Exhibit 10.28

 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT dated as of  October 15, 2008 between ISIS PHARMACEUTICALS,
INC., a Delaware Corporation (together with its successors and permitted
assigns, “Borrower”), and RBS ASSET FINANCE, INC., a New York corporation
(together with its successors and assigns, “Lender”).

 

R ECITALS:

 

WHEREAS, Borrower desires to obtain one or more Loans from Lender in an
aggregate principal amount not to exceed the Maximum Principal Amount, which
Loans are to be secured by the Collateral;

 

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the premises contained in this Agreement,
Lender and Borrower agree as follows:

 

ARTICLE I:  DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.01.  Defined Terms.  The following terms shall have the following
meanings for all purposes of this Loan Agreement:

 

“Agreement” means this Loan Agreement, as amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms hereof.

 

“Borrower’s State” has the meaning ascribed to such term in Schedule I hereto.

 

“Business Day” means any day on which Lender is open for business and is neither
a Saturday or Sunday nor a legal holiday on which banks are authorized or
required to be closed in Chicago, Illinois.

 

“Change of Control” means a change in control of Borrower or any Guarantor,
including, without limitation, a change in control resulting from direct or
indirect transfers of voting stock or partnership, membership or other ownership
interests, whether in one or a series of transactions.  “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of Borrower or any Guarantor, and a
Change of Control shall occur if any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act) acquires, after the date of this
Agreement, the beneficial ownership directly or indirectly, of 50% or more of
the voting power of the total outstanding stock or other ownership interests of
Borrower or any Guarantor.

 

“Closing Date” means with respect to each Loan, the date that the proceeds of
such Loan are disbursed to, or on behalf of, Borrower.

 

“Closing Fee” has the meaning ascribed to such term in Schedule I hereto.

 

“Collateral” means the property described on each Collateral Schedule, which
property shall be acceptable to Lender, in its sole discretion, and any other
assets of Borrower, any Guarantor or any other Person that are subject to a Lien
in favor of Lender pursuant to any Loan Document.

 

“Collateral Schedule” means each schedule describing Collateral attached to and
referencing a Note or Notes and executed by Borrower and Lender.

 

“Commitment” means Lender’s obligation to make Loans to Borrower pursuant to
Section 2.01 in an amount not to exceed the Maximum Principal Amount.

 

“Commitment Termination Date” means the earliest of (a) the date on which the
aggregate Original Principal Amount of all Loans equals the Maximum Principal
Amount, (b) the Scheduled Commitment Termination Date, (c) the date that an
Event of Default described in subsection (i) of Section 7.01 occurs or (d) the
date on which Lender elects to terminate the Commitment following (i) an Event
of Default or (ii) the occurrence of a material adverse change in the business,
assets or financial condition or prospects of Borrower or any Guarantor.

 

“Default” means any Event of Default or any condition, occurrence or event that,
after notice or lapse of time or both, would constitute an Event of Default.

 

“Default Rate” has the meaning ascribed to such term in Section 2.05(c).

 

“Environmental Laws” means all federal, state, local, or foreign law (including
any common law, consent decrees and administrative orders), statute, regulation,
or ordinance (in each case, as amended from time to time) regulating,
permitting,

 

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prohibiting or otherwise restricting the placement, discharge, release,
generation, treatment or disposal upon or into any environmental media of any
substance, pollutant, contaminant or waste that is now or hereafter classified
or considered to be hazardous or toxic.

 

“Event of Default” has the meaning assigned to such term in Section 7.01.

 

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

 

“Financial Statements” has the meaning ascribed to such term in Schedule I
hereto.

 

“Fixed Rate” has the meaning ascribed to such term in Schedule I hereto.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Guarantor” means each guarantor of the Obligations.

 

“Guaranty” means one or more instruments by which a Guarantor guarantees the
Obligations, in form and substance acceptable to Lender.

 

“Indebtedness” means (a) all items of indebtedness or liability which in
accordance with GAAP or federal tax law would be included in determining total
liabilities as shown on the liabilities side of a balance sheet,
(b) indebtedness secured by any mortgage, pledge, lien or security interest
existing on property owned by Borrower, whether or not the indebtedness secured
thereby shall have been assumed and (c) guaranties and endorsements (other than
for purposes of collection in the ordinary course of business) by Borrower and
other contingent obligations of Borrower in respect of, or to purchase or
otherwise acquire, indebtedness of others.

 

“Interim Interest Date” has the meaning ascribed to such term in Schedule I
hereto.

 

“Interim Interest Payment Date” has the meaning ascribed to such term in
Schedule I hereto.

 

“Lien” means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or otherwise), charge against
or interest in property to secure payment of a debt or performance of an
obligation or other priority or preferential arrangement of any kind or nature
whatsoever.

 

“Loan” means a loan from Lender to Borrower pursuant to this Agreement.

 

“Loan Documents” means, collectively, this Agreement, each Note, each Loan
Request, any Guaranty and each other instrument or document executed or
delivered by Borrower pursuant to or in connection with this Agreement and the
other Loan Documents, including, without limitation, any instrument or agreement
given to evidence or further secure the Obligations.

 

“Loan Request” means a Loan Request, duly executed by an authorized officer of
Borrower, in form and substance acceptable to Lender.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, properties or condition (financial or otherwise) of Borrower
or any Guarantor, (b) the ability of Borrower to perform or pay its Obligations
or any Indebtedness in the amount of $10,000,000.00 or more in accordance with
the terms thereof, (c) the ability of any Guarantor to perform its, his or her
obligations under a Guaranty, (d) Lender’s Lien on the Collateral or the
priority of such Lien, or (e) the validity or enforceability of any Loan
Document or the rights and remedies available to Lender under any Loan Document.

 

“Maximum Principal Amount” has the meaning ascribed to such term in Schedule I
hereto.

 

“Moody’s” means Moody’s Investor Services, Inc. or any successor thereto.

 

“Note” has the meaning ascribed to such term in Section 2.02.

 

“Notice Address” has the meaning ascribed to such term in Schedule I hereto.

 

“Obligations” means, subject to Section 8.10(c), the obligations to make the
payment of all indebtedness evidenced by the Notes, together with all
extensions, renewals, amendments and modifications thereof and the payment of
all other Indebtedness and other sums owed under, and the payment and the
performance of all obligations and covenants contained in the Loan Documents, in
each case whether now existing or hereafter incurred, direct or indirect,
absolute or contingent, and due or to become due, together with all fees and
expenses (including, without limitation, all attorneys’ fees and expenses)
incurred by Lender in connection with the collection or enforcement of any of
the Obligations.

 

“Organizational Documents” has the meaning ascribed to such term in Schedule I
hereto.

 

“Original Principal Amount” means the aggregate principal balance of each Loan
as of the Closing Date for such Loan.

 

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“Payment Date” has the meaning ascribed to such term in Schedule I hereto.

 

“Permitted Liens” means any of the following:  (a) Liens (other than Liens
relating to Environmental Laws) for taxes, assessments or other governmental
charges not yet due and payable, (b) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other similar Liens imposed by law,
which are incurred in the ordinary course of business for sums  that are not
delinquent, (c) Liens in favor of Lender, and (d) Liens explicitly identified in
any Loan Document as “permitted liens.”

