Exhibit 10.3
 
LOAN AND SECURITY AGREEMENT
 
THIS LOAN AND SECURITY AGREEMENT is made and dated as of September 30, 2013 and
is entered into by and among (a) (i) CLEVELAND BIOLABS, INC., a Delaware
corporation (“Inc”) and (ii) BIOLAB 612, LLC, a limited liability company formed
in the Russian Federation (“LLC”) (Inc and LLC hereinafter individually and
collectively referred to as the “Borrower”), and (b) HERCULES TECHNOLOGY II,
L.P., a Delaware limited partnership (“Lender”).
 
RECITALS
 
A.           Borrower has requested Lender to make available to Borrower two (2)
term loans (each a “Term Loan Advance” and collectively, the “Term Loan
Advances”) in an aggregate principal amount of up to Ten Million Dollars
($10,000,000) (the “Maximum Term Loan Amount”); and
 
B.           Lender is willing to make the Term Loan Advances on the terms and
conditions set forth in this Agreement.
 
AGREEMENT
 
NOW, THEREFORE, Borrower and Lender agree as follows:
 
SECTION 1.  DEFINITIONS AND RULES OF CONSTRUCTION
 
1.1           Unless otherwise defined herein, the following capitalized terms
shall have the following meanings:
 
“Account Control Agreement(s)” means any agreement entered into by and among the
Lender, Borrower and a third party Bank or other institution (including a
Securities Intermediary) in which Borrower maintains a Deposit Account or an
account holding Investment Property and which grants Lender a perfected first
priority security interest in the subject account or accounts.
 
“ACH Authorization” means the ACH Debit Authorization Agreement in substantially
the form of Exhibit H to the Disclosure Letter.
 
“Advance(s)” means a Term Loan Advance.
 
“Advance Date” means the funding date of any Advance.
 
“Advance Request” means a request for an Advance submitted by Borrower to Lender
in substantially the form of Exhibit A to the Disclosure Letter.
 
“Agreement” means this Loan and Security Agreement, as amended from time to
time.
 
“Amortization Date” means November 1, 2014.
 
“Assignee” has the meaning given to it in Section 11.13.
 
“Borrower Products” means all products, software, service offerings, technical
data or technology currently being designed, manufactured or sold by Borrower or
which Borrower intends to sell, license, or distribute in the future including
any products or service offerings under development, collectively, together with
all products, software, service offerings, technical data or technology that
have been sold, licensed or distributed by Borrower since its incorporation.
 
“Business Day” is any day that is not a Saturday, Sunday or a day on which
Lender is closed.
 
 
 

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“Cash” means all cash and liquid funds.
 
“Change in Control” means any reorganization, recapitalization, consolidation or
merger (or similar transaction or series of related transactions) of Borrower,
sale or exchange of outstanding shares (or similar transaction or series of
related transactions) of Borrower in which the holders of Borrower outstanding
shares immediately before consummation of such transaction or series of related
transactions do not, immediately after consummation of such transaction or
series of related transactions, retain shares representing more than fifty
percent (50%) of the voting power of the surviving entity of such transaction or
series of related transactions (or the parent of such surviving entity if such
surviving entity is wholly owned by such parent), in each case without regard to
whether Borrower is the surviving entity.
 
“Claims” has the meaning given to it in Section 11.10.
 
“Closing Date” means the date of this Agreement.
 
“Collateral” means the property described in Section 3.
 
 “Common Stock” means Inc’s common stock, $0.005 par value per share, and any
class or series of Inc’s capital stock into or for which such common stock may
be converted, exchanged or substituted pursuant to a reorganization,
recapitalization, exchange offer or otherwise.
 
 “Confidential Information” has the meaning given to it in Section 11.12.
 
“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including any such obligation directly or indirectly guaranteed, endorsed,
co-made or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards or
merchant services issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term “Contingent Obligation” shall not include endorsements for
collection or deposit in the ordinary course of business.  The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
 
“Copyright License” means any written agreement granting any right to use any
Copyright or Copyright registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
 
“Copyrights” means all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof, or of any other
country.
 
“Deposit Accounts” means any “deposit accounts,” as such term is defined in the
UCC, and includes any checking account, savings account, or certificate of
deposit.
 
“Disclosure Letter” means that certain Disclosure Letter dated as of even date
herewith between Borrower and Lender.
 
“Draw Period” means the period commencing upon the occurrence of the Milestone
Event and ending on the earlier to occur of (i) June 30, 2014, and (ii) an Event
of Default.
 
“End of Term Charge” is defined in Section 2.5
 
 
 

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“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.
 
“Event of Default” has the meaning given to it in Section 9.
 
“Excluded Accounts” means any zero balance accounts and accounts of LLC located
outside of the United States.
 
“Facility Charge” means one percent (1%) of the Maximum Term Loan Amount.
 
“Financial Statements” has the meaning given to it in Section 7.1.
 
 “GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time.
 
“Inc” defined in the preamble of the Agreement.
 
“Indebtedness” means indebtedness of any kind, including (a) all indebtedness
for borrowed money or the deferred purchase price of property or services
(excluding trade credit entered into in the ordinary course of business due
within sixty (60) days), including reimbursement and other obligations with
respect to surety bonds and letters of credit, (b) all obligations evidenced by
notes, bonds, debentures or similar instruments, (c) all capital lease
obligations, and (d) all Contingent Obligations.
 
“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” means all of Borrower’s Copyrights; Trademarks; Patents;
Licenses; trade secrets and inventions; mask works; Borrower’s applications
therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill
associated with any of the foregoing, together with Borrower’s rights to sue for
past, present and future infringement of Intellectual Property and the goodwill
associated therewith.
 
“Investment” means any beneficial ownership (including stock, partnership or
limited liability company interests) of or in any Person, or any loan, advance
or capital contribution to any Person or the acquisition of all, or
substantially all, of the assets of another Person.
 
“Joinder Agreements” means for each Subsidiary, a completed and executed Joinder
Agreement in substantially the form attached hereto as Exhibit G.
 
“Lender” has the meaning given to it in the preamble to this Agreement.
 
 “License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests.
 
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
against any property, any conditional sale or other title retention agreement,
and any lease in the nature of a security interest.
 
“LLC” defined in the preamble of this Agreement.
 
“Loan” means the Advances made under this Agreement.
 
“Loan Documents” means this Agreement, the Notes (if any), the ACH
Authorization, the Pledge Agreement, the Account Control Agreements, the Joinder
Agreements, all UCC Financing Statements, the Warrant, the Disclosure Letter,
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated.
 
 
 

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“Material Adverse Effect” means a material adverse effect upon: (i) the
business, operations, properties, assets, or condition (financial or otherwise)
of Borrower; or (ii) the ability of Borrower to perform the Secured Obligations
in accordance with the terms of the Loan Documents, or the ability of Lender to
enforce any of its rights or remedies with respect to the Secured Obligations;
or (iii) the Collateral or Lender’s Liens on the Collateral or the priority of
such Liens.
 
 “Maximum Term Loan Amount” shall have the meaning assigned to such term in the
preamble to this Agreement.
 
“Maximum Rate” shall have the meaning assigned to such term in Section 2.2.
 
“Milestone Event” means (a) Borrower has delivered evidence acceptable to Lender
in Lender’s reasonable discretion that Borrower has received a Biomedical
Advanced Research and Development Authority contract award or such other funding
sufficient to fund the base contract proposal for a series of studies of
Entolimod (CBLB502) as a radiation countermeasure, which studies shall be
structured in such a manner that their completion and resulting data would
reasonably be expected to provide a basis for submitting a Biological License
Application to the United States Food and Drug Administration for licensure of
Entolimod (CBLB502) as a radiation countermeasure, and (b) Lender has reviewed
and accepted, in Lender’s reasonable discretion, the plan and funding relating
to such studies.
 
“Note(s)” means a promissory note or promissory notes to evidence Lender’s
Loans.
 
“Patent License” means any written agreement granting any right with respect to
any invention on which a Patent is in existence or a Patent application is
pending, in which agreement Borrower now holds or hereafter acquires any
interest.
 
“Patents” means all letters patent of, or rights corresponding thereto, in the
United States or in any other country, all registrations and recordings thereof,
and all applications for letters patent of, or rights corresponding thereto, in
the United States or any other country.
 
“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of Lender
arising under this Agreement or any other Loan Document; (ii) Indebtedness
existing on the Closing Date which is disclosed in Schedule 1A to the Disclosure
Letter; (iii) Indebtedness of up to $250,000 outstanding at any time secured by
a Lien described in clause (vii) of the defined term “Permitted Liens,” provided
such Indebtedness does not exceed the lesser of the cost or fair market value of
the Equipment financed with such Indebtedness; (iv) Indebtedness to trade
creditors incurred in the ordinary course of business, including Indebtedness
incurred in the ordinary course of business with corporate credit cards; (v)
Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated
Indebtedness; (vii) reimbursement obligations in connection with letters of
credit that are secured by cash or cash equivalents and issued on behalf of the
Borrower or a Subsidiary thereof in an amount not to exceed $200,000 at any time
outstanding, (viii) guarantees or other Contingent Obligations required to be
made as credit support in connection with obtaining grants for Borrower or any
Subsidiary, (ix) Indebtedness incurred in connection with obtaining funds that
are to be pledged as required in connection with obtaining grants for Borrower
or any Subsidiary, (x) other Indebtedness in an amount not to exceed $150,000 at
any time outstanding, and (xi) extensions, refinancings and renewals of any
items of Permitted Indebtedness, provided that the principal amount is not
increased or the terms modified to impose materially more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
 
 
 

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“Permitted Investment” means: (i) Investments existing on the Closing Date which
are disclosed in Schedule 1B to the Disclosure Letter; (ii) (a) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one year from the
date of acquisition thereof, (b) commercial paper maturing no more than one year
from the date of creation thereof and currently having a rating of at least A-2
or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service,
(c) certificates of deposit issued by any bank with assets of at least
$500,000,000 maturing no more than one year from the date of investment therein,
and (d) money market accounts; (iii) repurchases of stock from former employees,
directors, or consultants of Borrower under the terms of applicable repurchase
agreements at the original issuance price of such securities in an aggregate
amount not to exceed $250,000 in any fiscal year, provided that no Event of
Default has occurred, is continuing or would exist after giving effect to the
repurchases; (iv) Investments accepted in connection with Permitted Transfers;
(v) 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 Borrower’s business; (vi) 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, provided that this subparagraph (vi) shall not apply to
Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans
not involving the net transfer on a substantially contemporaneous basis of cash
proceeds to employees, officers or directors relating to the purchase of capital
stock of Borrower pursuant to employee stock purchase plans or other similar
agreements approved by Borrower’s Board of Directors; (viii) Investments
consisting of travel advances and employee relocation advances in the ordinary
course of business; (ix) Investments in newly-formed Subsidiaries organized in
the United States, provided that such Subsidiaries enter into a Joinder
Agreement promptly after their formation by  Borrower and execute such other
documents as shall be reasonably requested by Lender; (x) Investments in
subsidiaries organized within or outside of the United States approved in
advance in writing by Lender; (xi) Investments in other Subsidiaries, provided
that any cash Investments by Borrower do not exceed $100,000 in the aggregate in
any fiscal year; (xii) joint ventures or strategic alliances in the ordinary
course of Borrower’s business consisting of the nonexclusive licensing of
technology, the development of technology or the providing of technical support,
provided that any cash Investments by Borrower do not exceed $100,000 in the
aggregate in any fiscal year; (xiii) Investments acquired pursuant to the
exercise of warrants in existence on the Closing Date and disclosed to Lender in
Schedule 1B to the Disclosure Letter, and (xiv) additional Investments that do
not exceed $250,000 in the aggregate.
 
