating to such new Product (and a copy of such Required Permits if
requested by Agent) and/or Borrower’s manufacture, sale, development, testing or
marketing thereof issued or outstanding as of the date of such notice), along
with a copy of an updated Intellectual Property Schedule, Products Schedule and
Required Permits Schedule; provided, however, that if Borrower shall at any time
obtain any new or additional Required Permits from the FDA, DEA, or parallel
state or local authorities, or foreign counterparts of the FDA, DEA, or parallel
state or local authorities, with respect to any new Product (excluding FX005,
FX006 and FX007) which has previously been disclosed to Agent, Borrower shall
promptly give written notice to Agent of such new or additional Required Permits
(along with a copy thereof if requested by Agent).

 

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(e) In addition to the events listed in Article 10, any one of the following
shall also constitute an Event of Default under this Agreement: the institution
of any proceeding by FDA or similar Governmental Authority to order the
withdrawal of any Product or Product category from the market or to enjoin
Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries
from manufacturing, marketing, selling or distributing any Product or Product
category, which in each case could result in a Material Adverse Change (b) the
institution of any action or proceeding by any DEA, FDA, or any other
Governmental Authority to revoke, suspend, reject, withdraw, limit, or restrict
any Required Permit held by Borrower, its Subsidiaries or any representative of
Borrower or its Subsidiaries, which, in each case, could result in Material
Adverse Change, (c) the commencement of any enforcement action against Borrower,
its Subsidiaries or any representative of Borrower or its Subsidiaries (with
respect to the business of Borrower or its Subsidiaries) by DEA, FDA, or any
other Governmental Authority, (d) the recall of any Products from the market,
the voluntary withdrawal of any Products from the market, or actions to
discontinue the sale of any Products, which in each case could result in a
Material Adverse Change or (e) the occurrence of adverse test results in
connection with a Product which could result in Material Adverse Change.

9 RESERVED.

10 EVENTS OF DEFAULT

10.1 Events of Default. The occurrence of any of the following conditions and/or
events, whether voluntary or involuntary, by operation of law or otherwise,
shall constitute an “Event of Default” and Credit Parties shall thereupon be in
default under this Agreement and each of the other Financing Documents:

(a) Borrower fails to (a) make any payment of principal or interest on any
Credit Extension on its due date, (b) pay any invoice for audit or inspection
fees or other Protective Advances within ten (10) days of Borrower’s receipt of
such invoice, or (c) pay any other Obligations within three (3) Business Days
after such Obligations are due and payable (which three (3) Business Day grace
period shall not apply to payments due on the Maturity Date or the date of
acceleration pursuant to Section 10.2 hereof);

(b) Any Credit Party defaults in the performance of or compliance with any term
contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 10.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied by the Credit Party or waived by Agent and Required
Lenders within ten (10) days after the earlier of (i) the date of receipt by any
Borrower of notice from Agent or Required Lenders of such default, (ii) the date
an officer of such Credit Party becomes aware, or through the exercise of
reasonable diligence should have become aware, of such default; provided,
however, that if the default cannot by its nature be cured within the ten
(10) day period or cannot after diligent attempts by such Credit Party be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then such Credit Party shall have an additional period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such time period the failure to cure the default shall not be deemed
an Event of Default (but Lender shall have no obligation to make Credit
Extensions during such cure period). Grace periods provided under this Section
shall not apply, among other things, to any covenants set forth in subsection
(c) below;

(c) Any Credit Party defaults in the performance of or compliance with any term
contained in Sections 6.2, 6.4, 6.5, 6.6, 6.8 or 6.10 or Article 7 or Article 8.

(d) Any representation, warranty, certification or statement made by any Credit
Party or any other Person in any Financing Document or in any certificate,
financial statement or other document delivered pursuant to any Financing
Document is incorrect in any respect (or in any material respect if such
representation, warranty, certification or statement is not by its terms already
qualified as to materiality) when made (or deemed made);

 

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(e) (i) any Credit Party defaults under any Material Agreement (after any
applicable grace period contained therein), or a Material Agreement shall be
terminated by a third party or parties party thereto prior to the expiration
thereof, or there is a loss of a material right of a Credit Party under any
Material Agreement to which it is a party, (ii) (A) any Credit Party fails to
make (after any applicable grace period) any payment when due (whether due
because of scheduled maturity, required prepayment provisions, acceleration,
demand or otherwise) on any Indebtedness (other than the Obligations) of such
Credit Party or such Subsidiary having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to all
creditors under any combined or syndicated credit arrangement) of more than One
Hundred Thousand Dollars ($100,000) (“Material Indebtedness”), (B) any other
event shall occur or condition shall exist under any contractual obligation
relating to any such Material Indebtedness, if the effect of such event or
condition is to accelerate, or to permit the acceleration of (without regard to
any subordination terms with respect thereto), the maturity of such Material
Indebtedness or (C) any such Material Indebtedness shall become or be declared
to be due and payable, or be required to be prepaid, redeemed, defeased or
repurchased (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof, (iii) any Credit Party defaults (beyond any
applicable grace period) under any obligation for payments due or otherwise
under any lease agreement that meets the criteria for the requirement of an
Access Agreement under Section 7.2 or for which an Access Agreement exists or
was required to be delivered, (iv) the occurrence of any breach or default under
any terms or provisions of any Subordinated Debt Document or under any agreement
subordinating the Subordinated Debt to all or any portion of the Obligations or
the occurrence of any event requiring the prepayment of any Subordinated Debt
(other than conversion into equity), or (v) any Borrower makes any payment on
account of any Indebtedness that has been subordinated to any of the
Obligations, other than payments specifically permitted by the terms of such
subordination;

(f) (i) any Credit Party shall generally not pay its debts as such debts become
due, shall admit in writing its inability to pay its debts generally, shall make
a general assignment for the benefit of creditors, or shall cease doing business
as a going concern, (ii) any proceeding shall be instituted by or against any
Credit Party seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, composition of it or its debts or any similar order, in each case under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or seeking the entry of an order for relief or the appointment of a
custodian, receiver, trustee, conservator, liquidating agent, liquidator, other
similar official or other official with similar powers, in each case for it or
for any substantial part of its property and, in the case of any such
proceedings instituted against (but not by or with the consent of) such Credit
Party, either such proceedings shall remain undismissed or unstayed for a period
of thirty (30) days or more or any action sought in such proceedings shall occur
or (iii) any Credit Party shall take any corporate or similar action or any
other action to authorize any action described in clause (i) or (ii) above;

(g) (i) The service of process seeking to attach, execute or levy upon, seize or
confiscate any Collateral Account, any Intellectual Property, or any funds of
any Credit Party on deposit with Agent, any Lender or any Affiliate of Agent or
any Lender, or (ii) a notice of lien, levy, or assessment is filed against any
assets of a Credit Party by any government agency, and the same under subclauses
(i) and (ii) hereof are not discharged or stayed (whether through the posting of
a bond or otherwise) prior to the earlier to occur of ten (10) days after the
occurrence thereof or such action becoming effective;

(h) (i) any court order enjoins, restrains, or prevents Borrower from conducting
any part of its business, (ii) the institution by any Governmental Authority of
criminal proceedings against any Credit Party, or (iii) one or more judgments or
orders for the payment of money (not paid or fully covered by insurance and as
to which the relevant insurance company has acknowledged coverage in writing)
aggregating in excess of $100,000 shall be rendered against any or all Credit
Parties and either (A) enforcement proceedings shall have been commenced by any
creditor upon any such judgments or orders, or (B) there shall be any period of
ten (10) consecutive days during which a stay of enforcement of any such
judgments or orders, by reason of a pending appeal, bond or otherwise, shall not
be in effect;

(i) any Lien created by any of the Financing Documents shall at any time fail to
constitute a valid and perfected Lien on all of the Collateral purported to be
encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or
any Credit Party shall so assert; any provision of any Financing Document shall
fail to be valid and binding on, or enforceable against, a Credit Party, or any
Credit Party shall so assert;

 

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(j) A Change in Control occurs or any Credit Party;

(k) Any Required Permit shall have been (a) revoked, rescinded, suspended,
modified in an adverse manner or not renewed in the Ordinary Course of Business
for a full term, or (b) subject to any decision by a Governmental Authority that
designates a hearing with respect to any applications for renewal of any of such
Required Permit or that could result in the Governmental Authority taking any of
the actions described in clause (a) above, and such decision or such revocation,
rescission, suspension, modification or non-renewal (i) has, or could reasonably
be expected to have, a Material Adverse Change, or (ii) adversely affects the
legal qualifications of any Credit Party to hold such Required Permit in any
applicable jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of any Credit Party to hold any Required Permit in any
other jurisdiction;

(l) Borrower’s equity fails to remain registered with the SEC in good standing,
and/or such equity fails to remain publicly traded on and registered with a
public securities exchange;

(m) The occurrence of any fact, event or circumstance that could reasonably be
expected to result in a Material Adverse Change; or

(n) Agent determines, based on information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more financial covenants in this Agreement during the next
succeeding financial reporting period.

Notwithstanding the foregoing, if a Credit Party fails to comply with any same
provision of this Agreement two (2) times in any twelve (12) month period and
Agent has given to any Borrower in connection with each such failure any notice
to which Borrower would be entitled under this Section before such failure could
become an Event of Default, then all subsequent failures by a Credit Party to
comply with such provision of this Agreement shall effect an immediate Event of
Default (without the expiration of any applicable cure period) with respect to
all subsequent failures by a Credit Party to comply with such provision of this
Agreement, and Agent thereupon may exercise any remedy set forth in this Article
10 without affording Borrower any opportunity to cure such Event of Default.

All cure periods provided for in this Section 10.1 shall run concurrently with
any cure period provided for in any applicable Financing Documents under which
the default occurred.

10.2 Rights and Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default, Agent
may, and at the written direction of any Lender shall, without notice or demand,
do any or all of the following: (i) deliver notice of the Event of Default to
Borrower, (ii) by notice to any Borrower declare all Obligations immediately due
and payable (but if an Event of Default described in Section 10.1(f) occurs all
Obligations shall be immediately due and payable without any action by Agent or
the Lenders), or (iii) by notice to any Borrower suspend or terminate the
obligations, if any, of the Lenders to advance money or extend credit for
Borrower’s benefit under this Agreement or under any other agreement between any
Credit Party and Agent and/or the Lenders (but if an Event of Default described
in Section 10.1(f) occurs all obligations, if any, of the Lenders to advance
money or extend credit for Borrower’s benefit under this Agreement or under any
other agreement between Borrower and Agent and/or the Lenders shall be
immediately terminated without any action by Agent or the Lenders).

(b) Without limiting the rights of Agent and Lenders set forth in
Section 10.2(a) above, upon the occurrence and during the continuance of an
Event of Default, Agent shall have the right, without notice or demand, to do
any or all of the following:

(i) with or without legal process, enter any premises where the Collateral may
be and take possession of and remove the Collateral from the premises or store
it on the premises, and foreclose upon and/or sell, lease or liquidate, the
Collateral, in whole or in part;

 

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

(iii) settle, compromise or adjust and grant releases with respect to disputes
and claims directly with Account Debtors for amounts on terms and in any order
that Agent considers advisable, notify any Person owing any Credit Party money
of Agent’s security interest in such funds, and verify the amount of such
Account;

(iv) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Agent requests and make it available as Agent
designates. Agent may also render any or all of the Collateral unusable at a
Credit Party’s premises and may dispose of such Collateral on such premises
without liability for rent or costs. Borrower grants Agent a license to enter
and occupy any of its premises, without charge, to exercise any of Agent’s
rights or remedies;

(v) pay, purchase, contest, or compromise any Lien which appears to be prior or
superior to its security interest and pay all expenses incurred;

(vi) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
and/or advertise for sale, the Collateral. Agent is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral (and including
in such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof) and, in connection with Agent’s exercise of its
rights under this Article 10, Borrower’s rights under all licenses and all
franchise agreements shall be deemed to inure to Agent for the benefit of the
Lenders;

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

(viii) demand and receive possession of the Books of Borrower and the other
Credit Parties; and

(ix) exercise all other rights and remedies available to Agent under the
Financing Documents or at law or equity, including all remedies provided under
the Code (including disposal of the Collateral pursuant to the terms thereof).

10.3 Notices. Any notice that Agent is required to give to a Credit Party under
the UCC of the time and place of any public sale or the time after which any
private sale or other intended disposition of the Collateral is to be made shall
be deemed to constitute reasonable notice if such notice is given in accordance
with this Agreement at least five (5) days prior to such action.

10.4 Protective Payments. If any Credit Party fails to pay or perform any
covenant or obligation under this Agreement or any other Financing Document,
Agent may pay or perform such covenant or obligation, and all amounts so paid by
Agent are Protective Advances and immediately due and payable, bearing interest
at the then highest applicable rate for the Credit Facilities hereunder, and
secured by the Collateral. No such payments or performance by Agent shall be
construed as an agreement to make similar payments or performance in the future
or constitute Agent’s waiver of any Event of Default.