 

“Person” means any natural person, corporation, partnership, limited liability
company, firm, association, trust, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.

 

“Prepayment Fee” means with respect to each Loan, the prepayment fee described
in the related Note.

 

“S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. or
any successor thereto.

 

“Scheduled Commitment Termination Date” has the meaning ascribed to such term in
Schedule I hereto.

 

“Stated Maturity Date” means, with respect to each Loan, the scheduled maturity
date described in the related Note.

 

“UCC” means the Uniform Commercial Code as from time to time in effect in the
State of New York.

 

Section 1.02.  Rules of Construction.  The singular form of any word used
herein, including the terms defined in Section 1.01 hereof, shall include the
plural, and vice versa.  The use herein of a word of any gender shall include
correlative words of all genders.  Unless otherwise specified, references to
Articles, Sections and other subdivisions of this Agreement are to the
designated Articles, Sections and other subdivision of this Agreement as
originally executed.  The words “hereof,” “herein,” “hereunder” and words of
similar import refer to this Agreement as a whole.  The headings or titles of
the several articles and sections shall be solely for convenience of reference
and shall not affect the meaning, construction or effect of the provisions
hereof.

 

Section 1.03.  Accounting and Financial Determinations.  Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with GAAP consistently
applied.  In the event that GAAP changes during the term of this Agreement such
that the financial covenants contained herein would then be calculated in a
different manner or with different components, Borrower and Lender shall amend
such provisions of this Agreement in such respects as necessary to conform the
financial covenants as criteria for evaluating the financial condition of
Borrower or a Guarantor, as applicable, to substantially the same criteria as
were effective prior to such change in GAAP.

 

ARTICLE II:  THE LOANS

 

Section 2.01.  Loans.

 

(a)           Commitment.  Lender hereby agrees, subject to the terms and
conditions of this Agreement, to make one or more Loans to Borrower from time to
time during the period from the date hereof to the Commitment Termination Date
in the aggregate Original Principal Amount not to exceed the Maximum Principal
Amount (the “Commitment”).  Not more than one Loan shall be funded in any
calendar month, and each Loan shall be in an Original Principal Amount of at
least $250,000.  The Original Principal Amount of each Loan shall reduce, dollar
for dollar, the remaining available amount under the Commitment, and any amount
funded may not be reborrowed after being repaid.  The Commitment shall terminate
automatically and without any further action on the Commitment Termination
Date.  Borrower’s obligation to repay a Loan shall commence, and interest shall
begin to accrue, on the Closing Date of such Loan.

 

(b)           Loan Request.  By delivering a duly completed and executed Loan
Request to Lender, on a Business Day, Borrower may irrevocably request that a
Loan be made on the Closing Date specified in such Loan Request (which date
shall be at least two Business Days but no more than 10 Business Days after the
date of delivery to Lender of such Loan Request).  On such Closing Date, subject
to the terms and conditions contained herein, Lender shall disburse the Original
Principal Amount specified in such Loan Request to, or on behalf of, Borrower to
the accounts or entities specified in such Loan Request.  Such Loan Request
shall specify the applicable Closing Date, the Original Principal Amount of such
Loan and the applicable disbursement instructions.  Borrower agrees that the
proceeds of all Loans shall be used solely for the purposes described in such
Loan Request.

 

Section 2.02.  Note.  Each Loan made by Lender under this Agreement shall be
evidenced by, and repaid with interest in accordance with, a single promissory
note of Borrower in form and substance acceptable to Lender, duly completed, in
the principal amount of the Original Principal Amount of such Loan, dated as of
the Closing Date for such Loan, made payable to Lender or order, and maturing on
the Stated Maturity Date of such Loan or such earlier date pursuant to an
acceleration hereunder (the “Note”).

 

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Section 2.03.  Scheduled Payments.  On each Payment Date, Borrower shall pay the
aggregate scheduled principal and interest payments owed with respect to each
Loan as set forth in the Notes and any prepayment as provided in Section 2.04;
provided, however, on the Stated Maturity Date or date of acceleration of a
Loan, Borrower shall repay in full the aggregate then outstanding principal
amount of such Loan plus all accrued and unpaid interest thereon and all other
amounts owed hereunder or under any other Loan Document related to such Loan.

 

All amounts required to be paid by Borrower hereunder shall be paid in lawful
money of the United States of America in immediately available funds to the
following account, or to such other account as designated by Lender to Borrower
in writing:

 

Clearing Bank:  RBS Citizens, N.A.

ABA:  241070417

Beneficiary:  RBS Asset Finance Customer Payments

Account:  450000-157-2

Borrower:  ISIS Pharmaceuticals, Inc.

 

Any payment received after 3:00 p.m. New York time will be deemed to be received
on the next succeeding Business Day.  Whenever any payment to be made hereunder
shall be stated to be due on a day which is not a Business Day, such payment may
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or the fees hereunder, as
the case may be.  All payments shall be applied first to accrued interest and
then to principal.

 

Section 2.04.  Prepayments.

 

(a)           Voluntary Prepayments.  Prior to the Stated Maturity Date,
Borrower may, from time to time on any Payment Date, make a voluntary prepayment
of principal outstanding under the Loans; provided, however, that (a) no Loan
may be prepaid in part but, instead, if principal outstanding thereunder is
prepaid at all, the entire principal balance outstanding thereunder shall be
prepaid in full; (b) all such voluntary prepayments shall require notice on or
before the date that is 30 calendar days in advance of any prepayment of the
Loans; and (c) in connection with each such voluntary prepayment, Borrower shall
pay all accrued interest on the outstanding principal amount of the Loan or
Loans prepaid, all other amount owed under any Loan Document and, except as
otherwise provided in any Loan Document, the aggregate Prepayment Fee for the
Loan or Loans prepaid, which shall not be refundable.

 

(b)           Mandatory Prepayment Upon Acceleration.  Upon any acceleration of
any Loan pursuant to Section 7.02, Borrower shall immediately repay all (or if
only a portion is accelerated thereunder, such portion of) the Loans then
outstanding, including accrued and unpaid interest thereon, plus the aggregate
Prepayment Fee for all such Loans and all other amounts owed under the Loan
Documents.

 

Section 2.05.  Interest Provisions.

 

(a)           Interest on the outstanding principal amount of each Loan shall
accrue at a rate per annum equal to the Fixed Rate for such Loan.  Interest
shall be computed on the basis of a 360-day year consisting of 12 30-day months.
On the Interim Interest Payment Date for a Loan, Borrower shall pay interest
accruing on such Loan from the applicable Closing Date through and including the
last day of the calendar month immediately preceding the applicable Interim
Interest Date.  Interest accruing on each Loan on and after the Interim Interest
Date for such Loan shall be payable on each Payment Date or the date of
prepayment, as applicable.

 

(b)           Any payment under a Loan Document that is not paid by Borrower on
the due date thereof shall, to the extent permissible by law, bear a late charge
equal to the lesser of three cents ($.03) per dollar of the delinquent amount or
the lawful maximum, and Borrower shall be obligated to pay the same immediately
upon receipt of Lender’s written invoice therefor.