“Permitted Liens” means any and all of the following: (i) Liens in favor of
Lender; (ii) Liens existing on the Closing Date which are disclosed in Schedule
1C to the Disclosure Letter; (iii) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings; provided, that Borrower maintains adequate
reserves therefor in accordance with GAAP to the extent required thereby; (iv)
Liens securing claims or demands of materialmen, artisans, mechanics, carriers,
warehousemen, landlords and other like Persons arising in the ordinary course of
Borrower’s business and imposed without action of such parties which are not
delinquent; (v) Liens arising from judgments, decrees or attachments in
circumstances which do not constitute an Event of Default hereunder; (vi) the
following deposits, to the extent made in the ordinary course of
business:  deposits under worker’s compensation, unemployment insurance, social
security and other similar laws, or to secure the performance of bids, tenders
or contracts (other than for the repayment of borrowed money) or to secure
indemnity, performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds; (vii) Liens on Equipment or software or
other intellectual property constituting purchase money liens and liens in
connection with capital leases securing Indebtedness permitted in clause (iii)
of “Permitted Indebtedness”;  (viii) Liens incurred in connection with
Subordinated Indebtedness; (ix) leasehold interests in leases or subleases and
licenses granted in the ordinary course of business and not interfering in any
material respect with the business of the licensor; (x) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties that are promptly paid on or before the date they become due; (xi)
Liens on insurance proceeds securing the payment of financed insurance premiums
that are promptly paid on or before the date they become due (provided that such
Liens extend only to such insurance proceeds and not to any other property or
assets); (xii) statutory and common law rights of set-off and other similar
rights as to deposits of cash and securities in favor of banks, other depository
institutions and brokerage firms; (xiii) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business so long as they do not materially
impair the value or marketability of the related property; (xiv) Liens on cash
or cash equivalents securing obligations permitted under clause (vii) of the
definition of Permitted Indebtedness; and (xv) Liens arising from pledges of
cash, letters of credit or other collateral required to be made in connection
with obtaining grants for Borrower or any Subsidiary; (xvi) Liens on cash or
bank letters of credit securing Indebtedness permitted in clause (ix) of
“Permitted Indebtedness”; and (xvii) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (i) through (xi) above; provided, that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced (as may have been reduced by any payment thereon) does not
increase.
 
 
 

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“Permitted Transfers” means (i) sales of Inventory in the normal course of
business, (ii) licenses and similar arrangements for the use of Intellectual
Property in the ordinary course of business that could not result in a legal
transfer of title of the licensed property, or (iii) dispositions of worn-out,
obsolete or surplus Equipment in the ordinary course of business, and (iv)
Transfers in connection with Permitted Investments, (v) sales of Borrower’s
equity securities provided that no Change in Control occurs as a result thereof,
(vi) dispositions expressly permitted under Section 7.6, 7.7 or 7.9 hereof,
(vii) dispositions arising from the abandonment of fixtures and other similar
tenant improvements in connection with office relocations, and (viii) other
Transfers of assets having a fair market value of not more than $250,000 in the
aggregate in any fiscal year.
 
“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, other entity or government.
 
“Pledge Agreement” means that certain Stock Pledge Agreements dated as of the
Closing Date executed by Inc in favor of Lender.
 
 “Prepayment Charge” shall have the meaning assigned to such term in Section
2.4.
 
“Prime Rate” means the “prime rate” as reported in The Wall Street Journal, and
if not reported, then the prime rate most recently reported in The Wall Street
Journal.
 
 “Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents,
Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter
of credit, and Letter of Credit Rights, and (ii) all customer lists, software,
and business records related thereto.
 
“SBA” shall have the meaning assigned to such term in Section 7.14.
 
“SBIC” shall have the meaning assigned to such term in Section 7.14.
 
“SBIC Act” shall have the meaning assigned to such term in Section 7.14.
 
“SEC” means the United States Securities and Exchange Commission or any
governmental authority that may be substituted therefor.
 
“Secured Obligations” means Borrower’s obligations under this Agreement and any
Loan Document, including any obligation to pay any amount now owing or later
arising.  Notwithstanding the foregoing, the “Secured Obligations” shall not
include any of Borrower’s obligations, liabilities or duties under the Warrant.
 
“Subordinated Indebtedness” means Indebtedness subordinated to the Secured
Obligations in amounts and on terms and conditions satisfactory to Lender in its
sole discretion.
 
“Subsequent Financing” means any sale and issuance by Borrower on or after the
date hereof and prior to expiration or earlier termination of this Agreement, in
a single transaction or series of related transactions not registered under the
Securities Act of 1933, as amended, of shares of its preferred stock, common
stock or other equity security, or of any instrument exercisable for or
convertible into or otherwise representing the right to acquire shares of
Borrower preferred stock, common stock or other equity security, to one or more
investors for cash for financing purposes (also known as a PIPE transaction),
which offering by Borrower is broadly marketed to multiple investors.
 
“Subsidiary” means an entity, whether corporate, partnership, limited liability
company, joint venture or otherwise, in which Borrower owns or controls more
than 50% of the outstanding voting securities, including each entity listed in
Schedule 1 to the Disclosure Letter.
 
 
 

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“Term Loan Advance” and “Term Loan Advances” are each defined in Recital A
hereof.
 
 “Term Loan Interest Rate” means for any day, a floating rate per annum rate
equal to the greater of either (i) ten and forty-five hundredths of one percent
(10.45%), or (ii) the sum of (A) ten and forty-five hundredths of one percent
(10.45%), plus (B) the Prime Rate minus four and one quarter of one percent
(4.25%).  The Term Loan Interest Rate will change from time to time on the day
the Prime Rate changes.
 
“Term Loan Maturity Date” means January 1, 2017.
 
“Trademark License” means any written agreement granting any right to use any
Trademark or Trademark registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
 
“Trademarks” means all trademarks (registered, common law or otherwise) and any
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof.
 
“UCC” means the Uniform Commercial Code as the same is, from time to time, in
effect in the State of California; provided, 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, Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as the same is, from time to time, in
effect in a jurisdiction other than the State of California, then the term “UCC”
shall mean the Uniform Commercial Code as in effect, from time to time, in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.
 
 “Warrant” means the warrant entered into in connection with the Loan.
 
Unless otherwise specified, all references in this Agreement or any Annex or
Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule”
shall refer to the corresponding Section, subsection, Exhibit, Annex, or
Schedule in or to this Agreement.  Unless otherwise specifically provided
herein, any accounting term used in this Agreement or the other Loan Documents
shall have the meaning customarily given such term in accordance with GAAP, and
all financial computations hereunder shall be computed in accordance with GAAP,
consistently applied. Unless otherwise defined herein or in the other Loan
Documents, terms that are used herein or in the other Loan Documents and defined
in the UCC shall have the meanings given to them in the UCC.
 
SECTION 2.  THE LOAN
 
2.1           Term Loan.
 
(a)           Advances.  Subject to the terms and conditions of this Agreement,
Lender will make, and Borrower agrees to draw, an initial Term Loan Advance in
the amount of Six Million Dollars ($6,000,000) on the Closing Date. During the
Draw Period, Borrower may request one (1) additional Term Loan Advance in an
amount of Four Million Dollars ($4,000,000).  The aggregate outstanding Term
Loan Advances shall not exceed the Maximum Term Loan Amount.  Proceeds of any
Advance shall be deposited into an account that is subject to a perfected
security interest in favor of Lender perfected by a control agreement.
 
(b)           Advance Request.  To obtain a Term Loan Advance, Borrower shall
complete, sign and deliver to Lender an Advance Request (at least five (5)
Business Days before the Advance Date or such lesser time period agreed to by
Lender).  Lender shall fund the Term Loan Advance in the manner requested by the
Advance Request provided that each of the conditions precedent to such Term Loan
Advance is satisfied as of the requested Advance Date.
 
(c)           Interest.  The principal balance of each Term Loan Advance shall
bear interest thereon from such Advance Date at the Term Loan Interest Rate
based on a year consisting of 360 days, with interest computed daily based on
the actual number of days elapsed.  The Term Loan Interest Rate will float and
change on the day the Prime Rate changes from time to time.
 
 
 

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(d)           Payment.  Borrower will pay interest on each Term Loan Advance on
the first (1st) Business Day of each month, beginning the month after the
Advance Date.  Commencing on the Amortization Date, and continuing on the first
(1st) Business Day of each month thereafter, Borrower shall repay the aggregate
principal balance of Term Loan Advances that are outstanding on the Amortization
Date in equal monthly installments of principal and interest (mortgage style)
based upon an amortization schedule equal to thirty (30) consecutive
months.  The entire principal balance of the Term Loan Advances and all accrued
but unpaid interest hereunder, and all other Secured Obligations with respect to
the Term Loan Advances, shall be due and payable on Term Loan Maturity
Date.  Borrower shall make all payments under this Agreement without setoff,
recoupment or deduction and regardless of any counterclaim or defense. Lender
will initiate debit entries to the Borrower’s account as authorized on the ACH
Authorization on each payment date of all periodic obligations payable to Lender
under each Term Loan Advance.  Once repaid, a Term Loan Advance or any portion
thereof may not be reborrowed.
 
2.2           Maximum Interest.  Notwithstanding any provision in this
Agreement, or any other Loan Document, it is the parties’ intent not to contract
for, charge or receive interest at a rate that is greater than the maximum rate
permissible by law that a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of California shall be deemed to be
the laws relating to permissible rates of interest on commercial loans) (the
“Maximum Rate”).  If a court of competent jurisdiction shall finally determine
that Borrower has actually paid to Lender an amount of interest in excess of the
amount that would have been payable if all of the Secured Obligations had at all
times borne interest at the Maximum Rate, then such excess interest actually
paid by Borrower shall be applied as follows:  first, to the payment of the
Secured Obligations consisting of the outstanding principal of the Term Loan
Advances; second, after all principal is repaid, to the payment of Lender’s
accrued interest, costs, expenses, professional fees and any other Secured
Obligations; and third, after all Secured Obligations are repaid, the excess (if
any) shall be refunded to Borrower.
 
2.3           Default Interest.  In the event any payment is not paid on the
scheduled payment date (other than non-payment of an automatically scheduled
payment due to the fault of Lender), an amount equal to five percent (5%) of the
past due amount shall be payable on demand. In addition, upon the occurrence and
during the continuation of an Event of Default hereunder, all Secured
Obligations, including principal, interest, compounded interest, and Lender’s
fees and expenses set forth in Section 11.11, shall bear interest at a rate per
annum equal to the rate set forth in Section 2.1(c), plus five percent (5%) per
annum.  In the event any interest is not paid when due hereunder, delinquent
interest shall be added to principal and shall bear interest on interest,
compounded at the rate set forth in Section 2.1(c).
 
2.4           Prepayment.  At its option upon at least seven (7) Business Days
prior notice to Lender, Borrower may prepay all, or any portion, of the
outstanding Advances by paying the entire principal balance or a portion
thereof, all accrued and unpaid interest on the portion prepaid, all unpaid
Lender’s fees and expenses accrued to the date of the repayment (including in
the event of a prepayment in full, the End of Term Charge), together with a
prepayment charge on the portion prepaid equal to the following percentage of
the Advance amount being prepaid: if such Advance amounts are prepaid in any of
the first twelve (12) months following the Closing Date, three percent (3%);
after twelve (12) months but prior to twenty four (24) months, two percent (2%);
and after twenty four (24) months but prior to the Term Loan Maturity Date, one
percent (1%) (each, a “Prepayment Charge”).  Borrower agrees that the Prepayment
Charge is a reasonable calculation of Lender’s lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early repayment of the Advances.  Upon the occurrence of a Change in Control,
Borrower shall prepay the outstanding amount of all principal and accrued
interest through the prepayment date and all unpaid Lender’s fees and expenses
accrued to the date of the repayment (including the End of Term Charge) together
with a Prepayment Charge.
 