10.5 Liability for Collateral No Waiver; Remedies Cumulative. So long as Agent
and the Lenders comply with reasonable banking practices regarding the
safekeeping of the Collateral in the possession or under the control of Agent
and the Lenders, Agent and the Lenders shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of
loss, damage or destruction of the Collateral. Agent’s

 

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

10.6 Application of Payments and Proceeds. Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (i) Borrower, for itself and the other
Credit Parties, irrevocably waives the right to direct the application of any
and all payments at any time or times thereafter received by Agent from or on
behalf of Borrower of all or any part of the Obligations, and, as between
Borrower and the Credit Parties on the one hand and Agent and Lenders on the
other, Agent shall have the continuing and exclusive right to apply and to
reapply any and all payments received against the Obligations in such manner as
Agent may deem advisable notwithstanding any previous application by Agent, and
(ii) unless the Agent and the Lenders shall agree otherwise, the proceeds of any
sale of, or other realization upon all or any part of the Collateral shall be
applied: first, to the Protective Advances; second, to accrued and unpaid
interest on the Obligations (including any interest which, but for the
provisions of the United States Bankruptcy Code, would have accrued on such
amounts); third, to the principal amount of the Obligations outstanding; and
fourth, to any other indebtedness or obligations of the Credit Parties owing to
Agent or any Lender under the Financing Documents. Borrower shall remain fully
liable for any deficiency. Any balance remaining shall be delivered to Borrower
or to whoever may be lawfully entitled to receive such balance or as a court of
competent jurisdiction may direct. Unless the Agent and the Lenders shall agree
otherwise, in carrying out the foregoing, (x) amounts received shall be applied
in the numerical order provided until exhausted prior to the application to the
next succeeding category, and (y) each of the Persons entitled to receive a
payment in any particular category shall receive an amount equal to its pro rata
share of amounts available to be applied pursuant thereto for such category.

10.7 Waivers.

(a) Except as otherwise provided for in this Agreement and to the fullest extent
permitted by applicable law, each Borrower waives: (i) presentment, demand and
protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Financing Documents and hereby
ratifies and confirms whatever Agent or Lenders may do in this regard; (ii) all
rights to notice and a hearing prior to Agent’s or any Lender’s entry upon the
premises of a Borrower, the taking possession or control of, or to Agent’s or
any Lender’s replevy, attachment or levy upon, any Collateral or any bond or
security which might be required by any court prior to allowing Agent or any
Lender to exercise any of its remedies; and (iii) the benefit of all valuation,
appraisal and exemption Laws. Each Borrower acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Financing Documents and the transactions evidenced hereby and thereby.

(b) Each Borrower for itself and all its successors and assigns, (i) agrees that
its liability shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver, or modification granted or consented to by Lender;
(ii) consents to any indulgences and all extensions of time, renewals, waivers,
or modifications that may be granted by Agent or any Lender with respect to the
payment or other provisions of the Financing Documents, and to any substitution,
exchange or release of the Collateral, or any part thereof, with or without
substitution, and agrees to the addition or release of any Borrower, endorsers,
guarantors, or sureties, or whether primarily or secondarily liable, without
notice to any other Borrower and without affecting its liability hereunder;
(iii) agrees that its liability shall be unconditional and without regard to the
liability of any other Borrower, Agent or any Lender for any tax on the
indebtedness; and (iv) to the fullest extent permitted by law, expressly waives
the benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing.

(c) To the extent that Agent or any Lender may have acquiesced in any
noncompliance with any requirements or conditions precedent to the closing of
the Credit Facilities or to any subsequent disbursement of Credit Extensions,
such acquiescence shall not be deemed to constitute a waiver by Agent or any
Lender of such requirements with

 

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respect to any future Credit Extensions and Agent may at any time after such
acquiescence require Borrower to comply with all such requirements. Any
forbearance by Agent or a Lender in exercising any right or remedy under any of
the Financing Documents, or otherwise afforded by applicable law, including any
failure to accelerate the maturity date of the Credit Facilities, shall not be a
waiver of or preclude the exercise of any right or remedy nor shall it serve as
a novation of the Financing Documents or as a reinstatement of the Obligations
or a waiver of such right of acceleration or the right to insist upon strict
compliance of the terms of the Financing Documents. Agent’s or any Lender’s
acceptance of payment of any sum secured by any of the Financing Documents after
the due date of such payment shall not be a waiver of Agent’s and such Lender’s
right to either require prompt payment when due of all other sums so secured or
to declare a default for failure to make prompt payment. The procurement of
insurance or the payment of taxes or other Liens or charges by Agent as the
result of an Event of Default shall not be a waiver of Agent’s right to
accelerate the maturity of the Obligations, nor shall Agent’s receipt of any
condemnation awards, insurance proceeds, or damages under this Agreement operate
to cure or waive any Credit Party’s default in payment of sums secured by any of
the Financing Documents.

(d) Without limiting the generality of anything contained in this Agreement or
the other Financing Documents, each Borrower agrees that if an Event of Default
is continuing (i) Agent and Lenders shall not be subject to any “one action” or
“election of remedies” law or rule, and (ii) all Liens and other rights,
remedies or privileges provided to Agent or Lenders shall remain in full force
and effect until Agent or Lenders have exhausted all remedies against the
Collateral and any other properties owned by Borrowers and the Financing
Documents and other security instruments or agreements securing the Obligations
have been foreclosed, sold and/or otherwise realized upon in satisfaction of
Borrowers’ obligations under the Financing Documents.

(e) Neither Agent nor any Lender shall be under any obligation to marshal any
assets in payment of any or all of the Obligations. Nothing contained herein or
in any other Financing Document shall be construed as requiring Agent or any
Lender to resort to any part of the Collateral for the satisfaction of any of
Borrowers’ obligations under the Financing Documents in preference or priority
to any other Collateral, and Agent may seek satisfaction out of all of the
Collateral or any part thereof, in its absolute discretion in respect of
Borrowers’ obligations under the Financing Documents. To the fullest extent
permitted by law, each Borrower, for itself and its successors and assigns,
waives in the event of foreclosure of any or all of the Collateral any equitable
right otherwise available to any Credit Party which would require the separate
sale of any of the Collateral or require Agent or Lenders to exhaust their
remedies against any part of the Collateral before proceeding against any other
part of the Collateral; and further in the event of such foreclosure each
Borrower does hereby expressly consent to and authorize, at the option of Agent,
the foreclosure and sale either separately or together of each part of the
Collateral.

10.8 Injunctive Relief. The parties acknowledge and agree that, in the event of
a breach or threatened breach of any Credit Party’s obligations under any
Financing Documents, Agent and Lenders may have no adequate remedy in money
damages and, accordingly, shall be entitled to an injunction (including, without
limitation, a temporary restraining order, preliminary injunction, writ of
attachment, or order compelling an audit) against such breach or threatened
breach, including, without limitation, maintaining any cash management and
collection procedure described herein. However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a waiver
or prohibition against any other legal or equitable remedies in the event of a
breach or threatened breach of any provision of this Agreement. Each Credit
Party waives, to the fullest extent permitted by law, the requirement of the
posting of any bond in connection with such injunctive relief. By joining in the
Financing Documents as a Credit Party, each Credit Party specifically joins in
this Section as if this Section were a part of each Financing Document executed
by such Credit Party.

11 NOTICES

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

 

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If to Borrower:

Flexion Therapeutics, Inc.

10 Mall Road, Suite 301

Burlington, MA 01803

Attention: Lisa Davidson

Fax: 781-202-3399

E-Mail: ldavidson@flexiontherapeutics.com

If to Agent or to MidCap (or any of its Affiliates or Approved Funds) as a
Lender:

MidCap Financial Trust

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Ave, Suite 200

Bethesda, MD 20814

Attn: Account Manager for Flexion transaction

Facsimile: 301-941-1450

Email: notices@midcapfinancial.com

With a copy to:

MidCap Financial Trust

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Ave, Suite 200

Bethesda, MD 20814

Attn: Legal

Facsimile: 301-941-1450

Email: legalnotices@midcapfinancial.com

If to any Lender other than MidCap: at the address set forth in the signature
pages to this Agreement or provided to Borrower as a notice address for such
Lender in connection with any assignment hereunder.

12 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

12.1 THIS AGREEMENT, EACH SECURED PROMISSORY NOTE AND EACH OTHER FINANCING
DOCUMENT, AND THE RIGHTS, REMEDIES AND OBLIGATIONS OF THE PARTIES HERETO AND
THERETO, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS
AGREEMENT OR SUCH FINANCING DOCUMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR
THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES AND
ALL OTHER MATTERS RELATING HERETO, THERETO OR ARISING THEREFROM (WHETHER
SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. NOTWITHSTANDING THE
FOREGOING, AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH AGENT AND LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 12.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE AGENT’S AND LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY.
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE, OR FORUM NON CONVENIENS AND HEREBY

 

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CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINTS, AND OTHER PROCESS ISSUED IN SUCH ACTION OR SUIT AND AGREES
THAT SERVICE OF SUCH SUMMONS, COMPLAINTS, AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
ARTICLE 11 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER TO OCCUR OF BORROWER’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAIL, PROPER POSTAGE PREPAID.

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

12.3 Borrower, Agent and each Lender agree that each Credit Extension (including
those made on the Closing Date) shall be deemed to be made in, and the
transactions contemplated hereunder and in any other Financing Document shall be
deemed to have been performed in, the State of Maryland.

13 GENERAL PROVISIONS

13.1 Successors and Assigns.

(a) This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Agent’s and each Lender’s prior written consent
(which may be granted or withheld in Agent’s or such Lender’s discretion). Any
Lender may at any time assign to one or more Eligible Assignees all or any
portion of such Lender’s Applicable Commitment and Credit Extensions, together
with all related obligations of such Lender hereunder. Borrower and Agent shall
be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned until Agent shall have received and
accepted an effective assignment agreement in form and substance acceptable to
Agent, executed, delivered and fully completed by the applicable parties
thereto, and shall have received such other information regarding such Eligible
Assignee as Agent reasonably shall require. Notwithstanding anything set forth
in this Agreement to the contrary, any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided, however, that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto. If
requested by Agent, Borrower agrees to (a) execute any documents reasonably
required to effectuate and acknowledge each assignment of an Applicable
Commitment or Credit Extension to an assignee hereunder, (b) make Borrower’s
management available to meet with Agent and prospective participants and
assignees of Applicable Commitments or Credit Extensions and (c) assist Agent or
the Lenders in the preparation of information relating to the financial affairs
of Borrower as any prospective participant or assignee of an Applicable
Commitment or Credit Extension reasonably may request.

(b) From and after the date on which the conditions described above have been
met, (A) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such assignment agreement, shall have the rights and
obligations of a Lender hereunder, and (B) the assigning Lender, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
assignment agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination). Upon the request of the
Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an
effective assignment agreement, each Borrower shall execute and deliver to Agent
for delivery to the Eligible Assignee (and, as applicable, the assigning Lender)
secured notes in the aggregate principal amount of the Eligible Assignee’s
Credit Extensions or Applicable Commitments (and, as applicable, secured
promissory notes in the principal amount of that portion of the principal amount
of the Credit Extensions or Applicable Commitments retained by the assigning
Lender).

 

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(c) Agent, acting solely for this purpose as an agent of Borrower, shall
maintain at its offices located in Bethesda, Maryland a copy of each assignment
agreement delivered to it and a register for the recordation of the names and
addresses of each Lender, and the commitments of, and principal amount (and
stated interest) of the Credit Extensions owing to, such Lender pursuant to the
terms hereof (the “Register”). The entries in such Register shall be conclusive,
absent manifest error, and Borrower, Agent and Lenders may treat each Person
whose name is recorded therein pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. Such Register shall be available for inspection by Borrower and any
Lender, at any reasonable time upon reasonable prior notice to Agent. Each
Lender that sells a participation shall, acting solely for this purpose as an
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 Obligations (each, a “Participant Register”). The
entries in the Participant Registers shall be conclusive, absent manifest error.
Each Participant Register shall be available for inspection by Borrower and the
Agent at any reasonable time upon reasonable prior notice to the applicable
Lender; 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
Financing Document) to any Person (including Borrower) 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. For the avoidance of doubt, the Agent
(in its capacity as Agent) shall have no responsibility for maintaining a
participant register.

(d) Notwithstanding anything to the contrary contained in this Agreement, the
Credit Extensions (including any Secured Promissory Notes evidencing such Credit
Extensions) are registered obligations, the right, title and interest of the
Lenders and their assignees in and to such Credit Extensions shall be
transferable only upon notation of such transfer in the Register, or the
applicable Participant Register, and no assignment, or participation, thereof
shall be effective until recorded therein. This Agreement shall be construed so
that the Credit Extensions are at all times maintained in “registered form”
within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the IRC and
Section 5f.103-1(c) of the United States Treasury Regulations.