 

(c)           Upon the occurrence and during the continuation of any Event of
Default or after acceleration, Borrower shall pay interest (i) with respect to
all Loans at a rate per annum equal to the rate otherwise in effect plus an
additional 3% per annum and (ii) with respect to all other Obligations of
Borrower to Lender at a rate per annum equal to the highest Fixed Rate then in
effect plus an additional 3% per annum (each such rate, a “Default Rate”).

 

(d)           The obligations of Borrower hereunder and under the Notes and the
other Loan Documents shall be subject to the limitation that payments of
interest to Lender, plus any other amounts paid to Lender in connection herewith
and therewith, shall not be required to the extent (but only to the extent) that
contracting for and receiving such payment by Lender would be contrary to the
provisions of any law applicable to Lender limiting the highest rate of interest
which may be contracted for, charged or received by Lender, and in such event
Borrower shall pay such Lender interest and other amounts at the highest rate
permitted by applicable law.

 

Section 2.06.  Payments Absolute.  The obligations of Borrower to pay interest
and principal required under this Article II and to make other payments under
the Loan Documents and to perform and observe the covenants and agreements
contained

 

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herein and therein shall be absolute and unconditional in all events, without
abatement, diminution, deduction, setoff or defense for any reason, including,
without limitation, any failure of the Collateral to be delivered, installed or
constructed, as applicable, any defects, malfunctions, breakdowns or infirmities
in the Collateral or any accident, condemnation, destruction or unforeseen
circumstances.  Notwithstanding any dispute between Borrower and Lender or any
other person, Borrower shall make all payments under the Loan Documents when due
and shall not withhold any payments pending final resolution of such dispute,
nor shall Borrower assert any right of set-off or counterclaim against its
obligation to make such payments required under the Loan Documents.

 

ARTICLE III:  CONDITIONS TO LOANS

 

Lender’s agreement to make the Loans to Borrower hereunder and to disburse the
proceeds thereof shall be subject to the condition precedent that Lender shall
have received, on or prior to the applicable Closing Date (or by such other time
as may be specified herein with respect thereto), all of the following, each in
form and substance satisfactory to Lender:

 

(a)           This Agreement and all other Loan Documents, properly executed on
behalf of Borrower, and each of the exhibits and schedules hereto and thereto
properly completed.

 

(b)           The respective Note, properly executed on behalf of Borrower.

 

(c)           A Loan Request for each such Loan, duly completed and properly
executed on behalf of Borrower.

 

(d)           A certificate of the Secretary or an Assistant Secretary of
Borrower, certifying as to (i) the resolutions of the board of directors of
Borrower, authorizing the execution, delivery and performance of this Agreement,
the Note, the other Loan Documents and any related documents, (ii) the
Organizational Documents of Borrower, (iii) the signatures of the officers or
agents of Borrower authorized to execute and deliver this Agreement, the Note,
the other Loan Documents and other instruments, agreements and certificates on
behalf of Borrower, and (iv) no Default or event or circumstance that could
reasonably be likely to have a Material Adverse Effect has occurred.

 

(e)           Current certified copies of the Organizational Documents of
Borrower.

 

(f)            A Certificate of Good Standing issued as to Borrower by the
Secretary of the State of the state of Borrower’s organization (or once Borrower
has provided a Certificate of Good Standing, a confirmation from a reputable
filing service in the applicable jurisdiction that such Good Standing
Certificate is still in effect) not more than 30 days prior to the Closing Date.

 

(g)           A Certificate of Qualification issued as to Borrower by the
Secretary of the State of the state where the Collateral is or will be located 
(or once Borrower has provided a Certificate of Qualification, a confirmation
from a reputable filing service in the applicable jurisdiction that such
Certificate of Qualification is still in effect) not more than 30 days prior to
the Closing Date.

 

(h)           [Intentionally Omitted]

 

(i)            [Intentionally Omitted]

 

(j)            [Intentionally Omitted]

 

(k)           [Intentionally Omitted]

 

(l)            Certificates of the insurance required hereunder, containing a
lender’s loss payable clause in favor of Lender.

 

(m)          [ Intentionally Omitted]

 

(n)           Current searches of appropriate filing offices showing that (i) no
state or federal tax liens have been filed and remain in effect against
Borrower, and (ii) no financing statements have been filed and remain in effect
against Borrower relating to the Collateral except those financing statements
filed by Lender.

 

(o)           Payment of the Closing Fee and, if any, all of Lender’s other
fees, commissions and expenses in connection with the funding of each Loan.

 

(p)           [Intentionally Omitted]

 

(q)           Any other documents or items reasonably required by Lender.

 

ARTICLE IV:  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER

 

Borrower represents, warrants and covenants for the benefit of Lender, as of the
date hereof and each Closing Date, as follows:

 

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(a)           Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization.  Borrower
is in good standing and is duly licensed or qualified to transact business in
each jurisdiction where the nature of its business requires such qualification,
except for those jurisdictions in which the failure to qualify could not
reasonably be expected to have a Material Adverse Effect.  Borrower’s exact
legal name is as set forth on the execution page hereof.

 

(b)           Borrower has full power and authority and holds all requisite
governmental licenses, permits and other approvals to (i) enter into and perform
its obligations under this Agreement, the Note and each other Loan Document to
which it is a party and to own its property, (ii) use the Collateral and
(iii) conduct its business substantially as currently conducted by it, except as
to clause (iii) where the failure to hold such licenses, permits and approvals
could not reasonably be expected to have a Material Adverse Effect.

 

(c)           This Agreement, the Note and the other Loan Documents to which it
is a party have been duly authorized, executed and delivered by Borrower and
constitute legal, valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms, except to the extent limited
by bankruptcy, reorganization or other laws of general application relating to
or effecting the enforcement of creditors’ rights.

 

(d)           The execution and delivery of this Agreement, the Note and the
other Loan Documents, the consummation of the transactions contemplated hereby
and thereby and the fulfillment of the terms and conditions hereof and thereof
do not and will not violate any law, rule, regulation or order, conflict with or
result in a breach of any of the terms or conditions of any Organizational
Document of Borrower or of any corporate restriction or of any agreement or
instrument to which Borrower is now a party and do not and will not constitute a
default under any of the foregoing or result in the creation or imposition of
any liens, charges or encumbrances of any nature upon any of the property or
assets of Borrower other than Liens in favor of Lender.

 

(e)           The authorization, execution, delivery and performance of this
Agreement, the Note and the other Loan Documents by Borrower do not require
submission to, approval of, or other action by any governmental authority or
agency, except for such action that has been duly obtained or taken and is in
full force and effect.

 

(f)            Assuming the timely filing with the Secretary of State of
Borrower’s State of UCC-1 financing statements showing Borrower as the “debtor”
thereunder and Lender as the “secured party” thereunder and containing a
description of the Collateral substantially similar to the description of the
Collateral contained in the respective Collateral Schedules, each of the Loan
Documents that purports to create a security interest creates a valid first
priority Lien on the Collateral subject only to Permitted Liens, securing the
payment and performance of the Obligations.

 

(g)           Except as disclosed by Borrower in its filings with the SEC that
are available to the public, there is no action, suit, proceeding, claim,
inquiry or investigation, at law or in equity, before or by any court,
regulatory agency, public board or body pending or, to the best of Borrower’s
knowledge, threatened against or affecting Borrower or any Guarantor,
challenging Borrower’s or any Guarantor’s authority to enter into this
Agreement, the Note or any of the other Loan Documents or any other action
wherein an unfavorable ruling or finding would adversely affect the
enforceability of this Agreement, the Note or any of the other Loan Documents,
or could reasonably be expected to have a Material Adverse Effect.

