Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of December 8, 2011
(the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability
company with an office located at 133 North Fairfax Street, Alexandria, Virginia
22314 (“Oxford”), as collateral agent (in such capacity, the “Collateral
Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto
from time to time including Oxford in its capacity as a Lender and SILICON
VALLEY BANK, a California corporation with an office located at 3003 Tasman
Drive, Santa Clara, CA 95054 (each a “Lender” and collectively, the “Lenders”),
and HANSEN MEDICAL, INC., a Delaware corporation with offices located at 800
East Middlefield Road, Mountain View, CA 94043 (“Borrower”), provides the terms
on which the Lenders shall lend to Borrower and Borrower shall repay the
Lenders. The parties agree as follows:

 

1. ACCOUNTING AND OTHER TERMS

1.1 Accounting terms not defined in this Agreement shall be construed in
accordance with GAAP. Calculations and determinations must be made in accordance
with GAAP. Capitalized terms not otherwise defined in this Agreement shall have
the meanings set forth in Section 14. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein. All references to “Dollars”
or “$” are United States Dollars, unless otherwise noted.

 

2. LOANS AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender,
the outstanding principal amount of all Term Loan advanced to Borrower by such
Lender and accrued and unpaid interest thereon and any other amounts due
hereunder as and when due in accordance with this Agreement.

2.2 Term Loan.

(a) Availability. Subject to the terms and conditions of this Agreement, the
Lenders agree, severally and not jointly, to make one (1) term loan (the “Term
Loan”) to Borrower on the Effective Date in an aggregate amount up to Thirty
Million Dollars ($30,000,000) according to each Lender’s Term Loan Commitment as
set forth on Schedule 1.1 hereto. After repayment, the Term Loan may not be
re-borrowed.

(b) Repayment. Borrower shall make monthly payments of interest only commencing
on the first (1st) Payment Date following the Funding Date of the Term Loan, and
continuing on the Payment Date of each successive month thereafter through and
including the Payment Date immediately preceding the Amortization Date.
Commencing on the Amortization Date, and continuing on the Payment Date of each
month thereafter, Borrower shall make consecutive equal monthly payments of
principal and interest, in arrears, to each Lender, as calculated by Collateral
Agent (which calculations shall be deemed correct absent manifest error) based
upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of
interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to
(x) thirty-six (36) months, if the Amortization Date in effect is the Initial
Amortization Date, or (y) thirty (30) months, if the Amortization Date in effect
is the Extended Amortization Date. All unpaid principal and accrued and unpaid
interest with respect to the Term Loan is due and payable in full on the
Maturity Date. The Term Loan may only be prepaid in accordance with Sections
2.2(c) and 2.2(d).

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

 

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(d) Permitted Prepayment of Term Loan. Borrower shall have the option, at any
time, to prepay all, but not less than all, of the Term Loan advanced by the
Lenders under this Agreement, provided Borrower (i) provides written notice to
Collateral Agent of its election to prepay the Term Loan at least ten (10) days
prior to such prepayment, and (ii) pays to the Lenders on the date of such
prepayment, payable to each Lender in accordance with its respective Pro Rata
Share, an amount equal to the sum of (A) all outstanding principal of the Term
Loan plus accrued but unpaid interest thereon through the prepayment date,
(B) the Final Payment, (C) the Prepayment Fee, plus (D) all other sums, that
shall have become due and payable but have not been paid, including Lenders’
Expenses, if any, and interest at the Default Rate with respect to any past due
amounts.

2.3 Payment of Interest on the Credit Extensions.

(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding
under the Term Loan shall accrue interest at a fixed per annum rate (which rate
shall be fixed for the duration of the Term Loan) equal to the Basic Rate,
determined by Collateral Agent on the Funding Date of the Term Loan, which
interest shall be payable monthly in arrears in accordance with Sections 2.2(b)
and 2.3(e). Interest shall accrue on the Term Loan commencing on, and including,
the day on which the Term Loan is made, and shall accrue on the Term Loan, or
any portion thereof, for the day on which the Term Loan or such portion is paid.

(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall bear interest at a rate per annum which
is five percentage 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 Section 2.3(b) is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Collateral Agent.

(c) 360-Day Year. Interest shall be computed on the basis of a three hundred
sixty (360) day year consisting of twelve (12) months of thirty (30) days.

(d) Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any
deposit accounts maintained by Borrower, including the Designated Deposit
Account (but excluding any deposit account maintained solely for payroll, tax or
employee benefits payments), for principal and interest payments or, upon prior
written notice to Borrower so long as no Event of Default has occurred and is
continuing, any other amounts Borrower owes the Lenders under the Loan Documents
when due. These debits (or ACH activity) shall not constitute a set-off.

(e) Payments. Except as otherwise expressly provided herein, all loan payments
by Borrower hereunder shall be made to the respective Lender to which such
payments are owed, at such Lender’s office in immediately available funds on the
date specified herein. Unless otherwise provided, interest is payable monthly on
the Payment Date of each month. Payments of principal and/or interest received
after 2:00 p.m. Eastern time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest,
as applicable, shall continue to accrue until paid. All payments to be made by
Borrower hereunder or under any other Loan Document, including payments of
principal and interest made hereunder and pursuant to any other Loan Document,
and all fees, expenses, indemnities and reimbursements, shall be made without
set-off, recoupment or counterclaim, in lawful money of the United States and in
immediately available funds.

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

 

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2.5 Fees. Borrower shall pay to Collateral Agent (except as indicated):

(a) Facility Fee. A fully earned, non-refundable facility fee of Two Hundred
Twenty Five Thousand Dollars ($225,000), receipt of which hereby is
acknowledged;

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

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

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

2.6 Withholding. Payments received by Lenders from Borrower hereunder will be
made free and clear of any withholding taxes. Specifically, however, if at any
time any Governmental Authority, applicable law, regulation or international
agreement requires Borrower to make any such withholding or deduction from any
such payment or other sum payable hereunder to Lenders, Borrower hereby
covenants and agrees that the amount due from Borrower with respect to such
payment or other sum payable hereunder will be increased to the extent necessary
to ensure that, after the making of such required withholding or deduction, each
Lender receives a net sum equal to the sum which it would have received had no
withholding or deduction been required and Borrower shall pay the full amount
withheld or deducted to the relevant Governmental Authority. Borrower will, upon
request, furnish Lenders with proof reasonably satisfactory to Lenders
indicating that Borrower has made such withholding payment; provided, however,
that Borrower need not make any withholding payment if the amount or validity of
such withholding payment is contested in good faith by appropriate and timely
proceedings and as to which payment in full is bonded or reserved against by
Borrower. The agreements and obligations of Borrower contained in this
Section 2.6 shall survive the termination of this Agreement.

 

3. CONDITIONS OF LOANS

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

(a) duly executed original Loan Documents to which Borrower or any of its
Subsidiaries is a party;

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

(c) duly executed original Secured Promissory Notes in favor of each Lender in
the original principal amount equal to such Lender’s Commitment Percentage of
the Term Loan;

(d) the certificate(s) for the Shares, together with Assignment(s) Separate from
Certificate, duly executed in blank;

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

 

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(f) the Perfection Certificates for Borrower and each of its Subsidiaries;

(g) the Annual Projections, for the current calendar year;

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

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

(j) the Post Closing Letter;

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

(l) a payoff letter from SVB in respect of the Existing Indebtedness;

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

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

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

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

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

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

(c) in such Lender’s sole discretion, there has not been any Material Adverse
Change or any material adverse deviation by Borrower from the Annual Projections
of Borrower presented to and accepted by Collateral Agent and each Lender; and

 

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

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

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of the Term Loan set forth in this
Agreement, to obtain the Term Loan, Borrower shall notify Lenders (which notice
shall be irrevocable) by facsimile, or telephone by 12:00 noon Eastern time
three (3) Business Days prior to the date the Term Loan is to be made. Together
with any such facsimile notification, Borrower shall deliver to Lenders by
facsimile a completed Payment/Advance Form (and the Loan Payment/Advance Request
Form, with respect to SVB) executed by a Responsible Officer or his or her
designee. Lenders may rely on any telephone notice given by a person whom a
Lender reasonably believes is a Responsible Officer or designee. On the Funding
Date, each Lender shall credit and/or transfer (as applicable) to the Designated
Deposit Account, an amount equal to its Term Loan Commitment.

 

4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the
ratable benefit of the Lenders, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in, and pledges to
Collateral Agent, for the ratable benefit of the Lenders, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral, subject only to
Permitted Liens that are permitted by the terms of this Agreement to have
priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort
claim (as defined in the Code), Borrower, shall promptly notify Collateral Agent
in a writing signed by Borrower, as the case may be, of the general details
thereof (and further details as may be required by Collateral Agent) and grant
to Collateral Agent, for the ratable benefit of the Lenders, in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to Collateral Agent.