2.5           End of Term Charge.  On the earliest to occur of (i) the Term Loan
Maturity Date, (ii) the date that Borrower prepays all outstanding Secured
Obligations, or (iii) if earlier, the date that the Secured Obligations become
due and payable, Borrower shall pay Lender a charge of Five Hundred Fifty
Thousand Dollars ($550,000) (the “End of Term Charge”).  Notwithstanding the
required payment date of such charge, it shall be deemed earned by Lender as of
the Closing Date.
 
 
 

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2.6           Witholding. In the event any payments are received by Lender from
Borrower pursuant to any Loan Document, such payments will be made subject to
applicable withholding for any taxes, levies, fees, deductions, withholding,
restrictions or conditions of any nature whatsoever.  Notwithstanding the
foregoing, if at any time any governmental authority, applicable law, regulation
or international agreement requires Borrower to make any such deduction or
withholding from any such payment or other sum payment hereunder to Lender, 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 deduction or withholding, Lender receives a net sum
equal to the sum which it would have received had no deductions or withholding
been required, and Borrower shall pay the full amount deducted or withheld to
the relevant governmental authority. Borrower will, upon request, furnish Lender
with proof satisfactory to Lender indicating that Borrower has made such
withholding payment. The agreements and obligations of Borrower contained in
this provision shall survive the termination of this Agreement.
 
2.7           Notes.  If so requested by Lender by written notice to Borrower,
then Borrower shall execute and deliver to Lender (and/or, if applicable and if
so specified in such notice, to any person who is an assignee of Lender pursuant
to Section 11.13) (promptly after the Borrower’s receipt of such notice) a Note
or Notes to evidence Lender’s Loans.
 
2.8           Termination.  All of Borrower’s covenants and obligations under
this Agreement (other than inchoate indemnity obligations and Lender’s
investment rights pursuant to Section 8 hereof) shall terminate upon
indefeasible satisfaction in full, in cash, of all amounts owing by Borrower to
Lender hereunder and upon termination of Lender’s commitment to make Advances
hereunder.  Upon such termination, and upon Borrower’s written request therefor,
and at Borrower’s sole cost and expense, Lender shall promptly terminate all
Liens in favor of Borrower.
 
SECTION 3.  SECURITY INTEREST
 
3.1           As security for the prompt, complete and indefeasible payment when
due (whether on the payment dates or otherwise) of all the Secured Obligations,
Borrower grants to Lender a security interest in all of Borrower’s right, title,
and interest in and to the following personal property whether now owned or
hereafter acquired (collectively, the “Collateral”):  (a) Receivables; (b)
Equipment; (c) Fixtures; (d) General Intangibles (other than Intellectual
Property); (e) Inventory; (f) Investment Property (but excluding thirty-five
percent (35%) of the capital stock of any foreign Subsidiary that constitutes a
Permitted Investment); (g) Deposit Accounts; (h) Cash; (i) Goods; and all other
tangible and intangible personal property of Borrower whether now or hereafter
owned or existing, leased, consigned by or to, or acquired by, Borrower and
wherever located, and any of Borrower’s property in the possession or under the
control of Lender; and, to the extent not otherwise included, all Proceeds of
each of the foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of each of the foregoing; provided, however,
that the Collateral shall include all Accounts and General Intangibles that
consist of rights to payment and proceeds from the sale, licensing or
disposition of all or any part, or rights in, the Intellectual Property (the
“Rights to Payment”).  Notwithstanding the foregoing, if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the
underlying Intellectual Property is necessary to have a security interest in the
Rights to Payment, then the Collateral shall automatically, and effective as of
the date of this Agreement, include the Intellectual Property to the extent
necessary to permit perfection of Lender’s security interest in the Rights to
Payment.  Notwithstanding the foregoing, the Collateral does not include (i)
Excluded Accounts, (ii) any interest of Borrower as a lessee or sublessee under
a real property lease, (iii) leased Equipment or Equipment financed by purchase
money indebtedness (in each case, and any accessions, attachments, replacements
or improvements thereon) that is subject to a Lien that is permitted pursuant to
subsection (ii) or (vii) of the definition of “Permitted Lien”, which is
securing Indebtedness permitted pursuant to subsection (ii) or (iii) of the
definition of “Permitted Indebtedness”, provided that (x) the foregoing
exclusion shall apply only to the extent the applicable lease or finance
contract relating to such Equipment prohibits the granting of security interests
other than such Permitted Lien and (y) upon the release of any such Lien, such
Equipment (and any accessions, attachments, replacements or improvements
thereon) shall be deemed to be Collateral hereunder and shall be subject to the
security interest granted herein without any action by Borrower or Lender, or
(iv) property that is non-assignable by its terms without the consent of the
licensor thereof or another party (but only to the extent such prohibition on
transfer is enforceable under applicable law, including, without limitation,
§9-406 and §9-408 of the UCC).  Upon payment in full in cash of the Secured
Obligations (other than inchoate indemnity obligations and any other obligations
which, by their terms, are to survive the termination of this Agreement),
Lender’s agreements to make Advances to Borrower have been terminated, and at
such time as this Agreement has been terminated, the Lender shall, at Borrower’s
sole cost and expense, release its Liens in the Collateral and all rights
therein shall revert to Borrower.
 
 
 

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SECTION 4.  CONDITIONS PRECEDENT TO LOAN
 
The obligation of Lender to make the Term Loan Advances hereunder are subject to
the satisfaction by Borrower of the following conditions:
 
4.1           Initial Advance.  On or prior to the Closing Date, Borrower shall
have delivered to Lender the following:
 
(a)           executed originals of the Loan Documents (excluding the Pledge
Agreement), Account Control Agreements, a legal opinion of Inc’s counsel, and
all other documents and instruments reasonably required by Lender to effectuate
the transactions contemplated hereby or to create and perfect the Liens of
Lender with respect to all Collateral, in all cases in form and substance
reasonably acceptable to Lender, it being acknowledged by Lender that no opinion
of Russian counsel and no legal documents governed by Russian law are required
to be delivered;
 
(b)           certified copy of resolutions of Inc’s board of directors
evidencing approval of (i) the Loan and other transactions evidenced by the Loan
Documents; and (ii) the Warrant and transactions evidenced thereby; and
certified copies of the resolutions of LLC’s board of director (or equivalent)
evidencing approval of the Loan and other transactions evidenced by the Loan
Documents;
 
(c)           certified copies of the Certificate of Incorporation and the
Bylaws (or equivalent for LLC), as amended through the Closing Date, of
Borrower;
 
(d)           a certificate of good standing for Inc from its state of
incorporation and similar certificates from all other jurisdictions in which it
does business and where the failure to be qualified would have a Material
Adverse Effect;
 
(e)           payment of the Facility Charge and reimbursement of Lender’s
current expenses reimbursable pursuant to this Agreement, which amounts may be
deducted from the initial Advance; and
 
(f)           such other documents as Lender may reasonably request.
 
4.2           All Advances.  On each Advance Date:
 
(a)           Lender shall have received (i) an Advance Request for the relevant
Advance as required by Section 2.1(b), duly executed by Inc’s Chief Executive
Officer or Chief Financial Officer, and (ii) any other documents Lender may
reasonably request.
 
(b)           The representations and warranties set forth in this Agreement and
in Section 5 and in the Warrant shall be true and correct in all material
respects on and as of the Advance Date with the same effect as though made on
and as of such date, except to the extent such representations and warranties
expressly relate to an earlier date.
 
(c)           Borrower shall be in compliance with all the terms and provisions
set forth herein and in each other Loan Document on its part to be observed or
performed, and at the time of and immediately after such Advance no Event of
Default shall have occurred and be continuing.
 
(d)           Each Advance Request shall be deemed to constitute a
representation and warranty by Borrower on the relevant Advance Date as to the
matters specified in paragraphs (b) and (c) of this Section 4.2 and as to the
matters set forth in the Advance Request.
 
 
 

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4.3           No Default.  As of the Closing Date and each Advance Date, (i) no
fact or condition exists that would (or would, with the passage of time, the
giving of notice, or both) constitute an Event of Default and (ii) no event that
has had or could reasonably be expected to have a Material Adverse Effect has
occurred and is continuing.
 
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
 
Borrower represents and warrants that:
 
5.1           Corporate Status.  Inc is a corporation duly organized, legally
existing and in good standing under the laws of the State of Delaware, and is
duly qualified as a foreign corporation in all jurisdictions in which the nature
of its business or location of its properties require such qualifications and
where the failure to be qualified could reasonably be expected to have a
Material Adverse Effect.  LLC is a limited liability company duly organized,
legally existing and in good standing under the laws of Russia, and is duly
qualified as a foreign corporation in all jurisdictions in which the nature of
its business or location of its properties require such qualifications and where
the failure to be qualified could reasonably be expected to have a Material
Adverse Effect, Borrower’s present name, former names (if any), locations, place
of formation, tax identification number, organizational identification number
and other information are correctly set forth in Exhibit C to the Disclosure
Letter, as may be updated by Borrower in a written notice (including any
Compliance Certificate) provided to Lender after the Closing Date.
 
5.2           Collateral.  Borrower owns the Collateral and owns or exclusively
licenses the Intellectual Property, free of all Liens, except for Permitted
Liens.  Borrower has the power and authority to grant to Lender a Lien in the
Collateral as security for the Secured Obligations.
 
5.3           Consents.  Borrower’s execution, delivery and performance of the
Notes (if any), this Agreement and all other Loan Documents, and Borrower’s
execution of the Warrant, (i) have been duly authorized by all necessary
corporate action of Borrower, (ii) will not result in the creation or imposition
of any Lien upon the Collateral, other than Permitted Liens and the Liens
created by this Agreement and the other Loan Documents, (iii) do not violate any
provisions of Borrower’s Certificate or Articles of Incorporation (or equivalent
documents of the LLC) (as applicable), bylaws, or any, law, regulation, order,
injunction, judgment, decree or writ to which Borrower is subject and (iv)
except as described in Schedule 5.3 to the Disclosure Letter, do not violate any
contract or agreement or require the consent or approval of any other
Person.  The individual or individuals executing the Loan Documents and the
Warrant are duly authorized to do so.
 
5.4           Material Adverse Effect.  Since June 30, 2013, no event that has
had or could reasonably be expected to have a Material Adverse Effect has
occurred and is continuing.
 
5.5           Actions Before Governmental Authorities.  There are no actions,
suits or proceedings at law or in equity or by or before any governmental
authority now pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or its property.
 
5.6           Laws.  Borrower is not in violation of any law, rule or
regulation, or in default with respect to any judgment, writ, injunction or
decree of any governmental authority, where such violation or default is
reasonably expected to result in a Material Adverse Effect.  Borrower is not in
default in any manner under any provision of any agreement or instrument
evidencing indebtedness, or any other material agreement to which it is a party
or by which it is bound.
 
