Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (as the same may be amended, restated,
modified, or supplemented from time to time, this “Agreement”) dated as of
May 14, 2015 (the “Effective Date”) among NSPH FUNDING LLC, a Delaware limited
liability company, as collateral agent (in such capacity, together with its
successors and assigns in such capacity, “Collateral Agent”), and the Lenders
listed on Schedule 1.1 hereof or otherwise a party hereto from time to time
including NSPH FUNDING LLC and SWK FUNDING LLC, a Delaware limited liability
company, each in its capacity as a Lender (each a “Lender” and collectively, the
“Lenders”), and NANOSPHERE, INC., a Delaware corporation (“Borrower”), provides
the terms on which the Lenders shall lend to Borrower and Borrower shall repay
the Lenders. The parties agree as follows:

 

1. DEFINITIONS AND OTHER TERMS

1.1 Defined Terms. Capitalized terms used herein shall have the meanings set
forth in Section 1.4 to the extent defined therein. All other capitalized terms
used but not defined herein shall have the meaning given to such terms in the
Code except that any accounting term used but not defined herein shall be
construed in accordance with GAAP. The term “financial statements” shall include
the accompanying notes and schedules thereto.

1.2 Accounting Terms.

(a) Generally. Except as otherwise specifically prescribed herein (including,
without limitation, Section 1.2(b) hereof), all accounting terms not
specifically or completely defined herein shall be construed in conformity with,
and all financial data (including financial ratios and other financial
calculations) required to be submitted pursuant to this Agreement shall be
prepared in conformity with GAAP, applied on a consistent basis, as in effect
from time to time, applied in a manner consistent with that used in preparing
the audited financial statements of the Borrower.

(b) Interest & Fee Calculations. Anything to the contrary in Section 1.2(a)
hereof or any other provision of the Loan Documents notwithstanding, for
purposes of calculating the amount of any interest payment or interest expense
(the “Interest Expense”), made to the Collateral Agent, the Lenders, or any
other holder of any Indebtedness of the Borrower (including, without limitation,
Oxford Finance, LLC, and Silicon Valley Bank (the “Existing Lenders”)) in any
period, such amount will be based solely on the stated interest rate set forth
in the operative agreements (including the Loan Documents) governing such
Indebtedness (the “Stated Rate”). The Stated Rate shall not include any payment
of any fees to any holder of any Indebtedness (including the Collateral Agent,
the Lenders, or the Existing Lenders), including closing fees, prepayment fees,
and final fees payable at maturity. As a consequence of the foregoing, the
Collateral Agent and Lenders acknowledge that, under GAAP rules, the amount of
Interest Expense reported on the Borrower’s financial statements and in SEC
filings may, due to the interaction of GAAP rules, the issuance of the Warrants,
and other compensation payable, or which may become payable, to the Collateral
Agent and Lenders hereunder (or payable to holders of other Indebtedness), be
different from the Interest Expense used to calculate Borrower’s compliance with
the Amortization Threshold and other ratios and covenants hereunder. For
purposes of determining Borrower’s compliance with the Amortization Threshold
and any other ratios and covenants hereunder, Borrower shall use the applicable
Stated Rate.

(c) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either the Borrower or the Collateral Agent shall so request, the
Collateral Agent and the Borrower shall negotiate in good faith to amend such
ratio or requirement to preserve the original intent thereof in light of such
change in GAAP (subject to the approval of the Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Borrower shall
provide to the Collateral Agent and the Lenders financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement
made before and after giving effect to such change in GAAP.

 

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(d) Rounding. Any financial ratios required to be maintained by the Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed herein and rounding the result
up or down to the nearest number (with a rounding-down if there is no nearest
number).

1.3 Section References. Any section, subsection, schedule or exhibit references
are to this Agreement unless otherwise specified.

1.4 Definitions. The following terms are defined in the Sections or subsections
referenced opposite such terms:

 

“Aggregate Revenue”

Section 2.6(a)

“Agreement”

Preamble

“Amortization Cap”

Section 2.2(b)(ii)

“Borrower”

Preamble

“Claims”

Section 12.2

“Collateral Agent”

Preamble

“Collateral Agent Report”

Exhibit B, Section 5

“Communication”

Section 10

“Default Rate”

Section 2.3(b)

“Effective Date”

Preamble

“Event of Default”

Section 8

“Indemnified Person”

Section 12.2

“Interest Expense”

“Lender” and “Lenders”

Section 1.2(b)

Preamble

“Lender Transfer”

Section 12.1

“New Subsidiary”

Section 6.10

“Non-Funding Lender”

Exhibit B, Section 10(c)(ii)

“Other Lender”

Exhibit B, Section 10(c)(ii)

“Perfection Certificate” and “Perfection Certificates”    

Section 5.1

“Revenue-Based Payment”

Section 2.6(a)

“Stated Rate”

“Term A Loan”

Section 1.2(b)

Section 2.2(a)(i)

“Term B Loan”

Section 2.2(a)(ii)

“Termination Date”

Exhibit B, Section 8

“Term Loan”

Section 2.2(a)(ii)

“Transfer”

Section 7.1

The following terms have the following meanings:

“2017 Amortization Period” means the period including the Payment Dates on or
after the Amortization Date up to and including the first Payment Date of the
year 2018.

“2018 Amortization Period” means the period including the second, third and
fourth Payment Dates of calendar year 2018, and the first Payment Date of the
year 2019.

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and all other rights to payment of a monetary obligation, whether or
not earned by performance, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a policy of insurance issued or to be issued, or
(d) for a secondary obligation incurred or to be incurred. The term “Account”
includes health-care-insurance receivables.

 

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

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

“Amortization Date” is the earliest of (i) (unless waived by the Required
Lenders) an Event of Default occurring, (ii) at the election of the Required
Lenders, on the Payment Date immediately after the Borrower fails to satisfy the
Amortization Threshold twice in any three trailing fiscal quarters, or (iii) the
later of (A) August 14, 2017 or (B) May 15, 2018, if Borrower achieves trailing
six (6) month revenue under GAAP of at least Twenty Five Million Dollars
($25,000,000.00) during any consecutive six (6) month period (measured at the
end of any fiscal month) prior to the fiscal quarter ending June 2017, subject
to verification and supporting evidence reasonably requested by Collateral
Agent. By way of example, if Borrower achieves trailing six (6) month revenue
under GAAP of $27,000,000 during the period from September 1, 2016 to
February 28, 2017 and has not failed to satisfy the Amortization Threshold twice
in any three trailing fiscal quarters, then the Amortization Date would be
May 15, 2018.

“Amortization Period” means, individually and collectively, (i) the 2017
Amortization Period; (ii) the 2018 Amortization Period; and (iii) the Subsequent
Amortization Period.

“Amortization Threshold” means the Borrower continuing to maintain on the last
day of each fiscal quarter of Borrower a ratio of (A) (i) cash operating
expenses plus (ii) cash interest expenses arising under the Loans (but not
including any fees or other consideration payable to the Agent or Lenders under
the Loan Documents) plus (iii) without duplication of any interest expenses,
Capital Expenditures divided by (B) Gross Profit, measured on a quarterly basis
on the last day of such fiscal quarter, at levels not to exceed the thresholds
in the table below:

 

Quarter    Ratio

Quarter beginning April 1, 2015

   4.50

Quarter beginning July 1, 2015

   3.50

Quarter beginning October 1, 2015

   2.60

Quarter beginning January 1, 2016

   1.80

Quarter beginning April 1, 2016

   1.80

Quarter beginning July 1, 2016

   1.60

Quarter beginning October 1, 2016

   1.30

Quarters beginning January 1, 2017, and beyond

   1.00

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including without limitation Executive Order No. 13224 (effective September 24,
2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy
Act, and the laws administered by OFAC.

“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c) a Person with

 

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which any Lender is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or
conspires to commit or supports “terrorism” as defined in Executive Order
No. 13224, or (e) a Person that is named a “specially designated national” or
“blocked person” on the most current list published by OFAC or other similar
list.

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

“Business Day” is any day that is not a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the states of New York or Illinois.

“Capital Expenditures” means, with respect to Borrower for any period, the
aggregate of all expenditures by Borrower and its Subsidiaries during such
period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.

“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., and (c) certificates of deposit
maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control
Agreement in favor of Collateral Agent.

“Change of Control” means the Borrower enters into any transaction or series of
related transactions in which (A) any “person” or “group” (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan) that was not a stockholder
of Borrower immediately prior to the first such transaction becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of more than 35% of
the voting stock of Borrower immediately after giving effect to such transaction
or related series of such transactions; or (B) Borrower ceases to own 100% of
the ownership interests of a Subsidiary of Borrower.

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

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account, or any other bank account maintained by Borrower or any Subsidiary at
any time.

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

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

 

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“Compliance Certificate” is that certain certificate in substantially the form
attached hereto as Exhibit D, together with such amendments, supplements,
modifications or replacements to such form as the Borrower and Collateral Agent
may hereafter approve.

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

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

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

“Corporate Credit Card Obligations” means Indebtedness arising with respect to a
certain line of credit, in the amount of $250,000, extended by Silicon Valley
Bank to Borrower in connection with Borrower’s corporate credit card, or any
successor or replacement of Silicon Valley Bank.

“Cost of Goods Sold” is the cost of goods or services as measured under GAAP.

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

“DOJ” means the U.S. Department of Justice or any successor thereto or any other
comparable Governmental Authority.

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

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

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

“Excluded Deposit Account” means any Deposit Account exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s, or any of its Subsidiaries’, employees and identified
to Collateral Agent by Borrower as such in the Perfection Certificate.

“Exigent Circumstance” means any event or circumstance that, in the reasonable
judgment of Collateral Agent, imminently threatens the ability of Collateral
Agent to realize upon all or any material portion of the Collateral, such as,
without limitation, fraudulent removal, concealment, or abscondment thereof,
destruction or material waste thereof, or failure of Borrower or any of its
Subsidiaries after reasonable demand to maintain or reinstate adequate casualty
insurance coverage, or which, in the judgment of Collateral Agent, could
reasonably be expected to result in a material diminution in value of the
Collateral.

 

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“Facility Fee” is a fee due on the Effective Date equal to 1.50% of the total
Term Loan Commitment, payable to the Lenders in accordance with their respective
Pro Rata Shares.

“FDA” means the U.S. Food and Drug Administration or any successor thereto or
any other comparable Governmental Authority.

“Final Fee” is a payment (in addition to and not a substitution for the regular
quarterly payments of principal plus accrued interest or any other fee payable
hereunder) due on the earliest to occur of (a) the Maturity Date, or (b) the
acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to
Section 2.2(c) or (d), in each case equal to five percent (5%) multiplied by the
principal amount of the Term Loan funded at such time, payable to Lenders in
accordance with their respective Pro Rata Shares.

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

“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any state thereof.

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

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

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

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

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body (including, without limitation, the FDA and DOJ), court, central
bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative functions of or pertaining to government, any
securities exchange and any self-regulatory organization.

“Gross Profit” is the sum of (a) Net Sales, minus (b) Cost of Goods Sold.

“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent for
the benefit of the Lenders.

 

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“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.

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

“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 or proceedings
seeking reorganization, arrangement, or other relief.

“Insolvent” means not Solvent.

“Intellectual Property” means all of Borrower’s or any of its Subsidiaries’
right, title and interest in and to the following:

(a) its Copyrights, Trademarks and Patents;

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

(c) any and all source code;

(d) any and all design rights which may be available to Borrower;

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above;

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents; and

(g) all licenses, sublicenses or other contracts under which Borrower or any
Subsidiary is granted rights by third parties in any Intellectual Property
asset.

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

“Investment” is, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of beneficial ownership interests (including stock, partnership
interest, or other equity securities) of another Person, (b) a loan, advance or
capital contribution to, guarantee or assumption of debt of, or purchase or
other acquisition of any other debt in, another Person, or (c) any other
investment of money or capital in order to obtain a profitable return. For
purposes of covenant compliance, the amount of any Investment shall be the
amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment.

“IP Security Agreement” is that certain Intellectual Property Security Agreement
executed and delivered by Borrower to Collateral Agent and dated as of the
Effective Date, as may be amended, restated, or otherwise modified or
supplemented from time to time.

 

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“Key Person” is each of Borrower’s (i) President and Chief Executive Officer,
who is Michael McGarrity as of the Effective Date, (ii) Chief Financial Officer,
who is Ann Wallin, as of the Effective Date, and (iii) Chief Strategy Officer
who is Kenneth Bahk as of the Effective Date.

“Knowledge” means to the Borrower’s knowledge, or with a similar qualification,
knowledge means the actual knowledge of the Responsible Officers.

“Lender” is any one of the Lenders.