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

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as the Lenders’ obligation
to make Credit Extensions has terminated, Collateral Agent shall, at Borrower’s
sole cost and expense, terminate its security interest in the Collateral and all
rights therein shall revert to Borrower. In the event (a) all Obligations (other
than inchoate indemnity obligations), except for Bank Services, are repaid in
full in cash, and (b) this Agreement and the Lenders’ obligation to make Credit
Extensions is terminated, Collateral Agent shall terminate the security interest
granted herein upon Borrower providing cash collateral acceptable to SVB in its
good faith business judgment for Bank Services, if any. In the event such Bank
Services consist of outstanding Letters of Credit, Borrower shall provide to SVB
cash collateral in an amount equal to (i) one hundred five percent (105.0%) of
the face amount of all such Letters of Credit denominated in Dollars and
(ii) one hundred ten percent (110.0%) of the Dollar Equivalent of the face
amount of all such Letters of Credit denominated in a Foreign Currency plus, in
each case, all interest, fees, and costs due or to become due in connection
therewith (as estimated by SVB in its good faith business judgment), to secure
all of the Obligations relating to such Letters of Credit.

 

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

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

4.4 Parallel Debt.

(a) For the purpose of ensuring and preserving the validity and continuity of
the security rights granted and to be granted by Borrower under or pursuant to
the Loan Documents, Borrower hereby irrevocably and unconditionally undertakes,
as an abstract obligation (abstraktes Schuldversprechen), to pay to the
Collateral Agent amounts equal to and in the currency of the Obligations from
time to time due in accordance with the terms and conditions of the Loan
Documents and irrespective of any discharge of an obligor’s obligation to pay
such amounts resulting from a failure by Collateral Agent or any Lender to take
appropriate steps in insolvency, bankruptcy or similar proceedings affecting an
obligor to preserve its respective right to be paid those amounts (such payment
undertaking and the obligations and liabilities which are the result thereof the
“Parallel Debt”).

(b) Borrower and the Collateral Agent acknowledge that:

(i) for this purpose the Parallel Debt constitutes undertakings, obligations and
liabilities of Borrower to the Collateral Agent and the Lenders under the Loan
Documents which are separate and independent from and without prejudice to, the
corresponding Obligations which Borrower have to each of the Collateral Agent
and the Lender; and

(ii) that the Parallel Debt represents the Collateral Agent’s and the Lenders’
own claims to receive payment of the Parallel Debt, provided that the total
amount which may become due under the Parallel Debt shall never exceed the total
amount which may otherwise become due as Obligations.

(c) Every payment of monies made by Borrower to the Collateral Agent or any
Lender shall be in satisfaction pro tanto of the Parallel Debt, provided that if
any such payment as is mentioned above is subsequently avoided or reduced by
virtue of any provisions or enactments relating to bankruptcy, liquidation or
similar laws of general application the Collateral Agent, for the ratable
benefit of the Lenders, shall be entitled to receive the avoided or reduced
amount of such payment from Borrower and Borrower shall remain liable to perform
the relevant obligation and the relevant liability shall be deemed not to have
been discharged.

 

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(d) Subject to the provision of this sub-clause (d), but notwithstanding any of
the other provisions of this Section 4.4:

(i) the total amount due and payable as Parallel Debt under this Section 4.4
shall be decreased to the extent that an obligor pays any amounts to the
Collateral Agent or any Lender or any of them as a payment for the Obligations
or the Collateral Agent or any Lender otherwise receives any amount in payment
of (a part of) the Obligations; and

(ii) to the extent that any obligor shall have paid any amounts to the
Collateral Agent or any Lender under the Parallel Debt or the Collateral Agent
or any Lender shall have otherwise received monies in payment of the Parallel
Debt, the total amount due and payable by any obligor on account of the
Obligations shall be decreased as if said amounts were received directly in
payment of the Obligations.

Notwithstanding Section 11 of this Agreement with respect to choice of law, this
Section 4.4 shall be governed by German law.

 

5. REPRESENTATIONS AND WARRANTIES

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

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

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

 

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5.2 Collateral.

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

(b) On the Effective Date, the Collateral is not in the possession of any third
party bailee (such as a warehouse) except as disclosed in the Perfection
Certificate, and, as of the Effective Date, no such third party bailee possesses
components of the Collateral in excess of Two Hundred Fifty Thousand Dollars
($250,000). None of the components of the Collateral shall be maintained at
locations other than as disclosed in the Perfection Certificates on the
Effective Date or as permitted pursuant to Section 6.11.

(c) All Inventory is in all material respects of good and marketable quality,
free from material defects.

(d) Borrower and each of the Loan Parties is the sole owner of the Intellectual
Property each respectively purports to own, except for non-exclusive licenses
granted to its customers in the ordinary course of business and other licenses
permitted under Section 7.1. Except as noted on the Perfection Certificates as
of the Effective Date, neither Borrower nor any of the Loan Parties is a party
to, nor is bound by, any material license or other material agreement with
respect to which Borrower or such Loan Party is the licensee that (i) prohibits
or otherwise restricts Borrower or such Loan Party from granting a security
interest in Borrower’s or such Loan Parties’ interest in such material license
or material agreement or any other property, or (ii) for which a default under
or termination of could interfere with Collateral Agent’s or any Lender’s right
to sell any Collateral. Borrower shall provide written notice to Collateral
Agent and each Lender, no less frequently than quarterly, within thirty
(30) days after the end of each quarter, of Borrower or any of Loan Party
entering into or becoming bound by any material, inbound license or similar
material agreement regarding Intellectual Property (other than over-the-counter
software that is commercially available to the public). Borrower shall, and
shall cause each Loan Party to, use commercially reasonable efforts to exclude
from the terms of such licenses or agreements (other than over-the-counter
software that is commercially available to the public) entered into after the
Effective Date any provisions therein that would restrict or prohibit such
licenses or agreement, or rights thereunder, from becoming subject to a security
interest in favor of Collateral Agent.

5.3 Litigation. Except as disclosed on the Perfection Certificate as of the
Effective Date, there are no actions, suits, investigations, or proceedings
pending or, to the knowledge of the Responsible Officers, threatened in writing
by or against Borrower or its Subsidiaries involving more than One Hundred
Thousand Dollars ($100,000).

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

5.5 Solvency. The fair salable value of Borrower’s and its Subsidiaries’
consolidated assets (including goodwill minus disposition costs) exceeds the
fair value of Borrower’s and its Subsidiaries’ consolidated liabilities;
Borrower and its Subsidiaries are not left with unreasonably small capital after
the transactions in this Agreement; and Borrower and each of its Subsidiaries is
able to pay its debts (including trade debts) as they mature.

 

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

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law

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

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

5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely as working capital and to fund its general business requirements in
accordance with the provisions of this Agreement, and not for personal, family,
household or agricultural purposes. A portion of the proceeds of the Term Loan
shall be used by Borrower to repay the Existing Indebtedness in full on the
Effective Date.

 

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

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

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

 

6. AFFIRMATIVE COVENANTS

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

6.1 Government Compliance.

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

(b) Obtain and keep in full force and effect, all of the Governmental Approvals
necessary for the performance by Borrower and the other Loan Parties of their
obligations under the Loan Documents to which each is a Party and the grant of a
security interest to Collateral Agent for the ratable benefit of the Lenders, in
all of the Collateral. Except to the extent disclosed by Borrower in its public
filings, Borrower shall promptly provide copies to Collateral Agent of any
material Governmental Approvals obtained by Borrower or any of its Subsidiaries.