13.2 Indemnification.

(a) Each Borrower hereby agrees to promptly pay (i) all costs and expenses of
Agent (including, without limitation, the reasonable fees, costs and expenses of
counsel to, and independent appraisers and consultants retained by Agent) in
connection with the examination, review, due diligence investigation,
documentation, negotiation, closing and syndication of the transactions
contemplated by the Financing Documents, in connection with the performance by
Agent of its rights and remedies under the Financing Documents and in connection
with the continued administration of the Financing Documents including (A) any
amendments, modifications, consents and waivers to and/or under any and all
Financing Documents, and (B) any periodic public record searches conducted by or
at the request of Agent (including, without limitation, title investigations,
UCC searches, fixture filing searches, judgment, pending litigation and tax lien
searches and searches of applicable corporate, limited liability, partnership
and related records concerning the continued existence, organization and good
standing of certain Persons); (ii) without limitation of the preceding clause
(i), all costs and expenses of Agent in connection with the creation, perfection
and maintenance of Liens pursuant to the Financing Documents; (iii) without
limitation of the preceding clause (i), all costs and expenses of Agent in
connection with (A) protecting, storing, insuring, handling, maintaining or
selling any Collateral, (B) any litigation, dispute, suit or proceeding relating
to any Financing Document, and (C) any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all of the Financing
Documents; (iv) without limitation of the preceding clause (i), all costs and
expenses of Agent in connection with Agent’s reservation of funds in
anticipation of the funding of the Credit Extensions to be made hereunder; and
(v) all costs and expenses incurred by Agent or Lenders in connection with any
litigation, dispute, suit or proceeding relating to any Financing Document and
in connection with any workout, collection, bankruptcy, insolvency and other
enforcement proceedings under any and all Financing Documents, whether or not
Agent or Lenders are a party thereto.

(b) Each Borrower hereby agrees to indemnify, pay and hold harmless Agent and
Lenders and the officers, directors, employees, trustees, agents, investment
advisors, collateral managers, servicers, and counsel of Agent and Lenders
(collectively called the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for such Indemnitee)
in connection with any investigative, response,

 

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remedial, administrative or judicial matter or proceeding, whether or not such
Indemnitee shall be designated a party thereto and including any such proceeding
initiated by or on behalf of a Credit Party, and the reasonable expenses of
investigation by engineers, environmental consultants and similar technical
personnel and any commission, fee or compensation claimed by any broker (other
than any broker retained by Agent or Lenders) asserting any right to payment for
the transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby and the use or intended use of the proceeds of
the Credit Facilities, except that Borrower shall have no obligation hereunder
to an Indemnitee with respect to any liability resulting from the gross
negligence or willful misconduct of such Indemnitee, as determined by a final
non-appealable judgment of a court of competent jurisdiction. To the extent that
the undertaking set forth in the immediately preceding sentence may be
unenforceable, Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable Law to the payment and
satisfaction of all such indemnified liabilities incurred by the Indemnitees or
any of them. No Indemnitee shall be liable for any damages arising from the use
by unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Financing Documents or the
transactions contemplated hereby or thereby.

(c) Notwithstanding any contrary provision in this Agreement, the obligations of
Borrowers under this Section 13.2 shall survive the payment in full of the
Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE
RESPONSIBLE OR LIABLE TO ANY CREDIT PARTY OR TO ANY OTHER PARTY TO ANY FINANCING
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.

13.3 Time of Essence. Time is of the essence for the payment and performance of
the Obligations in this Agreement.

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

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

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

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

13.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 13.2 to
indemnify each Lender and Agent shall survive until the statute of limitations
with respect to such claim or cause of action shall have run. All powers of
attorney and appointments of Agent or any Lender as Borrower’s attorney in fact
hereunder, and all of Agent’s and Lenders’ rights and powers in respect thereof,
are coupled with an interest, are irrevocable until all Obligations (other than
inchoate indemnity obligations and any other obligations which, by their terms,
are to survive the termination of this Agreement) have been fully repaid and
performed and Agent’s and the Lenders’ obligation to provide Credit Extensions
terminates.

 

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13.9 Confidentiality. In handling any confidential information of Borrower, each
of the Lenders and Agent shall use all reasonable efforts to maintain, in
accordance with its customary practices, the confidentiality of information
obtained by it pursuant to any Financing Document and designated in writing by
any Credit Party as confidential, but disclosure of information may be made:
(a) to the Lenders’ and Agent’s Subsidiaries or Affiliates; (b) to prospective
transferees or purchasers of any interest in the Credit Extensions (provided,
however, the Lender holding such Credit Extension shall use commercially
reasonable efforts to obtain any prospective transferee’s or purchaser’s
agreement to confidentiality terms with such Lender similar in scope to this
Section 13.9); (c) as required by Law, regulation, subpoena, order or other
legal, administrative, governmental or regulatory request; (d) to regulators or
as otherwise required in connection with an examination or audit, or to any
nationally recognized rating agency; (e) as Agent or any Lender considers
appropriate in exercising remedies under the Financing Documents; (f) to
financing sources that are advised of the confidential nature of such
information and are instructed to keep such information confidential (provided,
however, the Lender holding such Credit Extensions shall use commercially
reasonable efforts to obtain any such financing source’s agreement to
confidentiality terms with such Lender similar in scope to this Section 13.9);
(g) to third party service providers of the Lenders and/or Agent so long as such
service providers are bound to such Lender or Agent by obligations of
confidentiality similar in scope to this Section 13.9; (h) to the extent
necessary or customary for inclusion in league table measurements; and (i) in
connection with any litigation or other proceeding to which such Lender or Agent
or any of their Affiliates is a party or bound, or to the extent necessary to
respond to public statements or disclosures by Credit Parties or their
Affiliates referring to a Lender or Agent or any of their Affiliates.
Confidential information does not include information that either: (i) is in the
public domain or in the Lenders’ and/or Agent’s possession when disclosed to the
Lenders and/or Agent, or becomes part of the public domain after disclosure to
the Lenders and/or Agent through no breach of this Section 13.9 by Lenders
and/or Agent; or (ii) is disclosed to the Lenders and/or Agent by a third party,
if the Lenders and/or Agent does not know that the third party is prohibited
from disclosing the information. Agent and/or Lenders may use confidential
information for any purpose, including, without limitation, for the development
of client databases, reporting purposes, and market analysis, so long as Agent
and/or Lenders, as applicable, do not disclose Borrower’s identity or the
identity of any Person associated with Borrower unless otherwise permitted by
this Agreement. The provisions of the immediately preceding sentence shall
survive the termination of this Agreement. The agreements provided under this
Section 13.9 supersede all prior agreements, understanding, representations,
warranties, and negotiations between the parties about the subject matter of
this Section 13.9.

13.10 Right of Set-off. Borrower hereby grants to Agent and to each Lender, a
lien, security interest and right of set-off as security for all Obligations to
Agent and each Lender hereunder, whether now existing or hereafter arising upon
and against all deposits, credits, collateral and property, now or hereafter in
the possession, custody, safekeeping or control of Agent or the Lenders or any
entity under the control of Agent or the Lenders (including an Agent or Lender
Affiliate) or in transit to any of them. At any time after the occurrence and
during the continuance of an Event of Default, without demand or notice, Agent
or the Lenders may set-off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SET-OFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER,
ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

13.11 Publicity. Borrower will not directly or indirectly publish, disclose or
otherwise use in any public disclosure, advertising material, promotional
material, press release or interview, any reference to the name, logo or any
trademark of Agent or any Lender or any of their Affiliates or any reference to
this Agreement or the financing evidenced hereby, in any case except as required
by applicable Law, subpoena or judicial or similar order, in which case Borrower
shall endeavor to give Agent prior written notice of such publication or other
disclosure. Each Lender and Borrower hereby authorizes each Lender to publish
the name of such Lender and Borrower, the existence of the financing
arrangements referenced under this Agreement, the primary purpose and/or
structure of those arrangements, the amount of credit extended under each
facility, the title and role of each party to this Agreement, and the total
amount of the financing evidenced hereby in any “tombstone”, comparable
advertisement or press release which such Lender elects to submit for
publication. In addition, each Lender and Borrower agrees that each Lender may
provide lending industry trade organizations with information necessary and
customary for inclusion in league table measurements after the Closing Date.
With respect to any of the foregoing, such authorization shall be subject to
such Lender providing Borrower and the other Lenders with an opportunity to
review and confer with such Lender regarding, and approve, the contents of any
such tombstone, advertisement or information, as applicable, prior to its
initial submission for publication, but subsequent publications of the same
tombstone, advertisement or information shall not require Borrower’s approval.

 

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13.12 No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.

13.13 Approvals. Unless expressly provided herein to the contrary, any approval,
consent, waiver or satisfaction of Agent or Lenders with respect to any matter
that is the subject of this Agreement or the other Financing Documents may be
granted or withheld by Agent and Lenders in their sole and absolute discretion
and credit judgment.

13.14 Amendments; Required Lenders; Interlender Matters.

(a) No amendment, modification, termination or waiver of any provision of this
Agreement or any other Financing Document, no approval or consent thereunder, or
any consent to any departure by Borrower therefrom (in each case, other than
amendments, waivers, approvals or consents deemed ministerial by Agent), shall
in any event be effective unless the same shall be in writing and signed by
Borrower, Agent and Required Lenders. Except as set forth in clause (b) below,
all such amendments, modifications, terminations or waivers requiring the
consent of the “Lenders” shall require the written consent of Required Lenders.

(b) No amendment, modification, termination or waiver of any provision of this
Agreement or any other Financing Document shall, unless in writing and signed by
Agent and by each Lender directly affected thereby: (i) increase or decrease the
Applicable Commitment of any Lender (which shall be deemed to affect all
Lenders), (ii) reduce the principal of or rate of interest on any Obligation or
the amount of any fees payable hereunder, (iii) postpone the date fixed for or
waive any payment of principal of or interest on any Credit Extension, or any
fees or reimbursement obligation hereunder, (iv) release all or substantially
all of the Collateral, or consent to a transfer of any of the Intellectual
Property, in each case, except as otherwise expressly permitted in the Financing
Documents (which shall be deemed to affect all Lenders), (v) subordinate the
lien granted in favor of Agent securing the Obligations (which shall be deemed
to affect all Lenders, except as otherwise provided below), (vi) release a
Credit Party from, or consent to a Credit Party’s assignment or delegation of,
such Credit Party’s obligations hereunder and under the other Financing
Documents or any Guarantor from its guaranty of the Obligations (which shall be
deemed to affect all Lenders) or (vii) amend, modify, terminate or waive this
Section 13.14(b) or the definition of “Required Lenders” or “Pro Rata Share” or
any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the consent of each
Lender. For purposes of the foregoing, no Lender shall be deemed affected by
(i) waiver of the imposition of the Default Rate or imposition of the Default
Rate to only a portion of the Obligations, (ii) waiver of the accrual of late
charges, (iii) waiver of any fee solely payable to Agent under the Financing
Documents, (iv) subordination of a lien granted in favor of Agent provided such
subordination is limited to equipment being financed by a third party providing
Permitted Indebtedness.

(c) Agent shall not grant its written consent to any deviation or departure by
Borrower or any Credit Party from the provisions of Article 7 without the prior
written consent of the Required Lenders. Required Lenders shall have the right
to direct Agent to take any action described in Section 10.2(b). Upon the
occurrence of any Event of Default, Agent shall have the right to exercise any
and all remedies referenced in Section 10.2 without the written consent of
Required Lenders following the occurrence of an “Exigent Circumstance” (as
defined below). All matters requiring the satisfaction or acceptance of Agent in
the definition of Subordinated Debt shall further require the satisfaction and
acceptance of each Required Lender. Any reference in this Agreement to an
allocation between or sharing by the Lenders of any right, interest or
obligation “ratably,” “proportionally” or in similar terms shall refer to Pro
Rata Share unless expressly provided otherwise. As used in this Section,
“Exigent Circumstance” means any event or circumstance that, in the reasonable
judgment of Agent, imminently threatens the ability of Agent to realize upon all
or any material portion of the Collateral, such as, without limitation,
fraudulent removal, concealment, or abscondment thereof, destruction or material
waste thereof, or failure of Borrower after reasonable demand to maintain or
reinstate adequate casualty insurance coverage, or which, in the judgment of
Agent, could result in a material diminution in value of the Collateral.

 

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13.15 Borrower Liability. If there is more than one entity comprising Borrower,
then (a) any Borrower may, acting singly, request Credit Extensions hereunder,
(b) each Borrower hereby appoints the other as agent for the other for all
purposes hereunder, including with respect to requesting Credit Extensions
hereunder, (c) each Borrower shall be jointly and severally obligated to pay and
perform all obligations under the Financing Documents, including, but not
limited to, the obligation repay all Credit Extensions made hereunder and all
other Obligations, regardless of which Borrower actually receives said Credit
Extensions, as if each Borrower directly received all Credit Extensions,
(d) each Borrower waives (1) any suretyship defenses available to it under the
Code or any other applicable law, and (2) any right to require the Lenders or
Agent to: (A) proceed against any Borrower or any other person; (B) proceed
against or exhaust any security; or (C) pursue any other remedy. The Lenders or
Agent may exercise or not exercise any right or remedy they have against any
Credit Party or any security (including the right to foreclose by judicial or
non-judicial sale) without affecting any other Credit Party’s liability or any
Lien against any other Credit Party’s assets. Notwithstanding any other
provision of this Agreement or other related document, until payment in full of
the Obligations and termination of the Applicable Commitments, each Borrower
irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating Borrower to the rights of the Lenders
and Agent under this Agreement) to seek contribution, indemnification or any
other form of reimbursement from any other Credit Party, or any other Person now
or hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by any Credit Party with respect to the Obligations in connection
with this Agreement or otherwise and all rights that it might have to benefit
from, or to participate in, any security for the Obligations as a result of any
payment made by a Credit Party with respect to the Obligations in connection
with this Agreement or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
null and void. If any payment is made to a Credit Party in contravention of this
Section, such Credit Party shall hold such payment in trust for the Lenders and
Agent and such payment shall be promptly delivered to Agent for application to
the Obligations, whether matured or unmatured.