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

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

“LIBOR Rate” means 11.50% plus the greater of (a) 1.00% per annum, and (b) as
determined by Collateral Agent, the rate per annum published by the
Intercontinental Exchange Benchmark Administration Ltd. (the “Service”) (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service) as the “London Interbank Offered Rate” for a period
of three months, two (2) Business Days prior to the commencement of such initial
and each consecutive three month period, which determination shall be conclusive
in the absence of manifest error.

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

“Loan Documents” are, collectively, this Agreement, the IP Security Agreement,
the Warrants, the Perfection Certificates, each Control Agreement, each
Compliance Certificate, each Loan Payment Request Form, any subordination
agreements, any note, or notes or guaranties executed by Borrower or any other
Person, and any other present or future agreement entered into by Borrower, any
Guarantor or any other Person for the benefit of the Lenders and Collateral
Agent in connection with this Agreement; all as amended, restated, or otherwise
modified or supplemented from time to time.

“Loan Payment Request Form” is that certain form attached hereto as Exhibit C,
together with such amendments, supplements, modifications or replacements to
such form as the Borrower and Collateral Agent may hereafter approve.

“Material Adverse Change” is (a) a material adverse change in the business,
operations or condition (financial or otherwise) or prospects of Borrower or any
Subsidiary, when taken as a whole; (b) a material impairment of the ability of
the Borrower to repay any outstanding portion of the Obligations or (c) a
material adverse effect on the Collateral.

“Material Agreement” is any license, agreement or other contractual arrangement
with a Person or Governmental Authority whereby Borrower or any of its
Subsidiaries is reasonably likely to be required to transfer, either in-kind or
in cash, prior to the Maturity Date, assets or property valued (book or market)
at more than $250,000 in the aggregate or any license, agreement or other
contractual arrangement conveying rights in or to any intellectual property
necessary to make, use or sell any Inventory, products or services of Borrower
or any Subsidiary.

“Maturity Date” is, for each Term Loan, the earlier of (i) May 14, 2021 and
(ii) if the Borrower fails to satisfy the Amortization Threshold twice in any
three trailing fiscal quarters, the date that is the sixth next scheduled
Payment Date.

 

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“Milestone Date” is the date that Borrower has achieved, prior to May 14, 2016,
(i) trailing six (6) month revenue under GAAP of at least Twelve Million Dollars
($12,000,000.00) during any consecutive six (6) month period, measured quarterly
on an unaudited basis for any quarter for which audited financial statements are
not available; and (ii) no less than 100 cumulative new unit placements (such
placements having not been in existence as of January 1, 2015) during any
consecutive twelve (12) month period, measured quarterly; in each case subject
to verification and supporting evidence reasonably requested by Collateral
Agent.

“Net Sales” means for any period, net revenue of the Borrower and its
Subsidiaries for such period, derived solely from Product Sales, services,
royalty payments, and other revenue from the sale, licensing, or distribution of
Products and services (including Products distributed for product development
purposes and used in pre-clinical trials). To the extent applicable, components
of Net Sales shall be determined in the ordinary course of business in
accordance with historical practice and using the accrual method of accounting
in accordance with GAAP.

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Fee, any
Revenue-Based Payments and other amounts Borrower owes the Lenders now or later,
in connection with, related to, following, or arising from, out of or under,
this Agreement or, the other Loan Documents, or otherwise, and including
interest accruing after Insolvency Proceedings begin (whether or not allowed)
and debts, liabilities, or obligations of Borrower assigned to the Lenders
and/or Collateral Agent, and the performance of Borrower’s duties under the Loan
Documents.

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

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

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

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
re-examination certificates, utility models, extensions and
continuations-in-part of the same.

“Payment Date” is the earlier to occur of (i) the forty-fifth (45th) calendar
day of each fiscal quarter or (ii) when such forty-fifth (45th) calendar day is
not a Business Day, the next immediately succeeding Business Day. The first
Payment Date to occur hereunder shall be August 14, 2015.

“Permitted Indebtedness” is:

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

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

(c) Corporate Credit Card Obligations;

(d) Subordinated Debt;

(e) unsecured Indebtedness to trade creditors and in connection with credit
cards incurred in the ordinary course of business;

 

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(f) Indebtedness consisting of capitalized lease obligations and purchase money
Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to
finance the acquisition, repair, improvement or construction of fixed or capital
assets of such person, provided that (i) the aggregate outstanding principal
amount of all such Indebtedness does not exceed Two Hundred Fifty Thousand
Dollars ($250,000.00) at any time and (ii) the principal amount of such
Indebtedness does not exceed the lower of the cost or fair market value of the
property so acquired or built or of such repairs or improvements financed with
such Indebtedness (each measured at the time of such acquisition, repair,
improvement or construction is made);

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

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

“Permitted Investments” are:

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

(b) (i) Investments consisting of cash and Cash Equivalents, and (ii) any
Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such amendments to the investment policy has been approved
in writing by Collateral Agent, such approval not to be unreasonably withheld;

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

(d) Investments consisting of Deposit Accounts in which Collateral Agent has a
perfected security interest;

(e) Investments in connection with Transfers permitted by Section 7.1;

(f) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s board of directors; not to
exceed Fifty Thousand Dollars ($50,000.00) in the aggregate for (i) and (ii) in
any fiscal year;

(g) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business;

(h) 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 paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary;

(i) Investments in Subsidiaries, not to exceed Two Hundred Fifty Thousand
Dollars $250,000 per fiscal year; and

(j) non-cash Investments in joint ventures or strategic alliances in the
ordinary course of Borrower’s business consisting of the non-exclusive licensing
of technology, the development of technology or the providing of technical
support.

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public and (B) non-exclusive licenses for the use
of the Intellectual Property of Borrower or any of its Subsidiaries,

 

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and licenses in effect on the date hereof and disclosed on the Perfection
Certificate, in each case entered into in the ordinary course of business,
provided, that, with respect to each such license described in clause (B), the
license constitutes an arms-length transaction, the terms of which, on their
face, do not provide for a sale or assignment of any Intellectual Property
(except for those licenses which provide for sales, assignments, or transfers
upon any change of control, merger or acquisition effecting the Borrower or any
sale of all or substantially all of the assets of the Borrower) and do not
restrict the ability of Borrower or any of its Subsidiaries, as applicable, to
pledge, grant a security interest in or lien on any Intellectual Property.

“Permitted Liens” are:

(a) Liens existing on the Effective Date and disclosed on the Perfection
Certificates or arising under this Agreement and the other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies,
either (i) not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on its Books;

(c) Liens securing Indebtedness permitted under clause (f) of the definition of
“Permitted Indebtedness,” provided that (i) such Liens exist prior to the
acquisition of, or attach substantially simultaneous with, or within twenty
(20) days after the, acquisition, lease, repair, improvement or construction of,
such property financed or leased by such Indebtedness and (ii) such Liens do not
extend to any property of Borrower other than the property (and proceeds
thereof) acquired, leased or built, or the improvements or repairs, financed by
such Indebtedness;

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Two Hundred Fifty Thousand Dollars ($250,000.00), and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

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

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

(g) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Collateral Agent or any Lender
a security interest therein;

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

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

(j) Permitted Licenses.

 

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

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

(i) for a prepayment made through and including the first anniversary of the
Effective Date, two percent (2.00%) of the principal amount of such Term Loan
prepaid;

(ii) for a prepayment made after the first anniversary of the Effective Date
through and including the third anniversary of the Effective Date, one percent
(1.00%) of the principal amount of the Term Loans prepaid; and

(iii) for a prepayment made after the date which is after the third anniversary
of the Effective Date and prior to the Maturity Date, zero percent (0.00%) of
the principal amount of the Term Loans prepaid.

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

“Product” means any products manufactured, sold, developed, tested or marketed
by Borrower or any of its Subsidiaries.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, and whether tangible or intangible.

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

“Registration” means any registration, authorization, approval, license, permit,
clearance, certificate, and exemption issued or allowed by the FDA (including,
without limitation, new drug applications, abbreviated new drug applications,
biologics license applications, investigational new drug applications,
over-the-counter drug monograph, device pre-market approval applications, device
pre-market notifications, investigational device exemptions, product
recertifications, manufacturing approvals, registrations and authorizations, CE
Marks, pricing and reimbursement approvals, labeling approvals or their foreign
equivalent, controlled substance registrations, and wholesale distributor
permits).

“Regulatory Action” means an administrative, regulatory, or judicial enforcement
action, proceeding, investigation or inspection, FDA Form 483 notice of
inspectional observation, warning letter, untitled letter, other notice of
violation letter, recall, seizure, Section 305 notice or other similar written
communication, injunction or consent decree, issued by the FDA or a federal or
state court.

“Related Persons” means, with respect to any Person, each Affiliate of such
Person and each director, officer, employee, agent, trustee, representative,
attorney, accountant and each insurance, environmental, legal, financial and
other advisor and other consultants and agents of or to such Person or any of
its Affiliates.

“Required Lenders” means Lenders holding at least fifty-one percent (51%) of the
aggregate outstanding principal balance of the Term Loan.

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

 

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

“Revenue Based Payment” has the meaning assigned such term in Section 2.6
hereof.

“Royalties” means the amount of any and all royalties, license fees and any
other payments or income of any type recognized as revenue in accordance with
GAAP by Borrower and its Subsidiaries with respect to the sale of Products or
the provision of services by independent licensees of Borrower and/or its
Subsidiaries, including any such payments characterized as a share of net
profits, any up-front or lump sum payments, any milestone payments, commissions,
fees or any other similar amounts, less deductions for amounts deducted, repaid
or credited by reason of adjustments to the sales upon which royalty amounts are
based, regardless of the reason for such adjustment to such sales. For the
purposes of calculating Royalties, Lenders and Collateral Agent understand and
agree that Affiliates of Borrower shall not be regarded as independent
licensees.

“Second Draw Period” is the period commencing on the Milestone Date and ending
on May 14, 2016.

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

“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement; and
such Person is able to pay its debts (including trade debts) as they mature in
the ordinary course (without taking into account any forbearance and extensions
related thereto).

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

“Subsequent Amortization Period” means the period including the second, third
and fourth Payment Dates of calendar year 2019, and each subsequent Payment Date
thereafter.

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

“Supermajority Lenders” means (a) prior to the sale or assignment by SWK Funding
LLC of any interest held in the Obligations to any Person other than a
controlled Affiliate of SWK Funding LLC (including any Person for which SWK
Advisors LLC acts as an investment advisor (or similar type of representation or
agency) pursuant to a written agreement), at least sixty six and two-thirds of
one percent (66 2/3%), or (b) after the sale or assignment by SWK Funding LLC of
any interest held in the Obligations to any Person other than a controlled
Affiliate of SWK Funding LLC (including any Person for which SWK Advisors LLC
acts as an investment advisor (or similar type of representation or agency)
pursuant to a written agreement), the Required Lenders.

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

 

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“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower and each of its
Subsidiaries connected with and symbolized by such trademarks.

“Warrant” means any of that certain Warrant to Purchase Stock dated as of the
Effective Date issued by Borrower in favor of a Lender or such Lender’s
Affiliates or any other warrant entered into in connection with the Term Loan,
all as may be amended, restated, or otherwise modified or supplemented from time
to time.

 

2. LOANS AND TERMS OF PAYMENT

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

2.2 Term Loans.

(a) Availability.

(i) Subject to the terms and conditions of this Agreement, the Lenders agree,
severally and not jointly, to make term loans to Borrower on the Effective Date
in an aggregate principal amount of Twenty Million Dollars ($20,000,000.00)
according to each Lender’s Term A Loan Commitment as set forth on Schedule 1.1
hereto (such term loans are hereinafter referred to singly as a “Term A Loan”,
and collectively as the “Term A Loans”). After repayment, no Term A Loan may be
re-borrowed.

(ii) Subject to the terms and conditions of this Agreement, the Lenders agree,
severally and not jointly, during the Second Draw Period, upon the request of
Borrower, to make term loans to Borrower in an aggregate principal amount up to
Ten Million Dollars ($10,000,000) in one advance according to each Lender’s
Term B Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are
hereinafter referred to singly as a “Term B Loan”, and collectively as the
“Term B Loans”; each Term A Loan or Term B Loan is hereinafter referred to
singly as a “Term Loan” and the Term A Loans and the Term B Loans are
hereinafter referred to collectively as the “Term Loans”). After repayment, no
Term B Loan may be re-borrowed.

(b) Repayment.

(i) Borrower shall make quarterly payments of interest, in arrears, commencing
on the first (1st) Payment Date following the Funding Date of each Term Loan,
and continuing on the Payment Date of each successive quarter thereafter.
Commencing on the Amortization Date, and continuing on the Payment Date of each
quarter thereafter, Borrower shall make payments of principal to each Lender in
accordance with Section 2.6. All unpaid principal and accrued and unpaid
interest with respect to each Term Loan is due and payable in full on the
Maturity Date. The Term Loans may only be prepaid (other than via the
application of Revenue-Based Payments in accordance with Section 2.6) in
accordance with Sections 2.2(c) and 2.2(d).