6.2 Financial Statements, Reports, Certificates.

(a) Deliver to each Lender: (i) as soon as available, but no later than thirty
(30) days after the last day of each month, a company prepared consolidated and
consolidating balance sheet, income statement and cash flow statement covering
the consolidated operations of Borrower and its Subsidiaries, for such month
certified by a Responsible Officer and in a form reasonably acceptable to
Collateral Agent; (ii) as soon as available, but no later than one hundred
eighty (180) days after the last day of Borrower’s fiscal year or within five
(5) days of filing with the SEC, audited consolidated financial statements
prepared under GAAP, consistently applied, together with an unqualified opinion
(except for a going concern qualification resulting solely from Borrower having
less than twelve months’ of cash) on the financial statements from an
independent certified public accounting firm acceptable to Collateral Agent in
its reasonable discretion; (iii) as soon as available after approval thereof by
Borrower’s Board of Directors, but no later than ten (10) days after the last
day of each of Borrower’s fiscal years, Borrower’s consolidated and
consolidating (including but not limited to for Borrower’s Foreign Subsidiaries)
financial projections for the entire current fiscal year as approved by
Borrower’s Board of Directors, which such annual projections shall be set forth
in a quarter-by-quarter format (such annual financial projections as originally
delivered to Collateral Agent and the Lenders are referred to herein as the
“Annual Projections”; provided that, any revisions of the Annual Projections
approved by Borrower’s Board of Directors shall be delivered to Collateral Agent
and the Lenders no later than seven (7) days after such approval); (iv) within
five (5) days of delivery, copies of all statements, reports and notices made
available to Borrower’s security holders or holders of Subordinated Debt;
(v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission, (vi) except to the extent disclosed
in Borrower’s public filings, prompt (but no more frequently than quarterly,
within thirty (30) days after the end of each quarter) notice of (A) any
material change in the composition of the Intellectual Property, (B) notice of
the registration or recordation with the United States Copyright Office or the
United States Patent and Trademark Office of any ownership right of Borrower or
any other Loan Party in or to any copyright, patent or trademark, and
(C) Borrower’s knowledge of any event that in Borrower’s reasonable judgment has
materially and adversely affected the value of the Intellectual Property;
(vii) as soon as available, but no later than thirty (30) days after the last
day of each month, copies of the month-end account statements for each deposit
account or securities account maintained by Borrower or any Loan Party, which
statements may be provided to Collateral Agent and each Lender by Borrower or
directly from the applicable institution(s), and (viii) other financial
information as reasonably requested by Collateral Agent or any Lender.
Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date on which Borrower posts such
documents, or provides a link thereto, on Borrower’s website on the internet at
Borrower’s website address.

 

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(b) Concurrently with the delivery of the financial statements specified in
Section 6.2(a)(i) above but no later than thirty (30) days after the last day of
each month, deliver to each Lender, (x) a duly completed Compliance Certificate
signed by a Responsible Officer, (y) a report of Borrower’s aged listings by
invoice date, Account Debtor and location of Account Debtor (foreign or
domestic) of Borrower’s accounts receivable, together with a comparison to the
report for the prior period, and (z) a report of cash on hand with each of
Borrower’s Foreign Subsidiaries, by Foreign Subsidiary.

(c) Keep proper books of record and account in accordance with GAAP in all
material respects, in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities. Borrower
shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of
Borrower, Collateral Agent (or any Lender, if an Event of Default then exists)
during regular business hours upon reasonable prior notice (except while an
Event of Default has occurred and is continuing), to visit and inspect any of
its properties, to examine and make abstracts or copies from any of its books
and records, and to conduct a collateral audit and analysis of its operations
and the Collateral. Such audits shall be conducted no more often than (x) twice
every year, with respect to Borrower and each Domestic Subsidiary, and (y) once
every year, with respect to Foreign Subsidiaries if Collateral Agent reasonably
determines that information from the books and records available to it are
inadequate for such audit; in each case, unless (and more frequently if) an
Event of Default has occurred and is continuing.

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects except for Inventory for which adequate reserves have
been made. Returns and allowances between Borrower, or any of its Subsidiaries,
and their respective Account Debtors shall follow Borrower’s, or such
Subsidiary’s, customary practices as they exist at the Effective Date. Borrower
must promptly notify Collateral Agent of all returns (other than in connection
with exchanges that do not involve product quality), recoveries, disputes and
claims that involve, in any calendar year, more than (x) Two Hundred Fifty
Thousand Dollars ($250,000) with respect to catheters; (y) One Million Six
Hundred Thousand Dollars ($1,600,000), with respect to the Sensei Robotic
System; and (z) Three Million Two Hundred Thousand Dollars ($3,200,000) with
respect to the Magellan Robotic System; in each case of (x), (y) and (z),
individually or in the aggregate.

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

 

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6.5 Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral
insured for risks and in amounts standard for companies in Borrower’s and its
Subsidiaries’ industry and location and as Collateral Agent may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are reasonably satisfactory to Collateral Agent and Lenders. With respect
to Borrower and its Domestic Subsidiaries, all property policies shall have a
lender’s loss payable endorsement showing Collateral Agent as lender loss payee
and waive subrogation against Collateral Agent, and all liability policies shall
show, or have endorsements showing, Collateral Agent, as additional insured. All
such policies (or the loss payable and additional insured endorsements) shall
provide that the insurer shall endeavor to give Collateral Agent at least thirty
(30) days notice before canceling, amending, or declining to renew its policy.
At Collateral Agent’s request, Borrower shall deliver certified copies of
policies and evidence of all premium payments. Proceeds payable under any policy
shall, at Collateral Agent’s option, be payable to Collateral Agent, for the
ratable benefit of the Lenders, on account of the Obligations; provided that any
such payment shall not constitute a prepayment hereunder, including without
limitation for purposes of the Prepayment Fee. Notwithstanding the foregoing,
(a) so long as no Event of Default has occurred and is continuing, Borrower
shall have the option of applying the proceeds of any casualty policy up to Five
Hundred Thousand Dollars ($500,000) with respect to any loss, but not exceeding
One Million Dollars ($1,000,000), in the aggregate for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property
(i) shall be of equal or like value as the replaced or repaired Collateral and
(ii) shall be deemed Collateral (so long as such damaged or destroyed property
constituted Collateral) in which Collateral Agent has been granted a first
priority security interest (so long as such damaged or destroyed property was
required hereunder to be subject to Collateral Agent’s first priority security
interest), and (b) after the occurrence and during the continuance of an Event
of Default, all proceeds payable under such casualty policy shall, at the option
of Collateral Agent, be payable to Collateral Agent, for the ratable benefit of
the Lenders, on account of the Obligations. If Borrower or any of its
Subsidiaries fails to obtain insurance as required under this Section 6.5 or to
pay any amount or furnish any required proof of payment to third persons,
Collateral Agent and/or any Lender may make all or part of such payment or
obtain such insurance policies required in this Section 6.5, and take any action
under the policies Collateral Agent or such Lender deems prudent.

6.6 Operating Accounts.

(a) Maintain all of Borrower’s and its Domestic Subsidiaries’ primary domestic
Collateral Accounts with SVB or its Affiliates, in accounts which are subject to
a Control Agreement in favor of Collateral Agent (as necessary to perfect
Collateral Agent’s Lien in such Collateral Account). Borrower and its Domestic
Subsidiaries shall conduct all of their foreign exchange activities with Silicon
Valley Bank or its Affiliates. Notwithstanding, and without limiting, the
foregoing (x) from and after the Effective Date, Borrower shall maintain no more
than Six Million Dollars ($6,000,000) in Borrower’s account with Morgan Stanley
(the “Morgan Stanley Account”); and (y) Borrower shall have thirty (30) days
from the Effective Date to close the Morgan Stanley Account and to transfer to
SVB or its Affiliates the balance in such account. For the avoidance of doubt,
to the extent Borrower is required to do so to maintain Morgan Stanley as the
administrator of its stock option management program, Borrower may maintain an
account with Morgan Stanley solely for the purposes of administration of such
program, provided that collected funds in excess of $100 may not be held therein
for more than three (3) Business Days and thereafter shall be transferred to
Collateral accounts with SVB or its Affiliates.

(b) Borrower shall provide Collateral Agent five (5) Business Days’ prior
written notice before Borrower or any of its Subsidiaries establishes any
Collateral Account at or with any Person other than SVB. In addition, for each
Collateral Account that Borrower or any of its Subsidiaries, at any time
maintains, Borrower or such Subsidiary shall cause the applicable bank or
financial institution at or with which such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such
Collateral Account in accordance with the terms hereunder prior to the
establishment of such Collateral Account, which Control Agreement may not be
terminated without prior written consent of Collateral Agent; provided that, as
long as the Morgan Stanley Account maintains Five Million Dollars ($5,000,0000
or less and is closed within thirty (30) days of the Effective Date, Borrower
shall not be required to deliver to Collateral Agent a Control Agreement with
respect to such account. The provisions of the previous sentence shall not apply
to deposit accounts exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of Borrower’s, or any
of its Subsidiaries’, employees and identified to Collateral Agent by Borrower
as such.

 

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

(d) Collateral Agent and the Lenders agree not to give a notice of exclusive
control, entitlement order, or other directions or instructions under any
Control Agreement unless an Event of Default has occurred.