13.16 Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition or other proceeding be filed by or
against any Credit Party for liquidation or reorganization, should any Credit
Party become insolvent or make an assignment for the benefit of any creditor or
creditors or should an interim receiver, receiver, receiver and manager or
trustee be appointed for all or any significant part of any Credit Party’s
assets, and shall continue to be effective or to be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a fraudulent preference reviewable transaction or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Obligations shall
be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

13.17. USA PATRIOT Act Notification. Agent (for itself and not on behalf of any
Lender) and each Lender hereby notifies each Borrower that pursuant to the
requirements of the USA PATRIOT Act, it is required to obtain, verify and record
certain information and documentation that identifies Borrower, which
information includes the name and address of Borrower and such other information
that will allow Agent or such Lender, as applicable, to identify Borrower in
accordance with the USA PATRIOT Act.

14 AGENT

14.1 Appointment and Authorization of Agent. Each Lender hereby irrevocably
appoints, designates and authorizes Agent to take such action on its behalf
under the provisions of this Agreement and each other Financing Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Financing Document, together with such
powers as are reasonably incidental thereto. The provisions of this Article are
solely for the benefit of Agent and Lenders and none of Credit Parties nor any
other Person shall have any rights as a third party beneficiary of any of the
provisions hereof. The duties of Agent shall be mechanical and administrative in
nature. Notwithstanding any provision to the contrary contained elsewhere herein
or in any other Financing Document, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender or participant,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Financing Document or
otherwise exist against Agent. Without limiting the generality of the foregoing
sentence, the use of the term “agent” herein and in the other Financing
Documents

 

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with reference to Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any applicable
Law. Instead, such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship between
independent contracting parties. Without limiting the generality of the
foregoing, Agent shall have the sole and exclusive right and authority (to the
exclusion of the Lenders), and is hereby authorized, to (i) act as collateral
agent for Agent and each Lender for purposes of the perfection of all liens
created by the Financing Documents and all other purposes stated therein,
(ii) manage, supervise and otherwise deal with the Collateral, (iii) take such
other action as is necessary or desirable to maintain the perfection and
priority of the liens created or purported to be created by the Financing
Documents, (iv) except as may be otherwise specified in any Financing Document,
exercise all remedies given to Agent and the other Lenders with respect to the
Collateral, whether under the Financing Documents, applicable law or otherwise,
and (v) execute any amendment, consent or waiver under the Financing Documents
on behalf of any Lender that has consented in writing to such amendment, consent
or waiver; provided, however, that Agent hereby appoints, authorizes and directs
each Lender to act as collateral sub-agent for Agent and the Lenders for
purposes of the perfection of all liens with respect to the Collateral,
including any deposit account maintained by a Credit Party with, and cash and
cash equivalents held by, such Lender, and may further authorize and direct the
Lenders to take further actions as collateral sub-agents for purposes of
enforcing such liens or otherwise to transfer the Collateral subject thereto to
Agent, and each Lender hereby agrees to take such further actions to the extent,
and only to the extent, so authorized and directed.

14.2 Successor Agent.

(a) Agent may at any time assign its rights, powers, privileges and duties
hereunder to (i) another Lender, or (ii) any Person to whom Agent, in its
capacity as a Lender, has assigned (or will assign, in conjunction with such
assignment of agency rights hereunder) fifty percent (50%) or more of the Credit
Extensions or Applicable Commitments then held by Agent (in its capacity as a
Lender), in each case without the consent of the Lenders or Borrower. Following
any such assignment, Agent shall give notice to the Lenders and Borrower. An
assignment by Agent pursuant to this subsection (a) shall not be deemed a
resignation by Agent for purposes of subsection (b) below.

(b) Without limiting the rights of Agent to designate an assignee pursuant to
subsection (a) above, Agent may at any time give notice of its resignation to
the Lenders and Borrower. Upon receipt of any such notice of resignation,
Required Lenders shall have the right to appoint a successor Agent. If no such
successor shall have been so appointed by Required Lenders and shall have
accepted such appointment within ten (10) Business Days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent; provided, however, that if Agent shall
notify Borrower and the Lenders that no Person has accepted such appointment,
then such resignation shall nonetheless become effective in accordance with such
notice from Agent that no Person has accepted such appointment and, from and
following delivery of such notice, (i) the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Financing
Documents, and (ii) all payments, communications and determinations provided to
be made by, to or through Agent shall instead be made by or to each Lender
directly, until such time as Required Lenders appoint a successor Agent as
provided for above in this subsection (b).

(c) Upon (i) an assignment permitted by subsection (a) above, or (ii) the
acceptance of a successor’s appointment as Agent pursuant to subsection
(b) above, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder and under the other Financing Documents (if not already discharged
therefrom as provided above in this subsection (c)). The fees payable by
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between Borrower and such successor. After
the retiring Agent’s resignation hereunder and under the other Financing
Documents, the provisions of this Article shall continue in effect for the
benefit of such retiring Agent and its sub-agents in respect of any actions
taken or omitted to be taken by any of them while the retiring Agent was acting
or was continuing to act as Agent.

 

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15 DEFINITIONS

All terms used herein which are defined by the Code shall have the same meanings
as assigned to them by the Code unless and to the extent varied by this
Agreement. In addition to any terms defined in Sections 2.3, 2.4 or 2.5 hereof,
or in Articles 8 or 9 hereof, or in any schedule or exhibit attached hereto, as
used in this Agreement, the following terms have the following meanings:

“Access Agreement” means a landlord consent, bailee letter or warehouseman’s
letter, in form and substance reasonably satisfactory to Agent, in favor of
Agent executed by such landlord, bailee or warehouseman, as applicable, for any
third party location.

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

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

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

“Agent” means, MidCap, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders, together with
its successors and assigns.

“Agreement” has the meaning given it in the preamble of this Agreement.

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

“Applicable Commitment” has the meaning given it in Section 2.2

“Applicable Interest Rate” means a rate of interest equal to Six and 25/100
percent (6.25%) per annum.

“Applicable Prepayment Fee”, for each Credit Facility, has the meaning given it
in the Credit Facility Schedule for such Credit Facility.

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

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

“Blocked Person” means: (a) any Person listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

 

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“Borrower” means the entity(ies) described in the first paragraph of this
Agreement and each of their successors and permitted assigns. The term “each
Borrower” shall refer to each Person comprising the Borrower if there is more
than one such Person, or the sole Borrower if there is only one such Person. The
term “any Borrower” shall refer to any Person comprising the Borrower if there
is more than one such Person, or the sole Borrower if there is only one such
Person.

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

“Business Day” means any day that is not (a) a Saturday or Sunday or (b) a day
on which Agent is closed.

“Change in Control” means any event, transaction, or occurrence as a result of
which (a) Borrower ceases to own and control, directly or indirectly, all of the
economic and voting rights associated with the outstanding securities of each of
its Subsidiaries; (b) the occurrence of any “change in control” or any term of
similar effect under any Subordinated Debt Document; (c) Borrower ceases to own
and control, directly or indirectly, all of the economic and voting rights
associated with the outstanding voting capital stock (or other voting equity
interest) of each of its Subsidiaries; (d) any sale, license (other than
Permitted Licenses), or other disposition of all or substantially all of the
assets of Borrower; (e) any reorganization, consolidation, merger or other
transaction or series of related transactions in which any Person or two or more
Persons acting in concert shall have acquired by contract or otherwise, the
power to control the management of Borrower, or to control the equity interests
of Borrower entitled to vote for members of the board of directors of Borrower
on a fully-diluted basis (and taking into account all such securities that such
Person or Persons have the right to acquire pursuant to any option right)
representing fifty percent (50%) or more of the combined voting power of such
securities (other than any Person who is a stockholder of Borrower as of the
Closing Date or an affiliate thereof); or (f) both of the chief executive
officer and the chief medical officer of Borrower as of the date hereof shall
cease to be involved in the day to day operations (including research
development) or management of the business of Borrower, and an interim
replacement of such officer approved by Borrower’s board of directors is not
appointed on terms reasonably acceptable to Borrower’s board of directors within
90 days of such cessation or involvement.

“Closed Period” has the meaning given in the Credit Facility Schedule.

“Closing Date” has the meaning given it in the preamble of this Agreement.

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

“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of, Agent, for
the benefit of Agent and Lenders, pursuant to this Agreement and the other
Financing Documents, including, without limitation, all of the property
described in Exhibit A hereto.

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

“Commitment Commencement Date” has the meaning given it in the Credit Facility
Schedule.

“Commitment Termination Date” has the meaning given it in the Credit Facility
Schedule.

 

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

“Communication” has the meaning given it in Article 11.

“Compliance Certificate” means a certificate, duly executed by an authorized
officer of Borrower, appropriately completed and substantially in the form of
Exhibit B.

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

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

“Credit Extension” means an advance or disbursement of proceeds to or for the
account of Borrower in respect of a Credit Facility.

“Credit Extension Form” means that certain form attached hereto as Exhibit C, as
the same may be from time to time revised by Agent.

“Credit Facility” means a credit facility specified on the Credit Facility
Schedule.

“Credit Party” means any Borrower, any Guarantor under a guarantee of the
Obligations or any part thereof, and any other Person (other than Agent, a
Lender or a participant of a Lender), whether now existing or hereafter acquired
or formed, that becomes obligated as a borrower, guarantor, surety, indemnitor,
pledgor, assignor or other obligor under any Financing Document, and any Person
whose equity interests or portion thereof have been pledged or hypothecated to
Agent under any Financing Document; and “Credit Parties” means all such Persons,
collectively.

“Default” means any fact, event or circumstance which with notice or passage of
time or both, could constitute an Event of Default.

“Default Rate” has the meaning given it in Section 2.6(b).

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

“Designated Funding Account” is “Borrower’s Deposit Account, account number
ending in -87641 maintained with Silicon Valley Bank and over which Agent has
been granted control for the ratable benefit of all Lenders.

“Disclosure Letter” means that certain Disclosure Letter Agreement, dated as of
the Closing Date, by and among Borrower, Agent and the Lenders.

 

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“Dollars,” “dollars” and “$” each means lawful money of the United States.

“Draw Period” means, for each Credit Facility, the period commencing on the
Commitment Commencement Date and ending on the Commitment Termination Date.

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by Agent; provided, however, that notwithstanding the foregoing, “Eligible
Assignee” shall not include any Credit Party or any Subsidiary of a Credit
Party. Notwithstanding the foregoing, in connection with assignments by a Lender
due to a forced divestiture at the request of any regulatory agency, the
restrictions set forth herein shall not apply and Eligible Assignee shall mean
any Person or party becoming an assignee incident to such forced divestiture.

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

“ERISA” means the Employee Retirement Income Security Act of 1974, and all
regulations promulgated thereunder.

“Event of Default” has the meaning given it in Section 10.1.

“Exigent Circumstance” has the meaning given it in Section 13.14.

“FATCA” means Sections 1471 through 1474 of the IRC (or any amended or successor
version that is substantively comparable and not materially more onerous to
comply with) and any current or future regulations or official interpretations
thereof.

“Fee Letters” means, collectively, any fee letter agreements among Borrower and
Agent and Borrower and each Lender, in each case as approved in writing by
Borrower, Agent and each Lender.

“Financing Documents” means, collectively, this Agreement, the Perfection
Certificate, the Pledge Agreement, the Disclosure Letter, each note and
guarantee executed by one or more Credit Parties in connection with the
indebtedness governed by this Agreement, and each other present or future
agreement executed by one or more Credit Parties and, or for the benefit of, the
Lenders and/or Agent in connection with this Agreement, all as amended,
restated, or otherwise modified from time to time.

“Foreign Lender” has the meaning given it in Section 2.6(h)(iii).

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

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

“General Intangibles” means all “general intangibles”, as defined in the Code,
with such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, trademarks, service marks
and, to the extent permitted under applicable Law, any applications therefor,
whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists,
telephone numbers, domain names, claims,

 

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income and other tax refunds, security and other deposits, options to purchase
or sell real or personal property, rights in all litigation presently or
hereafter pending (whether in contract, tort or otherwise), insurance policies
(including, without limitation, key man, property damage, and business
interruption insurance), payments of insurance and rights to payment of any
kind.