 

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(ii) Notwithstanding Section 2.6 or any other provision in the Loan Documents,
quarterly principal payments made on or after the Amortization Date shall not
exceed the following (the “Amortization Cap”):

 

Prior to the Funding Date of the Term B Loans:

 

Payment Date

   Quarterly, Aggregate Cap on Principal
Payments to be Made to Lenders  

Each Payment Date During the 2017 Amortization Period

   $ 500,000.00   

Each Payment Date During the 2018 Amortization Period

   $ 1,000,000.00   

Each Payment Date During the Subsequent Amortization Period

   $ 1,666,667.00   

Upon and after the Funding Date of the Term B Loans

 

Payment Date

   Quarterly, Aggregate Cap on Principal
Payments to be Made to Lenders  

Each Payment Date During the 2017 Amortization Period

   $ 750,000.00   

Each Payment Date During the 2018 Amortization Period

   $ 1,500,000.00   

Each Payment Date During the Subsequent Amortization Periods

   $ 2,500,000.00   

Notwithstanding any of the foregoing, if Borrower fails to satisfy the
Amortization Threshold twice in any three trailing fiscal quarters, the above
table shall cease to have effect, and principal payments shall not exceed, in
the aggregate on any Payment Date, (i) $3,333,333.34 prior to the Funding Date
of the Term B Loans, and (ii) $5,000,000.00 upon and after the Funding Date of
the Term B Loans, in each case in any fiscal year.

(c) Mandatory Prepayments. If an event described in Section 7.2(c)(ii) occurs or
the Term Loans are accelerated following the occurrence of an Event of Default,
Borrower shall immediately pay to Lenders, payable to each Lender in accordance
with its respective Pro Rata Share, an amount equal to the sum of: (i) all
outstanding principal of the Term Loans plus accrued and unpaid interest thereon
through the prepayment date, (ii) the Final Fee, (iii) the Prepayment Fee (if
any), plus (iv) all other Obligations that are due and payable, including,
without limitation, Lenders’ Expenses and interest at the Default Rate with
respect to any past due amounts. Notwithstanding (but without duplication with)
the foregoing, on the Maturity Date, if the Final Fee had not previously been
paid in full in connection with the prepayment of the Term Loans in full,
Borrower shall pay to each Lender in accordance with its respective Pro Rata
Share, the Final Fee in respect of the Term Loans.

(d) Permitted Prepayment of Term Loans. Borrower shall have the option to prepay
all, but not less than all, of the Term Loans advanced by the Lenders under this
Agreement, provided Borrower (i) provides written notice to Collateral Agent of
its election to prepay the Term Loans at least five (5) Business Days prior to
such prepayment, and (ii) pays to the Lenders on the date of such prepayment,
payable to each Lender in accordance with its respective Pro Rata Share, an
amount equal to the sum of (A) all outstanding principal of the Term Loans plus
accrued and unpaid interest thereon through the prepayment date, (B) the Final
Fee, (C) the Prepayment Fee, plus (D) all other Obligations that are due and
payable, including, without limitation, Lenders’ Expenses and interest at the
Default Rate with respect to any past due amounts.

(e) Additional Uncommitted Term Loan.

(i) Request for Additional Term Loan. Provided no Event of Default then exists
or would arise therefrom, upon notice to the Collateral Agent (which shall
promptly notify the Lenders), the Borrower may, from time to time, request that
the Lenders advance additional term loans hereunder. At the time

 

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of sending such notice, the Lead Borrower (in consultation with the Agent) shall
specify the time period within which each Lender is requested to respond (which
shall in no event be less than thirty (30) Business Days from the date of
delivery of such notice to the Lenders).

(ii) Lender Elections to Increase. Each Lender shall notify the Collateral Agent
within such time period whether or not it agrees to provide an additional term
loan hereunder and, if so, whether by an amount equal to, greater than, or less
than its Commitment Percentage of such requested increase. Any Lender not
responding within such time period shall be deemed to have declined to provide
such additional term loan. Notwithstanding anything set forth in this Agreement
or any other Loan Document to the contrary, no Lender shall make any such
additional term loans or other advances under this Agreement without the
unanimous written consent of all other Lenders in their sole discretion (i.e. no
Lender may increase the Indebtedness of Borrower hereunder over and above the
advance, if any, of the Term B Loan).

(f) Notification by Collateral Agent; Additional Lenders. The Collateral Agent
shall notify the Borrower and each Lender of the Lenders’ responses to each
request made hereunder. To achieve the full amount of the requested term loan
and subject to the approval of the Collateral Agent, to the extent that the
existing Lenders decline to provide an additional term loan in the amount
requested by the Borrower, the Collateral Agent, in consultation with the
Borrower, will use its reasonable efforts to arrange for other Persons to become
a Lender hereunder and to issue commitments in an amount equal to the amount of
the term loans requested by the Borrower and not accepted by the existing
Lenders (and the Borrower may also invite additional Persons to become Lenders).

(g) Effective Date and Allocations. If additional term loans are to be made in
accordance with this Section, the Collateral Agent, in consultation with the
Borrower, shall determine the effective date (the “Additional Term Loan
Effective Date”) and the final allocation of such term loan. The Collateral
Agent shall promptly notify the Borrower and the Lenders of the final allocation
of such term loan and the Additional Term Loan Effective Date and on such date
(i) the additional term loans shall be made, subject to the terms and conditions
of the Loan Documents, and (ii) Schedule 1.1 shall be deemed modified, without
further action, to reflect the revised additional term loans of the Lenders.

(h) Conditions to Effectiveness of Additional Term Loans. As a condition
precedent to such additional term loan to be made pursuant to this Section,
(i) the Borrower shall deliver to the Collateral Agent a certificate dated as of
the Additional Term Loan Effective Date (in sufficient copies for each Lender)
signed by a Responsible Officer (A) certifying and attaching the resolutions
adopted by Borrower approving or consenting to such additional term loan, and
(B) certifying that, before and after giving effect to such additional term
loan, (1) the representations and warranties contained in Article V, and the
other Loan Documents are true and correct on and as of the Additional Term Loan
Effective Date, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they are true and correct
as of such earlier date, and except that for purposes of this Section, the
representations and warranties applicable to any financial statements shall be
deemed to refer to the most recent statements furnished by the Borrower to the
Lenders under this Agreement, and (2) no Event of Default exists or would arise
therefrom, (ii) the Borrower, the Collateral Agent, and any additional Lender
shall have executed and delivered a joinder to the Loan Documents in such form
as the Collateral Agent shall reasonably require; (iii) the Borrower shall have
paid such fees and other compensation to the Lenders and the Collateral Agent as
the Borrower, the Collateral Agent, and the Lenders shall agree; (iv) if
requested by the Collateral Agent, the Borrower shall deliver to the Collateral
Agent and the Lenders an opinion or opinions, in form and substance reasonably
satisfactory to the Collateral Agent, from counsel to the Borrower dated such
date; and (v) the Borrower, the Collateral Agent, and the Lenders shall have
delivered such other instruments, documents, agreements, and amendments to the
Loan Documents as the Collateral Agent may reasonably have requested.
Notwithstanding any of the foregoing in this Section 2.2(e), any additional term
loan made pursuant to this Section shall be subject to the approval of the
Lenders’ credit committees in their sole discretion.

2.3 Payment of Interest on the Term Loans.

(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding
under the Term Loans shall accrue interest at a per annum rate equal to the
LIBOR Rate, which interest shall be payable quarterly in arrears in accordance
with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan
commencing on, and including, the Funding Date of such Term Loan, and shall
accrue on the principal amount outstanding under such Term Loan through and
including the day on which such Term Loan is paid in full.

 

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(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall accrue interest at a fixed per annum rate
equal to the rate that is otherwise applicable thereto plus five percentage
points (5.00%) (the “Default Rate”). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Collateral Agent.

(c) 360-Day Year. Interest shall be computed on the basis of a three hundred
sixty (360) day year and the actual number of days elapsed.

(d) Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any
deposit accounts, maintained by Borrower or any of its Subsidiaries for
principal and interest payments or any other amounts Borrower owes the Lenders
under the Loan Documents when due. Any such debits (or ACH activity) shall not
constitute a set-off.

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

2.4 Fees. Borrower shall pay to Collateral Agent:

(a) Facility Fee. The Facility Fee, which shall be due on the Effective Date, to
be shared between the Lenders in accordance with their respective Pro Rata
Shares;

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

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

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

2.5 Withholding. Payments received by the Collateral Agent or the Lenders from
Borrower hereunder will be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any governmental
authority (including any interest, additions to tax or penalties applicable
thereto). Specifically, however, if at any time any Governmental Authority,
applicable law, regulation or international agreement requires Borrower to make
any withholding or deduction from any such payment or other sum payable
hereunder to the Lenders, Borrower hereby covenants and agrees that the amount
due from Borrower with respect to such payment or other sum payable hereunder
will be increased to the extent necessary to ensure that, after the making of
such required withholding or deduction, each Lender receives a net sum equal to
the sum which it would have received had no withholding or deduction been
required and Borrower shall pay the full amount withheld or deducted to the
relevant Governmental Authority; provided, that a Lender that shall have become
a Lender pursuant to a Lender Transfer shall be entitled to receive only such
additional amounts as such Lender’s assignor would have been entitled to receive
pursuant to this

 

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Section 2.5. Borrower will, upon request, furnish the Lenders with proof
reasonably satisfactory to the Lenders indicating that Borrower has made such
withholding payment; provided, however, that Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower. The agreements and
obligations of Borrower contained in this Section 2.5 shall survive the
termination of this Agreement.

2.6 Revenue Based Payment.

(a) During the period commencing on the Amortization Date until the Obligations
are satisfied in full (other than inchoate indemnity obligations), Borrower
promises to pay to each Lender according to its Pro Rata Share, an amount based
on the percentage of the aggregate of Net Sales, Royalties and any other income
or revenue recognized by Borrower and its Subsidiaries, on a consolidated basis,
in accordance with GAAP (collectively, the “Aggregate Revenue”) in each fiscal
quarter (the “Revenue-Based Payment”), which will be applied to the outstanding
principal amount of the Term Loans according to each Lender’s Pro Rata Share in
accordance with this Agreement. The Revenue-Based Payment with respect to each
fiscal quarter shall be payable on the Payment Date immediately following such
fiscal quarter and, anything to the contrary in this Agreement, including this
Section 2.6, notwithstanding, shall not exceed the applicable Amortization Cap
in any such fiscal quarter. Commencing with the fiscal quarter immediately prior
to the Amortization Date (such calculations to be prorated for such fiscal
quarter, if applicable, based on actual days elapsed between the Effective Date
and the end of such fiscal quarter), the Revenue-Based Payment, subject to the
immediately preceding sentence, with respect to each fiscal quarter shall be
calculated as the difference between:

(i) the aggregate Revenue-Based Payments payable from January 1 of the fiscal
year of which such fiscal quarter is part through the end of such fiscal
quarter, calculated as the sum of:

(A) (1) forty percent (40%) of Aggregate Revenue up to and including $40,000,000
in such fiscal year; plus (2) twenty five percent (25%) of Aggregate Revenue
greater than $40,000,000 up to and including $60,000,000 in such fiscal year;
plus (3) fifteen percent (15%) of Aggregate Revenue greater than $60,000,000 in
such fiscal year; or

(B) as it relates to any Payment Dates after the Borrower fails to satisfy the
Amortization Threshold twice in any three trailing fiscal quarters, sixty
percent (60%) of Aggregate Revenue; and

(ii) the amount of accrued interest paid to Lenders on or prior to such Payment
Date in such fiscal year plus the amount of Revenue-Based Payments, if any, made
with respect to prior fiscal quarters in such fiscal year; provided that the
Revenue-Based Payment is payable solely upon Aggregate Revenue in a given fiscal
year, and will not be calculated on a cumulative, year-over-year basis.

(c) In the event that Borrower makes any adjustment to Aggregate Revenue after
it has been reported to Agent, and such adjustment results in an adjustment to
the Revenue-Based Payment due to the Lenders pursuant to this Section, Borrower
shall so notify Collateral Agent and such adjustment shall be captured, reported
and reconciled with the next scheduled report and payment of Revenue-Based
Payment hereunder. Notwithstanding the foregoing, Collateral Agent and Borrower
shall discuss and agree on the amount of any such adjustment prior to it being
given effect with respect to future Revenue-Based Payments.