6.7 Protection of Intellectual Property Rights. Borrower and each of its
Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend
and maintain the validity and enforceability of its Intellectual Property that
is material to Borrower’s business; (b) promptly advise Collateral Agent in
writing of material infringement by a third party of its Intellectual Property,
if such infringement could reasonably be expected to have a Material Adverse
Change; and (c) not allow any Intellectual Property material to Borrower’s
business to be abandoned, forfeited or dedicated to the public without
Collateral Agent’s written consent.

6.8 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Collateral Agent and Lenders,
without expense to Collateral Agent or Lenders, upon reasonable notice and at
reasonable times (unless an Event of Default has occurred), Borrower and each of
its Subsidiaries and each of Borrower’s and its Subsidiaries’ officers,
employees and agents and Borrower’s Books, to the extent that Collateral Agent
or any Lender may reasonably deem them necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Collateral Agent or any
Lender with respect to any Collateral or relating to Borrower.

6.9 Notices of Litigation and Default.

(a) Borrower will give prompt written notice to Collateral Agent and Lenders of
any litigation or governmental proceedings pending or threatened (in writing)
against Borrower or any of its Subsidiaries, which could reasonably be expected
to result in damages or costs to Borrower or any of its Subsidiaries of Two
Hundred Fifty Thousand Dollars ($250,000) or more or which could reasonably be
expected to have a Material Adverse Change. Without limiting or contradicting
any other more specific provision of this Agreement, promptly (and in any event
within five (5) Business Days) upon Borrower becoming aware of the existence of
any Event of Default or event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, Borrower shall give written
notice to Collateral Agent and Lenders of such occurrence, which such notice
shall include a reasonably detailed description of such Event of Default or
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default.

(b) Borrower will give prompt written notice to Collateral Agent and Lenders
upon Borrower having knowledge that the sum (without duplication) of
(i) expenses incurred, (ii) outstanding settlement offers made,
(iii) settlements, and (iv) judgments in connection with proceedings pending or
threatened (in writing), in each case with respect to claims that have been
tendered or would qualify for tender by Borrower under Borrower’s director’s and
officers liability insurance (the “D&O Policy”), becoming greater than (x) the
aggregate coverage limits under such D&O Policy minus (y) Two Million Five
Hundred Thousand Dollars ($2,500,0000) (a “D&O Coverage Condition”). At all
times during the existence of a D&O Coverage Condition, Borrower will provide to
Collateral Agent and each Lender, concurrently with the delivery of the
financial statements specified in Section 6.2(a)(i) but no later than thirty
(30) days after the last day of each month, a report, in reasonable detail,
showing the then current amounts under clauses (i), (ii), (iii) and (iv), above,
the aggregate of all such amounts, and the excess, if any, of such aggregate
amount over Borrower’s aggregate coverage limits under its D&O Policy (the
“Excess D&O Claims Amount”).

6.10 Minimum Liquidity. Borrower shall at all times, measured monthly, maintain
Liquidity of at least Fifteen Million Dollars ($15,000,000); provided, that
within ten (10) days after the occurrence of a D&O Coverage Condition and at all
times thereafter so long as a D&O Coverage Condition exists, Borrower shall
maintain Liquidity of not less than the sum of (i) Fifteen Million Dollars
($15,000,000) and (ii) the Excess D&O Claims Amount.

 

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6.11 Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its
Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with a value in excess of Two Hundred Fifty Thousand Dollars
($250,000) with, or deliver any portion of the Collateral with a value in excess
of Two Hundred Fifty Thousand Dollars ($250,000) to, a bailee, in each case
pursuant to Section 7.2, then Borrower or such Subsidiary will first receive the
written consent of Collateral Agent and such bailee or landlord, as applicable,
must execute and deliver a bailee waiver or landlord waiver, as applicable, in
form and substance reasonably satisfactory to Collateral Agent prior to the
addition of any new offices or business locations, or any such storage with or
delivery to any such bailee, as the case may be.

6.12 Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its
Subsidiaries creates or acquires any Subsidiary, Borrower shall promptly notify
Collateral Agent and each Lender of the creation or acquisition of such new
Subsidiary and take all such action as may be reasonably required by Collateral
Agent or any Lender to cause each such Subsidiary to become a co-Borrower
hereunder or to guarantee the Obligations of Borrower under the Loan Documents
and, in each case, grant a continuing pledge and security interest in and to the
assets of such Subsidiary (substantially as described on Exhibit A hereto); and
(or, in Collateral Agent’s reasonable discretion) Borrower or such Subsidiary,
as applicable, shall grant and pledge to Collateral Agent, for the ratable
benefit of the Lenders, a perfected security interest in the Shares of the new
Subsidiary. Without limiting the foregoing, in the event that the operating
agreement for ECL7 no longer restricts it from providing a guarantee or
otherwise incurring debt, Borrower shall cause ECL7 to become a co-Borrower
hereunder or, in Lenders’ reasonable discretion, to guarantee the Obligations of
Borrower under the Loan Documents.

6.13 Further Assurances.

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

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

 

7. NEGATIVE COVENANTS

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

7.1 Dispositions. Convey, sell, lease, transfer, assign, dispose of or otherwise
make cash payments consisting of (collectively, “Transfer”), or permit any of
its Subsidiaries to Transfer, all or any material part of its business or
property, except for Transfers (a) consisting of cash payments to trade
creditors in the ordinary course of business; (b) of Inventory in the ordinary
course of business, and non-exclusive licenses of Intellectual Property in
connection therewith; (c) of worn-out or obsolete Equipment; (d) in connection
with Permitted Indebtedness, Permitted Liens and Permitted Investments; (e) of
non-exclusive licenses for the use of the Intellectual Property of Borrower, or
any of Borrower’s Subsidiaries, in the ordinary course of business in connection
with joint ventures and corporate collaborations; or (f) licenses for the use of
the Intellectual Property of Borrower, or any of Borrower’s Subsidiaries, that
are approved by Borrower’s Board of Directors and which could not result in a
legal transfer of title of the licensed property but that may be exclusive in
respects other than territory, including but not limited to field of use, and
that may be exclusive as to territory only as to discrete geographical areas
outside of the United States; provided that Borrower may not make Transfers in
addition to those specifically enumerated above, except to the extent the same
are contemplated in the Annual Projections.

7.2 Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses engaged in by Borrower as of the Effective Date or
reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person
shall cease to be actively engaged in the management of Borrower unless a
replacement for such Key Person (including any interim replacement) is approved
by Borrower’s Board of Directors and engaged by Borrower within one hundred
twenty (120) days of such change, or (ii) enter into any transaction or series
of related transactions in which the stockholders of Borrower who were not
stockholders immediately prior to the first such transaction own more than forty
nine percent (49%) of the voting stock of Borrower immediately after giving
effect to such transaction or related series of such transactions (other than by
the sale of Borrower’s equity securities in a public offering, a private
placement of public equity or to venture capital investors so long as Borrower
identifies to Collateral Agent the venture capital investors prior to the
closing of the transaction). Borrower shall not, without at least thirty
(30) days’ prior written notice to Collateral Agent: (A) add any new offices or
business locations, including warehouses (unless such new offices or business
locations contain less than Two Hundred Fifty Thousand Dollars ($250,000) in
assets or property of Borrower); (B) change its jurisdiction of organization,
(C) change its organizational structure or type, (D) change its legal name, or
(E) change any organizational number (if any) assigned by its jurisdiction of
organization.

 

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7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary (provided such surviving Subsidiary is a
“co-Borrower” hereunder or has provided a secured guaranty of Borrower’s
Obligations hereunder) or into Borrower provided Borrower is the surviving legal
entity, and as long as no Event of Default is occurring prior thereto or arises
as a result therefrom.

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

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein (except for Permitted Liens that are permitted by the
terms of this Agreement to have priority over Collateral Agent’s Lien), or enter
into any agreement, document, instrument or other arrangement (except with or in
favor of Collateral Agent or any Lender) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower, or any of
Borrower’s Subsidiaries, from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s, or such
Subsidiary’s, Intellectual Property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Liens” herein.

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

7.7 Distributions; Investments. (a) Pay any dividends (other than dividends
payable solely in capital stock) or make any distribution or payment or redeem,
retire or purchase any capital stock (other than repurchases pursuant to the
terms of employee stock purchase plans, employee restricted stock agreements,
stockholder rights plans, director or consultant stock option plans, or similar
plans, provided such repurchases do not exceed Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate per fiscal year) or (b) directly or
indirectly make any Investment other than Permitted Investments, or permit any
of its Subsidiaries to do so.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
(a) transactions that are in the ordinary course of Borrower’s 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, and
(b) equity investments by Borrower’s investors.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to the Lenders.