5.7           Information Correct and Current.  No information, report, Advance
Request, financial statement, exhibit or schedule furnished, by or on behalf of
Borrower to Lender in connection with any Loan Document or included therein or
delivered pursuant thereto contained, contains or will contain any material
misstatement of fact or omitted, omits or will omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were, are or will be made, not misleading at the time such
statement was made or deemed made. Additionally, any and all financial or
business projections provided by Borrower to Lender shall be (i) provided in
good faith and based on the most current data and information available to
Borrower, and (ii) the most current of such projections approved by Inc’s Board
of Directors.
 
 
 

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5.8           Tax Matters.  Except as described in Schedule 5.8 to the
Disclosure Letter, (a) Borrower has filed all federal, state and local tax
returns that it is required to file, (b) Borrower has duly paid or fully
reserved for all taxes or installments thereof (including any interest or
penalties) as and when due, which have or may become due pursuant to such
returns, and (c) Borrower has paid or fully reserved for any tax assessment
received by Borrower for the three (3) years preceding the Closing Date, if any
(including any taxes being contested in good faith and by appropriate
proceedings).
 
5.9           Intellectual Property Claims.  Borrower is the sole owner of, or
otherwise has the right to use, the Intellectual Property.  Except as described
in Schedule 5.9 to the Disclosure Letter, (i) each of the material Copyrights,
Trademarks and Patents is valid and enforceable, (ii) no material part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and (iii) no claim has been made to Borrower that any material part of the
Intellectual Property violates the rights of any third party. Exhibit D to the
Disclosure Letter is a true, correct and complete list of each of Borrower’s
Patents, registered Trademarks, registered Copyrights, and material agreements
under which Borrower licenses Intellectual Property from third parties (other
than shrink-wrap software licenses and open source software), together with
application or registration numbers, as applicable, owned by Borrower or any
Subsidiary, in each case as of the Closing Date. Borrower is not in material
breach of, nor has Borrower failed to perform any material obligations under,
any of the foregoing contracts, licenses or agreements and, to Borrower’s
knowledge, no third party to any such contract, license or agreement is in
material breach thereof or has failed to perform any material obligations
thereunder.
 
5.10           Intellectual Property.  Except as described in Schedule 5.10 to
the Disclosure Letter, Borrower has, or in the case of any proposed business,
will have, all material rights with respect to Intellectual Property necessary
in the operation or conduct of Borrower’s business as currently conducted and
proposed to be conducted by Borrower.  Without limiting the generality of the
foregoing, and in the case of Licenses, except for restrictions that are
unenforceable under Division 9 of the UCC or as otherwise described in Schedule
5.10 to the Disclosure Letter, Borrower has the right, to the extent required to
operate Borrower’s business, to freely transfer, license or assign Intellectual
Property without condition, restriction or payment of any kind (other than
license payments in the ordinary course of business and subject to open source
software licenses) to any third party, and Borrower owns or has the right to
use, pursuant to valid licenses, all software development tools, library
functions, compilers and all other third-party software and other items that are
used in the design, development, promotion, sale, license, manufacture, import,
export, use or distribution of Borrower Products.
 
5.11           Borrower Products.  No Intellectual Property owned by Borrower or
Borrower Product has been or is subject to any actual or, to the knowledge of
Borrower, threatened litigation, proceeding (including any proceeding in the
United States Patent and Trademark Office or any corresponding foreign office or
agency) or outstanding decree, order, judgment, settlement agreement or
stipulation that restricts in any manner Borrower’s use, transfer or licensing
thereof or that may affect the validity, use or enforceability thereof. There is
no decree, order, judgment, agreement, stipulation, arbitral award or other
provision entered into in connection with any litigation or proceeding that
obligates Borrower to grant licenses or ownership interest in any future
Intellectual Property related to the operation or conduct of the business of
Borrower or Borrower Products.  Borrower has not received any written notice or
claim, or, to the knowledge of Borrower, oral notice or claim, challenging or
questioning Borrower’s ownership in any Intellectual Property (or written notice
of any claim challenging or questioning the ownership in any licensed
Intellectual Property of the owner thereof) or suggesting that any third party
has any claim of legal or beneficial ownership with respect thereto nor, to
Borrower’s knowledge, is there a reasonable basis for any such claim.  To
Borrower’s knowledge, neither Borrower’s use of its Intellectual Property nor
the production and sale of Borrower Products infringes the Intellectual Property
or other rights of others.
 
5.12           Financial Accounts.  Exhibit E to the Disclosure Letter, as may
be updated by the Borrower in a written notice provided to Lender after the
Closing Date, is a true, correct and complete list of (a) all banks and other
financial institutions at which Borrower or any Subsidiary maintains Deposit
Accounts and (b) all institutions at which Borrower or any Subsidiary maintains
an account holding Investment Property, and such exhibit correctly identifies
the name, address and telephone number of each bank or other institution, the
name in which the account is held, a description of the purpose of the account,
and the complete account number therefor.
 
 
 

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5.13           Employee Loans.  Borrower has no outstanding loans to any
employee, officer or director of the Borrower nor has Borrower guaranteed the
payment of any loan made to an employee, officer or director of the Borrower by
a third party.
 
5.14           Capitalization and Subsidiaries.  Borrower’s capitalization as of
the Closing Date is set forth in Schedule 5.14 to the Disclosure
Letter.  Borrower does not own any stock, partnership interest or other
securities of any Person, except for Permitted Investments.  In Schedule 5.14 to
the Disclosure Letter, as may be updated by Borrower in a written notice
provided after the Closing Date, is a true, correct and complete list of each
Subsidiary.
 
SECTION 6.  INSURANCE; INDEMNIFICATION
 
6.1           Coverage.  Borrower shall cause to be carried and maintained
commercial general liability insurance, on an occurrence form, against risks
customarily insured against in Borrower’s line of business.  Such risks shall
include the risks of bodily injury, including death, property damage, personal
injury, advertising injury, and contractual liability per the terms of the
indemnification agreement found in Section 6.3.  Borrower collectively must
maintain a minimum of $2,000,000 of commercial general liability insurance for
each occurrence.  Inc has and agrees to maintain a minimum of $2,000,000 of
directors’ and officers’ insurance for each occurrence and $5,000,000 in the
aggregate.  So long as there are any Secured Obligations (other than inchoate
indemnity obligations) outstanding, Borrower shall also cause to be carried and
maintained insurance upon the Collateral, insuring against all risks of physical
loss or damage howsoever caused, in an amount not less than the full replacement
cost of the Collateral, provided that such insurance may be subject to standard
exceptions and deductibles.  Inc shall also carry and maintain a fidelity
insurance policy in an amount not less than $100,000.
 
6.2           Certificates.  Borrower shall deliver to Lender certificates of
insurance that evidence Borrower’s compliance with its insurance obligations in
Section 6.1 and the obligations contained in this Section 6.2.  Borrower’s
insurance certificate shall state Lender is an additional insured for commercial
general liability, a loss payee for all risk property damage insurance, subject
to the insurer’s approval, a loss payee for fidelity insurance, and a loss payee
for property insurance and additional insured for liability insurance for any
future insurance that Borrower may acquire from such insurer.  Attached to the
certificates of insurance will be additional insured endorsements for liability
and lender’s loss payable endorsements for all risk property damage insurance
and fidelity.  Any failure of Lender to scrutinize such insurance certificates
for compliance is not a waiver of any of Lender’s rights, all of which are
reserved.
 
6.3           Indemnity.  Borrower agrees to indemnify and hold Lender and its
officers, directors, employees, agents, in-house attorneys, representatives and
shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including such claims, costs, expenses, damages and
liabilities based on liability in tort, including strict liability in tort),
including reasonable attorneys’ fees and disbursements and other costs of
investigation or defense (including those incurred upon any appeal), that may be
instituted or asserted against or incurred by Lender or any such Person as the
result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents or the administration of such credit, or
in connection with or arising out of the transactions contemplated hereunder and
thereunder, or any actions or failures to act in connection therewith, or
arising out of the disposition or utilization of the Collateral, excluding in
all cases claims resulting solely from Lender’s gross negligence or willful
misconduct. Borrower agrees to pay, and to save Lender harmless from, any and
all liabilities with respect to, or resulting from any delay in paying, any and
all excise, sales or other similar taxes (excluding taxes imposed on or measured
by the net income of Lender) that may be payable or determined to be payable
with respect to any of the Collateral or this Agreement.
 
SECTION 7.  COVENANTS OF BORROWER
 
Borrower agrees as follows:
 
7.1           Financial Reports.  Inc shall furnish to Lender the financial
statements and reports listed hereinafter (the “Financial Statements”):
 
 
 

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(a)           as soon as practicable (and in any event within 30 days) after the
end of each month, unaudited interim monthly and year-to-date non-consolidated
financial statements of Borrower’s US operations as and for the periods ended
for such month, including balance sheet and related statements of income and
cash flows (which shall be prepared only for the year-to-date period), all
certified by Inc’s Chief Executive Officer or Chief Financial Officer to the
effect that they have been prepared in accordance with GAAP, except (i) for the
absence of footnotes, (ii) that they are subject to normal year-end adjustments,
(iii) they do not contain certain non-cash items that are customarily included
in quarterly and annual financial statements, and (iv) accruals for stock
compensation expense, clinical trials, professional fees, bonus accruals, 401(k)
match accruals, warrants and other similar accruals;
 
(b)           as soon as practicable (and in any event within 45 days) after the
end of each calendar  quarter, unaudited interim quarterly and year-to-date
consolidated financial statements as of and for the periods ended for such
quarter (prepared on a consolidated basis), including balance sheet and related
statements of income and cash flows (which shall be prepared only for the
year-to-date period), certified by Borrower’s Chief Executive Officer or Chief
Financial Officer to the effect that they have been prepared in accordance with
GAAP, for interim financial information and in accordance with the instructions
to Form 10-Q and Article 10 of Regulation S-X of SEC.  Certain information and
footnote disclosures normally included in the consolidated financial statements
prepared in accordance with GAAP will have been condensed or omitted pursuant to
such rules and regulations;
 
(c)           as soon as practicable (and in any event within one hundred fifty
(150) days) after the end of each fiscal year, unqualified audited financial
statements as of the end of such year (prepared on a consolidated and
consolidating basis), including balance sheet and related statements of income
and cash flows, and setting forth in comparative form the corresponding figures
for the preceding fiscal year, certified by a firm of independent certified
public accountants selected by Borrower, accompanied by any management report
from such accountants;
 
(d)           as soon as practicable (and in any event within 30 days) after the
end of each month, a Compliance Certificate in the form of Exhibit F to the
Disclosure Letter;
 
(e)           promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports that Inc has
made available to holders of its capital stock and copies of any regular,
periodic and special reports or registration statements that Inc files with the
SEC;
 
(f)           at the same time and in the same manner as it gives to its
directors, copies of all notices of meetings, minutes, consents and other
materials (other than materials that (i) present a potential conflict of
interest with Lender; (ii) relate to executive sessions; or (iii) are covered by
attorney-client privilege) that Inc provides to its directors in connection with
meetings of the Board of Directors, and within 30 days after each such meeting,
minutes of such meeting; and
 
(g)           financial and business projections promptly following their
approval by Inc’s Board of Directors, as well as budgets, operating plans and
other financial information reasonably requested by Lender.
 
Borrower shall not make any change in its (a) accounting policies or reporting
practices except as required by GAAP or the applicable standard for LLC, or (b)
fiscal years or fiscal quarters. The fiscal year of Borrower shall end on
December 31.
 
The executed Compliance Certificate may be sent via facsimile to Lender at (650)
473-9194 or via e-mail to BJadot@HTGC.com.  All Financial Statements required to
be delivered pursuant to clauses (a), (b) and (c) shall be sent via e-mail to
financialstatements@herculestech.com with a copy to BJadot@HTGC.com  and
BBang@HTGC.com provided, that if e-mail is not available or sending such
Financial Statements via e-mail is not possible, they shall be sent via
facsimile to Lender at: (866) 468-8916, attention Chief Credit Officer.
 