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

“Guarantor” means any present or future guarantor of the Obligations.

“Hazardous Materials” means petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which is prohibited by
any Laws; toxic mold, any substance that requires special handling; and any
other material or substance now or in the future defined as a “hazardous
substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic
pollutant,” “contaminant,” “pollutant” or other words of similar import within
the meaning of any Environmental Law, including: (a) any “hazardous substance”
defined as such in (or for purposes of) CERCLA, or any so-called “superfund” or
“superlien” Law, including the judicial interpretation thereof; (b) any
“pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33); (c) any
material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260;
(d) any petroleum or petroleum by-products, including crude oil or any fraction
thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel; (f) any “hazardous chemical” as defined pursuant
to 29 C.F.R. Part 1910; (g) any toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls (“PCB’s”), flammable explosives, radioactive
materials, infectious substances, materials containing lead-based paint or raw
materials which include hazardous constituents); and (h) any other toxic
substance or contaminant that is subject to any Environmental Laws or other past
or present requirement of any Governmental Authority.

“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

“Indebtedness” means (a) indebtedness for borrowed money (including the
Obligations) or the deferred price of property or services, such as
reimbursement and other obligations for surety bonds and letters of credit,
(b) obligations evidenced by notes, bonds, debentures or similar instruments,
(c) capital lease obligations, (d) non-contingent obligations of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit, banker’s acceptance or similar instrument, (e) equity securities of such
Person subject to repurchase or redemption other than at the sole option of such
Person, (f) obligations secured by a Lien on any asset of such Person, whether
or not such obligation is otherwise an obligation of such Person,
(g) “earnouts”, purchase price adjustments, profit sharing arrangements,
deferred purchase money amounts and similar payment obligations or continuing
obligations of any nature of such Person arising out of purchase and sale
contracts, (h) all Indebtedness of others guaranteed by such Person,
(i) off-balance sheet liabilities and/or pension plan or multiemployer plan
liabilities of such Person, (j) obligations arising under non-compete
agreements, (k) obligations arising under bonus, deferred compensation,
incentive compensation or similar arrangements, other than those arising in the
Ordinary Course of Business, and (l) Contingent Obligations.

“Indemnitee” has the meaning given it in Section 13.2.

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

 

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“Intellectual Property” includes without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, trade names, service marks, mask
works, rights of use of any name, domain names, or any other similar rights, any
applications therefor, whether registered or not, know-how, operating manuals,
trade secret rights, clinical and non-clinical data, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing.

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

“Investment” means, with respect to any Person, directly or indirectly, (a) to
purchase or acquire any stock or stock equivalents, or any obligations or other
securities of, or any interest in, any Person, including the establishment or
creation of a Subsidiary, (b) to make or commit to make any acquisition of all
or substantially all of the assets of another Person, or of any business,
Product, business line or product line, division or other unit operation of any
Person, or (c) make or purchase any advance, loan, extension of credit or
capital contribution to, or any other investment in, any Person.

“IRC” means the United States Internal Revenue Code of 1986 as amended and the
regulations promulgated thereunder.

“Joinder Requirements” has the meaning set forth in Section 6.8.

“Laws” means any and all federal, state, provincial, territorial, local and
foreign statutes, laws, judicial decisions, regulations, guidance, guidelines,
ordinances, rules, judgments, orders, decrees, codes, plans, injunctions,
permits, concessions, grants, franchises, governmental agreements and
governmental restrictions, whether now or hereafter in effect, which are
applicable to any Credit Party in any particular circumstance.

“Lender” means any one of the Lenders.

“Lenders” means the Persons identified on the Credit Facility Schedule as
amended from time to time to reflect assignments made in accordance with this
Agreement.

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

“Material Adverse Change” means (a) a material impairment in the perfection or
priority of the Agent’s Lien (or any Lender’s Lien therein to the extent
provided for in the Financing Documents) in the Collateral; (b) a material
impairment in the value of the Collateral; (c) a material adverse change in the
business, operations, or condition (financial or otherwise) of any Credit Party;
or (d) a material impairment of the prospect of repayment of any portion of the
Obligations.

“Material Agreement” means (i) the agreements listed in the Disclosure Schedule,
(ii) each agreement or contract to which a Credit Party is a party involving the
receipt or payment of amounts in the aggregate exceeding One Hundred Thousand
Dollars ($100,000) per year (excluding (a) any agreement or contract that
involves payment by the Borrower to another party for materials or supplies
(but, for the avoidance of doubt, not equipment) and services in the Ordinary
Course of Business, (b) employment offers or employment agreements, (c) contract
manufacturing agreements, and (d) clinical research organization agreements, but
specifically including all such agreements relating to licensure of Intellectual
Property) and (iii) any agreement or contract to which such Credit Party or its
Subsidiaries is a party the termination of which could reasonably be expected to
result in a Material Adverse Change.

“Material Indebtedness” has the meaning given it in Section 10.1.

 

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“Maturity Date” means February 1, 2020.

“Maximum Lawful Rate” has the meaning given it in Section 2.6(g).

“MidCap” has the meaning given it in the preamble of this Agreement.

“Obligations” means all of Borrower’s obligations to pay when due any debts,
principal, interest, Protective Advances, fees, indemnities and other amounts
Borrower owes the Agent or Lenders now or later, under this Agreement or the
other Financing Documents, including, without limitation, interest accruing
after Insolvency Proceedings begin (whether or not allowed) and debts,
liabilities, or obligations of Borrower assigned to the Lenders and/or Agent,
and the payment and performance of each other Credit Party’s covenants and
obligations under the Financing Documents. “Obligations” does not include
obligations under any warrants issued to Agent or a Lender.

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

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

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

“Ordinary Course of Business” means, in respect of any transaction involving any
Credit Party, the ordinary course of business of such Credit Party, as conducted
by such Credit Party in accordance with past practices, which shall in any event
be at arms length.

“Participant Register” has the meaning given it in Section 13.1(c).

“Payment Date” means the first calendar day of each calendar month.

“Perfection Certificate” means the Perfection Certificate delivered to Agent as
of the Closing Date, together with any amendments thereto required under this
Agreement.

“Permitted Contingent Obligations” means (a) Contingent Obligations resulting
from endorsements for collection or deposit in the Ordinary Course of Business;
(b) Contingent Obligations incurred in the Ordinary Course of Business with
respect to surety and appeal bonds, performance bonds and other similar
obligations not to exceed Fifty Thousand Dollars ($50,000) in the aggregate at
any time outstanding; (c) Contingent Obligations arising under indemnity
agreements with title insurers; (d) Contingent Obligations arising with respect
to customary indemnification obligations in favor of purchasers in connection
with dispositions of personal property assets permitted under Article 7; (e) so
long as there exists no Event of Default both immediately before and immediately
after giving effect to any such transaction, Contingent Obligations existing or
arising under any swap contract, provided, however, that such obligations are
(or were) entered into by Borrower or an Affiliate in the Ordinary Course of
Business for the purpose of directly mitigating risks associated with
liabilities, commitments, investments, assets, or property held or reasonably
anticipated by such Person and not for purposes of speculation; (f) Contingent
Obligations existing or arising in connection with any letter of credit obtained
for the purpose of securing a lease of real property, provided that the
aggregate face amount of all such letters of credit does not at any time exceed
$100,000; (g) Contingent Obligations existing or arising in connection with Bank
Services in an aggregate amount not at any time exceeding Four Hundred Thousand
Dollars ($400,000); and (h) other Contingent Obligations not permitted by
clauses (a) through (f) above, not to exceed $50,000 in the aggregate at any
time outstanding.

 

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“Permitted Indebtedness” means: (a) Borrower’s Indebtedness to the Lenders and
Agent under this Agreement and the other Financing Documents; (b) Indebtedness
existing on the Closing Date and described on the Disclosure Schedule;
(c) Indebtedness secured by Permitted Liens; (d) Subordinated Debt;
(e) unsecured Indebtedness to trade creditors incurred in the Ordinary Course of
Business; (f) Permitted Contingent Obligations; (g) Indebtedness consisting of
Permitted Investments described in clause (g) of the definition thereof; and
(h) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (b) and (c) above, provided, however, that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon the obligors thereunder.

“Permitted Investments” means: (a) Investments existing on the Closing Date and
described on the Disclosure Schedule; (b) Investments consisting of cash
equivalents; (c) any Investments permitted by Borrower’s investment policy, as
amended from time to time, provided that such investment policy (and any such
amendment thereto) has been approved in writing by the Agent; (d) Investments
consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of any Credit Party;
(e) Investments consisting of deposit accounts or securities accounts in which
the Agent has a first priority perfected security interest except as otherwise
provided by Section 6.6; (f) Investments accepted in connection with Transfers
permitted by Section 7.1 of this Agreement; (g)(A) Investments constituting cash
and cash equivalents in the Securities Subsidiary so long as Borrower at all
times remains in compliance with the applicable provisions related to Securities
Subsidiary in Sections 6.6 and 6.8, and (B) Investments in other Subsidiaries
solely to the extent permitted pursuant to Section 6.8; (h) Investments
consisting of (1) travel advances and employee relocation loans and other
employee loans and advances in the Ordinary Course of Business, and (2) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower’s board of directors; and (i) Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
Ordinary Course of Business.

“Permitted Liens” means: (a) Liens existing on the Closing Date and shown on the
Disclosure Schedule or arising under this Agreement and the other Financing
Documents; (b) purchase money Liens (including capital leases) (i) on Equipment
acquired or held by a Credit Party incurred for financing the acquisition of the
Equipment securing no more than Three Hundred Thousand Dollars ($300,000) in the
aggregate amount outstanding, or (ii) existing on Equipment when acquired, if
the Lien is confined to the property and improvements and the proceeds of the
Equipment; (c) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
adequate reserves are maintained on the Books of the Credit Party against whose
asset such Lien exists, provided that no notice of any such Lien has been filed
or recorded under the Internal Revenue Code of 1986, as amended, and the
treasury regulations adopted thereunder; (d) statutory Liens securing claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
Persons imposed without action of such parties, provided that they have no
priority over any of Agent’s Lien and the aggregate amount of such Liens for all
Credit Parties does not any time exceed Twenty Five Thousand Dollars ($25,000);
(e) leases or subleases of real property granted in the Ordinary Course of
Business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or Intellectual Property) granted in the
Ordinary Course of Business, if the leases, subleases, licenses and sublicenses
do not prohibit granting Agent a security interest; (f) banker’s liens, rights
of set-off and Liens in favor of financial institutions incurred made in the
Ordinary Course of Business arising in connection with a Credit Party’s
Collateral Accounts provided that such Collateral Accounts are subject to a
Control Agreement to the extent required hereunder; (g) Liens to secure payment
of workers’ compensation, employment insurance, old-age pensions, social
security and other like obligations incurred in the Ordinary Course of Business
(other than Liens imposed by ERISA); (h) Liens arising from judgments, decrees
or attachments in circumstances not constituting an Event of Default;
(i) easements, reservations, rights-of-way, restrictions, minor defects or
irregularities in title and similar charges or encumbrances affecting real
property not constituting a Material Adverse Change; (j) Permitted Licenses;
(k) Liens securing the reimbursement obligations in connection with any letter
of credit permitted in clause (f) of the definition of “Permitted Contingent
Obligations”; (l) to the extent any Intellectual Property created after the date
of this Agreement is held jointly by any Credit Party and any third party, Liens
in favor of, and securing, such third party’s rights therein; (m) Liens
consisting of cash collateral granted to Silicon Valley Bank securing Bank
Services permitted hereunder; and (n) Liens incurred in the extension, renewal
or refinancing of the indebtedness secured by Liens described in (a) and
(b) above, but any extension, renewal or replacement Lien must be limited to the
property encumbered by the existing Lien and the principal amount of the
Indebtedness may not increase.

 

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

“Pledge Agreement” means that certain Pledge Agreement dated as the date hereof
by and among Borrower, Agent, and the other parties signatory thereto, as the
same may be amended, restated, supplemented, or otherwise modified from time to
time.

“Pro Rata Share” means, as determined by Agent, with respect to each Credit
Facility and Lender holding an Applicable Commitment or Credit Extensions in
respect of such Credit Facility, a percentage (expressed as a decimal, rounded
to the ninth decimal place) determined by dividing (a) in the case of
fully-funded Credit Facilities, the amount of Credit Extensions held by such
Lender in such Credit Facility by the aggregate amount of all outstanding Credit
Extensions for such Credit Facility, and (b) in the case of Credit Facilities
that are not fully-funded, the amount of Credit Extensions and unfunded
Applicable Commitments held by such Lender in such Credit Facility by the
aggregate amount of all outstanding Credit Extensions and unfunded Applicable
Commitments for such Credit Facility.

“Protective Advances” means all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses) of Agent and Lenders for
preparing, amending, negotiating, administering, defending and enforcing the
Financing Documents (including, without limitation, those incurred in connection
with appeals or Insolvency Proceedings) or otherwise incurred by Agent or the
Lenders in connection with the Financing Documents.