 

(h)           Borrower has good title to all of the Collateral, in each case
free and clear of all Liens except for Permitted Liens.

 

(i)            Borrower is in compliance with all laws, rules, regulations and
orders of governmental authorities applicable to it and its properties except to
the extent the non-compliance with which could not reasonably be expected to
have a Material Adverse Effect.

 

(j)            Borrower has heretofore furnished to Lender the Financial
Statements and those statements fairly present the financial condition of
Borrower and such Guarantor, if any, on the dates thereof and the results of its
operations and cash flows for the periods then ended and were prepared in
accordance with GAAP.  Since the date of the most recent financial statements,
there has been no material adverse change in the business, properties or
financial condition or prospects of Borrower or any Guarantor.  Except as
disclosed in the Financial Statements or the notes thereto and for the items
previously disclosed in writing by Borrower to Lender, neither Borrower nor any
Guarantor, as of each Closing Date, has or will have any liabilities, contingent
or otherwise, that could reasonably be expected to have a Material Adverse
Effect.

 

(k)           Borrower has filed, and will pay, all federal, state and local tax
returns which are required to be filed by it, and Borrower has paid or caused to
be paid to the respective taxing authorities all taxes as shown on said returns
or on any assessment received by it to the extent such taxes have become due,
except any such taxes or charges which are being

 

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diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP have been set aside on its books.

 

(l)            For purposes of Section 9-307 of the UCC, Borrower is and will
remain located in the Borrower’s State.  Borrower’s residence for federal income
tax purposes is located at its Notice Address specified in Schedule I.  Borrower
has authorized Lender to file financing statements that are sufficient when
filed to perfect the security interests created pursuant to this Agreement and
the other Loan Documents.  When such financing statements are filed in the
offices noted therein, Lender will have a valid and perfected security interest
in the Collateral that constitutes personal property, subject to no other Lien
other than Permitted Liens.

 

(m)          All factual information heretofor or contemporaneously furnished by
or on behalf of Borrower or any Guarantor in writing to Lender for purposes of
or in connection with this Agreement or any transaction contemplated hereby is,
and all other such factual information hereafter furnished by or on behalf of
Borrower or any Guarantor to Lender will be, true and correct in every material
respect on the date as of which such information is dated or certified, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.

 

(n)           None of Borrower or any Guarantor is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying “margin stock.”  None of the proceeds of any
Loan will be used for the purpose of, or be made available by Borrower or any
Guarantor in any manner to any other Person to enable or assist such Person in,
directly or indirectly purchasing or carrying “margin stock”.  Terms for which
meanings are provided in F.R.S. Board Regulation T, U or X or any regulations
substituted therefor, as from time to time in effect, are used in this
Section with such meanings.

 

(o)           None of Borrower or any Guarantor is an “investment company” nor a
“company controlled by an investment company” within the meaning of the
Investment Company Act of 1940, as amended, or a “holding company,” or a
“subsidiary company” of a “holding company,” or an “affiliate” of a “holding
company” or of a “subsidiary company” of a “holding company,” within the meaning
of the Public Utility Holding Company Act of 1935, as amended.

 

ARTICLE V:  SECURITY INTEREST

 

This Agreement is intended to constitute a security agreement within the meaning
of the UCC.  To secure the payment and performance of the Obligations, Borrower
hereby grants to Lender a security interest constituting a first Lien on the
Collateral.  Borrower hereby authorizes, and ratifies any previous authorization
for, Lender to file UCC financing statements and any amendments thereto
describing the Collateral and containing any other information required by the
applicable UCC.  Borrower authorizes Lender, and hereby grants Lender a power of
attorney (which is coupled with an interest), to file financing statements and
amendments thereto securing the Collateral and containing any other information
required by the applicable UCC and all proper terminations of the filings of
other secured parties with respect to the Collateral, in such form and substance
as Lender, in its sole discretion, may determine.  Until the later of the
Scheduled Commitment Termination Date or the date there is no outstanding
Indebtedness under the Notes, Borrower hereby waives any right that Borrower may
have to file with the applicable filing officer, and agrees that it will not
file or authorize the filing of, any financing statement, amendment, termination
or other record pertaining to the Collateral and/or Lender’s interest therein,
except as authorized by Lender in writing.

 

ARTICLE VI:  COVENANTS

 

Section 6.01.  Affirmative Covenants.  So long as any Loan shall remain unpaid,
Borrower will comply, and shall cause each Guarantor to comply, with the
following requirements unless waived by Lender in writing:

 

(a)           Financial Statements.  Borrower shall deliver to Lender for
Borrower and each Guarantor respectively: (i) as soon as practicable, and in any
event within 45 days after the end of each fiscal quarter (other than the last
fiscal quarter), unaudited financial statements including in each instance,
balance sheets, income statements, and statements of cash flow, on a
consolidated and consolidating basis, as appropriate, and separate profit and
loss statements as of and for the quarterly period then ended and for the fiscal
year to date, prepared in accordance with GAAP, and certified by Borrower’s
chief financial officer or such Guarantor’s chief financial officer, as
applicable, to be true and correct, (ii) as soon as practicable, and in any
event within 90 days after the end of each fiscal year, annual audited financial
statements, including balance sheets, income statements and statements of cash
flow for the fiscal year then ended, on a consolidated and consolidating basis,
as appropriate, which have been prepared by the independent accountants of
Borrower or such Guarantor, as applicable, in accordance with GAAP and (iii) as
soon as practicable, any certifications required by the Securities and Exchange
Commission of the United States (the “SEC”) or by securities laws applicable to
Borrower and each Corporate Guarantor concerning financial statements of
Borrower or such Corporate Guarantor, as applicable.  Such audited financial
statements shall be accompanied by the independent accountant’s opinion, which
opinion shall be in form generally recognized as “unqualified.”  Borrower shall
be deemed to have complied with the foregoing requirements

 

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with respect to Borrower and/or any Guarantor, as applicable, if such entity
files Forms 10-K and 10-Q with the SEC that are publicly available within the
time frames set forth above.

 

(b)           [Intentionally Omitted]

 

(c)           Notices.  Borrower shall deliver to Lender each of the following:

 

(i)            as soon as possible and in any event within three Business Days
after the occurrence of a Default, an Event of Default or an event which could
reasonably be expected to result in a Material Adverse Effect, a statement of
Borrower setting forth reasonably detailed information regarding such Default,
Event of Default or event and the action that Borrower has taken and proposes to
take with respect thereto;

 

(ii)           promptly after the commencement thereof, notice in writing of all
litigation and of all proceedings before any governmental or regulatory agency
affecting Borrower or any Guarantor which seek a monetary recovery against
Borrower or any Guarantor in excess of $10,000,000;

 

(iii)          promptly upon knowledge thereof, notice of any loss, theft or
destruction of or material damage to, or and any action, suit or proceeding
relating to, Collateral having a value in excess of $250,000;

 

(iv)          promptly after the amending thereof, copies of any and all
amendments to any of its Organizational Documents (provided Borrower shall be
deemed to have complied with the foregoing requirements with respect to Borrower
if Borrower discloses such amendments by filing a Form 8-K with the SEC that is
publicly available within the times frames set forth above);

 

(v)           promptly upon knowledge thereof, notice of the violation by
Borrower of any law or court order applicable to Borrower, which violation could
reasonably be expected to have a Material Adverse Effect.