(d) Notwithstanding anything herein to the contrary, if Aggregate Revenue is not
sufficient for Borrower to pay any required interest or other amount due under
this Agreement or any other Loan Document pursuant to Revenue-Based Payments
under this Section 2.6, Borrower shall not be excused from making such payment
and shall remain fully and unconditionally obligated to make such payment under
this Agreement or any other Loan Document.

 

3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Term Loan. Each Lender’s obligation to make
a Term A Loan is subject to the condition precedent that Collateral Agent and
each Lender shall consent to or shall have received, in

 

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form and substance satisfactory to Collateral Agent and each Lender, such
documents, and completion of such other matters, as Collateral Agent and each
Lender may reasonably deem necessary or appropriate, including, without
limitation:

(a) the Loan Documents, each duly executed by Borrower, as applicable;

(b) a completed Perfection Certificate for Borrower;

(c) duly executed Control Agreements with respect to any Collateral Accounts
maintained by Borrower;

(d) the Operating Documents and good standing certificates of Borrower certified
by the Secretary of State (or equivalent agency) of Borrower’s jurisdiction of
organization or formation and each jurisdiction in which Borrower is qualified
to conduct business, each as of a date no earlier than thirty (30) days prior to
the Effective Date;

(e) a copy of resolutions of the governing body for Borrower evidencing approval
of the Term Loans and other transactions evidenced by the Loan Documents;

(f) duly executed original officer’s certificates for Borrower that is a party
to the Loan Documents certifying as to (i) the incumbency of each Responsible
Officer executing each Loan Document and (ii) the documents delivered pursuant
to Section 3.1(d) and 3.1(e), in a form acceptable to Collateral Agent and the
Lenders;

(g) certified copies, dated as of date no earlier than thirty (30) days prior to
the Effective Date, of financing statement searches, as Collateral Agent shall
request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial Term
Loan, will be terminated or released;

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

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

(j) a copy of any applicable Investors Rights Agreement and any amendments
thereto;

(k) payment of the Facility Fee and Lenders’ Expenses then due as specified in
Section 2.4 hereof;

(l) a landlord’s consent executed in favor of Collateral Agent in respect of all
of Borrower’s leased locations;

(m) a payoff letter executed by Oxford Finance LLC; and

(n) Borrower shall have received, in an aggregate amount of at least Four
Million Dollars ($4,000,000), net proceeds from a bona fide equity financing
after May 6, 2015 from investors, provided that such equity financing shall not
permit, or include any provision, permitting redemption, “clawbacks” or similar
rights to any proceeds funded, liquidated damages, escrow or deposit
arrangements, blocked account provisions, limitations on the use of any
proceeds, setoff or similar rights with respect to the proceeds of such
transaction or any other funds, or other restrictions encumbering or limiting
the use of the net proceeds from such transaction or series of related
transactions, subject to verification by Collateral Agent (including supporting
documentation reasonably requested by Collateral Agent).

 

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3.2 Conditions Precedent to all Term Loans. The obligation of each Lender to
extend each Term Loan, including the initial Term Loan, is subject to the
following conditions precedent:

(a) receipt by Collateral Agent of an executed Loan Payment Request Form in the
form of Exhibit C attached hereto;

(b) the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the Funding Date of each Term
Loan; provided, however, that such materiality qualifier shall not be applicable
to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the
funding of such Term Loan;

(c) in such Lender’s reasonable discretion, there has not been any Material
Adverse Change;

(d) no Event of Default or an event that with the passage of time could result
in an Event of Default, shall exist; and

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

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

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of a Term Loan set forth in this Agreement,
to obtain a Term Loan (other than the Term Loan funded on the Effective Date),
Borrower shall notify the Lenders (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 2:00 p.m. New York City time not
less than fifteen (15) Business Days prior to the date the Term Loan is to be
made. Together with any such electronic, facsimile or telephonic notification,
Borrower shall deliver to Collateral Agent by electronic mail or facsimile a
completed Loan Payment Request Form executed by a Responsible Officer or his or
her designee. The Collateral Agent may rely on any telephone notice given by a
person whom Collateral Agent reasonably believes is a Responsible Officer or
designee.

3.5 Post-Closing Obligations. Notwithstanding any provision herein or in any
other Loan Document to the contrary, to the extent not actually delivered on or
prior to the Effective Date, the Borrower shall:

(a) no later than 30 days after the Effective Date (or such later date as
Collateral Agent may agree), use commercially reasonable efforts to deliver a
bailee waiver executed in favor of Collateral Agent in respect of the location
at 5346 36th Street, SE, Grand Rapids, Michigan, 49512;

(b) no later than 30 days after the Effective Date (or such later date as
Collateral Agent may agree), deliver insurance endorsements in favor of
Collateral Agent as required by Section 6.5 of this Agreement; and

(c) no later than 10 days after the Effective Date (or such later date as
Collateral Agent may agree), deliver to Collateral Agent executed Control
Agreements among each of (i) Borrower, Collateral Agent, SVB Asset Management,
and U.S. Bank, N.A., with respect to account no. 19-SV1026, and (ii) Borrower,
Collateral Agent, and Silicon Valley Bank, with respect to account no.
3300938851.

 

4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the
ratable benefit of the Lenders, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in,

 

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and pledges to Collateral Agent, for the ratable benefit of the Lenders, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof. If Borrower shall acquire a
commercial tort claim (as defined in the Code), Borrower shall grant to
Collateral Agent, for the ratable benefit of the Lenders, a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to Collateral
Agent.

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as the Lenders’ obligation
to extend Term Loans has terminated, Collateral Agent shall, at the sole cost
and expense of Borrower, release its Liens in the Collateral and all rights
therein shall revert to Borrower.

4.2 Authorization to File Financing Statements. Borrower hereby authorizes
Collateral Agent to file financing statements or take any other action required
to perfect Collateral Agent’s security interests in the Collateral, without
notice to Borrower, with all appropriate jurisdictions to perfect or protect
Collateral Agent’s interest or rights under the Loan Documents.

 

5. REPRESENTATIONS AND WARRANTIES

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

5.1 Due Organization, Authorization: Power and Authority. Borrower and each of
its Subsidiaries is duly existing and in good standing as a Registered
Organization in its jurisdictions of organization or formation and Borrower and
each of its Subsidiaries is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its businesses or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change. In
connection with this Agreement, Borrower and each of its Subsidiaries has
delivered to Collateral Agent a completed perfection certificate and any updates
or supplements thereto on or before the Effective Date (each a “Perfection
Certificate” and collectively, the “Perfection Certificates”). Borrower
represents and warrants that all the information set forth on the Perfection
Certificates pertaining to Borrower and each of its Subsidiaries is accurate and
complete (it being understood and agreed that Borrower and each of its
Subsidiaries may from time to time update certain information in the Perfection
Certificates after the Effective Date to the extent permitted by one or more
specific provisions in this Agreement; such updated Perfection Certificates
subject to the review and approval of Collateral Agent).

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

5.2 Collateral.

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

 

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(b) The security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral, subject only
to Permitted Liens.

(c) On the Effective Date, and except as disclosed on the Perfection Certificate
(i) the Collateral is not in the possession of any third party bailee, and
(ii) no such third party bailee possesses components of the Collateral in excess
of Two Hundred Fifty Thousand Dollars ($250,000.00).

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

(e) Borrower and each of its Subsidiaries is the sole owner of the Intellectual
Property each respectively purports to own, free and clear of all Liens other
than Permitted Liens. Except as noted on the Perfection Certificates, neither
Borrower nor any of its Subsidiaries is a party to, nor is bound by, any
Material Agreement.

5.3 Litigation. Except as disclosed on the Perfection Certificate, there are no
actions, suits, investigations, or proceedings pending or, to the Knowledge of
the Responsible Officers, threatened in writing by or against Borrower or any of
its Subsidiaries involving (i) more than Two Hundred Fifty Thousand Dollars
($250,000.00), (ii) a claim for infringement of any material intellectual
property or (iii) challenges to the validity of any material Intellectual
Property.

5.4 No Material Adverse Change; Financial Statements. All consolidated financial
statements for Borrower and its Subsidiaries, delivered to Collateral Agent
fairly present, in conformity with GAAP, in all material respects the
consolidated financial condition of Borrower and its Subsidiaries, and the
consolidated results of operations of Borrower and its Subsidiaries. Since
December 31, 2014, there has not been a Material Adverse Change.

5.5 Solvency. Borrower and each of its Subsidiaries, when taken as a whole, are
Solvent.

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

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

 

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

5.8 Tax Returns and Payments; Pension Contributions. Borrower and each of its
Subsidiaries has timely filed all required tax returns and reports, and Borrower
and each of its Subsidiaries, has timely paid all foreign, federal, state, and
local taxes, assessments, deposits and contributions owed by Borrower and such
Subsidiaries in an amount greater than One Hundred Thousand Dollars ($100,000),
in all jurisdictions in which Borrower or any such Subsidiary is subject to
taxes, including the United States, unless such taxes are being contested in
accordance with the next sentence. Borrower and each of its Subsidiaries may
defer payment of any contested taxes, provided that Borrower or such Subsidiary
(a) in good faith contests its obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (b) notifies
Collateral Agent and Lenders of the commencement of, and any material
development in, the proceeding; and (c) maintains adequate reserves or other
appropriate provisions on the books of such Borrower or Subsidiary, as
applicable, in accordance with GAAP and which do not involve, in the reasonable
judgment of the Lenders, any risk of the sale, forfeiture or loss of any of the
Collateral. Neither Borrower nor any of its Subsidiaries is aware of any claims
or adjustments proposed for any of Borrower’s or such Subsidiaries’ prior tax
years which could result in additional taxes becoming due and payable by
Borrower or its Subsidiaries. Borrower and each of its Subsidiaries have paid
all amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and neither Borrower nor any
of its Subsidiaries have withdrawn from participation in, and have not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower or its Subsidiaries, including any liability
to the Pension Benefit Guaranty Corporation or its successors or any other
Governmental Authority.

5.9 Use of Proceeds. Borrower shall use the proceeds of the Term Loans solely as
working capital and to fund its general business requirements in accordance with
the provisions of this Agreement, and not for personal, family, household or
agricultural purposes.

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

 

6. AFFIRMATIVE COVENANTS

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

6.1 Government Compliance.

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

(b) Obtain and keep in full force and effect, all of the material Governmental
Approvals necessary for the performance by Borrower and its Subsidiaries of
their respective businesses and obligations under the Loan Documents and the
grant of a security interest to Collateral Agent for the ratable benefit of the
Lenders, in all of the Collateral.

 

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6.2 Financial Statements, Reports, Certificates; Notices.

(a) Deliver to Collateral Agent and each Lender:

(i) as soon as available, but no later than forty-five (45) days after the last
day of each fiscal quarter of Borrower, a company prepared consolidated and
consolidating balance sheet, income statement and cash flow statement covering
the consolidated operations of Borrower and its Subsidiaries for such month
certified by a Responsible Officer and in a form reasonably acceptable to
Collateral Agent;

(ii) as soon as available, but no later than the later of (i) ninety (90) days
after the last day of Borrower’s fiscal year or (ii) within five (5) days of
filing with the Securities and Exchange Commission, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Collateral Agent in its reasonable
discretion;

(iii) as soon as available after approval thereof by Borrower’s board of
directors, but no later than the earlier of ten (10) days after such approval
and forty-five (45) days after the last day of Borrower’s fiscal
year, Borrower’s annual (A) financial projections and (B) budget, in each case,
for the entire current fiscal year as approved by Borrower’s board of directors;
provided that, any revisions to such projections and/or budget approved by
Borrower’s board of directors shall be delivered to Collateral Agent and the
Lenders no later than seven (7) days after such approval);

(iv) within five (5) days of delivery, copies of all non-ministerial statements,
reports and notices made available to Borrower’s board of directors, security
holders or holders of Subordinated Debt, provided that Borrower shall not be
required to provide any information that is highly sensitive or a trade secret,
as determined in good faith by Borrower’s board of directors, subject to
attorney-client privilege or which presents a conflict of interest with
Collateral Agent or Lenders;

(v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission;

(vi) as soon as available, but no later than thirty (30) days after the last day
of each month, copies of the month-end account statements for each Collateral
Account maintained by Borrower or its Subsidiaries, which statements may be
provided to Collateral Agent and each Lender by Borrower or directly from the
applicable institution(s);

(vii) prompt delivery of (and in any event within five (5) days after the same
are sent or received) copies of all material correspondence, reports, documents
and other filings with any Governmental Authority that could reasonably be
expected to have a material adverse effect on any of the Governmental Approvals
material to Borrower’s business or otherwise could reasonably be expected to
have a Material Adverse Change;

(viii) prompt notice of any event that (A) could reasonably be expected to
materially and adversely affect the Borrower’s Intellectual Property and
(B) could reasonably be expected to result in a Material Adverse Change;