“Register” has the meaning given it in Section 13.1(d).

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

“Required Lenders” means, unless all of the Lenders and Agent agree otherwise in
writing, Lenders having (a) more than sixty percent (60)% of the Applicable
Commitments of all Lenders, or (b) if such Applicable Commitments have expired
or been terminated, more than sixty percent (60%) of the aggregate outstanding
principal amount of the Credit Extensions.

“Required Permit” means all licenses, certificates, accreditations, product
clearances or approvals, provider numbers or provider authorizations, supplier
numbers, provider numbers, marketing authorizations, other authorizations,
registrations, permits, consents and approvals of a Credit Party (a) issued or
required under Laws applicable to the business of Borrower or any of its
Subsidiaries or necessary in the manufacturing, importing, exporting,
possession, ownership, warehousing, marketing, promoting, sale, labeling,
furnishing, distribution or delivery of goods or services under Laws applicable
to the business of Borrower or any of its Subsidiaries, or (b) issued by any
Person from which Borrower or any of its Subsidiaries have received an
accreditation. Without limiting the generality of the foregoing, “Required
Permits” includes any Drug Application (including without limitation, at any
point in time, all licenses, approvals and permits issued by the FDA or any
other applicable Governmental Authority necessary for the testing, manufacture,
marketing or sale of any Product by any applicable Borrower(s) as such
activities are being conducted by such Borrower with respect to such Product at
such time) and any drug listings and drug establishment registrations under 21
U.S.C. Section 510, registrations issued by DEA under 21 U.S.C. Section 823 (if
applicable to any Product), and those issued by State governments for the
conduct of Borrower’s or any Subsidiary’s business.

“Reserve Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.

“Responsible Officer” means any of the President and Chief Executive Officer or
Chief Business Officer of Borrower.

 

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“Secured Promissory Note” has the meaning given it in Section 2.7.

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

“Securities Subsidiary” shall mean Flexion Therapeutics Securities Corporation.,
a Massachusetts securities corporation.

“Stated Rate” has the meaning given it in Section 2.6(g).

“Subordinated Debt” means indebtedness incurred by Borrower which shall be
(i) in an amount satisfactory to Agent, (ii) made pursuant to documents in form
and substance satisfactory to Agent (the “Subordinated Debt Documents”), and
(iii) subordinated to all of Borrower’s now or hereafter indebtedness to the
Lenders (pursuant to a subordination, intercreditor, or other similar agreement
in form and substance satisfactory to Agent entered into between Agent, Borrower
and the other creditor), on terms acceptable to Agent.

“Subsidiary” means, with respect to any Person, any Person of which more than
fifty percent (50.0%) of the voting stock or other equity interests (in the case
of Persons other than corporations) is owned or controlled, directly or
indirectly, by such Person or one or more of Affiliates of such Person.

“Taxes” has the meaning given it in Section 2.6(h).

“Transfer” has the meaning given it in Section 7.1.

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

42

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

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

BORROWER:

 

FLEXION THERAPEUTICS, INC. By:  

/s/ Michael Clayman, MD

Name: Michael Clayman, MD Title: Chief Executive Officer

 

FLEXION THERAPEUTICS, INC.

CREDIT AND SECURITY AGREEMENT

SIGNATURE PAGE

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

AGENT:

 

MIDCAP FINANCIAL TRUST By:   Apollo Capital Management, L.P.,   its investment
manager By:   Apollo Capital Management GP, LLC,   its general partner By:  

/s/ Maurice Amsellem             (SEAL)

Name: Maurice Amsellem Title: Authorized Signatory

 

FLEXION THERAPEUTICS, INC.

CREDIT AND SECURITY AGREEMENT

SIGNATURE PAGE

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

LENDERS:

 

MIDCAP FUNDING XIII TRUST By:   Apollo Capital Management, L.P., its investment
manager By:   Apollo Capital Management GP, LLC, its general partner By:  

/s/ Maurice Amsellem             (SEAL)

Name: Maurice Amsellem Title: Authorized Signatory

 

FLEXION THERAPEUTICS, INC.

CREDIT AND SECURITY AGREEMENT

SIGNATURE PAGE

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

SILICON VALLEY BANK By:  

/s/ Clark Hayes            (SEAL)

Name: Clark Hayes Title: Director, Healthcare and Life Sciences

Address for Notices:

SILICON VALLEY BANK

275 Grove Street, Suite 2-200

Newton, Massachusetts 02466

Attn: Clark Hayes

Email: chayes@svb.com

Fax: 617-969-4395

 

FLEXION THERAPEUTICS, INC.

CREDIT AND SECURITY AGREEMENT

SIGNATURE PAGE

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

EXHIBITS AND SCHEDULES

EXHIBITS

 

Exhibit A            Collateral Exhibit B    Form of Compliance Certificate
Exhibit C    Credit Extension Form

SCHEDULES

Credit Facility Schedule

Amortization Schedule (for each Credit Facility)

Post-Closing Obligations Schedule

Closing Deliveries Schedule

Disclosure Schedule

Intellectual Property Schedule

Products Schedule

Required Permits Schedule

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

EXHIBIT A

COLLATERAL

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

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

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

Pursuant to the terms of a certain negative pledge arrangement with Agent and
Lenders, Borrower has agreed not to encumber any of its Intellectual Property
without Agent’s and Lenders’ prior written consent except as permitted
thereunder.

Notwithstanding the foregoing, except as provided below, the Collateral shall
not include any Intellectual Property of any Credit Party, whether now owned or
hereafter acquired, except to the extent that it is necessary under applicable
law to have a Lien and security interest in any such Intellectual Property in
order to have a perfected Lien and security interest in and to IP Proceeds
(defined below), and for the avoidance of any doubt, the Collateral shall
include, and Agent shall have a Lien and security interest in, (x) all IP
Proceeds, and (y) all payments with respect to IP Proceeds that are received
after the commencement of a bankruptcy or insolvency proceeding. The term “IP
Proceeds” means, collectively, all cash, Accounts, license and royalty fees,
claims, products, awards, judgments, insurance claims, and other revenues,
proceeds or income, arising out of, derived from or relating to any Intellectual
Property of any Credit Party, and any claims for damage by way of any past,
present or future infringement of any Intellectual Property of any Credit Party
(including, without limitation, all cash, royalty fees, other proceeds, Accounts
and General Intangibles that consist of rights of payment to or on behalf of a
Credit Party and the proceeds from the sale, licensing or other disposition of
all or any part of, or rights in, any Intellectual Property by or on behalf of a
Credit Party).

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

EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:   MidCap Financial Trust, as Agent FROM:      

 

DATE:                       , 201    

The undersigned authorized officer of FLEXION THERAPEUTICS, INC. (“Borrower”)
certifies that under the terms and conditions of the Credit and Security
Agreement between Borrower, Agent and the Lenders (the “Agreement”):

(1) Borrower is in complete compliance with all required covenants for the month
ending                     , 201    , except as noted below;

(2) there are no Events of Default except as noted below;

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

(4) Each of Borrower and the other Credit Parties has timely filed all required
tax returns and reports, and has timely paid all foreign, federal, state and
local taxes, assessments, deposits and contributions owed except as otherwise
permitted pursuant to the terms of the Agreement; and

(5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Agent.

Attached are the required documents supporting the certifications set forth in
this Compliance Certificate. The undersigned certifies, in his/her capacity as
an officer of the Borrower, that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned acknowledges, in his/her
capacity as an officer of Borrower, that no borrowings may be requested at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date
this certificate is delivered. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.

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

 

Reporting Covenant

  

Required

  

Complies

Quarterly Financial Statements   

Quarterly within 45 days

       Yes            No     Audited Financial Statements   

Annually within 180 days after FYE

   Yes    No Board Approved Projections   

Annually as soon as available, but not later than March 31

   Yes    No Compliance Certificate   

Monthly within 45 days

   Yes    No Updates to Disclosure Schedules   

Together with delivery of Compliance Certificate

   Yes    No Updates to Intellectual Property Schedules   

Together with delivery of Compliance Certificate

   Yes    No

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

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

 

 

 

 

 

 

 

FLEXION THERAPEUTICS, INC.

 

By:                                                                   
               

Name:                                                                   
                       

Title:                                                                   
                          

    

AGENT USE ONLY

 

Received by:                                               

AUTHORIZED SIGNER

Date:                                                           

 

Verified:                                                      

AUTHORIZED SIGNER

Date:                                                           

 

Compliance Status:         Yes     No    

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

EXHIBIT C

CREDIT EXTENSION FORM

DEADLINE IS NOON E.S.T.

Date:             , 20    

 

LOAN ADVANCE:

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

 

From Account #                                         
                                 To Account #                                 
                                                                    (Loan
Account #)                                 (Deposit Account #)
Amount of Advance $                                
                                

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

 

         Authorized Signature:                                    Phone
Number:                                                                      
         Print Name/Title:                                            

 

OUTGOING WIRE REQUEST:

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

 

Beneficiary Name:                                        
                                         
                                                                              
   Amount of Wire: $                                                            
Beneficiary Lender:                                 
                                       Account
Number:                                                               City and
State:                                                                 

 

Beneficiary Lender Transit (ABA) #:                 Beneficiary Lender Code
(Swift, Sort, Chip, etc.):              (For International Wire Only)   
Intermediary Lender:                                           Transit (ABA)
#:                                                                   For Further
Credit to:                                        
                                         
                                                                      Special
Instruction:                                       
                                         
                                                                         

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

 

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

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

CREDIT FACILITY SCHEDULE

The following Credit Facilities are specified on this Credit Facility Schedule:

Credit Facility #1:

Credit Facility and Type: Term, Tranche 1

Lenders for and their respective Applicable Commitments to this Credit Facility:

 

Applicable Commitment

   Amount  

MidCap Funding XIII Trust

     50 % 

Silicon Valley Bank

     50 % 

The following defined terms apply to this Credit Facility:

Applicable Prepayment Fee: means the following amount, calculated as of the date
(the “Accrual Date”) that the Applicable Prepayment Fee becomes payable in the
case of prepayments required under the Financing Documents or the date any
voluntary prepayment is made: (a) for an Accrual Date on or after the Closing
Date through and including the date which is twelve (12) months after the
Closing Date, three percent (3.0%) multiplied by the amount of the outstanding
principal of the Credit Extension prepaid or required to be prepaid (whichever
is greater); (b) for an Accrual Date on or after the date which is twelve
(12) months after the Closing Date through and including the date which is
twenty-four (24) months after the Closing Date, two percent (2.0%) multiplied by
the amount of the outstanding principal of the Credit Extension prepaid or
required to be prepaid (whichever is greater); (c) for an Accrual Date on or
after the date which is twenty-four (24) months after the Closing Date through
and including the date which is thirty-six (36) months after the Closing Date,
one percent (1.0%) multiplied by the amount of the outstanding principal of the
Credit Extension prepaid or required to be prepaid (whichever is greater); and
(d) for an Accrual Date occurring more than thirty-six (36) months after the
Closing Date, zero percent (0%).

Closed Period: Not applicable.

Commitment Commencement Date: Closing Date

Commitment Termination Date: the close of the Business Day following the Closing
Date.

Minimum Credit Extension Amount: $15,000,000

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

Credit Facility #2:

Credit Facility and Type: Term, Tranche 2

Lenders for and their respective Applicable Commitments to this Credit Facility:

 

Applicable Commitment

   Amount  

MidCap Funding XIII Trust

     50 % 

Silicon Valley Bank

     50 % 

The following defined terms apply to this Credit Facility:

Applicable Funding Conditions: means the date on which Agent and each Lender
determine, in the sole discretion, exercised in good faith, of Agent and each
Lender, that a “Qualifying Event” has occurred. “Qualifying Event” means that
Borrower has received positive Phase III data meeting primary endpoints and
sufficient to file an NDA for FX006.

Applicable Prepayment Fee: means the following amount, calculated as of the date
(the “Accrual Date”) that the Applicable Prepayment Fee becomes payable in the
case of prepayments required under the Financing Documents or the date any
voluntary prepayment is made: (a) for an Accrual Date on or after the Closing
Date through and including the date which is twelve (12) months after the
Closing Date, three percent (3.0%) multiplied by the amount of the outstanding
principal of the Credit Extension prepaid or required to be prepaid (whichever
is greater); (b) for an Accrual Date on or after the date which is twelve
(12) months after the Closing Date through and including the date which is
twenty-four (24) months after the Closing Date, two percent (2.0%) multiplied by
the amount of the outstanding principal of the Credit Extension prepaid or
required to be prepaid (whichever is greater); (c) for an Accrual Date on or
after the date which is twenty-four (24) months after the Closing Date through
and including the date which is thirty-six (36) months after the Closing Date,
one percent (1.0%) multiplied by the amount of the outstanding principal of the
Credit Extension prepaid or required to be prepaid (whichever is greater); and
(d) for an Accrual Date occurring more than thirty-six (36) months after the
Closing Date, zero percent (0%).

Closed Period: Not applicable.