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

 

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7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies
Borrower that pursuant to the requirements of Anti-Terrorism Laws, and
Collateral Agent’s policies and practices, Collateral Agent is required to
obtain, verify and record certain information and documentation that identifies
Borrower and their principals, which information includes the name and address
of Borrower and their principals and such other information that will allow
Collateral Agent to identify such party in accordance with Anti-Terrorism Laws.
Borrower shall not, nor shall Borrower permit any Subsidiary or Affiliate to,
directly or indirectly, knowingly enter into any documents, instruments,
agreements or contracts with any Person listed on the OFAC Lists. Borrower shall
immediately notify Collateral Agent if Borrower has knowledge that Borrower, or
any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is
convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is
arraigned and held over on charges involving money laundering or predicate
crimes to money laundering. Borrower shall not, nor shall 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 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.

 

8. EVENTS OF DEFAULT

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

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

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2
(Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6
(Operating Accounts), 6.9 (Notices of Litigation and Default), 6.10 (Minimum
Liquidity), 6.11 (Landlord Waivers; Bailee Waivers) or 6.12
(Creation/Acquisition of Subsidiaries) or Borrower violates any covenant in
Section 7; or

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

8.3 Material Adverse Change. A Material Adverse Change occurs;

 

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8.4 Attachment; Levy; Restraint on Business.

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under control of Borrower (including a
Subsidiary) on deposit with any Lender or any Lender’s Affiliate or any bank or
other institution at which Borrower maintains a Collateral Account, or (ii) a
notice of lien, levy, or assessment is filed against any of Borrower’s assets by
any government agency, and the same under subclauses (i) and (ii) hereof are
not, within ten (10) days after the occurrence thereof, discharged or stayed
(whether through the posting of a bond or otherwise); provided, however, no
Credit Extensions shall be made during any ten (10) day cure period; and

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

8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made while any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is a default in any agreement to which Borrower is a
party with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could have a Material Adverse Change;

8.7 Judgments. One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Fifty Thousand Dollars ($250,000) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided that no
Credit Extensions will be made prior to the satisfaction, vacation, or stay of
such judgment, order or decree);

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

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

8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any
reason to be in full force and effect; (b) any guarantor does not perform any
obligation or covenant under any guaranty of the Obligations; (c) any
circumstance described in Section 8.3 occurs; (d) any circumstance described in
Sections 8.4, 8.5, 8.7, or 8.8 occurs with respect to any guarantor; or (e) the
liquidation, winding up, or termination of existence of any guarantor;

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

 

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8.12 Lien Priority. Any Lien created hereunder or by any other Loan Document
shall at any time fail to constitute a valid and perfected Lien on any of the
Collateral purported to be secured thereby, subject to no prior or equal Lien,
other than Permitted Liens.

 

9. RIGHTS AND REMEDIES

9.1 Rights and Remedies.

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

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

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

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

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

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

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

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

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

 

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

(v) demand and receive possession of Borrower’s Books;

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

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

9.2 Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with
Account Debtors, for amounts and on terms Collateral Agent determines
reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance
policies; (e) pay, contest or settle any Lien, charge, encumbrance, security
interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and
(f) transfer the Collateral into the name of Collateral Agent or a third party
as the Code or any applicable law permits. Borrower hereby appoints Collateral
Agent as its lawful attorney-in-fact to sign Borrower’s name on any documents
necessary to perfect or continue the perfection of Collateral Agent’s security
interest in the Collateral regardless of whether an Event of Default has
occurred until all Obligations (other than inchoate indemnity obligations) have
been satisfied in full and Collateral Agent and the Lenders are under no further
obligation to make Credit Extensions hereunder. Collateral Agent’s foregoing
appointment as Borrower’s attorney in fact, and all of Collateral Agent’s rights
and powers, coupled with an interest, are irrevocable until all Obligations
(other than inchoate indemnity obligations) have been fully repaid and performed
and Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions
terminates.

9.3 Protective Payments. If Borrower fails to obtain the insurance called for by
Section 6.5 or fails to pay any premium thereon or fails to pay any other amount
which Borrower is obligated to pay under this Agreement or any other Loan
Document, Collateral Agent may obtain such insurance or make such payment, and
all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately
due and payable, bearing interest at the Default Rate, and secured by the
Collateral. Collateral Agent will make reasonable efforts to provide Borrower
with notice of Collateral Agent obtaining such insurance or making such payment
at the time it is obtained or paid or within a reasonable time thereafter. No
such payments by Collateral Agent are deemed an agreement to make similar
payments in the future or Collateral Agent’s waiver of any Event of Default.

 

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

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

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

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

 

10. NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three
(3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
receipt of confirmation of transmission, when sent by 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 Collateral Agent,
Lender or Borrower may change its mailing address or facsimile number by giving
the other party written notice thereof in accordance with the terms of this
Section 10.

 

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If to Borrower:   

HANSEN MEDICAL, INC.

800 East Middlefield Road

Mountain View, California 94043

Attn: Chief Financial Officer

Fax:  (650)404-5901

with a copy to:   

Gunderson Dettmer Stough

Villeneuve Franklin & Hachigian,

LLP

1200 Seaport Blvd.

Redwood City, California 94063

Attn: David T. Young

Fax:  (650) 321-2800

and a copy to:   

Chapman and Cutler LLP

595 Market Street, 26th Floor

San Francisco, CA 94105

Attn: David W. Thill

Fax:  (415) 541-050

If to Collateral Agent:   

OXFORD FINANCE LLC

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: General Counsel

Fax: (703) 519-5225

with a copy to   

SILICON VALLEY BANK

2400 Hanover Street

Palo Alto, California 94304

Attn: Jason Hughes

Fax: (650) 856-7879

with a copy to:   

DLA Piper LLP (US)

4365 Executive Drive, Suite 1100

San Diego, California 92121-2133

Attn: Troy Zander

Fax: (858) 638-5086

 

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

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

 

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

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

 

12. GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not transfer,
pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s and each Lender’s prior written consent (which may be granted
or withheld in Collateral Agent’s and each Lender’s discretion, subject to
Section 12.6). The Lenders have the right, without the consent of or notice to
Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation
in (any such sale, transfer, assignment, negotiation, or grant of a
participation, a “Lender Transfer”) all or any part of, or any interest in, the
Lenders’ obligations, rights, and benefits under this Agreement and the other
Loan Documents; provided, however, that any such Lender Transfer (other than a
transfer, pledge, sale or assignment to an Eligible Assignee) of its
obligations, rights, and benefits under this Agreement and the other Loan
Documents shall require the prior written consent of the Required Lenders (such
approved assignee, an “Approved Lender”). Borrower and Collateral Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned until Collateral Agent shall have received and
accepted an effective assignment agreement in form satisfactory to Collateral
Agent executed, delivered and fully completed by the applicable parties thereto,
and shall have received such other information regarding such Eligible Assignee
or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding
anything to the contrary contained herein, so long as no Event of Default has
occurred and is continuing, no Lender Transfer (other than a Lender Transfer
(i) in respect of the Warrants or (ii) in connection with (x) assignments by a
Lender due to a forced divestiture at the request of any regulatory agency; or
(y) a Lender’s own financing or securitization transactions and upon the
occurrence of a default, Event of Default or similar occurrence with respect to
such financing or securitization transaction) shall be permitted to any Person
if such person is an Affiliate or Subsidiary of Borrower, a direct competitor of
Borrower or a vulture hedge fund, each as determined by Collateral Agent,
without Borrower’s consent.

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

12.9 Confidentiality. In handling any confidential information of Borrower, the
Lenders and Collateral Agent agree to maintain the confidentiality of such
information using the same degree of care that it exercises for their own
proprietary information, but disclosure of information may be made: (a) to the
Lenders’ and Collateral Agent’s Subsidiaries or Affiliates (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such information and instructed to keep such information
confidential); (b) subject to an agreement containing provisions substantially
the same as those of this Section, to prospective transferees or purchasers of
any interest in the Credit Extensions (provided, however, the Lenders and
Collateral Agent shall use commercially reasonable efforts to obtain such
prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order; (d) to
Lenders’ or Collateral Agent’s regulators or as otherwise required in connection
with an examination or audit; (e) as Collateral Agent considers appropriate in
exercising remedies under the Loan Documents; and (f) to third party service
providers of the Lenders and/or Collateral Agent so long as such service
providers have executed a confidentiality agreement with the Lenders and
Collateral Agent with terms no less restrictive than those contained herein.
Confidential information does not include information that either: (i) is in the
public domain or in the Lenders’ and/or Collateral Agent’s possession (without
restriction on disclosure) when disclosed to the Lenders and/or Collateral
Agent, or becomes part of the public domain after disclosure to the Lenders
and/or Collateral Agent (other than as a consequence of breach of this
Section 12.9); or (ii) is disclosed to the Lenders and/or Collateral Agent by a
third party, if the Lenders and/or Collateral Agent does not know that the third
party is prohibited from disclosing the information. Collateral Agent and the
Lenders may use confidential information for any purpose, including, without
limitation, for the development of client databases, reporting purposes, and
market analysis, so long as Collateral Agent does not disclose Borrower’s
identity or the identity of any person associated with Borrower unless otherwise
expressly permitted by this Agreement. The provisions of this Section 12.9 shall
survive the termination of this Agreement.