 

(d)           Compliance with Laws.  Borrower shall comply in all material
respects with all governmental rules and regulations and all other applicable
laws and court orders, including, without limitation, all Environmental Laws.

 

(e)           Maintenance of Properties.  Borrower shall, at its own expense,
maintain, preserve, protect and keep the Collateral in good repair, working
order and condition in compliance with all applicable laws, rules, regulations
and the requirements of all applicable insurance policies, and make necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times and shall maintain
in full force and effect all rights, franchises, permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on its business as presently or proposed to be conducted where the failure to so
maintain the same could reasonably be expected to have a Material Adverse
Effect.  Borrower will not make any material alterations, modifications or
additions to the Collateral which cannot be removed without materially damaging
the functional capabilities or economic value of the Collateral unless Lender
has provided its prior written consent.

 

(f)            Insurance.  Borrower shall, at its own expense, procure and
maintain continuously in effect: (i) public liability insurance for personal
injuries, death or damage to or loss of property arising out of or in any way
relating to the Collateral, and (ii) insurance against such hazards as Lender
may reasonably require, in each case in amounts reasonably acceptable to
Lender.  All insurance policies required by this Section shall be taken out and
maintained with insurance companies reasonably acceptable to Lender.  Borrower
shall provide written notice to Lender of any cancellation or material revision
of coverage under any such insurance at least 30 days before the cancellation or
revision becomes effective.  No insurance shall be subject to any co-insurance
clause.  Borrower shall cause Lender to be named as loss payee on all insurance
policies relating to any Collateral and shall cause Lender to be named as
additional insured under all liability policies, in each case pursuant to
appropriate endorsements in form and substance satisfactory to Lender.  Such
insurance shall not be affected by any unintentional act or negligence or
representation or warranty on the part of Borrower or other owner of the policy
or the property described in such policy.  Prior to each Closing Date, Borrower
shall deposit with Lender evidence satisfactory to Lender of such insurance and,
at least 10 days prior to the expiration thereof, Borrower will promptly notify
Lender, if such insurance is cancelled (but no later than 30 days following such
cancellation.  At Lender’s request, Borrower shall provide Lender evidence
reasonably satisfactory to Lender of such insurance.  Borrower shall provide or
cause to be provided to Lender and to its insurance consultant (or any agent,
officer or employee of Lender) such other information relating to its insurance
coverage as may be reasonably requested by Lender.

 

(g)           Books and Records; Inspections.  Borrower will keep books and
records that accurately reflect all of its material business affairs and
transactions.  Borrower will, and will cause each Guarantor to, permit Lender or
any of its representatives (including outside auditors), upon reasonable advance
written notice and at reasonable times (not to exceed two Business Days) and
intervals (which intervals, so long as no Default or Event of Default exists,
shall not exceed more than one visit in any 12 month period, but if a Default or
Event of Default exists, shall be unlimited), to visit all of its offices, to
discuss its financial matters with its officers and to reasonably examine (and,
at the expense of

 

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Borrower, copy extracts from) books or other corporate records (including
computer records), provided however, if an Event of  Default exist Lender shall
not be required to provide any such advance written notice to Borrower.

 

(h)           Perfection of Liens.  Borrower shall take such action as may be
necessary or as Lender may request in order to perfect and protect Lender’s Lien
on the Collateral.

 

(i)            Title.  Borrower will at all times protect and defend, at its own
cost and expense, its title from and against all claims, liens and legal
processes of creditors of Borrower (other than Lender), and keep all Collateral
free and clear of all such claims, liens and processes other than Permitted
Liens.

 

Section 6.02.  Negative Covenants.  So long as the Loan shall remain unpaid,
Borrower agrees that:

 

(a)           Liens.  Borrower will not create, incur or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, assignment or transfer
in, on or of any of the Collateral except for Permitted Liens.

 

(b)           Fundamental Changes.  Borrower will not, without Lender’s prior
written consent, enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), or, other than in
the ordinary course of its business, convey, sell assign, lease, transfer, or
otherwise dispose of, in one transaction or series of transactions, all or any
substantial part of its property or assets; provided, however, that
notwithstanding the foregoing, Borrower may enter into a merger or consolidation
or convey, sell assign, lease, transfer, or otherwise dispose of, in one
transaction or series of transactions, all or any substantial part of its
property or assets without Lender’s prior written consent if the surviving or
acquiring entity in such transaction (i) (A) shall be organized and existing
under the laws of the United States or any state thereof, or (B) shall, both
before and after giving effect to such transaction, have assets in the United
States of $100,000,000.00 or more, (ii) shall promptly execute and deliver to
Lender an agreement reasonably satisfactory to Lender pursuant to which such
entity assumes and agrees to be fully liable for all of Borrower’s obligations
under the Loan Documents, and (iii) (A) shall have it’s senior unsecured debt
rated by S&P and Moody’s, and (B) such senior unsecured debt shall be rated at
least BBB by S&P and at least Baa2 by Moody’s, and, in such case, after giving
effect to such transaction, no other Default or Event of Default shall exist.

 

(c)           Sale of Collateral.  Borrower will not (in each case in one
transaction or series of related transactions) sell, transfer, lease, contribute
or otherwise convey or dispose of, or grant options, warrants or other rights
with respect to, or agree to do any of the foregoing with respect to, all or any
part of the Collateral.

 

(d)           Location or Name Changes.  Borrower will not change its location
for purposes of Section 9-307 of the UCC or its name in any manner that could
make any financing statement filed in connection with any Loan Document
seriously misleading within the meaning of Section 9-506 of the UCC or any
similar statute, unless it shall have given Lender at least 30 days’ prior
written notice thereof.

 

(e)           Replacement Cash Collateral.  At any time during the term hereof,
Borrower shall be permitted to deposit with and pledge to Lender (or one of its
affiliates), as security for the Obligations, cash or cash equivalents in a sum
equal to the principal amount of the Loans outstanding from time to time, plus
the unused portion of the Maximum Principal Amount all on terms and conditions
reasonably satisfactory to Lender and Borrower.  In the event Borrower pledges
such cash collateral with Lender (or one of its affiliates) on terms and
conditions satisfactory to Lender, then Lender shall release its security
interest in the Collateral; provided, however, that Lender shall not be
obligated to release its security interest in the Collateral prior to the
expiration of the applicable period described in Section 547 of the United State
Bankruptcy Code (11 U.S.C. §547) or any other similar law or regulation or any
successor to any such law for avoiding (or otherwise setting aside) the cash
collateral pledge.

 

Section 6.03.  Indemnity.