Notwithstanding anything herein to the contrary, documents required to be
delivered pursuant to this Section 7.1 may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which (i) such
financial statements and/or appropriate disclosures are publicly available as
posted on the Electronic Data Gathering Analysis and Retrieval system (EDGAR) or
any successor filing system of the SEC, or (ii) Borrower posts such documents,
or provides a link thereto on the Borrower’s website on the Internet.
 
 
 

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7.2           Management Rights.  Borrower shall permit any representative that
Lender authorizes, including its attorneys and accountants, to inspect the
Collateral and examine and make copies and abstracts of the books of account and
records of Borrower at reasonable times and upon reasonable notice during normal
business hours.  In addition, any such representative shall have the right to
meet with management and officers of Borrower to discuss such books of account
and records.  In addition, Lender shall be entitled at reasonable times and
intervals to consult with and advise the management and officers of Borrower
concerning significant business issues affecting Borrower.  Such consultations
shall not unreasonably interfere with Borrower’s business operations.  The
parties intend that the rights granted Lender shall constitute “management
rights” within the meaning of 29 C.F.R Section 2510.3-101(d)(3)(ii), but that
any advice, recommendations or participation by Lender with respect to any
business issues shall not be deemed to give Lender, nor be deemed an exercise by
Lender of, control over Borrower’s management or policies.
 
7.3           Further Assurances.  Borrower shall from time to time execute,
deliver and file, alone or with Lender, any financing statements, security
agreements, collateral assignments, notices, control agreements, or other
documents to perfect or give the highest priority to Lender’s Lien on the
Collateral.  Borrower shall from time to time procure any instruments or
documents as may be requested by Lender, and take all further action that may be
necessary or desirable, or that Lender may reasonably request, to perfect and
protect the Liens granted hereby and thereby.  In addition, and for such
purposes only, Borrower hereby authorizes Lender to execute and deliver on
behalf of Borrower and to file such financing statements, collateral
assignments, notices, control agreements, security agreements and other
documents without the signature of Borrower either in Lender’s name or in the
name of Lender as agent and attorney-in-fact for Borrower.  Borrower shall
protect and defend Borrower’s title to the Collateral and Lender’s Lien thereon
against all Persons claiming any interest adverse to Borrower or Lender other
than Permitted Liens.  Notwithstanding the foregoing, Borrower shall not be
required to deliver documents governed by Russian law prior to an Event of
Default.
 
7.4           Indebtedness.  Borrower shall not create, incur, assume, guarantee
or be or remain liable with respect to any Indebtedness, or permit any
Subsidiary so to do, other than Permitted Indebtedness, or prepay any
Indebtedness or take any actions which impose on Borrower an obligation to
prepay any Indebtedness, except for the conversion of Indebtedness into equity
securities and the payment of cash in lieu of fractional shares in connection
with such conversion.
 
7.5           Collateral.  Borrower shall at all times keep the Collateral, the
Intellectual Property and all other property and assets used in Borrower’s
business or in which Borrower now or hereafter holds any interest free and clear
from any Liens whatsoever (except for Permitted Liens), and shall give Lender
prompt written notice of any legal process affecting the Collateral, the
Intellectual Property, such other property and assets, or any Liens
thereon.  Borrower shall cause its Subsidiaries to protect and defend such
Subsidiary’s title to its assets from and against all Persons claiming any
interest adverse to such Subsidiary, and Borrower shall cause its Subsidiaries
at all times to keep such Subsidiary’s property and assets free and clear from
any Liens whatsoever (except for Permitted Liens), and shall give Lender prompt
written notice of any legal process affecting such Subsidiary’s
assets.  Borrower shall not agree with any Person other than Lender not to
encumber its property other than: (i) any agreement evidencing an asset sale
permitted hereunder, as to the assets being sold, and (ii) any agreement
evidencing Indebtedness secured by clause (vii) of the definition of Permitted
Liens, as to the assets securing such Indebtedness.
 
7.6           Investments.  Borrower shall not directly or indirectly acquire or
own, or make any Investment in or to any Person, or permit any of its
Subsidiaries so to do, other than Permitted Investments.
 
7.7           Distributions.  Borrower shall not, and shall not allow any
Subsidiary to, (a) repurchase or redeem any class of stock or other equity
interest other than pursuant to employee, director or consultant purchase or
repurchase plans or other similar agreements, provided, however, in each case
the repurchase or redemption price does not exceed the original consideration
paid for such stock or equity interest, or (b) declare or pay any cash dividend
or make a cash distribution on any class of stock or other equity interest,
except that LLC may pay dividends to Inc and a Subsidiary may pay dividends or
make distributions to its shareholders, or (c) lend money to any employees,
officers or directors or guarantee the payment of any such loans granted by a
third party in excess of $100,000 in the aggregate or (d) waive, release or
forgive any indebtedness owed by any employees, officers or directors in excess
of $100,000 in the aggregate.
 
 
 

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7.8           Transfers.  Except for Permitted Transfers, Borrower shall not
voluntarily or involuntarily transfer, sell, lease, license, lend or in any
other manner convey any equitable, beneficial or legal interest in any material
portion of their assets.
 
7.9           Mergers or Acquisitions.  Borrower shall not merge or consolidate,
or permit any of its Subsidiaries to merge or consolidate, with or into any
other business organization (other than mergers or consolidations of a
Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any
of its Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where the Secured Obligations are
indefeasibly paid in full, pursuant to a prepayment in accordance with Section
2.4, concurrently with the closing of any merger, consolidation or other
acquisition.
 
7.10           Taxes.  Borrower and its Subsidiaries shall pay when due all
taxes, fees or other charges of any nature whatsoever (together with any related
interest or penalties) now or hereafter imposed or assessed against Borrower,
Lender (other than taxes imposed on or measured by the net income of Lender) or
the Collateral or upon Borrower’s ownership, possession, use, operation or
disposition thereof or upon Borrower’s rents, receipts or earnings arising
therefrom.  Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral.  Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor in accordance with
GAAP.
 
7.11           Corporate Changes.  Neither Borrower nor any Subsidiary shall
change its corporate name, legal form or jurisdiction of formation without
twenty (20) days’ prior written notice to Lender.  Neither Borrower nor any
Subsidiary shall relocate its chief executive office or its principal place of
business unless: (i) it has provided prior written notice to Lender; and (ii) in
the case of Inc or any domestic subsidiary that guarantees the obligations under
this Agreement, such relocation shall be within the continental United
States.  Neither Borrower nor any Subsidiary shall relocate any item of
Collateral (other than (v) sales of Inventory in the ordinary course of
business, (w) relocation of drug product or placebo product in connection with
the conduct of pre-clinical or clinical studies; (x) relocations of mobile
Equipment having an aggregate value of up to $100,000 in any fiscal year, (y)
relocations of Equipment having an aggregate value of up to $150,000 in any
fiscal year, and (z) relocations of Collateral from a location described on
Exhibit C to the Disclosure Letter to another location described on Exhibit C to
the Disclosure Letter) unless (i) it has provided prompt written notice to
Lender, (ii) such relocation is within the continental United States or in the
case of non-U.S. entities within the location of such applicable entities and,
(iii) if such relocation is to a third party bailee, it has delivered a bailee
agreement in form and substance reasonably acceptable to Lender.
 
7.12           Deposit Accounts.  Except for Excluded Accounts, Borrower shall
not maintain any Deposit Accounts, or accounts holding Investment Property,
except with respect to which Lender has an Account Control Agreement.
 
7.13           Subsidiaries.  Borrower shall notify Lender of each Subsidiary
formed subsequent to the Closing Date and, within 30 days of formation, shall
cause any such Subsidiary organized under the laws of any State within the
United States to execute and deliver to Lender a Joinder Agreement.
 
7.14           Small Business Administration.  Lender has received a license
from the U.S. Small Business Administration (“SBA”) to extend loans as a small
business investment company (“SBIC”) pursuant to the Small Business Investment
Act of 1958, as amended, and the associated regulations (collectively, the “SBIC
Act”).  Portions of the loan to Borrower will be made under the SBA license and
the SBIC Act.  Addendum 1 to this Agreement outlines various responsibilities of
Lender and Borrower associated with an SBA loan, and such Addendum 1 is hereby
incorporated in this Agreement.
 
SECTION 8. RIGHT TO INVEST
 
8.1           Lender or its assignee or nominee shall have the right, in its
discretion, to participate in any Subsequent Financing in an amount of up to One
Million Dollars ($1,000,000) (the “Investment Limit”) on the same terms,
conditions and pricing afforded to others participating in any such Subsequent
Financing; provided, however, Lender’s (or its assignee’s or nominee’s)
participation in any such Subsequent Financing shall not exceed ten percent
(10%) of such Subsequent Financing, unless otherwise approved by Borrower.  Once
Lender (or its assignee or nominee) participates in a Subsequent Financing,
Lender (or its assignee or nominee) shall have no further right to participate
in any other Subsequent Financing.  Notwithstanding the foregoing, if Lender (or
its assignee or nominee) participates in a Subsequent Financing up to the ten
percent (10%) limitation set forth above, and such participation amounts to less
than the Investment Limit, Lender (or its assignee or nominee) may participate
in an additional Subsequent Financing up to the amount of the uninvested portion
of the Investment Limit.   The terms of this Section 8.1 shall survive the
termination of this Agreement.
 
 
 

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SECTION 9. EVENTS OF DEFAULT
 
The occurrence of any one or more of the following events shall be an Event of
Default:
 
9.1           Payments.  Borrower fails to pay any amount due under this
Agreement or any of the other Loan Documents on the due date; or
 
9.2           Covenants.  Borrower breaches or defaults in the performance of
any covenant or Secured Obligation under this Agreement, or any of the other
Loan Documents, and with (a) with respect to a default under any covenant under
this Agreement (other than under Sections 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, or
7.14(subject to the exception set forth the Addendum 1)) such default continues
for more than twenty (20) days after the earlier of the date on which (i) Lender
has given notice of such default to Borrower and (ii) Borrower has actual
knowledge of such default, or (b) with respect to a default under any of
Sections 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, or 7.14(subject to the exception set
forth the Addendum 1)), the occurrence of such default; or
 
9.3           Material Adverse Effect.  An event has occurred that would
reasonably be expected to have a Material Adverse Effect; or
 
9.4           Other Loan Documents.  The occurrence of any default under any
Loan Document or any other agreement between Borrower and Lender and such
default continues for more than twenty (20) days after the earlier of the date
on which (a) Lender has given notice of such default to Borrower, or (b)
Borrower has actual knowledge of such default; or
 
9.5           Representations.  Any representation or warranty made by Borrower
in any Loan Document or in the Warrant shall have been false or misleading in
any material respect; or
 
9.6           Insolvency.  Borrower (A) (i) shall make an assignment for the
benefit of creditors; or (ii) shall be unable to pay its debts as they become
due, or be unable to pay or perform under the Loan Documents, or shall become
insolvent; or (iii) shall file a voluntary petition in bankruptcy; or (iv) shall
file any petition, answer, or document seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation pertinent to such
circumstances; or (v) shall seek or consent to or acquiesce in the appointment
of any trustee, receiver, or liquidator of Borrower or of all or any substantial
part (i.e., 33-1/3% or more) of the assets or property of Borrower; or (vi)
shall cease operations of its business as its business has normally been
conducted, or terminate substantially all of its employees; or (vii) Borrower or
its directors or majority shareholders shall take any action initiating any of
the foregoing actions described in clauses (i) through (vi); or (B) either (i)
forty-five (45) days shall have expired after the commencement of an involuntary
action against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or (ii) a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or (iii) Borrower shall file any answer admitting or not contesting
the material allegations of a petition filed against Borrower in any such
proceedings; or (iv) the court in which such proceedings are pending shall enter
a decree or order granting the relief sought in any such proceedings; or (v)
thirty (30) days shall have expired after the appointment, without the consent
or acquiescence of Borrower, of any trustee, receiver or liquidator of Borrower
or of all or any substantial part of the properties of Borrower without such
appointment being vacated; or
 
9.7           Attachments; Judgments.  Any portion of Borrower’s assets is
attached or seized, or a levy is filed against any such assets and such
attachment, seizure or levy has not been removed, discharged or rescinded within
ten (10) days, or a judgment or judgments (not covered by independent
third-party insurance as to which liability has been accepted by such insurance
carrier) is/are entered for the payment of money, individually or in the
aggregate, of at least $150,000 and such judgment remains unstayed for a period
of ten (10) days, or Borrower is enjoined or in any way prevented by court order
from conducting any part of its business;
 
 
 

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9.8           Other Obligations.  The occurrence of any default under any
agreement or obligation of Borrower involving any Indebtedness in excess of
$150,000 which has resulted in a right by a third party or parties, whether or
not exercised, to accelerate the maturity of such Indebtedness, or the
occurrence of any default under any agreement  or obligation of Borrower that
could reasonably be expected to have a Material Adverse Effect.
 