Commitment Commencement Date: Closing Date

Commitment Termination Date: the earliest to occur of (a) September 30, 2016,
(b) an Event of Default, or (c) the existence of any Default.

Minimum Credit Extension Amount: $15,000,000

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

AMORTIZATION SCHEDULE (FOR EACH CREDIT FACILITY)

Commencing on March 1, 2017, and continuing on the first day of each calendar
month thereafter, an amount per month equal to the total amount of Credit
Extensions made under all Credit Facilities divided by thirty-six (36) months.

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

POST CLOSING OBLIGATIONS SCHEDULE

Borrower shall satisfy and complete each of the following obligations, or
provide Agent each of the items listed below, as applicable, on or before the
date indicated below, all to the satisfaction of Agent in its sole and absolute
discretion:

 

1. By not later than sixty (60) days after the Closing Date, Borrower shall take
such steps as required to comply with the last sentence of Section 6.6

 

2. By not later than sixty (60) days after the Closing Date, Borrower shall take
such steps as required to comply with Sections 4.2(e) and 7.2 with respect to
the delivery of Access Agreements from its current landlords and bailees.

 

3. By not later than twenty (20) days after the Closing Date, Borrower shall
deliver Control Agreements executed by (i) Silicon Valley Bank in accordance
with Section 6.6, in respect of account number of Borrower ending -7641,
maintained with Silicon Valley Bank in the name of Borrower, and (ii) State
Street Bank and Trust in accordance Section 6.6, in respect of account number of
Borrower DE3745, maintained with State Street Bank and Trust Company in the name
of Borrower.

 

4. By not later than thirty (30) days after the Closing Date, Borrower shall
deliver to Agent all certificates of insurance and evidence of additional
insured, loss payable, and cancellation endorsements, each in form and substance
satisfactory to Agent.

Borrower’s failure to complete and satisfy any of the above obligations on or
before the date indicated above, or Borrower’s failure to deliver any of the
above listed items on or before the date indicated above, shall constitute an
immediate and automatic Event of Default.

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

CLOSING DELIVERIES SCHEDULE

 

1. duly executed original signatures to the Financing Documents to which
Borrower is a party;

 

2. duly executed original signatures to the Control Agreements with Silicon
Valley Bank and State Street Bank;

 

3. duly executed original Secured Promissory Notes in favor of Silicon Valley
Bank with a face amount equal to such Lender’s Applicable Commitment under each
Credit Facility;

 

4. the Operating Documents of Borrower and good standing certificates of
Borrower certified by the Secretary of State of the state(s) of organization of
Borrower as of a date no earlier than thirty (30) days prior to the Closing
Date;

 

5. good standing certificates dated as of a date no earlier than thirty
(30) days prior to the Closing Date to the effect that Borrower is qualified to
transact business in all states in which the nature of Borrower’s business so
requires;

 

6. duly executed original signatures to the completed Borrowing Resolutions for
Borrower;

 

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

 

8. the Perfection Certificate executed by Borrower;

 

9. a legal opinion of Borrower’s counsel dated as of the Effective Date together
with the duly executed original signatures thereto;

 

10. evidence satisfactory to Agent that the insurance policies required by
Article 6 are in full force and effect, together with appropriate evidence
showing loss payable and/or additional insured clauses or endorsements in favor
of Agent, for the ratable benefit of the Lenders;

 

11. payment of the fees and expenses of Agent and Lenders then accrued; and

 

12. a certificate executed by a Responsible Officer of Borrower, in form and
substance satisfactory to Agent.

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

DISCLOSURE SCHEDULE

 

  1. Scheduled Permitted Liens

 

Debtor

  

Secured Party

  

Collateral

Flexion Therapeutics, Inc.    North Business Machines, Inc.    Copy Machine   
North Business Machines NH, Inc.   

 

  2. Scheduled Permitted Indebtedness

 

Debtor

  

Creditor

  

Amount of Indebtedness outstanding as

  

Maturity Date

Flexion Therapeutics, Inc.    Patrick Boen    $11,916.67 (as of July 31, 2015) 1
   N/A Flexion Therapeutics, Inc.    Employees2    
$719,711.03 (as of June 30, 2015)    Q1 2016

 

1 
Remaining severance obligations to Mr. Boen pursuant to Severance Agreement executed in connection with
termination of services.

2 
Employees are eligible for annual bonuses based on company and individual objectives and subject to board approval

 

  3. Schedule Permitted Investments

 

Debtor

  

Type of Investment

Flexion Therapeutic, Inc.    Owns 1,000 shares of Common Stock of Flexion
Therapeutics Securities Corporation

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

  4. Scheduled Material Agreements

 

  1. 06/12/09- Out-License Agreement by and between Astrazeneca AB and Flexion
Therapeutics AG

 

  2. 09/03/10- Out-License Agreement by and between AstraZeneca AB and Flexion
Therapeutics Inc., as amended by a Letter Agreement dated March 17, 2014

 

  3. Lease dated February 22, 2013, as amended on July 13, 2015

 

  4. Amended and Restated Offer Letter, as amended, with Michael Clayman

 

  5. Amended and Restated Offer Letter, as amended, with Neil Bodick

 

  6. Amended and Restated Offer Letter, as amended, with Frederick Driscoll

 

  7. Manufacturing and Supply Agreement by and between Flexion Therapeutics,
Inc. and Patheon UK Limited dated July 31, 2015

 

  8. Technical Transfer and Service Agreement by and between Flexion
Therapeutics, Inc. and Patheon UK Limited dated July 31, 2015

 

  5. Scheduled of Potential Litigation:

See Disclosure Letter.

 

  6.
Scheduled ownership interest in any Chattel Paper, letter of credit rights, commercial
tort claims, Instruments, documents or investment property: 

 

  •  
Borrower Owns 1,000 shares of Common Stock of Flexion Therapeutics Securities Corporation

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

INTELLECTUAL PROPERTY SCHEDULE

The following is a list of Material Intellectual Property:

1. 06/12/09- Out-License Agreement by and between Astrazeneca AB and Flexion
Therapeutics AG pursuant to which the Company exclusively in-licenses the
patents as indicated on the attached Patent Schedule

AstraZeneca AB

SE-431 83 Mölndal

Sweden

2. 09/03/10- Out-License Agreement by and between AstraZeneca AB and Flexion
Therapeutics Inc., as amended by a Letter Agreement dated March 17, 2014
pursuant to which the Company exclusively in-licenses the patents as indicated
on the attached Patent Schedule

AstraZeneca AB

SE-431 83 Mölndal

Sweden

3. Exclusive License Agreement by and between Flexion Therapeutics, Inc. and
Southwest Research Institute dated July 25, 2014 pursuant to which the Company
exclusively in-licenses the patents as indicated on the attached Patent Schedule

Southwest Research Institute

6220 Culebra Road

San Antonio, Texas 78238

4. Manufacturing and Supply Agreement by and between Flexion Therapeutics, Inc.
and Patheon UK Limited dated July 31, 2015 pursuant to which the Company
licenses out certain intellectual property (on a non-exclusive, exclusive, and
co-exclusive basis) to Patheon UK Limited

Patheon UK Limited

Kingfisher Drive, Covingham

Swindon Wiltshire SN3 5BZ

England

5. The list of patents related to FX006 is set forth on the Patent Schedule
attached hereto (Flexion Case List 7-31-15.xls).

6. A list of patents related to in-licenses of intellectual property is set
forth on the Patent Schedule attached hereto (Flexion Case List 7-31-15.xls).

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

7. The following is a list of patents related to the Company’s other programs:

FX005 – Composition of Matter

 

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

United States

   10/581,305    Granted      US 7,943,776        05/17/2011   

United States

   13/080,583    Abandoned      

United States

   13/628,958    Granted      US 8,742,124        06/03/2014   

Argentina

   P040104794    Response w/2 mo ext. due
9/22/15 (final)      

Austria

   04806056    Granted      1699766         08/11/2010   

Australia

   2004303579    Granted      2004303579        07/17/2008   

Bangladesh

   300/2004    Granted      1004378         06/15/2006   

Belgium

   04806056    Granted      1699766         08/11/2010   

Brazil

   PI0417844-0    Pending – Awaiting First
Office Action      

Canada

   2,547,617    Granted      2,547,617        02/05/2013   

Switzerland

   04806056    Granted      1699766         08/11/2010   

Chile

   2004-3181    Granted      49.039         03/08/2013   

China

   200480041887.3    Granted      200480041887.3        11/10/2010   

Colombia

   06/061504    Granted      661504         10/26/2010   

Cyprus

   04806056    Granted      1699766         08/11/2010   

Czech Republic

   04806056    Granted      1699766         08/11/2010   

Germany

   04806056    Granted      602004028757.7-08        08/11/2010   

Denmark

   04806056    Granted      1699766         08/11/2010   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Egypt

   PCT577/2006    Pending – Awaiting
Confirmation from
Foreign Agent
regarding Status of
Reinstatement of
Application      

Europe

   04806056    Granted      1699766         08/11/2010   

Spain

   04806056    Granted      1699766         08/11/2010   

Finland

   04806056    Granted      1699766         08/11/2010   

France

   04806056    Granted      1699766         08/11/2010   

United Kingdom

   04806056    Granted      1699766         08/11/2010   

United Kingdom

   0329572.2    Provisional/Expired      

Greece

   04806056    Granted      1699766         08/11/2010   

Hong Kong

   06113410.9    Granted      1092797B        12/17/2010   

Croatia

   04806056    Granted      1699766         08/11/2010   

Hungary

   04806056    Granted      1699766         08/11/2010   

Indonesia

   W00200601738    Pending – Response due
08/01/15 (final)      

Ireland

   04806056    Granted      1699766         08/11/2010   

Israel

   175998    Granted      175998         03/01/2013   

India

   3812/DELNP/2006    Pending – Awaiting
Next Communication      

Italy

   04806056    Granted      1699766         08/11/2010   

Japan

   2006/544544    Granted      5046650         07/27/2012   

Korea

   10-2006-7012125    Granted      10-1151530        05/23/2012   

Liechtenstein

   04806056    Granted      1699766         08/11/2010   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Lithuania

   04806056    Granted      1699766         08/11/2010   

Luxembourg

   04806056    Granted      1699766         08/11/2010   

Latvia

   04806056    Granted      1699766         08/11/2010   

Monaco

   04806056    Granted      1699766         08/11/2010   

Montenegro

   04806056    Granted      1699766         08/11/2010   

Malta

   2542    Granted      PAT/2542        12/16/2014   

Mexico

   PA/a/2006/006660    Granted      262909         12/09/2008   

Malaysia

   PI20045224    Granted      MY-145908-A        05/15/2012   

Netherlands

   04806056    Granted      1699766         08/11/2010   

Norway

   20063330    Pending – Response
due w/1 mo ext. due
9/11/15 (final)      

New Zealand

   547998    Granted      547998         07/09/2009   

Philippines

   1-2006-501216    Granted      1-2006-501216        04/18/2011   

Pakistan

   1034/2004    Pending – Awaiting
Next Communication      

Poland

   04806056    Granted      1699766         08/11/2010   

Portugal

   04806056    Granted      1699766         08/11/2010   

Romania

   04806056    Granted      1699766         08/11/2010   

Serbia

   04806056    Granted      1699766         08/11/2010   

Russian Federation

   2006125634    Granted      2382028         02/20/2010   

Saudi Arabia

   04250419    Granted      2147         01/19/2009   

Sweden

   04806056    Granted      1699766         08/11/2010   

Singapore

   200604098-4    Granted      123289         12/31/2008   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Slovenia

   04806056    Granted      1699766         08/11/2010   

Thailand

   096268    Pending – Awaiting for
First Office Action      

Turkey

   04806056    Granted      1699766         08/11/2010   

Taiwan

   093139710    Granted      I342214         05/21/2011   

Ukraine

   UA a 200606333    Granted      88777         11/25/2009   

Uruguay

   28.688    Pending - Awaiting for
First Office Action      

Venezuela

   2203/04    Pending - Awaiting
for initial
communication from
Patent Office
regarding
Patentability
Examination      

PCT

   PCT/GB2004/005241    Expired/National Phase      

South Africa

   2006/4973    Granted      2006/4973        05/30/2007   

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

FX005 – Formulation

 

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

United States

   12/420,349    Abandoned      

United States

   61/043,491    Provisional/Expired      

United States

   13/401,447    Pending – Appeal
Brief due 11/13/15
(final)      

United States

   13/401,486    Abandoned      

Austria

   09730701.1    Granted      2271318         11/28/2012   

Australia

   2009235240    Granted      2009235240        03/07/2013   

Belgium

   09730701.1    Granted      2271318         11/28/2012   

Brazil

   PI0911069-0    Pending – Awaiting
for First Office Action      

Canada

   2,725,822    Pending – Response
to Issue Fee due
1/7/16 (Final)      