(ix) written notice at least (10) days prior to Borrower’s creation of a
Subsidiary in accordance with the terms of Section 6.10);

(x) written notice: (1) at least thirty (30) days prior to Borrower’s (A) adding
any new offices or business locations, including warehouses (unless such new
offices or business locations contain less than Two Hundred Fifty Thousand
Dollars ($250,000.00) in assets or property of Borrower or any of its
Subsidiaries), (B) changing its jurisdiction of organization, (C) changing its
organizational structure or type, (D) change its legal name, or (E) changing any
organizational number (if any) assigned by its jurisdiction of organization; and
(2) at least fifteen (15) days prior to Borrower’s registering or filing any
Intellectual Property after the date hereof; provided, however, that the
Borrower may, if commercially reasonable and in accordance with current
practices, file or register any Intellectual Property prior to any such notice,
provided that Borrower provides Collateral Agent with prompt notice after such
filing;

 

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(xi) upon Borrower becoming aware of the existence of any Event of Default or
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default, prompt (and in any event within three
(3) Business Days) written notice of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default;

(xii) notice if Borrower or such Subsidiary has Knowledge that Borrower, or any
Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is
convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is
arraigned and held over on charges involving money laundering or predicate
crimes to money laundering;

(xiii) upon Borrower becoming aware of the existence of any commercial tort
claim greater than Two Hundred Fifty Thousand Dollars ($250,000), notice of such
commercial tort claim and of the general details thereof;

(xiv) if Borrower or any of its Subsidiaries is not now a Registered
Organization but later becomes one, written notice of such occurrence and
information regarding such Person’s organizational identification number within
seven (7) Business Days of receiving such organizational identification number;

(xv) Upon Collateral Agent’s request, Borrower shall furnish to Collateral
Agent a report, in form acceptable to Collateral Agent, reconciling the
Royalties, Net Sales and all other revenue reported by Borrower to Collateral
Agent during any reporting period to the Aggregate Revenue reported by Borrower
hereunder for such period and the amount of Revenue-Based Payment(s) made by
Borrower in connection with such period(s); and

(xvi) other information as reasonably requested by Collateral Agent or any
Lender.

Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date on which Borrower posts such documents, or provides a link thereto, on
Borrower’s website on the internet at Borrower’s website address.

(b) No later than thirty (30) days after the last day of each month, deliver to
Collateral Agent and each Lender:

(i) a duly completed Compliance Certificate signed by a Responsible Officer;

(ii) an updated Perfection Certificate to reflect any amendments, modifications
and updates to certain information in the Perfection Certificate after the
Effective Date to the extent such amendments, modifications and updates are
permitted by one or more specific provisions in this Agreement;

(iii) copies of any material Governmental Approvals obtained by Borrower or any
of its Subsidiaries;

(iv) written notice of the commencement of, and any material development in, the
proceedings contemplated by Section 5.8 hereof;

(v) written notice of any litigation or governmental proceedings pending or
threatened (in writing) against Borrower or any of its Subsidiaries, which could
reasonably be expected to result in damages or costs to Borrower or any of its
Subsidiaries of Two Hundred Fifty Thousand Dollars ($250,000.00); and

 

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(vi) written notice of all returns, recoveries, disputes and claims regarding
Inventory that involve more than Two Hundred Fifty Thousand Dollars
($250,000.00) individually or in the aggregate in any calendar year.

(c) Keep proper, complete and true books of record and account in accordance
with GAAP in all material respects. Borrower shall, and shall cause each of its
Subsidiaries to, allow, at the sole cost of Borrower, Collateral Agent or any
Lender, during regular business hours upon reasonable prior notice (provided
that no notice shall be required when an Event of Default has occurred and is
continuing), to visit and inspect any of its properties, to examine and make
abstracts or copies from any of its books and records, and to conduct a
collateral audit and analysis of its operations and the Collateral. Such audits
shall be conducted no more often than twice every year unless (and more
frequently if) an Event of Default has occurred and is continuing.
Notwithstanding the foregoing, upon request of any Lender, Borrower agrees to
permit such Lender to communicate with Borrower’s accounting firm with respect
to the consolidated financial statements delivered hereunder.

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower, or any of
its Subsidiaries, and their respective Account Debtors shall follow Borrower’s,
or such Subsidiary’s, customary practices as they exist at the Effective Date.

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

6.5 Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral
insured for risks and in amounts standard for companies in Borrower’s and its
Subsidiaries’ industry and location and as Collateral Agent may reasonably
request, including, but not limited to, D&O insurance. Insurance policies shall
be in a form, with companies, and in amounts that are reasonably satisfactory to
Collateral Agent and Lenders. All property policies shall have a lender’s loss
payable endorsement showing Collateral Agent as lender loss payee and waive
subrogation against Collateral Agent, and all liability policies shall show, or
have endorsements showing, Collateral Agent, as additional insured. The
Collateral Agent shall be named as lender loss payee and/or additional insured
with respect to any such insurance providing coverage in respect of any
Collateral, and each provider of any such insurance shall agree, by endorsement
upon the policy or policies issued by it or by independent instruments furnished
to the Collateral Agent, that it will give the Collateral Agent thirty
(30) days’ prior written notice before any such policy or policies shall be
materially altered or canceled. At Collateral Agent’s request, Borrower shall
deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Collateral Agent’s option, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account
of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of
Default has occurred and is continuing, Borrower shall have the option of
applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand
Dollars ($250,000.00) with respect to any loss, but not exceeding Two Hundred
Fifty Thousand Dollars ($250,000.00), in the aggregate for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property
(i) shall be of equal or like value as the replaced or repaired Collateral and
(ii) shall be deemed Collateral in which Collateral Agent has been granted a
first priority security interest, and (b) after the occurrence and during the
continuance of an Event of Default, all proceeds payable under such casualty
policy shall, at the option of Collateral Agent, be payable to Collateral Agent,
for the ratable benefit of the Lenders, on account of the Obligations. If
Borrower or any of its Subsidiaries fails to obtain insurance as required under
this Section 6.5 or to pay any amount or furnish any required proof of payment
to third persons, Collateral Agent and/or any Lender may make (but has no
obligation to do so), at Borrower’s expense, all or part of such payment or
obtain such insurance policies required in this Section 6.5, and take any action
under the policies Collateral Agent or such Lender deems prudent.

 

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6.6 Operating Accounts.

(a) Borrower shall provide Collateral Agent ten (10) days’ prior written notice
before Borrower or any of its Subsidiaries establishes any Collateral Account.
In addition, for each Collateral Account that Borrower or any of its
Subsidiaries, at any time maintains, other than the Excluded Deposit Accounts,
Borrower or such Subsidiary shall cause the applicable bank or financial
institution at or with which such Collateral Account is maintained to execute
and deliver a Control Agreement or other appropriate instrument with respect to
such Collateral Account to perfect Collateral Agent’s Lien in such Collateral
Account in accordance with the terms hereunder prior to the establishment of
such Collateral Account, which Control Agreement may not be terminated without
prior written consent of Collateral Agent.

(b) Neither Borrower nor any of its Subsidiaries shall maintain any Collateral
Accounts except Collateral Accounts maintained in accordance with Section 6.6.

6.7 Protection of Intellectual Property Rights. Borrower and each of its
Subsidiaries shall: (a) protect, defend and maintain the validity and
enforceability of its Intellectual Property that is material to its business;
(b) promptly advise Collateral Agent in writing of a challenge to the validity
of Borrower’s interest in any material Intellectual Property of Borrower, or
material infringement by a third party of its Intellectual Property; and (c) not
allow any Intellectual Property material to its business to be abandoned,
forfeited or dedicated to the public without Collateral Agent’s prior written
consent.

6.8 Litigation Cooperation. Commencing on the Effective Date and continuing
through the termination of this Agreement, make available to Collateral Agent
and the Lenders, without expense to Collateral Agent or the Lenders, Borrower
and each of Borrower’s officers, employees and agents and Borrower’s Books, to
the extent that Collateral Agent or any Lender may reasonably deem them
necessary to prosecute or defend any third-party suit or proceeding instituted
by or against Collateral Agent or any Lender with respect to any Collateral or
relating to Borrower.

6.9 Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its
Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will first
receive the written consent of Collateral Agent and, in the event that the
Collateral at any new location is valued in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) in the aggregate, at Collateral Agent’s election, such
bailee or landlord, as applicable, must execute and deliver a bailee waiver or
landlord waiver, as applicable, in form and substance reasonably satisfactory to
Collateral Agent prior to the addition of any new offices or business locations,
or any such storage with or delivery to any such bailee, as the case may be.

6.10 Creation/Acquisition of Subsidiaries. In the event any Borrower or any
Subsidiary of any Borrower creates or acquires any Subsidiary after the
Effective Date, Borrower or such Subsidiary shall promptly notify Collateral
Agent of such creation or acquisition, and Borrower or such Subsidiary shall
take all actions reasonably requested by Collateral Agent to achieve any of the
following with respect to such “New Subsidiary” (defined as a Subsidiary formed
after the date hereof during the term of this Agreement): (i) to cause such New
Subsidiary to become either a co-Borrower hereunder, if such New Subsidiary is
organized under the laws of the United States, or a secured guarantor with
respect to the Obligations; and (ii) to grant and pledge to Collateral Agent a
perfected security interest in 100% of the stock, units or other evidence of
ownership held by Borrower or its Subsidiaries of any such New Subsidiary which
is organized under the laws of the United States, and 65% of the stock, units or
other evidence of ownership held by Borrower or its Subsidiaries of any such New
Subsidiary which is a Foreign Subsidiary.

6.11 Further Assurances. Execute any further instruments, including promissory
notes, and take further action as Collateral Agent or any Lender reasonably
requests to perfect or continue Collateral Agent’s Lien in the Collateral or to
effect the purposes of this Agreement, including without limitation, permit
Collateral Agent or any Lender (i) to meet with officers of Borrower to discuss
Borrower’s business and prospects or (ii) to discuss Borrower’s financial
condition with Borrower’s accountants.

 

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7. NEGATIVE COVENANTS

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

7.1 Dispositions. Convey, sell, lease, transfer, assign, dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property (including Intellectual Property),
except for Transfers (a) of Inventory in the ordinary course of business; (b) of
worn-out or obsolete Equipment; and (c) Permitted Liens, Permitted Investments
and Permitted Licenses.

7.2 Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses engaged in by Borrower as of the Effective Date or
reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person
shall cease to be actively engaged in the management of Borrower unless written
notice thereof is provided to Collateral Agent and each Lender within ten
(10) days after the date on which a Responsible Officer obtains Knowledge that
such Key Person is no longer so engaged, or (ii) a Change of Control occurs.
Borrower shall not, without at least thirty (30) days’ prior written notice to
Collateral Agent: (A) add any new offices or business locations, including
warehouses (unless such new offices or business locations contain less than Two
Hundred Fifty Thousand Dollars ($250,000.00) in assets or property of Borrower
or any of its Subsidiaries); (B) change its jurisdiction of organization,
(C) change its organizational structure or type, (D) change its legal name, or
(E) change any organizational number (if any) assigned by its jurisdiction of
organization.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or with (or into) Borrower provided Borrower
is the surviving legal entity, and as long as no Event of Default is occurring
prior thereto or arises as a result therefrom. Without limiting the foregoing,
Borrower shall not, without Collateral Agent’s prior written consent, enter into
any binding contractual arrangement with any Person to attempt to facilitate a
merger or acquisition of Borrower, unless (i) no Event of Default exists when
such agreement is entered into by Borrower, (ii) such agreement does not give
such Person the right to claim any fees, payments or damages from Borrower, and
(iii) Borrower notifies Collateral Agent in advance of entering into such an
agreement.

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

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

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

7.7 Restricted Payments. Pay any dividends (other than dividends payable solely
in capital stock) or make any distribution or payment in respect of or redeem,
retire or purchase any capital stock (other than repurchases pursuant to the
terms of employee stock purchase plans, employee restricted stock agreements,
stockholder rights plans, director or consultant stock option plans, or similar
plans, provided such repurchases do not exceed Two Hundred Fifty Thousand
Dollars ($250,000.00) in the aggregate per fiscal year).

7.8 Investments. Directly or indirectly make any Investment other than Permitted
Investments, or permit any of its Subsidiaries to do so.

 

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7.9 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower or any of its
Subsidiaries, except for (a) transactions that are in the ordinary course of
Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that
are no less favorable to Borrower or such Subsidiary than would be obtained in
an arm’s length transaction with a non-affiliated Person, and (b) Subordinated
Debt or equity investments by Borrower’s investors in Borrower or its
Subsidiaries entered into in accordance with this Agreement.

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

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

7.12 Compliance with Anti-Terrorism Laws. Neither Borrower nor any of its
Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any
Affiliate to, directly or indirectly, knowingly enter into any documents,
instruments, agreements or contracts with any Person listed on the OFAC Lists.
Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of
its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct
any business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224 or any
similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.