9.9           Post-Closing Deliverable.  Borrower fails to deliver to Lender
within twenty (20) Business Days after the Closing Date, the fully-executed
Pledge Agreement, together with the executed stock powers and originals stock
certificates.
 
SECTION 10.  REMEDIES
 
10.1           General.  Upon and during the continuance of any one or more
Events of Default, (i) Lender may, at its option, accelerate and demand payment
of all or any part of the Secured Obligations together with a Prepayment Charge
and declare them to be immediately due and payable (provided, that upon the
occurrence of an Event of Default of the type described in Section 9.6, all of
the Secured Obligations shall automatically be accelerated and made due and
payable, in each case without any further notice or act), and (ii) Lender may
notify any of Borrower’s account debtors to make payment directly to Lender,
compromise the amount of any such account on Borrower’s behalf and endorse
Lender’s name without recourse on any such payment for deposit directly to
Lender’s account.  Lender may exercise all rights and remedies with respect to
the Collateral under the Loan Documents or otherwise available to it under the
UCC and other applicable law, including the right to release, hold, sell, lease,
liquidate, collect, realize upon, or otherwise dispose of all or any part of the
Collateral and the right to occupy, utilize, process and commingle the
Collateral.  All Lender’s rights and remedies shall be cumulative and not
exclusive.  Lender agrees that it will not issue a notice of exclusive control
over any of Borrower’s Deposit Accounts or accounts containing Investment
Property except upon and during the continuance of an Event of Default.
 
10.2           Collection; Foreclosure.  Upon the occurrence and during the
continuance of any Event of Default, Lender may, at any time or from time to
time, apply, collect, liquidate, sell in one or more sales, lease or otherwise
dispose of, any or all of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, in such order as Lender may
elect.  Any such sale may be made either at public or private sale at its place
of business or elsewhere.  Borrower agrees that any such public or private sale
may occur upon ten (10) calendar days’ prior written notice to Borrower.  Lender
may require Borrower to assemble the Collateral and make it available to Lender
at a place designated by Lender that is reasonably convenient to Lender and
Borrower.  The proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be applied by Lender in the following order
of priorities:
 
First, to Lender in an amount sufficient to pay in full Lender’s costs and
professionals’ and advisors’ fees and expenses as described in Section 11.11;
 
Second, to Lender in an amount equal to the then unpaid amount of the Secured
Obligations (including principal, interest, and the Default Rate interest), in
such order and priority as Lender may choose in its sole discretion; and
 
Finally, after the full, final, and indefeasible payment in Cash of all of the
Secured Obligations, to any creditor holding a junior Lien on the Collateral, or
to Borrower or its representatives or as a court of competent jurisdiction may
direct.
 
Lender shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it complies with the obligations of a
secured party under the UCC.
 
 
 

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10.3           No Waiver.  Lender shall be under no obligation to marshal any of
the Collateral for the benefit of Borrower or any other Person, and Borrower
expressly waives all rights, if any, to require Lender to marshal any
Collateral.
 
10.4           Cumulative Remedies.  The rights, powers and remedies of Lender
hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative.  The exercise of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of or election of remedies with respect to any other rights, powers and
remedies of Lender.
 
SECTION 11. MISCELLANEOUS
 
11.1           Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
 
11.2           Notice.  Except as otherwise provided herein, any notice, demand,
request, consent, approval, declaration, service of process or other
communication (including the delivery of Financial Statements) that is required,
contemplated, or permitted under the Loan Documents or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given, delivered, and received upon the earlier of: (i) the day
of transmission by facsimile or hand delivery or delivery by an overnight
express service or overnight mail delivery service; or (ii) the third calendar
day after deposit in the United States mails, with proper first class postage
prepaid, in each case addressed to the party to be notified as follows:
 
 
If to Lender:
HERCULES TECHNOLOGY II, L.P.

 
Legal Department

 
Attention:  Chief Legal Officer and Mr. Bryan Jadot

 
400 Hamilton Avenue, Suite 310

 
Palo Alto, California 94301

 
Facsimile:  650-473-9194

 
Telephone:  650-289-3060

 
If to Borrower:
CLEVELAND BIOLABS, INC.

 
Attention:  Leah Brownlee

 
73 High Street

 
Buffalo, New York 14203

 
Facsimile:  (716) 849-6820

 
Telephone:  716-849-6810 x379

 
BIOLAB 612, LLC

 
Attention: Leah Brownlee

 
73 High Street

 
Buffalo, New York  14203

 
Facsimile: (716) 849-6820

 
Telephone:  (716) 849-6810 x379

or to such other address as each party may designate for itself by like notice.
 
11.3           Borrower Liability.  Either Borrower may, acting singly, request
Advances hereunder.  Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder, including with respect to requesting Advances
hereunder.  Each Borrower hereunder shall be jointly and severally obligated to
repay all Advances made hereunder, regardless of which Borrower actually
receives said Advance, as if each Borrower hereunder directly received all
Advances.  Each Borrower waives (a) any suretyship defenses available to it
under the Code or any other applicable law, including, without limitation, the
benefit of California Civil Code Section 2815 permitting revocation as to future
transactions and the benefit of California Civil Code Sections 1432, 2809, 2810,
2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right
to require Lender to: (i) proceed against any Borrower or any other person;
(ii) proceed against or exhaust any security; or (iii) pursue any other
remedy.  Lender may exercise or not exercise any right or remedy it has against
any Borrower or any security it holds (including the right to foreclose by
judicial or non-judicial sale) without affecting any Borrower’s liability. 
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in equity
(including, without limitation, any law subrogating Borrower to the rights of
Lender under this Agreement) to seek contribution, indemnification or any other
form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Secured Obligations,
for any payment made by Borrower with respect to the Secured Obligations in
connection with this Agreement or otherwise and all rights that it might have to
benefit from, or to participate in, any security for the Secured Obligations as
a result of any payment made by Borrower with respect to the Secured Obligations
in connection with this Agreement or otherwise.  Any agreement providing for
indemnification, reimbursement or any other arrangement prohibited under this
Section shall be null and void.  If any payment is made to a Borrower in
contravention of this Section, such Borrower shall hold such payment in trust
for Lender and such payment shall be promptly delivered to Lender for
application to the Secured Obligations, whether matured or unmatured.
 
 
 

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11.4           Entire Agreement; Amendments.  This Agreement and the other Loan
Documents constitute the entire agreement and understanding of the parties
hereto in respect of the subject matter hereof and thereof, and supersede and
replace in their entirety any prior proposals, term sheets, non-disclosure or
confidentiality agreements, letters, negotiations or other documents or
agreements, whether written or oral, with respect to the subject matter hereof
or thereof (including Lender’s revised proposal letter dated August 20,
2013).  None of the terms of this Agreement or any of the other Loan Documents
may be amended except by an instrument executed by each of the parties hereto.
 
11.5           No Strict Construction.  The parties hereto have participated
jointly in the negotiation and drafting of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
 
11.6           No Waiver.  The powers conferred upon Lender by this Agreement
are solely to protect its rights hereunder and under the other Loan Documents
and its interest in the Collateral and shall not impose any duty upon Lender to
exercise any such powers.  No omission or delay by Lender at any time to enforce
any right or remedy reserved to it, or to require performance of any of the
terms, covenants or provisions hereof by Borrower at any time designated, shall
be a waiver of any such right or remedy to which Lender is entitled, nor shall
it in any way affect the right of Lender to enforce such provisions thereafter.
 
11.7           Survival.  All agreements, representations and warranties
contained in this Agreement and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement (other than the Warrant which shall survive
only in accordance with its own terms).
 
11.8           Successors and Assigns.  The provisions of this Agreement and the
other Loan Documents shall inure to the benefit of and be binding on Borrower
and its permitted assigns (if any).  Borrower shall not assign its obligations
under this Agreement or any of the other Loan Documents without Lender’s express
prior written consent, and any such attempted assignment shall be void and of no
effect.  Lender may assign, transfer, or endorse its rights hereunder and under
the other Loan Documents (unless otherwise expressly prohibited in such
documents) without prior notice to Borrower, and all of such rights shall inure
to the benefit of Lender’s successors and assigns.
 
11.9           Governing Law.  This Agreement and the other Loan Documents have
been negotiated and delivered to Lender in the State of California, and shall
have been accepted by Lender in the State of California.  Payment to Lender by
Borrower of the Secured Obligations is due in the State of California.  This
Agreement and the other Loan Documents (with the exception of Account Control
Agreements, which shall be governed by the jurisdiction as provided for therein,
as applicable) shall be governed by, and construed and enforced in accordance
with, the laws of the State of California, excluding conflict of laws principles
that would cause the application of laws of any other jurisdiction.
 
 
 

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11.10           Consent to Jurisdiction and Venue.  All judicial proceedings (to
the extent that the reference requirement of Section 11.10 is not applicable)
arising in or under or related to this Agreement or any of the other Loan
Documents may be brought in any state or federal court located in the State of
California.  By execution and delivery of this Agreement, each party hereto
generally and unconditionally: (a) consents to nonexclusive personal
jurisdiction in Santa Clara County, State of California; (b) waives any
objection as to jurisdiction or venue in Santa Clara County, State of
California; (c) agrees not to assert any defense based on lack of jurisdiction
or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement or the other Loan
Documents.  Service of process on any party hereto in any action arising out of
or relating to this Agreement shall be effective if given in accordance with the
requirements for notice set forth in Section 11.2, and shall be deemed effective
and received as set forth in Section 11.2.  Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of either party to bring proceedings in the courts of any other
jurisdiction.
 
11.11           Mutual Waiver of Jury Trial / Judicial Reference.
 
(a)           Because disputes arising in connection with complex financial
transactions are most quickly and economically resolved by an experienced and
expert person and the parties wish applicable state and federal laws to apply
(rather than arbitration rules), the parties desire that their disputes be
resolved by a judge applying such applicable laws.  EACH OF BORROWER AND LENDER
SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF
ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM
(COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST LENDER OR ITS ASSIGNEE OR
BY LENDER OR ITS ASSIGNEE AGAINST BORROWER.  This waiver extends to all such
Claims, including Claims that involve Persons other than Borrower and Lender;
Claims that arise out of or are in any way connected to the relationship between
Borrower and Lender; and any Claims for damages, breach of contract, tort,
specific performance, or any equitable or legal relief of any kind, arising out
of this Agreement, any other Loan Document.
 