Switzerland

   09730701.1    Granted      2271318         11/28/2012   

China

   200980121732.3    Allowed – Awaiting
for Letters Patent to
be issued by Patent
Office      

Colombia

   10-134.179    Abandoned      

Colombia

   13-153.126    Pending – Awaiting
Next Action      

Cyprus

   09730701.1    Granted      2271318         11/28/2012   

Czech Republic

   09730701.1    Granted      2271318         11/28/2012   

Germany

   09730701.1    Granted      2271318         11/28/2012   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Denmark

   09730701.1    Granted      2271318         11/28/2012   

Egypt

   PCT 1778/2010    Pending – Awaiting
for First Office Action      

Europe

   09730701.1    Granted      2271318         11/28/2012   

Spain

   09730701.1    Granted      2271318         11/28/2012   

Finland

   09730701.1    Granted      2271318         11/28/2012   

France

   09730701.1    Granted      2271318         11/28/2012   

United Kingdom

   09730701.1    Granted      2271318         11/28/2012   

Greece

   09730701.1    Granted      2271318         11/28/2012   

Hong Kong

   11102650.4    Pending – Will be
granted due to grant
of EP application –
awaiting Letters
Patent from Patent
Office      

Croatia

   09730701.1    Granted      2271318         11/28/2012   

Hungary

   09730701.1    Granted      2271318         11/28/2012   

Indonesia

   W00201003530    Response to final
fees due 5/24/16      W00201003530        5/25/2015   

Ireland

   09730701.1    Granted      2271318         11/28/2012   

Israel

   208573    Pending – Certificate
of Patent and
Certificate of
Renewal Fee will be
sent      208573         11/01/2014   

India

   2338/MUMNP/2010    Pending – Section 8
requirements due
9/25/15 (final) &      

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date         Deadline for
acceptance due
3/25/16 (final)      

Italy

   09730701.1    Granted      2271318         11/28/2012   

Japan

   2011-503502    Granted      5485261         02/28/2014   

Korea

   10-2010-7025013    Pending – Awaiting
Next Action      

Liechtenstein

   09730701.1    Granted      2271318         11/28/2012   

Lithuania

   09730701.1    Granted      2271318         11/28/2012   

Luxembourg

   09730701.1    Granted      2271318         11/28/2012   

Latvia

   09730701.1    Granted      2271318         11/28/2012   

Monaco

   09730701.1    Granted      2271318         11/28/2012   

Malta

   09730701.1    Granted      2271318         11/28/2012   

Mexico

   MX/a/2010/010980    Granted      313108         09/09/2013   

Malaysia

   PI2010004722    Pending – Awaiting
for First Office Action      

Netherlands

   09730701.1    Granted      2271318         11/28/2012   

Norway

   09730701.1    Granted      2271318         11/28/2012   

New Zealand

   588677    Granted      588677         10/08/2012   

Philippines

   1-2010-502266    Pending – Allowed      

Poland

   09730701.1    Granted      2271318         11/28/2012   

Portugal

   09730701.1    Granted      2271318         11/28/2012   

Romania

   09730701.1    Granted      2271318         11/28/2012   

Serbia

   09730701.1    Granted      2271318         11/28/2012   

Russian

   2010143985    Granted      2538702         11/21/2014   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Federation

           

Sweden

   09730701.1    Granted      2271318         11/28/2012   

Singapore

   201007087-8    Granted      165055         04/30/2013   

Slovenia

   09730701.1    Granted      2271318         11/28/2012   

Turkey

   09730701.1    Granted      2271318         11/28/2012   

Ukraine

   a201012746    Granted      101027         02/25/2013   

PCT

   PCT/GB2009/050353    Expired/National
Phase      

South Africa

   2010/07916    Granted      2010/07916        04/30/2014   

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

FX007 – Composition of Matter

 

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

United States

   11/815,140    Granted      US 8,324,252        12/04/2012   

United States

   13/688,790    Granted      US 8,835,465        09/16/2014   

United States

   60/650,053    Expired/Provisional      

United States

   60/653,329    Expired/Provisional      

United States

   60/721,633    Expired/Provisional      

Argentina

   P060100376    Pending – Awaiting
for First Office Action      

Austria

   06701619.6    Granted      1846394         10/26/2011   

Australia

   2006210710    Granted      2006210710        03/25/2010   

Belgium

   06701619.6    Granted      1846394         10/26/2011   

Brazil

   PI 0606793-0    Pending - Awaiting
for First Office Action      

Canada

   2,595,834    Granted      2,595,834        04/30/2013   

Switzerland

   06701619.6    Granted      1846394         10/26/2011   

Chile

   2006-0219    Granted      49.219         06/13/2013   

China

   200680010108.2    Granted      200680010108.2        05/23/2012   

Colombia

   07090213    Granted      1815         03/29/2012   

Cyprus

   06701619.6    Granted      1846394         10/26/2011   

Czech Republic

   06701619.6    Granted      1846394         10/26/2011   

Germany

   06701619.6    Granted      1846394         10/26/2011   

Denmark

   06701619.6    Granted      1846394         10/26/2011   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Ecuador

   07-7705    Pending – Motion Filed Against Resolution for Lapsed Application;
Awaiting Next Communication      

Egypt

   802/2007   

Pending – Response

due 9/22/15 (final)

     

Europe

   06701619.6    Granted      1846394         10/26/2011   

Europe

   11167362.0    Pending - Allowed      

Spain

   06701619.6    Granted      1846394         10/26/2011   

Finland

   06701619.6    Granted      1846394         10/26/2011   

France

   06701619.6    Granted      1846394         10/26/2011   

United Kingdom

   06701619.6    Granted      1846394         10/26/2011   

Greece

   06701619.6    Granted      1846394         10/26/2011   

Hong Kong

   08101578.0    Granted      1114374         03/23/2012   

Hong Kong

   12104298.7    Pending – Subject to Status of EP 2383268      

Croatia

   06701619.6    Granted      1846394         10/26/2011   

Hungary

   06701619.6    Granted      1846394         10/26/2011   

Indonesia

   W00200702467    Pending - Awaiting Next Action      

Ireland

   06701619.6    Granted      1846394         10/26/2011   

Israel

   184674    Granted      184674         11/01/2012   

India

   6476/DELNP/2007    Pending – Awaiting Next Action      

Italy

   06701619.6    Granted      1846394         10/26/2011   

Japan

   2007-553688    Granted      5139084         11/22/2012   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Korea

   10-2007-7020258    Granted      1302945         08/27/2013   

Liechtenstein

   06701619.6    Granted      1846394         10/26/2011   

Lithuania

   06701619.6    Granted      1846394         10/26/2011   

Luxembourg

   06701619.6    Granted      1846394         10/26/2011   

Latvia

   06701619.6    Granted      1846394         10/26/2011   

Monaco

   06701619.6    Granted      1846394         10/26/2011   

Montenegro

   06701619.6    Granted      1846394         10/26/2011   

Malta

   3270    Granted      PAT/3270        08/22/2006   

Mexico

   MX/a/2007/009437    Granted      298884         05/04/2012   

Malaysia

   PI20060475    Granted      MY-149512-A        09/13/2013   

Netherlands

   06701619.6    Granted      1846394         10/26/2011   

Norway

   20073791    Pending – Awaiting First Office Action      

New Zealand

   561145    Granted      561145         06/07/2011   

Philippines

   1-2007-501673    Granted      1-2007-501673        11/02/2011   

Pakistan

   0067/2006    Pending – Awaiting Next Communication      

Poland

   06701619.6    Granted      1846394         10/26/2011   

Portugal

   06701619.6    Granted      1846394         10/26/2011   

Romania

   06701619.6    Granted      1846394         10/26/2011   

Serbia

   06701619.6    Granted      1846394         10/26/2011   

Russia Federation

   2007132976    Granted      2415852         04/10/2011   

Saudi Arabia

   06270007    Granted      2535         11/22/2010   

Sweden

   06701619.6    Granted      1846394         10/26/2011   

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

Country

  

Application No.

  

Status

   Patent No.      Issue Date  

Singapore

   200705360-06    Granted      134066         02/26/2010   

Slovenia

   06701619.6    Granted      1846394         10/26/2011   

Thailand

   108388    Pending – Awaiting Next Action      

Turkey

   06701619.6    Granted      1846394         10/26/2011   

Taiwan

   095103831    Granted      I370127         08/11/2012   

Ukraine

   a 2007009911    Granted      93197         01/25/2011   

Uruguay

   29.360    Pending - Awaiting First Office Action      

Venezuela

   00195-2006    Pending – According to notes, application lapsed prior to
transfer to Dechert due to lack of publication although FA proceeded
w/corresponding Appeal to avoid lapse of application      

PCT

   PCT/GB2006/000334    Expired/National Phase      

South Africa

   2007/06212    Granted      2007/06212         06/25/2008   

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

8. The list of trademarks is set forth below:

 

          APPLICATION NO. / REGISTRATION    FILING DATE / REGISTRATION

MARK 

  

COUNTRY

   NO.    DATE ANQUEST     United States    Application No. 86508591   
Filed 1/20/15 FLEXION    United States    Application No. 86508601   
Filed 1/20/15 TRELARTA    United States    Application No. 86508895   
Filed 1/20/15 ZILRETTA    United States    Application No. 86508900   
Filed 1/20/15 FLEXION    Australia    Application No. 1706925    Filed 7/14/15
ZILRETTA    Australia    Application No. 1706927    Filed 7/14/15 FLEXION   
Brazil    Application No. 909689300    Filed 7/16/15 FLEXION    Brazil   
Application No. 909689555    Filed 7/16/15 ZILRETTA    Brazil   
Application No. 909689628    Filed 7/16/15 ANQUEST     Canada   
Application No. 1731785    Filed 6/8/15 FLEXION    Canada   
Application No. 1737733    Filed 7/16/15 TRELARTA    Canada   
Application No. 1731786    Filed 6/8/15 ZILRETTA    Canada   
Application No. 1731787    Filed 6/8/15 FLEXION    Chile   
Application No. 1162758    Filed 7/17/15 ZILRETTA    Chile   
Application No. 1162759    Filed 7/17/15 FLEXION    China   
Application No. to be assigned    Filed 7/17/15 FLEXION    China   
Application No. to be assigned    Filed 7/17/15 ZILRETTA    China   
Application No. to be assigned    Filed 7/17/15

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

          APPLICATION NO. / REGISTRATION    FILING DATE / REGISTRATION

MARK 

  

COUNTRY

   NO.    DATE ANQUEST     European Union    Registration No. 13749015   
Filed 2/17/15

Registered 6/16/15

FLEXION     European Union    Application No. 13786439    Filed 3/2/15 TRELARTA
   European Union    Registration No. 13749031    Filed 2/17/15

Registered 6/16/15

ZILRETTA    European Union    Application No. 13749056    Filed 2/17/15 FLEXION
   Hong Kong    Application No. 303472533    Filed 7/15/15 ZILRETTA    Hong Kong
   Application No. 303472542    Filed 7/15/15 FLEXION    India   
Application No. 3009640    Filed 7/15/15 ZILRETTA    India   
Application No. 3009641    Filed 7/15/15 FLEXION    Japan   
Application No. 2015-066806    Filed 7/14/15 ZILRETTA    Japan   
Application No. 2015-066807    Filed 7/14/15 FLEXION    Mexico   
Application No. 1633402    Filed 7/15/15 FLEXION    Mexico   
Application No. 1633403    Filed 7/15/15 ZILRETTA    Mexico   
Application No. 1633404    Filed 7/15/15 ANQUEST     Norway   
Application No. 201507166    Filed 6/9/15 FLEXION    Norway   
Application No. 201508750    Filed 7/14/15 TRELARTA    Norway   
Application No. 201507226    Filed 6/9/15 ZILRETTA    Norway   
Application No. 201507168    Filed 6/9/15 FLEXION    Singapore   
Application No. 40201512177V    Filed 7/15/15 ZILRETTA    Singapore   
Application No. 40201512178T    Filed 7/15/15

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

          APPLICATION NO. / REGISTRATION    FILING DATE / REGISTRATION

MARK 

  

COUNTRY

   NO.    DATE FLEXION    South Africa    Application No. 2015/18923   
Filed 7/14/15 FLEXION    South Africa    Application No. 2015/18924   
Filed 7/14/15 ZILRETTA    South Africa    Application No. 2015/18928   
Filed 7/14/15 FLEXION    South Korea    Application No. 45-2015-0006615   
Filed 7/17/15 ZILRETTA    South Korea    Application No. 40-2015-0053496   
Filed 7/17/15 ANQUEST     Switzerland    Application No. 56776/2015   
Filed 6/9/15 FLEXION    Switzerland    Application No. 58409/2015   
Filed 7/14/15 TRELARTA    Switzerland    Application No. 56777/2015   
Filed 6/9/15 ZILRETTA    Switzerland    Application No. 56778/2015   
Filed 6/9/15

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

PRODUCTS SCHEDULE

 

FX005     IA for OA p38 FX006     IA for OA Steroids
FX007     TrkA - Osteoarthritis

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

REQUIRED PERMITS SCHEDULE

The Company has licenses in the ordinary course from governmental agencies to
carry on its business including general incorporation rights and rights to
manufacture clinical product and import and export clinical product to various
jurisdictions in which the Company is conducting clinical trials. The Company
does not have any Drug Applications.