 

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

 

13. COLLATERAL AGENT

13.1 Appointment and Authorization of Collateral Agent. Each Lender hereby
irrevocably appoints, designates and authorizes Collateral Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
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 Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere herein or in any other Loan
Document, Collateral Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Collateral 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 Loan Document or
otherwise exist against Collateral Agent. Without limiting the generality of the
foregoing sentence, the use of the term “agent” herein and in the other Loan
Documents with reference to Collateral 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.

13.2 Delegation of Duties. Collateral Agent may execute any of its duties under
this Agreement or any other Loan Document by or through its, or its Affiliates,
agents, employees or attorneys-in-fact and shall be entitled to obtain and rely
upon the advice of counsel and other consultants or experts concerning all
matters pertaining to such duties. Collateral Agent shall not be responsible for
the negligence or misconduct of any agent or attorney-in-fact that it selects in
the absence of gross negligence or willful misconduct.

13.3 Liability of Collateral Agent. Except as otherwise provided herein, no
Collateral Agent-Related Person shall (a) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or
any other Loan Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct in connection with its duties
expressly set forth herein), or (b) be responsible in any manner to any Lender
or participant for any recital, statement, representation or warranty made by
Borrower or any officer thereof, contained herein or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by Collateral Agent under or in connection with,
this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrower or any other party to any Loan Document
to perform its obligations hereunder or thereunder. No Collateral Agent-Related
Person shall be under any obligation to any Lender or participant to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of Borrower or any Affiliate thereof.

 

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13.4 Reliance by Collateral Agent. Collateral Agent may rely, and shall be fully
protected in acting, or refraining to act, upon, any resolution, statement,
certificate, instrument, opinion, report, notice, request, consent, order, bond
or other paper or document that it has no reason to believe to be other than
genuine and to have been signed or presented by the proper party or parties or,
in the case of cables, telecopies and telexes, to have been sent by the proper
party or parties. In the absence of its gross negligence or willful misconduct,
Collateral Agent may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any certificates or
opinions furnished to Collateral Agent and conforming to the requirements of the
Loan Agreement or any of the other Loan Documents. Collateral Agent may consult
with counsel, and any opinion or legal advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, not taken
or suffered by Collateral Agent hereunder or under any Loan Documents in
accordance therewith. Collateral Agent shall have the right at any time to seek
instructions concerning the administration of the Collateral from any court of
competent jurisdiction. Collateral Agent shall not be under any obligation to
exercise any of the rights or powers granted to Collateral Agent by this
Agreement and the other Loan Documents at the request or direction of Lenders
unless Collateral Agent shall have been provided by Lenders with adequate
security and indemnity against the costs, expenses and liabilities that may be
incurred by it in compliance with such request or direction.

13.5 Notice of Default. Unless the officers of Collateral Agent acting in their
capacity as officer of Collateral Agent on Borrower’s account have actual
knowledge thereof or have been notified in writing thereof by Lenders,
Collateral Agent shall not be required to ascertain or inquire as to the
existence or possible existence of any Event of Default. Collateral Agent shall
not be deemed to have knowledge or notice of the occurrence of any default
and/or Event of Default, unless Collateral Agent shall have received written
notice from a Lender or Borrower, describing such default or Event of Default.
Collateral Agent will notify the Lenders of its receipt of any such notice.
Collateral Agent shall take such action with respect to an Event of Default as
may be determined by Lenders in accordance with the terms of Section 9(a);
provided, however, that while an Event of Default has occurred and is
continuing, Collateral Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of
Default as Collateral Agent shall deem advisable or in the best interest of the
Lenders, including without limitation, satisfaction of other security interests,
liens or encumbrances on the Collateral not permitted under the Loan Documents,
payment of taxes on behalf of Borrower, payments to landlords, warehouseman,
bailees and other persons in possession of the Collateral and other actions to
protect and safeguard the Collateral, and actions with respect to insurance
claims for casualty events affecting Borrower and/or the Collateral.

13.6 Credit Decision; Disclosure of Information by Collateral Agent. Each Lender
acknowledges that no Collateral Agent-Related Person has made any representation
or warranty to it, and that no act by Collateral Agent hereafter taken,
including any consent to and acceptance of any assignment or review of the
affairs of Borrower, or any Affiliate thereof, shall be deemed to constitute any
representation or warranty by any Collateral Agent-Related Person to any Lender
as to any matter, including whether Collateral Agent-Related Persons have
disclosed material information in their possession. Each Lender represents to
Collateral Agent that it has, independently and without reliance upon any
Collateral Agent-Related Person and based on such documents and information as
it has deemed appropriate, made its own appraisal of, and investigation into,
the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower, or any of Borrower’s Subsidiaries, and all
applicable bank or other regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrower hereunder. Each Lender also represents that it
will, independently and without reliance upon any Collateral Agent-Related
Person and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by Collateral
Agent herein, Collateral Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of Borrower or any of its Affiliates which may come into the
possession of any Collateral Agent-Related Person.

 

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13.7 Indemnification of Collateral Agent. Each Lender severally, but not
jointly, agrees (a) to indemnify and hold Collateral Agent (and each Collateral
Agent-Related Person) harmless from and against and (b) promptly upon receipt by
each Lender of Collateral Agent’s statement, to reimburse Collateral Agent,
according to such Lender’s Pro Rata Share, to the extent Collateral Agent shall
not otherwise have been reimbursed by Borrower on account of and for, any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including, without limitation, the fees and
disbursements of counsel and other advisors) or disbursements of any kind of
nature whatsoever with respect to Collateral Agent’s performance of its duties
under this Agreement and the other Loan Documents; provided, however, that no
Lender shall be liable for the payment to Collateral Agent of any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from Collateral Agent’s
gross negligence or willful misconduct. Such reimbursement shall not in any
respect release Borrower from any liability or obligation. If any indemnity
furnished to Collateral Agent for any purpose shall, in the opinion of
Collateral Agent, be insufficient or become impaired, Collateral Agent may call
for additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. Collateral Agent’s right
to indemnification shall survive termination of this Agreement.

13.8 Collateral Agent in its Individual Capacity. With respect to its Credit
Extensions, Oxford shall have the same rights and powers under this Agreement as
any other Lender and may exercise such rights and powers as though it were not
Collateral Agent, and the terms “Lender” and “Lenders” include Oxford in its
individual capacity.

13.9 Successor Collateral Agent. Collateral Agent may resign at any time by
giving thirty (30) days’ prior written notice thereof to Lenders and Borrower;
provided, however, that the retiring Collateral Agent shall continue to serve
until a successor Collateral Agent shall have been selected and approved
pursuant to this Section 13.9. Upon any such notice, Collateral Agent shall have
the right to appoint, subject to the consent of Lenders, a successor Collateral
Agent. Without limitation of the foregoing, if Collateral Agent becomes
insolvent or commits any act or omission constituting gross negligence or
willful misconduct of its duties as Collateral Agent hereunder, then the Lenders
shall have the right to replace the Collateral Agent. Upon the acceptance of its
appointment as successor Collateral Agent hereunder, the Person acting as such
successor Collateral Agent shall succeed to all the rights, powers and duties of
the retiring Collateral Agent and the respective term “Collateral Agent” means
such successor Collateral Agent and the retiring Collateral Agent’s appointment,
powers and duties in such capacities shall be terminated without any other
further act or deed on its behalf. After any retiring Collateral Agent’s
resignation hereunder as Collateral Agent, the provisions of this Article 13 and
Section 12.2 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent under this Agreement.

13.10 Proofs of Claim. In case of any Insolvency Proceeding relative to
Borrower, each Lender shall promptly file a claim or claims, on the form
required in such proceeding, for the full outstanding amount of such Lender’s
claim, and shall use its best efforts to cause said claim or claims to be
approved and each of the Lenders hereby irrevocably agrees that, to the extent
that it fails timely to do so, any other Lender may in the name of the first
Lender, or otherwise, prove up (but not vote) any and all claims of the first
Lender relating to the first Lender’s claim.