(b)           If the waiver of jury trial set forth in Section 11.10(a) is
ineffective or unenforceable, the parties agree that all Claims shall be
resolved by reference to a private judge sitting without a jury, pursuant to
Code of Civil Procedure Section 638, before a mutually acceptable referee or, if
the parties cannot agree, a referee selected by the Presiding Judge of the Santa
Clara County, California.  Such proceeding shall be conducted in Santa Clara
County, California, with California rules of evidence and discovery applicable
to such proceeding.
 
(c)           In the event Claims are to be resolved by judicial reference,
either party may seek from a court identified in Section 11.9, any prejudgment
order, writ or other relief and have such prejudgment order, writ or other
relief enforced to the fullest extent permitted by law notwithstanding that all
Claims are otherwise subject to resolution by judicial reference.
 
11.12           Professional Fees.  Borrower promises to pay Lender’s fees and
expenses necessary to finalize the loan documentation, including but not limited
to reasonable attorneys’ fees, UCC searches, filing costs, and other
miscellaneous expenses. In addition, Borrower promises to pay any and all
reasonable attorneys’ and other professionals’ fees and expenses (including fees
and expenses of in-house counsel) incurred by Lender after the Closing Date in
connection with or related to:  (a) the Loan; (b) the administration,
collection, or enforcement of the Loan; (c) the amendment or modification of the
Loan Documents; (d) any waiver, consent, release, or termination under the Loan
Documents; (e) the protection, preservation, sale, lease, liquidation, or
disposition of Collateral or the exercise of remedies with respect to the
Collateral; (f) any legal, litigation, administrative, arbitration, or out of
court proceeding in connection with or related to Borrower or the Collateral,
and any appeal or review thereof; and (g) any bankruptcy, restructuring,
reorganization, assignment for the benefit of creditors, workout, foreclosure,
or other action related to Borrower, the Collateral, the Loan Documents,
including representing Lender in any adversary proceeding or contested matter
commenced or continued by or on behalf of Borrower’s estate, and any appeal or
review thereof.
 
11.13           Confidentiality.  Lender acknowledges that certain items of
Collateral and information provided to Lender by Borrower are confidential and
proprietary information of Borrower, if and to the extent such information
either (x) is marked as confidential by Borrower at the time of disclosure, or
(y) should reasonably be understood to be confidential (the “Confidential
Information”).  Accordingly, Lender agrees that any Confidential Information it
may obtain in the course of acquiring, administering, or perfecting  Lender’s
security interest in the Collateral shall not be disclosed to any other person
or entity in any manner whatsoever, in whole or in part, without the prior
written consent of Borrower, except that Lender may disclose any such
information:  (a) to its own directors, officers, employees, accountants,
counsel and other professional advisors and to its affiliates if Lender in its
sole discretion determines that any such party should have access to such
information in connection with such party’s responsibilities in connection with
the Loan or this Agreement and, provided that such recipient of such
Confidential Information either (i) agrees to be bound by the confidentiality
provisions of this paragraph or (ii) is otherwise subject to confidentiality
restrictions that reasonably protect against the disclosure of Confidential
Information; (b) if such information is generally available to the public
through no fault of Lender; (c) if required or appropriate in any report,
statement or testimony submitted to any governmental authority having or
claiming to have jurisdiction over Lender; (d) if required or appropriate in
response to any summons or subpoena or in connection with any litigation, to the
extent permitted or deemed advisable by Lender’s counsel; (e) to comply with any
legal requirement or law applicable to Lender; (f) to the extent reasonably
necessary in connection with the exercise of any right or remedy under any Loan
Document, including Lender’s sale, lease, or other disposition of Collateral
after default; (g) to any participant or assignee of Lender or any prospective
participant or assignee; provided, that such participant or assignee or
prospective participant or assignee agrees in writing to be bound by this
Section prior to disclosure; or (h) otherwise with the prior consent of
Borrower; provided, that any disclosure made in violation of this Agreement
shall not affect the obligations of Borrower or any of its affiliates or any
guarantor under this Agreement or the other Loan Documents.
 
 
 

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11.14           Assignment of Rights.  Borrower acknowledges and understands
that Lender may sell and assign all or part of its interest hereunder and under
the Loan Documents to any person or entity (an “Assignee”).  After such
assignment the term “Lender” as used in the Loan Documents shall mean and
include such Assignee, and such Assignee shall be vested with all rights, powers
and remedies of Lender hereunder with respect to the interest so assigned; but
with respect to any such interest not so transferred, Lender shall retain all
rights, powers and remedies hereby given.  No such assignment by Lender shall
relieve Borrower of any of its obligations hereunder.  Lender agrees that in the
event of any transfer by it of the Note(s)(if any), it will endorse thereon a
notation as to the portion of the principal of the Note(s), which shall have
been paid at the time of such transfer and as to the date to which interest
shall have been last paid thereon.
 
11.15           Revival of Secured Obligations.  This Agreement and the Loan
Documents shall remain in full force and effect and continue to be effective if
any petition is filed by or against Borrower for liquidation or reorganization,
if Borrower becomes insolvent or makes an assignment for the benefit of
creditors, if a receiver or trustee is appointed for all or any significant part
of Borrower’s assets, or if any payment or transfer of Collateral is recovered
from Lender.  The Loan Documents and the Secured Obligations and Collateral
security shall continue to be effective, or shall be revived or reinstated, as
the case may be, if at any time payment and performance of the Secured
Obligations or any transfer of Collateral to Lender, or any part thereof is
rescinded, avoided or avoidable, reduced in amount, or must otherwise be
restored or returned by, or is recovered from, Lender or by any obligee of the
Secured Obligations, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment, performance, or transfer
of Collateral had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or
recovered, the Loan Documents and the Secured Obligations shall be deemed,
without any further action or documentation, to have been revived and reinstated
except to the extent of the full, final, and indefeasible payment to Lender in
Cash (other than inchoate indemnity obligations).
 
11.16           Counterparts.  This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
 
11.17           No Third Party Beneficiaries.  No provisions of the Loan
Documents are intended, nor will be interpreted, to provide or create any
third-party beneficiary rights or any other rights of any kind in any person
other than Lender and Borrower unless specifically provided otherwise herein,
and, except as otherwise so provided, all provisions of the Loan Documents will
be personal and solely between the Lender and the Borrower.
 
 
 

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11.18           Publicity.  Lender may use Borrower’s name and logo, and include
a brief description of the relationship between Borrower and Lender, in Lender’s
marketing materials.  (a)  Borrower consents to the publication and use by
Lender and any of its member businesses and affiliates of (i) Borrower's name
(including a brief description of the relationship between Borrower and Lender)
and logo and a hyperlink to Borrower’s web site, separately or together, in
written and oral presentations, advertising, promotional and marketing
materials, client lists, public relations materials or on its web site
(together, the “Lender Publicity Materials”); (ii) the names of officers of
Borrower in the Lender Publicity Materials; and (iii) Borrower’s name,
trademarks or servicemarks in any news release concerning Lender.
 
(b)           Neither Borrower nor any of its member businesses and affiliates
shall, without Lender’s consent, publicize or use (i) Lender's name (including a
brief description of the relationship between Borrower and Lender), logo or
hyperlink to Lender’s web site, separately or together, in written and oral
presentations, advertising, promotional and marketing materials, client lists,
public relations materials or on its web site (together, the “Borrower Publicity
Materials”); (ii) the names of officers of Lender in the Borrower Publicity
Materials; and (iii) Lender’s name, trademarks, servicemarks in any news release
concerning Borrower.
 
(SIGNATURES TO FOLLOW)
 
 
 

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IN WITNESS WHEREOF, Borrower and Lender have duly executed and delivered this
Loan and Security Agreement as of the day and year first above written.
 
BORROWER:
CLEVELAND BIOLABS, INC.

Signature:   /s/ C. Neil Lyons
Print Name: C. Neil Lyons
Title:            Chief Financial Officer

BIOLAB 612, LLC

Signature:    /s/ Askar Kuchumov
Print Name:  Askar Kuchumov, Ph.D.
Title:             General Director

Accepted in Palo Alto,
California:                                                     LENDER:
HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership

By:          Hercules Technology SBIC
Management, LLC,
its General Partner

By:           Hercules Technology Growth Capital, Inc.,its Manager

By:       /s/ K. Nicholas Martitsch
Name:  K. Nicholas Martitsch
Its:       Associate General Counsel
 
 
 
 
 

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Table of Addenda, Exhibits and Schedules

Addendum 1:   SBA Provisions
Exhibit B-1:       Term Note
Exhibit G:          Joinder Agreement
 
 
 
 
 
 

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ADDENDUM 1 TO LOAN AND SECURITY AGREEMENT
 

 
(a)           Borrower’s Business.  For purposes of this Addendum 1, Borrower
shall be deemed to include its “affiliates” as defined in Title 13 Code of
Federal Regulations Section 121.103.  Borrower represents and warrants to Lender
as of the Closing Date and covenants to Lender for a period of one year after
the Closing Date with respect to subsections 2, 3, 4, 5, 6 and 7 below, as
follows:
 
1.           Size Status.  Borrower does not have tangible net worth in excess
of $18 million or average net income after Federal income taxes (excluding any
carry-over losses) for the preceding two completed fiscal years in excess of Six
Million Dollars ($6,000,000);
 
2.           No Relender.  Borrower’s primary business activity does not
involve, directly or indirectly, providing funds to others, purchasing debt
obligations, factoring, or long-term leasing of equipment with no provision for
maintenance or repair;
 
3.           No Passive Business.  Borrower is engaged in a regular and
continuous business operation (excluding the mere receipt of payments such as
dividends, rents, lease payments, or royalties).  Borrower’s employees are
carrying on the majority of day to day operations.  Borrower will not pass
through substantially all of the proceeds of the Loan to another entity;
 
4.           No Real Estate Business.  Borrower is not classified under Major
Group 65 (Real Estate) or Industry No. 1531 (Operative Builders) of the Standard
Industrial Classification Manual.  The proceeds of the Loan will not be used to
acquire or refinance real property unless Borrower (x) is acquiring an existing
property and will use at least fifty-one percent (51%) of the usable square
footage for its business purposes; (y) is building or renovating a building and
will use at least sixty-seven percent (67%) of the usable square footage for its
business purposes; or (z) occupies the subject property and uses at least
sixty-seven percent (67%) of the usable square footage for its business
purposes.
 
5.           No Project Finance.  Borrower’s assets are not intended to be
reduced or consumed, generally without replacement, as the life of its business
progresses, and the nature of Borrower’s business does not require that a stream
of cash payments be made to the business's financing sources, on a basis
associated with the continuing sale of assets (e.g., real estate development
projects and oil and gas wells).  The primary purpose of the Loan is not to fund
production of a single item or defined limited number of items, generally over a
defined production period, where such production will constitute the majority of
the activities of Borrower (e.g., motion pictures and electric generating
plants).
 
6.           No Farm Land Purchases.  Borrower will not use the proceeds of the
Loan to acquire farm land which is or is intended to be used for agricultural or
forestry purposes, such as the production of food, fiber, or wood, or is so
taxed or zoned.
 