7.13 Material Agreements. Neither Borrower nor any of its Subsidiaries shall,
without the consent of Collateral Agent, (a) enter into a Material Agreement
other than those in effect as of the Effective Date and listed on the Perfection
Certificate or (b) materially amend a Material Agreement.

7.14 Financial Covenant. Borrower shall not permit its cash on deposit in a
Collateral Account subject to a Control Agreement in favor of the Collateral
Agent to be less than (a) Three Million Dollars ($3,000,000.00) prior to the
earlier of March 31, 2016 or the Funding Date of the Term B Loan, and (b) Four
Million Dollars ($4,000,000.00) after the earlier of March 31, 2016 or the
Funding Date of the Term B Loan.

7.15 Inconsistent Agreements. Enter into any agreement containing any provision
which would (a) be violated or breached by any borrowing by Borrower hereunder
or by the performance by Borrower or any other party obligated hereunder of any
of its Obligations hereunder or under any other Loan Document, (b) prohibit
Borrower or any other party obligated hereunder from granting to Collateral
Agent and Lenders a Lien on any of its assets or (c) create or permit to exist
or become effective any encumbrance or restriction on the ability of any other
party obligated hereunder to (i) pay dividends or make other distributions to
Borrower or any other Subsidiary, or pay any Indebtedness owed to Borrower or
any other Subsidiary, (ii) make loans or advances to Borrower or any other party
obligated hereunder or (iii) transfer any of its assets or properties to
Borrower or any other party obligated hereunder, other than, in the case of
clauses (b) and (c), (A) restrictions or conditions imposed by any agreement
relating to Permitted Indebtedness and other secured Indebtedness or to leases
and licenses permitted by

 

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this Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness or the property leased or licenses,
(B) customary provision in leases and other contracts restricting the assignment
thereof, (C) restrictions and conditions imposed by law, (D) those arising under
any Loan Document and (E) customary provisions in contracts for the disposition
of any assets: provided that the restrictions in any such contract shall apply
only to the assets or Subsidiary that is to be disposed of and such disposition
is permitted hereunder.

7.16 Equity Raise. Borrower shall not fail to receive, in an aggregate amount of
at least Six Million Dollars ($6,000,000), net proceeds from any combination of
either or both of the following: (i) upfront, milestone or royalty payments in
connection with Permitted Licenses, distribution, or collaboration agreements,
in each case as permitted hereunder and subject to terms and conditions
reasonably acceptable to Collateral Agent, or (ii) a bona fide equity financing
from investors, provided that such equity financing shall not permit, or include
any provision, permitting redemption, “clawbacks” or similar rights to any
proceeds funded, liquidated damages, escrow or deposit arrangements, blocked
account provisions, limitations on the use of any proceeds, setoff or similar
rights with respect to the proceeds of such transaction or any other funds, or
other restrictions encumbering or limiting the use of the net proceeds from such
transaction or series of related transactions, in each case after the Effective
Date and subject to verification by Collateral Agent (including supporting
documentation reasonably requested by Collateral Agent), no later than
January 14, 2016.

 

8. EVENTS OF DEFAULT

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

8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Term Loan on its due date, or (b) pay any other Obligations
within three (3) Business Days after such Obligations are due and payable (which
three (3) Business Day grace period shall not apply to payments due on the
Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof);

8.2 Covenant Default.

(a) Borrower or any of its Subsidiaries fails or neglects to perform any
obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4
(Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Landlord Waivers; Bailee Waivers), 6.10
(Creation/Acquisition of Subsidiaries) or Borrower violates any provision in
Section 7; or

(b) Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant or agreement contained in
this Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
fifteen (15) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the fifteen (15) day period or
cannot after diligent attempts by Borrower be cured within such fifteen (15) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but no Term Loans shall be made during such cure period).

8.3 Material Adverse Change. A Material Adverse Change has occurred;

8.4 Attachment; Levy; Restraint on Business.

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or any of its Subsidiaries or of any entity under control
of Borrower or its Subsidiaries on deposit with any institution at which
Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a
notice of lien, levy, or assessment is filed against Borrower or any of its
Subsidiaries or their respective assets by any government agency, and the same
under subclauses (i) and (ii) hereof are not, within thirty (30) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); and

 

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

8.5 Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent;
(b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or
(c) an Insolvency Proceeding is begun against Borrower or any of its
Subsidiaries and not dismissed or stayed within sixty (60) days (but no Term
Loans shall be extended while Borrower or any Subsidiary is Insolvent and/or
until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is (a) a default in any agreement to which Borrower
or any of its Subsidiaries is a party with a third party or parties resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00) or that could reasonably be expected to have a
Material Adverse Change; (b) any default under a Material Agreement that permits
the counterparty thereto to accelerate the payments owed by Borrower thereunder
in an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000)
individually or in the aggregate with any other Material Agreements being
contemporaneously terminated; or (c) a revocation of a Material Agreement if
such revocation could reasonably be expected to have a Material Adverse Change.

8.7 Judgments. (a) One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Fifty Thousand Dollars ($250,000.00) (not covered by independent third-party
insurance) shall be rendered against Borrower or any of its Subsidiaries and
shall remain unsatisfied, unvacated, or unstayed for a period of thirty
(30) days after the entry thereof or (b) any judgments, orders or decrees
rendered against Borrower that could reasonably be expected to result in a
Material Adverse Change;

8.8 Misrepresentations. Borrower or any of its Subsidiaries or any Person acting
for Borrower or any of its Subsidiaries makes any representation, warranty, or
other statement now or later in this Agreement, any Loan Document or in any
writing delivered to Collateral Agent and/or Lenders or to induce Collateral
Agent and/or the Lenders to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement, when taken as a whole, is
incorrect in any material respect when made or deemed made;

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

8.10 Reserved.

8.11 Governmental Approvals or Clearance; FDA Action. (a) Any Governmental
Approval or Clearance shall have been revoked, rescinded, suspended, modified in
an adverse manner, or not renewed in the ordinary course for a full term and
such revocation, rescission, suspension, modification or non-renewal has
resulted in or could reasonably be expected to result in a Material Adverse
Change; or (b) (i) the FDA, DOJ, or other Governmental Authority initiates a
Regulatory Action against Borrower or any of its Subsidiaries or any supplier of
Borrower or any of its Subsidiaries that causes Borrower or any of its
Subsidiaries to recall, withdraw, remove or discontinue manufacturing,
distributing, and/or marketing any of its products which have an aggregate
value, either individually or collectively for all such products, of at least
Five Hundred Thousand Dollars ($500,000), even if such action is based on
previously disclosed conduct; (ii) the FDA issues a warning letter or Regulatory
Action to Borrower or any of its Subsidiaries with respect to any of its
activities or products which could reasonably be expected to result in a
Material Adverse Change; (iii) Borrower or any of its Subsidiaries conducts a
mandatory or voluntary recall which could reasonably be expected to result in
liability and expense to Borrower or any of its Subsidiaries of $500,000 or
more; (iv) Borrower or any of its Subsidiaries enters into a settlement
agreement with the FDA, DOJ, or other Governmental Authority that results in
aggregate liability as to any single or related series of transactions,
incidents or conditions, of $500,000 or more, or that could reasonably be
expected to result in a Material Adverse Change even if such settlement
agreement is based on previously disclosed conduct; or (v) Borrower or any of
its Subsidiaries fails to respond to the FDA with respect to observations
identified in an FDA

 

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Form 483 notice of inspection observation to Collateral Agent’s reasonable
satisfaction within six months of receipt; or (vi) the FDA revokes any
authorization or permission granted under any Registration, or Borrower or any
of its Subsidiaries withdraws any Registration, that could reasonably be
expected to result in a Material Adverse Change.

8.12 Lien Priority; Intellectual Property. Any Lien created hereunder or by any
other Loan Document shall at any time fail to constitute a valid and perfected
Lien on any of the Collateral purported to be secured thereby, subject to no
prior or equal Lien, other than Permitted Liens arising as a matter of
applicable law. Any Intellectual Property material to Borrower’s business shall
cease to be validly owned or licensed by Borrower free and clear of any Liens
other than Permitted Liens.

 

9. RIGHTS AND REMEDIES

9.1 Rights and Remedies.

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

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

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

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

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

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

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

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

 

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

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

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

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

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

Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance.
For the avoidance of doubt, Collateral Agent and Lenders acknowledge that
Collateral Agent may not, and the Lenders may not direct the Collateral Agent
to, exercise its right to send a “notice of exclusive control” or similar notice
under any Control Agreement, or otherwise exercise or assert exclusive control
over any Collateral Account unless an Event of Default has occurred and is
continuing; and provided no Event of Default has occurred and is continuing
Borrower may use the proceeds in the Collateral Accounts in accordance with, and
subject to, the terms and conditions of the Loan Documents.

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

9.3 Protective Payments. If Borrower or any of its Subsidiaries fail to obtain
the insurance called for by Section 6.5 or fails to pay any premium thereon or
fails to pay any other amount which Borrower or any of its

 

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

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

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

9.6 No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender,
at any time or times, to require strict performance by Borrower of any provision
of this Agreement or any other Loan Document shall not waive, affect, or
diminish any right of Collateral Agent or any Lender thereafter to demand strict
performance and compliance herewith or therewith. No waiver hereunder shall be
effective unless signed by

 

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Collateral Agent and the Required Lenders and then is only effective for the
specific instance and purpose for which it is given. The rights and remedies of
Collateral Agent and the Lenders under this Agreement and the other Loan
Documents are cumulative. Collateral Agent and the Lenders have all rights and
remedies provided under the Code, any applicable law, by law, or in equity. The
exercise by Collateral Agent or any Lender of one right or remedy is not an
election, and Collateral Agent’s or any Lender’s waiver of any Event of Default
is not a continuing waiver. Collateral Agent’s or any Lender’s delay in
exercising any remedy is not a waiver, election, or acquiescence.

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

 

10. NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three
(3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by facsimile transmission or email; (c) one (1) Business
Day after deposit with a reputable overnight courier with all charges prepaid;
or (d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address, facsimile number,
or email address indicated below. Any of Collateral Agent, Lender or Borrower
may change its mailing address, facsimile number or email address by giving the
other party written notice thereof in accordance with the terms of this
Section 10.

 

If to Borrower:

NANOSPHERE, INC.

4088 Commercial Avenue

Northbrook, IL 60062

Attn: Chief Financial Officer

Fax: (847) 400-9199

Email: awallin@nanosphere.us

with a copy (which shall not constitute notice) to:

SEYFARTH SHAW LLP

620 Eighth Avenue

New York, NY 10018-1405

Attn: Blake Hornick

Fax: (212) 218-5526

Email: BHornick@seyfarth.comm

If to Collateral Agent:

NSPH Funding LLC

c/o Life Sciences Alternative Funding LLC

50 Main Street

Suite 1000

White Plains, NY 10606

Attention: Stephen J. DeNelsky

Email: steve@lsafunding.com

with a copy (which shall not constitute notice) to:

LATHAM & WATKINS LLP

505 Montgomery Street

Suite 2000

San Francisco, CA 94111-6538

Attn: Haim Zaltzman

Fax: 415.395.8095

Email: haim.zaltzman@lw.com

If to SWK Funding SWK Funding LLC

 

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LLC:

14755 Preston Road, Suite 105

Dallas, Texas 75254

Attention: Brett Pope

Fax:

Email: notifications@swkhold.com

with a copy (which shall not constitute notice) to:

Holland & Knight LLP

200 Crescent Court

Dallas, TX 75201

Attn: Ryan Magee

Fax: (214) 964-9501

Email: ryan.magee@hklaw.com

 

11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

11.1 Waiver of Jury Trial. EACH OF BORROWER, COLLATERAL AGENT AND LENDERS
UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS AMONG BORROWER,
COLLATERAL AGENT AND/OR LENDERS RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED AMONG BORROWER, COLLATERAL AGENT AND/OR LENDERS. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

11.2 Governing Law and Jurisdiction.

(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS (EXCLUDING THOSE LOAN DOCUMENTS
THAT BY THEIR OWN TERMS ARE EXPRESSLY GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT
OF LAWS PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF ANY LAWS OTHER THAN
THE LAWS OF THE STATE OF NEW YORK), INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE COLLATERAL,
PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK
SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF
ANY LIEN OR IN REGARD TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS
IN COLLATERAL, SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL CONTINUE TO APPLY TO
THAT EXTENT.