 

(a)           Whether or not covered by insurance, Borrower hereby assumes
responsibility for and agrees to reimburse Lender, its affiliates and its and
their respective officers, directors, employees and agents (individually and
collectively, the “Indemnified Parties”) for and will indemnify, defend and hold
the Indemnified Parties harmless from and against all liabilities, obligations,
losses, damages, penalties, claims, suits, actions, proceedings, judgments,
awards, amounts paid in settlements, obligations, debts, diminutions in value,
fines, penalties, charges, fees, costs and expenses (including reasonable
attorneys’ fees and expenses) of whatsoever kind and nature, imposed on,
incurred by or asserted against any Indemnified Party that in any way relate to
or arise out of any of the Loan Documents, the transactions contemplated thereby
or the Collateral, including, without limitation (collectively, the “Losses”),
(i) the selection, manufacture, construction, acquisition, acceptance or
rejection of the Collateral, (ii) the ownership of the Collateral, (iii) the
delivery, installation, lease, possession, maintenance, use, condition, return
or operation of the Collateral, (iv) the condition of the Collateral sold or
otherwise disposed of after possession by Borrower, (v) any patent or copyright
infringement, (vi) any act or omission on the part of Borrower, Guarantor or any
of its or their officers, employees,

 

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agents, contractors, lessees, licensees or invitees, (vii) any misrepresentation
or inaccuracy in any representation or warranty of Borrower or any Guarantor, or
a breach of Borrower or any Guarantor of any of its covenants or obligations
under any of the Loan Documents, (viii) any claim, loss, cost or expense
involving alleged damage to the environment relating to the Collateral,
including, without limitation, investigation, removal, cleanup and remedial
costs, (ix) any personal injury, wrongful death or property damage arising under
any statutory or common law or tort law theory, including, without limitation,
damages assess for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Collateral,
(x) any past, present or threatened, in writing, injury to, or destruction of,
the Collateral, including, without limitation, costs to investigate and assess
such injury or damage and (xi) any administrative process or proceeding or
judicial or other similar proceeding (including, without limitation, any
alternative dispute resolution process and any bankruptcy proceeding) in any way
connected with any matter addressed in any of the Loan Documents; provided
however, that Borrower shall not be required to indemnify, defend or hold
harmless any Indemnified Party from and against Losses to the extent arising
from Indemnified Party’s gross negligence or willful misconduct.

 

(b)           An Indemnified Party shall provide prompt written notice to
Borrower of a possible indemnification claim after the Indemnified Party
receives notice of the claim, provided however, that the failure of an
Indemnified Party to provide prompt written notice to Borrower shall not release
Borrower from any obligations under this Section except to the extent Borrower
is materially prejudiced by such failure.  If any action or proceeding be
commenced, to which action or proceeding one or more of the Indemnified Parties
are made a party by reason of the execution or performance of this Agreement or
any other Loan Document, or in which it becomes necessary to defend or uphold
the Lien of this Agreement, all sums paid by the Indemnified Parties, for the
expense of any litigation to prosecute or defend the rights and Lien created
hereby or otherwise, shall be paid by Borrower to such Indemnified Parties, as
the case may be, as hereinafter provided.  Borrower will pay and save the
Indemnified Parties harmless against any and all liability with respect to any
intangible personal property tax or similar imposition of any state or any
subdivision or authority thereof now or hereafter in effect, to the extent that
the same may be payable by the Indemnified Parties in respect of this Agreement
or any Obligation.

 

(c)           All amounts payable to Indemnified Parties under this
Section shall be deemed Obligations secured by this Agreement and shall be
payable immediately upon demand.  In case any action, suit or proceeding is
brought against one or more of the Indemnified Parties by reason of any such
occurrence, Borrower, upon request of such Indemnified Parties, will, at
Borrower’s expense, resist and defend such action, suit or proceeding or cause
the same to be resisted or defended by counsel designated by Borrower, which
counsel shall be reasonably acceptable to Lender, and Borrower shall have full
power to litigate, compromise or settle the same on behalf of the Indemnified
Parties in its sole discretion; provided that (i) Borrower shall have
acknowledged in writing its obligation to fully indemnify such Indemnified
Parties in respect of such action, suit or proceeding prior to assuming the
defense thereof, (ii) Borrower shall keep such Indemnified Parties fully
apprised of the status of such action, suit or proceeding and shall provide such
Indemnified Parties with all information with respect to such action, suit or
proceeding as such Indemnified Parties shall reasonably request, (iii) each such
Indemnified Party, at its own expense, may participate in any action, suit or
proceeding controlled by Borrower and (iv) no such settlement shall include an
admission of an omission or misconduct of an Indemnified Party without the prior
written consent of such Indemnified Party.  In connection with any claim for
indemnification hereunder by an Indemnified Party, such Indemnified Party shall
cooperate in good faith with Borrower.  Notwithstanding anything in this
Section  to the contrary, Borrower shall not be entitled to control and assume,
or continue, the defense of, or compromise or settle, any action, suit or
proceeding if (A) an Event of Default shall have occurred and be continuing,
(B) in the reasonable opinion of such Indemnified Parties, such action, suit or
proceeding will involve any material danger of the sale, forfeiture or loss of,
or creation of any Lien on any Collateral, (C) in the reasonable opinion of such
Indemnified Parties, there exists an actual or potential conflict of interests,
(D) such claim or liability involves the risk of criminal sanctions or liability
to any such Indemnified Party or (E) such proceeding involves claims against an
Indemnified Party not fully indemnified by Borrower or which Borrower and the
Indemnified Parties have been unable to sever such claims from the indemnified
claim(s).  In the circumstances described in clauses (A) through (E), such
Indemnified Parties shall be entitled to control or defend such action, suit or
proceeding at the expense of Borrower; provided, however, that no Indemnified
Party shall be permitted to settle or compromise any action, suit or proceeding
without the prior written consent of Borrower, which consent shall not be
unreasonably withheld, conditioned or delayed.  Borrower may in any event
participate in all such actions, suits or proceedings at its own expense. 
Nothing herein contained shall be deemed to require an Indemnified Party to
contest any liability, charge, loss, obligation, claim, damage, penalty, cause
of action, suit, cost, expense or judgment or assume control of or defend any
action, suit or proceeding with respect thereto. The obligations of Borrower
under this Section shall survive the termination of this Agreement and not be
merged with any applicable judgment.  If and to the extent that the foregoing
undertaking may be unenforceable for any reason, Borrower hereby agrees to make
the maximum contribution to the payment and satisfaction of each of the Losses
that is permissible under applicable law.

 

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Section 6.04.  Performance by Lender.  If Borrower at any time fails to perform
or observe any of the covenants or agreements contained in this Agreement,
Lender may, but need not, with notice to Borrower, perform or observe such
covenant on behalf and in the name, place and stead of Borrower (or, at Lender’s
option, in Lender’s name) and may, but need not, take any and all other actions
which Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments), and Borrower shall thereupon
pay to Lender on demand the amount of all moneys expended and all costs and
expenses (including reasonable attorneys’ fees and legal expenses) incurred by
Lender in connection with or as a result of the performance or observance of
such agreements or the taking of such action by Lender, together with interest
thereon from the date expended or incurred at the lesser of the highest Default
Rate then in effect or the highest rate permitted by law.