7.           No Foreign Investment.  The proceeds of the Loan will not be used
substantially for a foreign operation.  At the time of the Loan, Borrower will
not have more than forty-nine percent (49%) of its employees or tangible assets
located outside the United States.  The representation in this subsection (7) is
made only as of the date hereof and shall not continue for one year as
contemplated in the first sentence of this Section 1.
 
(b)           Small Business Administration Documentation.  Lender acknowledges
that Borrower completed, executed and delivered to Lender SBA Forms 480, 652 and
1031 (Parts A and B) together with a business plan showing Borrower’s financial
projections (including balance sheets and income and cash flows statements) for
the period described therein and a written statement (whether included in the
purchase agreement or pursuant to a separate statement) from Lender regarding
its intended use of proceeds from the sale of securities to Lender (the “Use of
Proceeds Statement”).  Borrower represents and warrants to Lender that the
information regarding Borrower and its affiliates set forth in the SBA Form 480,
Form 652 and Form 1031 and the Use of Proceeds Statement delivered as of the
Closing Date is accurate and complete.
 
 
 

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(c)           Inspection.  The following covenants contained in this Section (c)
are intended to supplement and not to restrict the related provisions of the
Loan Documents.  Subject to the preceding sentence, Borrower will permit, for so
long as Lender holds any debt or equity securities of Borrower, Lender or its
representative, at Lender’ expense, and examiners of the SBA to visit and
inspect the properties and assets of Borrower, to examine its books of account
and records, and to discuss Borrower’s affairs, finances and accounts with
Borrower’s officers, senior management and accountants, all at such reasonable
times as may be requested by Lender or the SBA.
 
(d)           Annual Assessment.  Promptly after the end of each calendar year
(but in any event prior to February 28 of each year) and at such other times as
may be reasonably requested by Lender, Borrower will deliver to Lender a written
assessment of the economic impact of Lender’ investment in Borrower, specifying
the full-time equivalent jobs created or retained in connection with the
investment, the impact of the investment on the businesses of Borrower in terms
of expanded revenue and taxes, other economic benefits resulting from the
investment (such as technology development or commercialization, minority
business development, or expansion of exports) and such other information as may
be required regarding Borrower in connection with the filing of Lender’s SBA
Form 468.   Lender will assist Borrower with preparing such assessment.  In
addition to any other rights granted hereunder, Borrower will grant Lender and
the SBA access to Borrower’s books and records for the purpose of verifying the
use of such proceeds.  Borrower also will furnish or cause to be furnished to
Lender such other information regarding the business, affairs and condition of
Borrower as Lender may from time to time reasonably request.
 
(e)           Use of Proceeds.  Borrower will use the proceeds from the Loan
only for purposes set forth in Section 7.14.  Borrower will deliver to Lender
from time to time promptly following Lender’s request, a written report,
certified as correct by Borrower's Chief Financial Officer, verifying the
purposes and amounts for which proceeds from the Loan have been
disbursed.  Borrower will supply to Lender such additional information and
documents as Lender reasonably requests with respect to its use of proceeds and
will permit Lender and the SBA to have access to any and all Borrower records
and information and personnel as Lender deems necessary to verify how such
proceeds have been or are being used, and to assure that the proceeds have been
used for the purposes specified in Section 7.14.
 
(f)           Activities and Proceeds.  Neither Borrower nor any of its
affiliates (if any) will engage in any activities or use directly or indirectly
the proceeds from the Loan for any purpose for which a small business investment
company is prohibited from providing funds by the SBIC Act, including 13 C.F.R.
§107.720.  Without obtaining the prior written approval of Lender, Borrower will
not change within 1 year of the date hereof, Borrower’s current business
activity to a business activity which a licensee under the SBIC Act is
prohibited from providing funds by the SBIC Act.
 
(g)           Redemption Provisions.  Notwithstanding any provision to the
contrary contained in the Certificate of Incorporation of Borrower, as amended
from time to time (the “Charter”), if, pursuant to the redemption provisions
contained in the Charter, Lender is entitled to a redemption of its Warrant,
such redemption (in the case of Lender) will be at a price equal to the
redemption price set forth in the Charter (the “Existing Redemption
Price”).  If, however, Lender delivers written notice to Borrower that the then
current regulations promulgated under the SBIC Act prohibit payment of the
Existing Redemption Price in the case of an SBIC (or, if applied, the Existing
Redemption Price would cause the Common Stock to lose its classification as an
“equity security” and Lender has determined that such classification is
unadvisable), the amount Lender will be entitled to receive shall be the greater
of (i) fair market value of the securities being redeemed taking into account
the rights and preferences of such securities plus any costs and expenses of the
Lender incurred in making or maintaining the Warrant, and (ii) the Existing
Redemption Price where the amount of accrued but unpaid dividends payable to the
Lender is limited to Borrower's earnings plus any costs and expenses of the
Lender incurred in making or maintaining the Warrant; provided, however, the
amount calculated in subsections (i) or (ii) above shall not exceed the Existing
Redemption Price.
 
 
 

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(h)             Compliance and Resolution.   Borrower agrees that a failure to
comply with Borrower’s obligations under this addendum, or any other set of
facts or circumstances where it has been asserted by any governmental regulatory
agency (or Lender believes that there is a substantial risk of such assertion)
that Lender and its affiliates are not entitled to hold, or exercise any
significant right with respect to, any securities issued to Lender by Borrower,
will constitute a breach of the obligations of Borrower under the financing
agreements between Borrower and Lender.  In the event of (i) a failure to comply
with Borrower’s obligations under this Addendum; or (ii) an assertion by any
governmental regulatory agency (or Lender believes that there is a substantial
risk of such assertion) of a failure to comply with Borrower’s obligations under
this Addendum, then (i) Lender and Borrower will meet and resolve any such issue
in good faith to the satisfaction of Borrower, Lender, and any governmental
regulatory agency, and (ii) upon request of Lender or Borrower, Borrower and/or
Lender, as applicable, will cooperate and assist with any assignment of the
financing agreements from Hercules Technology II, L.P. to Hercules Technology
Growth Capital, Inc. so that the Term Loan and Loan Documents will no longer be
subject to the SBIC Act or other SBA provision, and any such assignment (i)
shall be at no cost to Borrower and (ii) shall not constitute an Event of
Default under the Loan Documents.  And any breach or failure to comply pursuant
to the preceding portion of this paragraph or Section 7.14 of the Loan Agreement
shall not constitute an Event of Default.
 
 
 
 

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EXHIBIT B-1
 
PROMISSORY NOTE
 
$[  ],000,000                                                                                                Advance
Date:  ___ __, 2013
 
Maturity Date:  _____ ___, 20[ ]
 
FOR VALUE RECEIVED, Cleveland BioLabs, Inc. (“Inc”) and BioLab 612, LLC (“LLC”),
(Inc and LLC, individually and collectively referred to herein as “Borrower”)
hereby promises to pay to the order of Hercules Technology II, L.P., a Delaware
limited partnership or the holder of this Note (the “Lender”) at 400 Hamilton
Avenue, Suite 310, Palo Alto, CA 94301 or such other place of payment as the
holder of this Secured Term Promissory Note (this “Promissory Note”) may specify
from time to time in writing, in lawful money of the United States of America,
the principal amount of [  ] Million Dollars ($[  ],000,000) or such other
principal amount as Lender has advanced to Borrower, together with interest at a
floating rate per annum rate equal to the greater of either (i) ten and
forty-five hundredths of one percent (10.45%), or (ii) the sum of (A) ten and
forty-five hundredths of one percent (10.45%), plus (B) the Prime Rate minus
four and one quarter of one percent (4.25%) based upon a year consisting of 360
days, with interest computed daily based on the actual number of days in each
month.
 
This Promissory Note is the Note referred to in, and is executed and delivered
in connection with, that certain Loan and Security Agreement dated
[              ], 20[  ], by and between Borrower and Lender (as the same may
from time to time be amended, modified or supplemented in accordance with its
terms, the “Loan Agreement”), and is entitled to the benefit and security of the
Loan Agreement and the other Loan Documents (as defined in the Loan Agreement),
to which reference is made for a statement of all of the terms and conditions
thereof.  All payments shall be made in accordance with the Loan Agreement.  All
terms defined in the Loan Agreement shall have the same definitions when used
herein, unless otherwise defined herein.  An Event of Default under the Loan
Agreement shall constitute a default under this Promissory Note.
 
Borrower waives presentment and demand for payment, notice of dishonor, protest
and notice of protest under the UCC or any applicable law.   Borrower agrees to
make all payments under this Promissory Note without setoff, recoupment or
deduction and regardless of any counterclaim or defense.  This Promissory Note
has been negotiated and delivered to Lender and is payable in the State of
California.  This Promissory Note shall be governed by and construed and
enforced in accordance with, the laws of the State of California, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
 

 
BORROWER:                                                                                     CLEVELAND
BIOLABS, INC.
 
By:
Title:
 

 
BIOLAB 612, LLC
 
By:
Title:
 
 
 

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EXHIBIT G
 
FORM OF JOINDER AGREEMENT
 
This Joinder Agreement (the “Joinder Agreement”) is made and dated as of
[          ], 201[ ], and is entered into by and between__________________, a
___________ corporation (“Subsidiary”), and HERCULES TECHNOLOGY II, L.P. as a
Lender.
 
RECITALS
 
A.           Subsidiary’s Affiliate, Cleveland BioLabs, Inc. (“Inc”) and BioLab
612, LLC (“LLC”) (Inc and LLC, individually and collectively referred to herein
as “Borrower”) [has entered/desires to enter] into that certain Loan and
Security Agreement dated [         ], 2013, with Lender, as such agreement may
be amended (the “Loan Agreement”), together with the other agreements
executed  and delivered in connection therewith;
 
B.           Subsidiary acknowledges and agrees that it will benefit both
directly and indirectly from Borrower’s execution of the Loan Agreement and the
other agreements executed and delivered in connection therewith;
 
AGREEMENT
 
NOW THEREFORE, Subsidiary and Lender agree as follows:
 
1.           The recitals set forth above are incorporated into and made part of
this Joinder Agreement.  Capitalized terms not defined herein shall have the
meaning provided in the Loan Agreement.
 
2.           By signing this Joinder Agreement, Subsidiary shall be bound by the
terms and conditions of the Loan Agreement the same as if it were the Borrower
(as defined in the Loan Agreement) under the Loan Agreement, mutatis mutandis,
provided however, that Lender shall have no duties, responsibilities or
obligations to Subsidiary arising under or related to the Loan Agreement or the
other agreements executed and delivered in connection therewith.  Rather, to the
extent that Lender has any duties, responsibilities or obligations arising under
or related to the Loan Agreement or the other agreements executed and delivered
in connection therewith, those duties, responsibilities or obligations shall
flow only to Borrower and not to Subsidiary or any other person or entity.  By
way of example (and not an exclusive list): (a) Lender’s providing notice to
Borrower in accordance with the Loan Agreement or as otherwise agreed between
Borrower and Lender shall be deemed provided to Subsidiary; (b) a Lender’s
providing an Advance to Borrower shall be deemed an Advance to Subsidiary; and
(c) Subsidiary shall have no right to request an Advance or make any other
demand on Lender.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
 

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[SIGNATURE PAGE TO JOINDER AGREEMENT]
 
SUBSIDIARY:
_________________________________.

 
 
By:
Name:
Title:
Address:
 
Telephone: ___________
Facsimile: ____________
 
LENDER:                HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership
 
By:          Hercules Technology SBIC Management, LLC,
its General Partner
 
By:          Hercules Technology Growth Capital, Inc.,
its Manager
 
By:__________________________________
Name: _______________________________
Its:      _______________________________