(b) Submission to Jurisdiction. Any legal action or proceeding with respect to
the Loan Documents shall be brought exclusively in the courts of the State of
New York located in the City of New York, Borough of Manhattan, or of the United
States of America for the Southern District of New York and, by execution and
delivery of this Agreement, Borrower hereby accepts for itself and in respect of
its Property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Notwithstanding the foregoing, Collateral Agent and Lenders shall have
the right to bring any action or proceeding against Borrower (or any property of
Borrower) in the court of any other jurisdiction Collateral Agent or Lenders
deem necessary or appropriate in order to realize on the

 

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Collateral or other security for the Obligations. The parties hereto hereby
irrevocably waive any objection, including any objection to the laying of venue
or based on the grounds of forum non conveniens, that any of them may now or
hereafter have to the bringing of any such action or proceeding in such
jurisdictions.

(C) Service of Process. Borrower irrevocably waives personal service of any and
all legal process, summons, notices and other documents and other service of
process of any kind and consents to such service in any suit, action or
proceeding brought in the United States of America with respect to or otherwise
arising out of or in connection with any Loan Document by any means permitted by
applicable requirements of law, including by the mailing thereof (by registered
or certified mail, postage prepaid) to the address of Borrower specified herein
(and shall be effective when such mailing shall be effective, as provided
therein). Borrower agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

(d) Non-exclusive Jurisdiction. Nothing contained in this Section 11.2 shall
affect the right of Collateral Agent or Lenders to serve process in any other
manner permitted by applicable requirements of law or commence legal proceedings
or otherwise proceed against Borrower in any other jurisdiction.

 

12. GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not transfer,
pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s prior written consent (which may be granted or withheld in
Collateral Agent’s discretion, subject to Section 12.5). The Lenders have the
right, without the consent of but with prior notice to Borrower (such prior
notice, however, shall not be required if (i) assignment is to an Affiliate of
the assigning Lender or (ii) an Event of Default has occurred and continues), to
sell, transfer, assign, pledge, negotiate, or grant participation in (any such
sale, transfer, assignment, negotiation, or grant of a participation, a “Lender
Transfer”) all or any part of, or any interest in, the Lenders’ obligations,
rights, and benefits under this Agreement and the other Loan Documents

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

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

 

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

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

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

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

(iii) no such amendment, waiver or other modification shall, unless signed by
all the Lenders directly affected thereby, (A) reduce the principal of, rate of
interest on or any fees with respect to any Term Loan or forgive any principal,
interest (other than default interest) or fees (other than late charges) with
respect to any Term Loan (which shall include, without limitation, any amendment
or waiver to Article II of this Agreement, any conditions thereunder, or the
definitions of 2017 Amortization Period, 2018 Amortization Period, Amortization
Cap, Amortization Date, Amortization Period, Amortization Threshold, Milestone
Date, Subsequent Amortization Period; (B) postpone the date fixed for, or waive,
any payment of principal of any Term Loan or of interest on any Term Loan or any
other Obligations (other than default interest) or any fees provided for
hereunder (other than late charges or for any termination of any commitment);
(C) change the definition of the term “Required Lenders” or “Supermajority
Lenders” or the percentage of Lenders which shall be required for the Lenders to
take any action hereunder; (D) release all or substantially all of any material
portion of the Collateral, authorize Borrower to sell or otherwise dispose of
all or substantially all or any material portion of the Collateral, except, in
each case with respect to this clause (D), as otherwise may be expressly
permitted under this Agreement or the other Loan Documents (including in
connection with any disposition permitted hereunder); (E) amend, waive or
otherwise modify this Section 12.5 or the definitions of the terms used in this
Section 12.5 insofar as the definitions affect the substance of this
Section 12.5; (F) consent to the assignment, delegation or other transfer by
Borrower of any of its rights and obligations under any Loan Document or release
Borrower of its payment obligations under any Loan Document, except, in each
case with respect to this clause (F), pursuant to a merger or consolidation
permitted pursuant to this Agreement; (G) amend any of the provisions of
Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan
Commitment, Commitment Percentage or that provide for the Lenders to receive
their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral
hereunder; (H) subordinate the Liens granted in favor of Collateral Agent
securing the Obligations; or (I) amend any of the provisions of Section 12.5. It
is hereby understood and agreed that all Lenders shall be deemed directly
affected by an amendment, waiver or other modification of the type described in
the preceding clauses (C), (D), (E), (F), (G) and (H) of the immediately
preceding sentence.

(b) Other than as expressly provided for in Section 12.5(a)(i)-(iii), Collateral
Agent may, if requested by the Required Lenders, from time to time designate
covenants in this Agreement less restrictive by notification to a representative
of Borrower.

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

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

 

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12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force and effect until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. The obligation of Borrower
in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the
confidentiality provisions in Section 12.8 below, shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

12.8 Confidentiality. In handling any confidential information of Borrower, the
Lenders and Collateral Agent shall exercise the same degree of care that it
exercises for their own proprietary information, but disclosure of information
may be made: (a) subject to the terms and conditions of this Agreement, to the
Lenders’ and Collateral Agent’s Subsidiaries or Affiliates; (b) to prospective
transferees (other than those identified in (a) above) or purchasers of any
interest in the Term Loans (provided, however, the Lenders and Collateral Agent
shall, except upon the occurrence and during the continuance of an Event of
Default, obtain such prospective transferee’s or purchaser’s agreement to the
terms of this provision or to similar confidentiality terms); (c) as required by
law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s
regulators or as otherwise required in connection with an examination or audit;
(e) as Collateral Agent reasonably considers appropriate in exercising remedies
under the Loan Documents; and (f) to third party service providers of the
Lenders and/or Collateral Agent so long as such service providers have executed
a confidentiality agreement or have agreed to similar confidentiality terms with
the Lenders and Collateral Agent with terms no less restrictive than those
contained herein. Confidential information does not include information that
either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s
possession when disclosed to the Lenders and/or Collateral Agent, or becomes
part of the public domain after disclosure to the Lenders and/or Collateral
Agent at no fault of the Lenders or the Collateral Agent; or (ii) is disclosed
to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or
Collateral Agent does not know that the third party is prohibited from
disclosing the information. Collateral Agent and the Lenders may use
confidential information for any purpose, including, without limitation, for the
development of client databases, reporting purposes, and market analysis. The
provisions of the immediately preceding sentence shall survive the termination
of this Agreement. The agreements provided under this Section 12.8 supersede all
prior agreements, understanding, representations, warranties, and negotiations
between the parties about the subject matter of this Section 12.8.

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

12.10 Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any
documents reasonably required to effectuate and acknowledge each assignment of a
Term Loan Commitment or Term Loan to an assignee in accordance with
Section 12.1, (ii) make Borrower’s management available to meet with Collateral
Agent and prospective participants and assignees of Term Loan Commitments (which
meetings shall be conducted no more often than twice every twelve months unless
an Event of Default has occurred and is continuing), and (iii) assist Collateral
Agent or the Lenders in the preparation of information relating to the financial
affairs of Borrower as any prospective participant or assignee of a Term Loan
Commitment or Term Loan reasonably may request. Subject to the provisions of
Section 12.8, Borrower authorizes each Lender to disclose to any prospective
participant or assignee of a Term Loan Commitment, any and all information in
such Lender’s possession concerning Borrower and its financial affairs which has
been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement, or which has been delivered to such Lender by or on behalf of
Borrower in connection with such Lender’s credit evaluation of Borrower prior to
entering into this Agreement.

 

39

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12.11 Public Announcement. Borrower hereby agrees that Collateral Agent and each
Lender may make a public announcement of the transactions contemplated by this
Agreement, and may publicize the same in marketing materials, newspapers and
other publications, and otherwise, and in connection therewith may use
Borrower’s name, tradenames and logos.

12.12 Collateral Agent and Lender Agreement. Collateral Agent and each Lender
hereby agree to the terms and conditions set forth on Exhibit B attached hereto.
Borrower acknowledges and agrees to the terms and conditions set forth on
Exhibit B attached hereto.

[Balance of Page Intentionally Left Blank]

 

40

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

 

BORROWER: NANOSPHERE, INC.

By

Michael McGarrity

Name:  Michael McGarrity

Title:  CEO

COLLATERAL AGENT AND LENDER: NSPH Funding LLC

By

/s/ Stephen J. DeNelsky

Name:  Stephen J. DeNelsky

Title:  President

LENDER: SWK FUNDING LLC

By:

SWK Holdings Corporation its sole Manager

By

/s/ Brett Pope

Name:  Brett Pope

Title:  CEO

[Signature Page to Loan and Security Agreement]

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SCHEDULE 1.1

Lenders and Commitments

 

Term A Loans

 

Lender

   Term Loan
Commitment      Commitment
Percentage  

NSPH Funding LLC

   $ 12,000,000.00         60.00 % 

SWK Funding LLC

   $ 8,000,000.00         40.00 %    

 

 

    

 

 

 

TOTAL

$ 20,000,000.00      100.00 %    

 

 

    

 

 

 

 

Term B Loans

 

Lender

   Term Loan
Commitment      Commitment
Percentage  

NSPH Funding LLC

   $ 6,000,000.00         60.00 % 

SWK Funding LLC

   $ 4,000,000.00         40.00 %    

 

 

    

 

 

 

TOTAL

$ 10,000,000.00      100.00 %    

 

 

    

 

 

 

 

Aggregate (all Term Loans)

 

Lender

   Term Loan
Commitment      Commitment
Percentage  

NSPH Funding LLC

   $ 18,000,000.00         60.00 % 

SWK Funding LLC

   $ 12,000,000.00         40.00 %    

 

 

    

 

 

 

TOTAL

$ 30,000,000.00      100.00 %    

 

 

    

 

 

 

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EXHIBIT A

Description of Collateral

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

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

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral shall not include (i) any United
States intent-to-use trademark applications to the extent that and solely during
the period in which the grant of a security interest therein would impair, under
applicable federal law, the registrability of such applications or the validity
or enforceability of registrations issuing from such applications or (ii) any
license or contract, in each case if the granting of a Lien in such license or
contract is prohibited by or would constitute a default under the agreement
governing such license or contract (but (A) only to the extent such prohibition
is enforceable under applicable law and (B) other than to the extent that any
such term would be rendered ineffective pursuant to Section 9.406, 9.408 or
9.409 (or any other Section) of Division 9 of the Code); provided that upon the
termination, lapsing or expiration of any such prohibition, such license or
contract, as applicable, shall automatically be subject to the security interest
granted in favor of Lender hereunder and become part of the “Collateral.”

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EXHIBIT B

Collateral Agent and Lender Terms

1. Appointment of Collateral Agent.

(a) Each Lender hereby appoints NSPH Funding LLC (together with any successor
Collateral Agent pursuant to Section 7 of this Exhibit B) as Collateral Agent
under the Loan Documents and authorizes Collateral Agent to (i) execute and
deliver the Loan Documents and accept delivery thereof on its behalf from
Borrower, (ii) take such action on its behalf and to exercise all rights, powers
and remedies and perform the duties as are expressly delegated to Collateral
Agent under such Loan Documents and (iii) exercise such powers as are reasonably
incidental thereto.

(b) Without limiting the generality of clause (a) above, Collateral Agent shall
have the sole and exclusive right and authority (to the exclusion of the
Lenders), and is hereby authorized, to (i) act as the disbursing and collecting
agent for the Lenders with respect to all payments and collections arising in
connection with the Loan Documents (including in any other bankruptcy,
insolvency or similar proceeding), and each Person making any payment in
connection with any Loan Document to any Lender is hereby authorized to make
such payment to Collateral Agent, (ii) file and prove claims and file other
documents necessary or desirable to allow the claims of Collateral Agent and
Lenders with respect to any Obligation in any bankruptcy, insolvency or similar
proceeding (but not to vote, consent or otherwise act on behalf of such Lender),
(iii) act as collateral agent for Collateral Agent and each Lender for purposes
of the perfection of all Liens created by the Loan Documents and all other
purposes stated therein, (iv) manage, supervise and otherwise deal with the
Collateral, (v) take such other action as is necessary or desirable to maintain
the perfection and priority of the Liens created or purported to be created by
the Loan Documents, (vi) except as may be otherwise specified in any Loan
Document, exercise all remedies given to Collateral Agent and the other Lenders
with respect to the Borrower and/or the Collateral, whether under the Loan
Documents, applicable Requirements of Law or otherwise and (vii) execute any
amendment, consent or waiver under the Loan Documents on behalf of any Lender
that has consented in writing to such amendment, consent or waiver; provided,
however, that Collateral Agent hereby appoints, authorizes and directs each
Lender to act as collateral sub-agent for Collateral Agent and the Lenders for
purposes of the perfection of all Liens with respect to the Collateral,
including any Deposit Account maintained by Borrower with, and cash and Cash
Equivalents held by, such Lender, and may further authorize and direct the
Lenders to take further actions as collateral sub-agents for purposes of
enforcing such Liens or otherwise to transfer the Collateral subject thereto to
Collateral Agent, and each Lender hereby agrees to take such further actions to
the extent, and only to the extent, so authorized and directed. Collateral Agent
may, upon any term or condition it specifies, delegate or exercise any of its
rights, powers and remedies under, and delegate or perform any of its duties or
any other action with respect to, any Loan Document by or through any trustee,
co-agent, employee, attorney-in-fact and any other Person (including any
Lender). Any such Person shall benefit from this Exhibit B to the extent
provided by Collateral Agent.