 

ARTICLE VII:  EVENTS OF DEFAULT

 

Section 7.01.  Events of Default.  Each of the following events or occurrences
shall constitute an “Event of Default”:

 

(a)           Borrower shall default in the payment of any Obligation when due
and such failure continues for 10 calendar days;

 

(b)           Any representation or warranty of Borrower made in any Loan
Document or any other writing or certificate furnished by or on behalf of
Borrower pursuant to any Loan Document is or shall be incorrect when made in any
material respect;

 

(c)           Borrower shall fail to perform any of its obligations under
Section 6.01(c), 6.01(f), 6.01(i) or 6.02(a);

 

(d)           Borrower shall default in the due performance and observance of
any other agreement contained herein or in any other Loan Document (other than
items set forth elsewhere in this Section 7.01), and such default shall continue
unremedied for a period of 30 days after Borrower has actual knowledge thereof
or has received notice by Lender thereof;

 

(e)           The occurrence of an event of default or a breach or default,
after the passage of all applicable notice and cure or grace periods provided
therefor, under any other Loan Document or any other agreement between or among
Borrower or any Guarantor and Lender or any of its affiliates;

 

(f)            The occurrence of a default or an event of default (however
defined) under any instrument, agreement or other document evidencing or
relating to, and the acceleration of, any indebtedness or other monetary
obligation of Borrower or any Guarantor having a principal amount (including,
without limitation, the amount of any outstanding letters of credit),
individually or in the aggregate, in excess of $10,000,000;

 

(g)           (i) Any judgment or order for the payment of money (not paid or
fully covered by insurance maintained in accordance with the requirements of
this Agreement and as to which the relevant insurance company has acknowledged
coverage) in excess of $10,000,000 shall be rendered against Borrower or any
Guarantor, which judgment or order is not, within thirty (30) days after entry
thereof, bonded or stayed pending appeal, or (ii) any such judgment or order
(not paid or fully covered by insurance maintained in accordance with the
requirements of this Agreement and as to which the relevant insurance company
has acknowledged coverage) becomes a final, unappealable judgment or order;

 

(h)           The occurrence of any Change in Control unless the Person or group
(as such term is used in Section 13(d)(3) of the Exchange Act) acquiring such
control, or the Person with control of such Person, (i) shall have it’s senior
unsecured debt rated by S&P and Moody’s, and (ii) such senior unsecured debt
shall be rated at least BBB by S&P and at least Baa2 by Moody’s, and the Person
that has such senior unsecured debt ratings shall have executed and delivered to
Lender a guaranty of all of Borrower ‘s obligations and liabilities under the
Loan Documents, which guaranty shall be in form and substance satisfactory to
Lender;

 

(i)            Borrower or any Guarantor shall be or become insolvent, or admit
in writing its inability to pay its debts as they mature, or make an assignment
for the benefit of creditors; or Borrower or any Guarantor shall apply for or
consent to the appointment of any receiver, trustee or similar officer for it or
for all or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
Borrower or any Guarantor (and such involuntary appointment is not dismissed or
stayed within 30 days); or Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against Borrower or any Guarantor (and such involuntary proceeding is not
dismissed or stayed within 30 days; or

 

(j)            Any Loan Document or any Lien granted thereunder shall (except in
accordance with its terms), in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and enforceable obligation
of

 

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Borrower; Borrower or  any Guarantor or any other Person shall, directly or
indirectly, contest in any manner the effectiveness, validity, binding nature or
enforceability of any Loan Document or any Lien granted thereunder; or any Lien
securing (or required to secure) any Obligation shall, in whole or in part,
cease to be a first priority perfected Lien subject only to Permitted Liens.

 

(k)           At any time Borrower shall be a guarantor of obligations under
such Loan Agreement, an of Event of Default shall exist under and as defined in
that certain Loan Agreement of even date herewith between Lender and IBIS
BIOSCIENCES, INC.

 

(l)            [Intentionally Omitted]

 

Section 7.02.  Remedies.  (a)  Following the occurrence of an Event of Default
described in subsection (i) of Section 7.01, all of the outstanding principal
amount of the Loans and other Obligations shall be due and payable and the
Commitment (if not theretofore terminated) shall terminate, whereupon the full
unpaid amount of such Loans and other Obligations which shall be so declared due
and payable shall be and become immediately due and payable, without
presentment, notice of dishonor, protest or further notice of any kind, all of
which are hereby expressly waived by Borrower, and, as the case may be, the
Commitment shall terminate.

 

(b)  Following the occurrence of any Event of Default and subject to subsection
(a) of this Section, Lender may exercise, at its option, concurrently,
successively or in any combination, all rights and remedies of a secured party
in, to and against the Collateral granted by the UCC or otherwise available at
law or in equity, including, without limitation:

 

(i)            by notice to Borrower, declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or the Commitment (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which shall
be so declared due and payable shall be and become immediately due and payable,
without presentment, notice of dishonor, protest or further notice of any kind,
all of which are hereby expressly waived by Borrower, and/or, as the case may
be, the Commitment shall terminate;

 

(ii)           recover all fees and expenses (including, without limitation,
reasonable attorneys’ fees) in connection with the lawful collection or
enforcement of the Obligations, which fees and expenses shall constitute
additional Obligations of Borrower hereunder;

 

(iii)          take immediate and exclusive possession of the Collateral, which
constitutes personal property, or any part thereof, with or without any court
order or other process of law and enter the premises where such Collateral is
located and remove the same therefrom, or require Borrower to assemble and
package such Collateral and make it available to Lender for its possession at a
place designated by Lender;

 

(iv)          sell, lease, sublease, hold or otherwise dispose of all or any
part of the Collateral and hold, maintain, preserve and prepare the Collateral
for sale until disposed of;

 

(v)           [Intentionally Omitted]

 

(vi)          sue for specific performance of any Obligation or recover damages
for breach thereof; and

 

(vii)         exercise any one or more of the remedies available under any Loan
Document.

 

Section 7.03.  Use of Proceeds.  Any proceeds received by Lender in exercising
the rights and remedies specified in Section 7.02 shall be first applied to pay
the costs and expenses, including, without limitation, reasonable attorneys’
fees and expenses, incurred by Lender as a result of an Event of Default.  Any
proceeds remaining after payment of such costs and expenses shall be applied to
the satisfaction of the Obligations as determined by Lender in its sole
discretion and, unless Lender accepts the Collateral in full or partial
satisfaction of the Obligations, any excess proceeds after satisfaction of all
Obligations shall be paid to Borrower.

 

ARTICLE VIII:  MISCELLANEOUS PROVISIONS

 

Section 8.01.  Waivers, Amendments.  No provision of this Agreement or any of
the other Loan Documents shall be deemed waived or amended except by a written
instrument setting forth the matter waived or amended and signed by the party
against which enforcement of such waiver or amendment is sought.  Waiver of any
matter shall not be deemed a waiver of the same or any other matter on any
future occasion.  No notice to or demand on Borrower in any case shall entitle
it to any notice or demand in similar or other circumstances.

 

Section 8.02.  Notices.  All notices, certificates, requests, demands and other
formal communications provided for hereunder or under any Loan Document shall be
in writing and shall be (a) personally delivered or (b) sent by overnight
courier of national reputation, and shall be deemed to have been given on
(i) the date received if personally delivered and (ii) the next Business Day if
sent by overnight courier.  All communications shall be addressed to the party
to whom notice is being given at its

 

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Notice Address.  If notice to Borrower of any intended disposition of the
Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in this Section) at least 10 calendar days prior to the date of
intended disposition or other action.  The parties acknowledge and agree that
routine or informal communications may be conducted by email, in addition to the
means set forth above.