13.11 Collateral and Guaranty Matters. The Lenders irrevocably authorize
Collateral Agent, at its option and in its discretion, to release any guarantor
and any Lien on any Collateral granted to or held by Collateral Agent under any
Loan Document (i) upon the date that all Obligations due hereunder have been
fully and indefeasibly paid in full and the Term Loan Commitments or other
obligations of any Lender to provide funds to Borrower under this Agreement
remain outstanding, (ii) that is transferred or to be transferred as part of or
in connection with any Transfer permitted hereunder or under any other Loan
Document, or (iii) as approved in accordance with Section 12.6. Upon request by
Collateral Agent at any time, all Lenders will confirm in writing Collateral
Agent’s authority to release its interest in particular types or items of
Property, pursuant to this Section 13.11.

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

 

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

 

14. DEFINITIONS

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

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

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

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

“Agreement” is defined in the preamble hereof.

“Amortization Date” is, (i) February 1, 2013 (the “Initial Amortization Date”)
if Borrower has not satisfied the Magellan Milestone; or (ii) August 1, 2013
(the “Extended Amortization Date”) if Borrower has satisfied the Magellan
Milestone.

“Annual Projections” is defined in Section 6.2(a).

“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.

“AorTx” is AorTx, Inc., a Delaware corporation and wholly-owned Subsidiary of
Borrower.

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

“Approved Lender” has the meaning given it in Section 12.1.

“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by SVB or any SVB Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in SVB’s various
agreements related thereto (each, a “Bank Services Agreement”); provided that
the aggregate amount of such Bank Services shall not exceed Five Hundred
Thousand Dollars ($500,000) in the aggregate.

 

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“Bank Services Agreement” is defined in the definition of Bank Services.

“Basic Rate” means the per annum rate of interest equal to the greater of
(i) nine and forty-five hundredths percent (9.45%) and (ii) the sum of (a) the
three (3) month U.S. LIBOR rate reported in the Wall Street Journal three
(3) Business Days prior to the Funding Date of such Term Loan (which shall not
be less than one and one-quarter percent (1.25%)), plus (b) eight and twenty one
hundredths percent (8.20%).

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

“Borrower” is defined in the preamble hereof.

“Borrower’s Books” are Borrower’s books and records including ledgers, federal,
and state tax returns, records regarding Borrower’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” is any day that is not a Saturday, Sunday or a day on which
Collateral Agent is closed.

“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., and (c) certificates of deposit
maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control
Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct
purchase by Borrower, co-borrower, or any subsidiary of Borrower of any Auction
Rate Securities, or purchasing participations in, or entering into any type of
swap or other derivative transaction, or otherwise holding or engaging in any
ownership interest in any type of Auction Rate Security by Borrower,
co-borrower, or any subsidiary of Borrower shall be conclusively determined by
the Lenders as an ineligible Cash Equivalent, and any such transaction shall
expressly violate each other provision of this Agreement governing Permitted
Investments. Notwithstanding the foregoing, Cash Equivalents does not include
and Borrower, and each of Borrower’s Subsidiaries, are prohibited from
purchasing, purchasing participations in, entering into any type of swap or
other equivalent derivative transaction, or otherwise holding or engaging in any
ownership interest in any type of debt instrument, including, without
limitation, any corporate or municipal bonds with a long-term nominal maturity
for which the interest rate is reset through a dutch auction and more commonly
referred to as an auction rate security.

“Claims” is defined in Section 12.2.

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

 

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“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A and any and all other properties, rights and assets of Borrower
granted by Borrower to Collateral Agent, for the ratable benefit of the Lenders,
and each Lender, or arising under the Code or other applicable law, now, or in
the future.

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

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

“Collateral Agent-Related Person” means the Collateral Agent, together with its
Affiliates, and the officers, directors, employees, agents, advisors, auditors
and attorneys-in-fact of such Persons; provided, however, that no Collateral
Agent-Related Person shall be an Affiliate of Borrower.

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

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

“Communication” is defined in Section 10.

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

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) 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” is 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 Collateral Agent pursuant to which
Collateral Agent obtains control (within the meaning of the Code) for the
benefit of the Lenders over such Deposit Account, Securities Account, or
Commodity Account.

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

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

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

“Designated Deposit Account” is Borrower’s deposit account, account number
3300465692, maintained with SVB.

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

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

 

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“Domestic Subsidiary” means any Subsidiary of Borrower that is organized under
the laws of the United States of America, any State or Territory thereof, or the
District of Columbia.

“D&O Coverage Condition” is defined in Section 6.9(b).

“D&O Policy” is defined in Section 6.9(b).

“ECL7” is ECL7, LLC, a Delaware limited liability company, of which Borrower is
the sole member.

“Effective Date” is defined in the preamble of this Agreement.

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

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

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations.

“Excess D&O Claims Amount” is defined in Section 6.9.

“Existing Indebtedness” means the indebtedness of Borrower to SVB in the
aggregate principal outstanding amount as of the Effective Date of approximately
Three Million Three Hundred Ninety Thousand Six Hundred Eighty Nine and 88/100
Dollars ($3,390,689.88) pursuant to that certain Loan and Security Agreement,
dated August 25, 2008, entered into by and between SVB and Borrower.

“Event of Default” is defined in Section 8.

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the earliest
to occur of (a) the Maturity Date, or (b) the acceleration of the Term Loan, or
(c) the prepayment of the Term Loan pursuant to Section 2.2(c) or (d), equal to
the original principal amount of such Term Loan multiplied by the Final Payment
Percentage, payable to Lenders in accordance with their respective Pro Rata
Shares.

 

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“Final Payment Percentage” is three and ninety-five hundredths percent (3.95%).

“Foreign Currency” means lawful money of a country other than the United States.

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

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

“German Share Pledge Documents” is that certain Share Pledge Agreement by and
among Hansen International, Collateral Agent and Hansen Germany, together with
such other agreements, instruments and documents executed and or delivered in
connection therewith.

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

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

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

“Hansen Germany” is Hansen Medical Deutschland, GmbH, an entity organized under
the laws of Germany and a wholly-owned Subsidiary of Hansen International.

“Hansen Germany Organizational Documents” is the Articles of Association,
Commercial Register Excerpt and the Shareholder’s Resolution of Hansen Germany.

“Hansen International” is Hansen Medical International, Inc., a Delaware
corporation and wholly-owned Subsidiary of Borrower.

“Hansen UK” is Hansen Medical Systems UK Ltd., an entity organized under the
laws of England and Wales, and a wholly-owned Subsidiary of Hansen
International.

“Hansen UK Organizational Documents” are the Articles of Association, Board
Minutes and Shareholder Resolution of Hansen UK.

 

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

“Indemnified Person” is defined in Section 12.2.

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

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

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person. Notwithstanding the foregoing, “Investments”
exclude trade debt incurred in the ordinary course of any Person’s business.

“Key Person” means each of Borrower’s (i) President and Chief Executive Officer,
who is Bruce J. Barclay as of the Effective Date, and (ii) Chief Financial
Officer, who is Pete Mariani as of the Effective Date.

“Lender” is any one of the Lenders.

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

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

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

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

“Liquidity” means the sum of (i) unrestricted cash and Cash Equivalents
maintained with Silicon Valley Bank or its Affiliates (subject to control
agreements in favor of Collateral Agent) (the “Net Cash”) at all times of at
least Twelve Million Dollars ($12,000,000), plus (ii) seventy percent (70%) of
net trade Accounts receivable billed and collected in the United States (the
“Eligible A/R”); provided that, if the Eligible A/R is less than Three Million
Dollars ($3,000,000), Borrower shall have additional Net Cash in a minimum
amount sufficient to permit Borrower to achieve Net Cash plus Eligible A/R of at
least Fifteen Million Dollars ($15,000,000).

 

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“Loan Documents” are, collectively, this Agreement, the Warrants, the Perfection
Certificate, each Compliance Certificate, the UK Share Charge Documents, German
Share Pledge Documents, the Post Closing Letter, any Bank Services Agreement,
any subordination agreements, any note, or notes or guaranties executed by
Borrower, and any other present or future agreement entered into by Borrower for
the benefit of Lenders and Collateral Agent in connection with this Agreement,
all as amended, restated, or otherwise modified.

“Loan Party” means (x) as of the Effective Date, Borrower and each Domestic
Subsidiary other than ECL7, LLC; and (y) after the Effective Date, each
co-Borrower or Guarantor of the Obligations, in accordance with Section 6.12.

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

“Luna” is Luna Innovations Incorporated.

“Magellan Milestone” is Borrower’s receipt of approval from the Food and Drug
Administration, by no later than December 31, 2012, of Borrower’s Magellan
Robotic System.