 

Section 8.03.  Severability.  Any provision of this Agreement or any other Loan
Document which is invalid, illegal or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity,
legality or enforceability of such provision in any other jurisdiction.

 

Section 8.04.  Execution in Counterparts.  This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute one and the same document.

 

Section 8.05.  Further Assurance and Corrective Instruments.  Borrower hereby
agrees that it will, from time to time, execute, acknowledge and deliver or
authorize, as applicable, or cause to be executed, acknowledged and delivered or
authorized, such further acts, instruments, conveyances, transfers and
assurances and take such other actions, as Lender reasonably deems necessary or
advisable for the implementation, correction, confirmation or perfection of this
Agreement or the other Loan Documents and any rights of Lender hereunder or
thereunder.

 

Section 8.06.  Time of the Essence.  Time is of the essence with respect to the
performance by Borrower of the Obligations.

 

Section 8.07.  Entire Agreement.  This Agreement and the other Loan Documents
constitute the entire agreement between Lender and Borrower.  There are no other
understandings, agreements, representations or warranties, written or oral,
between Lender and Borrower with respect to the subject matter of this Agreement
and the other Loan Documents.

 

Section 8.08.  Governing Law.  THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

 

Section 8.09.  Successors and Assigns; Assignments by Lender.  This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that Borrower may
not assign or transfer its rights or obligations hereunder without the prior
written consent of Lender except as permitted under Section 6.02(b).  Lender may
assign, in whole or in part, its rights under this Agreement.  Upon any
assignment by Lender of its entire right and interest under the Loan Documents,
Lender shall automatically be relieved, from and after the date of such
assignment, of any liability for the performance of any obligation of Lender
therein.

 

Section 8.10.  Assignments and Participations.  Borrower acknowledges and agrees
that a material inducement to Lender’s willingness to complete the transactions
contemplated by the Loan Documents is that Lender may, at any time, complete an
assignment or participation with respect to any Loan Document or any or all of
the servicing rights with respect thereto.  In connection with any such
assignment or participation:  (a) Borrower agrees to cooperate in good faith
with Lender, including, without limitation, providing such documents, financial
information and other information (“Information”) reasonably requested by Lender
or any entity involved with respect to such assignment or participation; 
(b) Borrower consents to Lender’s providing the Information, including any other
information that Lender may now have or hereafter acquire with respect to
Borrower or the Collateral to any entity involved with respect to such
assignment or participation;  and (c) Notwithstanding anything to the contrary
in any Loan Document, in the event that Lender assigns a Note, (i) the related
Loan shall be deemed a separate loan that includes and incorporates each term
and condition in this Agreement and the other Loan Documents related thereto,
(ii) the term “Obligations” as used herein and in the Loan Documents with
respect to any assignee shall mean only the Indebtedness and obligations
evidenced by or related to the Notes held by the assignee and (iii) the term
Collateral as used herein and in the Loan Documents with respect to such
assignee shall mean only the Collateral described on the Collateral Schedules
that specifically refer to the Notes held by such assignee.

 

Section 8.11.  Waiver of Jury Trial.  LENDER AND BORROWER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE LOAN
DOCUMENTS, ANY DEALINGS BETWEEN LENDER AND BORROWER RELATING TO THE SUBJECT
MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY LOAN DOCUMENT,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LENDER AND BORROWER. 
BORROWER ACKNOWLEDGES AND AGREES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR LENDER ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). 
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THIS WAIVER SHALL APPLY

 

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TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, ANY LOAN DOCUMENT, OR TO ANY OTHER DOCUMENT OR AGREEMENT RELATING TO
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY RELATED TRANSACTION.  IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

 

Section 8.12.  Forum Selection and Consent to Jurisdiction.  BORROWER AND LENDER
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY FEDERAL OR LOCAL COURT
LOCATED IN THE CITY OF CHICAGO, ILLINOIS, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL MAY BE
FOUND.  BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.  BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
ILLINOIS.  BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.  TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

Section 8.13.  Waiver of Certain Claims.  TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER AND EACH GUARANTOR SHALL NOT ASSERT, AND HEREBY WAIVES, ANY CLAIM
AGAINST LENDER ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF, ANY LOAN DOCUMENT OR ANY AGREEMENT OR
INSTRUMENT CONTEMPLATED THEREBY, ANY LOAN OR THE USE OF THE PROCEEDS THEREOF.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS.]

 

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[g15241kg03i001.jpg]

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.

 

 

BORROWER:

 

 

 

 

 

 

 

 

 

By

/s/ B. Lynne Parshall

 

Name

B. Lynne Parshall

 

Title

COO & CFO

 

 

 

 

 

LENDER:

 

 

 

RBS ASSET FINANCE, INC.

 

 

 

 

 

By

/s/ Cynthia Prince

 

Name

Cynthia Prince

 

Title

Vice President

 

[EXECUTION PAGE OF LOAN AGREEMENT]

 

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[g15241kg03i001.jpg]

 

SCHEDULE I

 

The following terms shall have the following meanings:

 

“Borrower’s State” means Delaware.

 

“Closing Fee” — Not applicable

 

“Financial Statements” means the audited financial statement of Borrower and
each Guarantor for their fiscal years ended December 31, 2007 and the unaudited
financial statement of Borrower and each Guarantor and for the quarter ended
June 30, 2008.

 

“Fixed Rate” means, with respect to each Loan and each Note, a rate per annum
equal to the sum of (i) the notional rate per annum for a fixed rate payer under
a 3 year interest rate swap on the day that is two Business Days prior to the
applicable Closing Date plus (ii) (a) 3.85% or (b) such other amount as Lender
may specify, which rate will be set forth in such Note.

 

“Interim Interest Date” means, with respect to each Loan and each Note, the
interim interest date described in such Note.

 

“Interim Interest Payment Date” means, with respect to each Loan and each Note,
the interim interest date described in such Note.

 

“Maximum Principal Amount” means $9,400,000.00.

 

“Notice Address” means with respect to Borrower or Lender, as applicable, the
following address, or such other address as such party may designate in writing
to the other party:

 

If to Borrower:

 

Isis Pharmaceuticals, Inc.

 

 

Attention: Chief Financial Officer

 

 

1896 Rutherford Road

 

 

Carlsbad, CA 92008

 

 

Telephone No.:   760 603-2469

 

 

Facsimile No.:  760 918-3592

 

 

 

 

 

w/copy to General Counsel (fax: 760 268-4922

 

 

 

If to Lender:

 

RBS Asset Finance, Inc.

 

 

71 S. Wacker Drive, Suite 2800

 

 

Chicago, IL  60606

 

 

Telephone No.:  (312) 777-3500

 

 

Facsimile No.:  (312) 777-4001

 

“Organizational Documents” means (i) with respect to Borrower, the articles of
incorporation and by-laws of Borrower and (ii) with respect to each Corporate
Guarantor, the articles of incorporation and by-laws/certificate of formation
and limited liability company/operating agreement] of such Guarantor.

 

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

 

“Scheduled Commitment Termination Date” means March 31, 2009.

 

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