“Magellan Robotic System” is a system which cannulates peripheral vessels with a
proprietary technology that delivers simultaneous distal tip control of a
catheter and a sheath, from a centralized, remote workstation.

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

“Maturity Date” is January 1, 2016.

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

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

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

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

“Payment/Advance Form” is that certain form attached hereto as Exhibit B-1.

“Payment Date” is the first (1st) calendar day of each calendar month,
commencing February 1, 2012.

“Perfection Certificate” is defined in Section 5.1.

 

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“Permitted Indebtedness” is:

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

(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

(c) Subordinated Debt;

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

(e) Indebtedness secured by liens specified in clause (c) of the definition of
“Permitted Liens” provided such Indebtedness shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate principal amount outstanding at any
one time;

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

(g) unsecured Indebtedness incurred in the ordinary course of business in an
aggregate principal amount not to exceed at any time Fifty Thousand Dollars
($50,000);

(h) cash collateralized Bank Services in an amount of Three Hundred Fifty
Thousand Dollars ($350,000) in the aggregate;

(i) non-cash collateralized Bank Services in an amount of One Hundred Fifty
Thousand Dollars ($150,000) in the aggregate; and

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

“Permitted Investments” are:

(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;

(b) (i) Investments by Borrower in Domestic Subsidiaries (other than Hansen
International), not to exceed Fifty Thousand Dollars ($50,000) in the aggregate
at any time; and (ii) Investments by Borrower in Hansen International, solely
for Investment by Hansen International in Hansen UK and Hansen Germany, for such
Subsidiaries’ ordinary course operating expenses, such that Cash in accounts of
such Subsidiaries shall not at any time exceed Seven Hundred Fifty Thousand
Dollars ($750,000) in the aggregate;

(c) Investments in cash and Cash Equivalents;

(d) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors; not to
exceed the aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) in
any year;

(e) 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, including, without limitation the
shares of common stock of Luna, the warrant to purchase shares of Luna common
stock held as of the Effective Date and the shares of Luna common stock acquired
via exercise of such warrant;

 

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(f) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business

(g) Investments held in any Collateral Account subject to a Control Agreement;

(h) Non-cash Investments in joint ventures, strategic alliances, licensing and
similar arrangements customary in Borrower’s industry and which do not require
Borrower to assume or otherwise become liable for the obligations of any third
party not directly related to or arising out of such arrangement or, require
Borrower to transfer ownership of non-cash assets to such joint venture or other
entity except as otherwise permitted hereunder; and

(i) Investments made in connection with technology purchases not otherwise
permitted hereunder in aggregate amounts outstanding at any time not to exceed
Five Hundred Thousand Dollars ($500,000).

“Permitted Liens” are:

(a) Liens arising under the Loan Documents in favor of Collateral Agent or any
Lender;

(b) Liens existing on the Effective Date and shown on the Perfection Certificate
or arising under this Agreement and the other Loan Documents;

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

(d) purchase money Liens (i) on Equipment or other assets subject to capital
leases acquired or held by Borrower incurred for financing the acquisition of
the Equipment or such assets subject to capital leases, or (ii) on existing
Equipment or such assets subject to capital leases when acquired, in each case
if the Lien is confined to the property and improvements and the proceeds of the
Equipment or other assets subject to capital leases; provided that such Liens
under this clause (c) (A) may have priority over liens granted to Collateral
Agent hereunder to the extent provided under the Code so long as the
Indebtedness secured by the Liens remain outstanding and (B) may secure
Indebtedness of no more than Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate principal amount outstanding at any one time;

(e) statutory Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons imposed without action of
such parties, provided they have no priority over any of Collateral Agent’s Lien
and the aggregate amount of the obligations secured by such Liens does not any
time exceed One Hundred Thousand Dollars ($100,000);

(f) 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 Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Collateral Agent or any Lender a security
interest in any of the Collateral;

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

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

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

 

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(j) licenses of Intellectual Property permitted by Section 7.1 hereof, and
restrictions thereunder with respect to such Intellectual Property; and

(k) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) and (c) 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.

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

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

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

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

(ii) for a prepayment made after the date which is after the second anniversary
of the Funding Date of such Term Loan, one and one-half percent (1.50%) of the
principal amount of the Term Loan prepaid.

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

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

“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their respective Term Loan, Lenders
holding one hundred percent (100%) of the aggregate outstanding principal
balance of the Term Loan, or (ii) at any time from and after any Original Lender
has assigned or transferred any interest in its Term Loan, Lenders holding,
sixty-six percent (66%) or more of the aggregate outstanding principal balance
of the Term Loan, plus, in respect of this clause (ii), (A) each Original Lender
that has not assigned or transferred any portion of its respective Term Loan,
(B) each assignee of an Original Lender provided such assignee was assigned or
transferred and continues to hold one hundred percent (100%) of the assigning
Original Lender’s interest in the Term Loan and (C) any Person or party
providing financing to an Original Lender or formed to undertake a
securitization transaction with respect to an Original Lender and any transferee
of such Person or party upon the occurrence of a default, event of default or
similar occurrence with respect to such financing or securitization transaction
(in each case in respect of clauses (A), (B) and (C) of this clause (ii),
whether or not such Lender is included within the Lenders holding sixty-six
percent (66%) of the Terms Loans). For purposes of this definition only, a
Lender shall be deemed to include itself, and any Lender that is an Affiliate or
Approved Fund of such Lender.

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

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

 

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“Secured Promissory Note” is defined in Section 2.4.

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

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

“Sensei Robotic System” is a system which addresses the cardiovascular space for
electrophysiology procedures to treat patients who suffer from abnormal heart
rhythms, or arrhythmias, such as atrial fibrillation.

“Shares” means one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by Borrower,
in any Subsidiary; provided that, in the event Borrower, demonstrates to
Collateral Agent’s reasonable satisfaction, that a pledge of more than sixty
five percent (65%) of the Shares of a Subsidiary of Borrower which is not an
entity organized under the laws of the United States or any territory thereof,
is reasonably likely to create an adverse tax consequence to Borrower under the
U.S. Internal Revenue Code, “Shares” shall mean sixty-five percent (65%) of the
issued and outstanding capital stock, membership units or other securities owned
or held of record by Borrower in such Subsidiary.

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

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

“SVB” means Silicon Valley Bank.

“Term Loan” is defined in Section 2.2(a) hereof.

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

“Transfer” is defined in Section 7.1.

“UK Share Charge Documents” is that certain Charge Over Shares, Registration
Documents (Form 395 (UK)), Stock Certificate and Stock Transfer Form, together
with such other agreements, instruments and documents executed and or delivered
in connection therewith, each in form and content reasonably acceptable to
Lenders.

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

[Balance of Page Intentionally Left Blank]

 

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

 

BORROWER: HANSEN MEDICAL, INC.

By  

/s/ Peter J. Mariani

Name:  

Peter J. Mariani

Title:  

Chief Financial Officer

COLLATERAL AGENT AND LENDER: OXFORD FINANCE LLC

By  

/s/ John G. Henderson

Name:  

John G. Henderson

Title:  

Vice President & General Counsel

LENDER: SILICON VALLEY BANK

By  

/s/ Jason Hughes

Name:  

Jason Hughes

Title:  

DTL

[Signature Page to Loan and Security Agreement]

 

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SCHEDULE 1.1

Lenders and Commitments

Term Loan

 

Lender

   Term Loan
Commitment      Commitment
Percentage  

OXFORD FINANCE LLC

   $ 20,000,000         66.6666667 % 

SILICON VALLEY BANK

   $ 10,000,000         33.3333333 % 

TOTAL

   $ 30,000,000         100.00 % 

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EXHIBIT A

Description of Collateral

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

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit 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 (including but not
limited to the shares of common stock of Luna Innovations Incorporated (“Luna”),
the warrant to purchase shares of Luna common stock, and the shares of Luna
common stock acquired via exercise of such warrant), supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

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

Notwithstanding the foregoing, the Collateral does not include any of the
following, whether now owned or hereafter acquired:

(a) any 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; any 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; and the
goodwill of the business of Borrower connected with and symbolized thereby,
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, or (b) any United
States trademark application filed on the basis of Borrower’s intent-to-use such
trademark (collectively, the “Intellectual Property”); provided, however, the
Collateral shall include all Accounts, license and royalty fees and other
revenues, proceeds, or income arising out of or relating to any of the
Intellectual Property;

(b) any leasehold interests in real property; or

(c) any segregated deposit account held by a Loan Party utilized solely for
payroll, payroll taxes and other employee wage and benefit payments or tax
withholding purposes, but only to the extent utilized by such Loan Party for
such purposes in the ordinary course of its business.

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