(c) Under the Loan Documents, Collateral Agent (i) is acting solely on behalf of
the Lenders, with duties that are entirely administrative in nature,
notwithstanding the use of the defined term “Collateral Agent”, the terms
“agent”, “Collateral Agent” and “collateral agent” and similar terms in any Loan
Document to refer to Collateral Agent, which terms are used for title purposes
only, (ii) is not assuming any obligation under any Loan Document other than as
expressly set forth therein or any role as agent, fiduciary or trustee of or for
any Lender or any other Person and (iii) shall have no implied functions,
responsibilities, duties, obligations or other liabilities under any Loan
Document, and each Lender, by accepting the benefits of the Loan Documents,
hereby waives and agrees not to assert any claim against Collateral Agent based
on the roles, duties and legal relationships expressly disclaimed in clauses
(i) through (iii) above. Except as expressly set forth in the Loan Documents,
Collateral Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to Borrower or any of its
Subsidiaries that is communicated to or obtained by NSPH Funding LLC or any of
its Affiliates in any capacity.

2. Binding Effect; Use of Discretion; E-Systems.

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(a) Each Lender, by accepting the benefits of the Loan Documents, agrees that
(i) any action taken by Collateral Agent or Required Lenders (or, if expressly
required in any Loan Document, a greater proportion of the Lenders) in
accordance with the provisions of the Loan Documents, (ii) any action taken by
Collateral Agent in reliance upon the instructions of Required Lenders (or,
where so required, such greater proportion) and (iii) the exercise by Collateral
Agent or Required Lenders (or, where so required, such greater proportion) of
the powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all of
Lenders.

(b) If Collateral Agent shall request instructions from Required Lenders or all
affected Lenders with respect to any act or action (including failure to act) in
connection with any Loan Document, then Collateral Agent shall be entitled to
refrain from such act or taking such action unless and until Collateral Agent
shall have received instructions from Required Lenders or all affected Lenders,
as the case may be, and Collateral Agent shall not incur liability to any Person
by reason of so refraining. Collateral Agent shall be fully justified in failing
or refusing to take any action under any Loan Document (i) if such action would,
in the opinion of Collateral Agent, be contrary to any Requirement of Law or any
Loan Document, (ii) if such action would, in the opinion of Collateral Agent,
expose Collateral Agent to any potential liability under any Requirement of Law
or (iii) if Collateral Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limiting the foregoing,
no Lender shall have any right of action whatsoever against Collateral Agent as
a result of Collateral Agent acting or refraining from acting under any Loan
Document in accordance with the instructions of Required Lenders or all affected
Lenders, as applicable.

(c) Collateral Agent is hereby authorized by Borrower and each Lender to
establish procedures (and to amend such procedures from time to time) to
facilitate administration and servicing of the Term Loans and other matters
incidental thereto. Without limiting the generality of the foregoing, Collateral
Agent is hereby authorized to establish procedures to make available or deliver,
or to accept, notices, documents (including, without limitation, borrowing base
certificates) and similar items on, by posting to or submitting and/or
completion, on E-Systems. Borrower and each Lender acknowledges and agrees that
the use of transmissions via an E-System or electronic mail is not necessarily
secure and that there are risks associated with such use, including risks of
interception, disclosure and abuse, and Borrower and each Lender assumes and
accepts such risks by hereby authorizing the transmission via E-Systems or
electronic mail. Each “e-signature” on any such posting shall be deemed
sufficient to satisfy any requirement for a “signature”, and each such posting
shall be deemed sufficient to satisfy any requirement for a “writing”, in each
case including pursuant to any Loan Document, any applicable provision of any
Code, the federal Uniform Electronic Transactions Act, the Electronic Signatures
in Global and National Commerce Act and any substantive or procedural
Requirement of Law governing such subject matter. All uses of an E-System shall
be governed by and subject to, in addition to this Section, the separate terms,
conditions and privacy policy posted or referenced in such E-System (or such
terms, conditions and privacy policy as may be updated from time to time,
including on such E-System) and related contractual obligations executed by
Collateral Agent, Borrower and/or Lenders in connection with the use of such
E-System. ALL E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS”
AND “AS AVAILABLE”. NO REPRESENTATION OR WARRANTY OF ANY KIND IS MADE BY AGENT,
ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY E-SYSTEMS.

3. Collateral Agent’s Reliance, Etc. Collateral Agent may, without incurring any
liability hereunder, (a) consult with any of its Related Persons and, whether or
not selected by it, any other advisors, accountants and other experts (including
advisors to, and accountants and experts engaged by, Borrower) and (b) rely and
act upon any document and information (including those transmitted by electronic
transmission) and any telephone message or conversation, in each case believed
by it to be genuine and transmitted, signed or otherwise authenticated by the
appropriate parties. None of Collateral Agent and its Related Persons shall be
liable for any action taken or omitted to be taken by any of them under or in
connection with any Loan Document, and each Lender and Borrower hereby waives
and shall not assert (and Borrower shall cause its Subsidiaries to waive and
agree not to assert) any right, claim or cause of action based thereon, except
to the extent of liabilities resulting from the gross negligence or willful
misconduct of Collateral Agent or, as the case may be, such Related Person

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(each as determined in a final, non-appealable judgment of a court of competent
jurisdiction) in connection with the duties of Collateral Agent expressly set
forth herein. Without limiting the foregoing, Collateral Agent: (i) shall not be
responsible or otherwise incur liability for any action or omission taken in
reliance upon the instructions of the Required Lenders or for the actions or
omissions of any of its Related Persons, except to the extent that a court of
competent jurisdiction determines in a final non-appealable judgment that
Collateral Agent acted with gross negligence or willful misconduct in the
selection of such Related Person; (ii) shall not be responsible to any Lender or
other Person for the due execution, legality, validity, enforceability,
effectiveness, genuineness, sufficiency or value of, or the attachment,
perfection or priority of any Lien created or purported to be created under or
in connection with, any Loan Document; (iii) makes no warranty or
representation, and shall not be responsible, to any Lender or other Person for
any statement, document, information, representation or warranty made or
furnished by or on behalf of Borrower or any Related Person of Borrower in
connection with any Loan Document or any transaction contemplated therein or any
other document or information with respect to Borrower, whether or not
transmitted or (except for documents expressly required under any Loan Document
to be transmitted to the Lenders) omitted to be transmitted by Collateral Agent,
including as to completeness, accuracy, scope or adequacy thereof, or for the
scope, nature or results of any due diligence performed by Collateral Agent in
connection with the Loan Documents; and (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any provision of
any Loan Document, whether any condition set forth in any Loan Document is
satisfied or waived, as to the financial condition of Borrower or as to the
existence or continuation or possible occurrence or continuation of any Event of
Default, and shall not be deemed to have notice or Knowledge of such occurrence
or continuation unless it has received a notice from Borrower or any Lender
describing such Event of Default that is clearly labeled “notice of default” (in
which case Collateral Agent shall promptly give notice of such receipt to all
Lenders, provided that Collateral Agent shall not be liable to any Lender for
any failure to do so, except to the extent that such failure is attributable to
Collateral Agent’s gross negligence or willful misconduct as determined by a
final non-appealable judgment of a court of competent jurisdiction); and, for
each of the items set forth in clauses (i) through (iv) above, each Lender and
Borrower hereby waives and agrees not to assert (and Borrower shall cause its
Subsidiaries to waive and agree not to assert) any right, claim or cause of
action it might have against Collateral Agent based thereon.

4. Collateral Agent Individually. Collateral Agent and its Affiliates may make
loans and other extensions of credit to, acquire stock and stock equivalents of,
engage in any kind of business with, Borrower or any Affiliate of Borrower as
though it were not acting as Collateral Agent and may receive separate fees and
other payments therefor. To the extent Collateral Agent or any of its Affiliates
makes any Term Loans or otherwise becomes a Lender hereunder, it shall have and
may exercise the same rights and powers hereunder and shall be subject to the
same obligations and liabilities as any other Lender and the terms “Lender”,
“Required Lender” and any similar terms shall, except where otherwise expressly
provided in any Loan Document, include, without limitation, Collateral Agent or
such Affiliate, as the case may be, in its individual capacity as Lender, or as
one of the Required Lenders.

5. Lender Credit Decision; Collateral Agent Report. Each Lender acknowledges
that it shall, independently and without reliance upon Collateral Agent, any
Lender or any of their Related Persons or upon any document solely or in part
because such document was transmitted by Collateral Agent or any of its Related
Persons, conduct its own independent investigation of the financial condition
and affairs of Borrower and make and continue to make its own credit decisions
in connection with entering into, and taking or not taking any action under, any
Loan Document or with respect to any transaction contemplated in any Loan
Document, in each case based on such documents and information as it shall deem
appropriate. Except for documents expressly required by any Loan Document to be
transmitted by Collateral Agent to the Lenders, Collateral Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, Property, financial
and other condition or creditworthiness of Borrower or any Affiliate of Borrower
that may come in to the possession of Collateral Agent or any of its Related
Persons. Each Lender agrees that is shall not rely on any field examination,
audit or other report provided by Collateral Agent or its Related Persons (a
“Collateral Agent Report”). Each Lender further acknowledges that any Collateral
Agent Report (a) is provided to the Lenders solely as a courtesy, without
consideration, and based upon the understanding that such Lender will not rely
on such Collateral Agent Report, (b) was prepared by Collateral Agent or its
Related Persons based upon information provided by Borrower solely for
Collateral Agent’s own internal use, and (c) may not be complete and may not
reflect all information and findings obtained by Collateral Agent or its Related
Persons regarding the operations and condition of Borrower. Neither Collateral
Agent nor any of its Related Persons makes any

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representations or warranties of any kind with respect to (i) any existing or
proposed financing, (ii) the accuracy or completeness of the information
contained in any Collateral Agent Report or in any related documentation,
(iii) the scope or adequacy of Collateral Agent’s and its Related Persons’ due
diligence, or the presence or absence of any errors or omissions contained in
any Collateral Agent Report or in any related documentation, and (iv) any work
performed by Collateral Agent or Collateral Agent’s Related Persons in
connection with or using any Collateral Agent Report or any related
documentation. Neither Collateral Agent nor any of its Related Persons shall
have any duties or obligations in connection with or as a result of any Lender
receiving a copy of any Collateral Agent Report. Without limiting the generality
of the forgoing, neither Collateral Agent nor any of its Related Persons shall
have any responsibility for the accuracy or completeness of any Collateral Agent
Report, or the appropriateness of any Collateral Agent Report for any Lender’s
purposes, and shall have no duty or responsibility to correct or update any
Collateral Agent Report or disclose to any Lender any other information not
embodied in any Collateral Agent Report, including any supplemental information
obtained after the date of any Collateral Agent Report. Each Lender releases,
and agrees that it will not assert, any claim against Collateral Agent or its
Related Persons that in any way relates to any Collateral Agent Report or arises
out of any Lender having access to any Collateral Agent Report or any discussion
of its contents, and agrees to indemnify and hold harmless Collateral Agent and
its Related Persons from all claims, liabilities and expenses relating to a
breach by any Lender arising out of such Lender’s access to any Collateral Agent
Report or any discussion of its contents.

6. Indemnification. Each Lender agrees to reimburse Collateral Agent and each of
its Related Persons (to the extent not reimbursed by Borrower as required under
the Loan Documents) promptly upon demand for its Pro Rata Share of any
out-of-pocket costs and expenses (including, without limitation, fees, charges
and disbursements of financial, legal and other advisors and any taxes or
insurance paid in the name of, or on behalf of, Borrower) incurred by Collateral
Agent or any of its Related Persons in connection with the preparation,
syndication, execution, delivery, administration, modification, amendment,
consent, waiver or enforcement of, or the taking of any other action (whether
through negotiations, through any work-out, bankruptcy, restructuring or other
legal or other proceeding (including, without limitation, preparation for and/or
response to any subpoena or request for document production relating thereto) or
otherwise) in respect of, or legal advice with respect to, its rights or
responsibilities under, any Loan Document. Each Lender further agrees to
indemnify Collateral Agent and each of its Related Persons (to the extent not
reimbursed by Borrower as required under the Loan Documents), ratably according
to its Pro Rata Share, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, to the extent not
indemnified by the applicable Lender, taxes, interests and penalties imposed for
not properly withholding or backup withholding on payments made to or for the
account of any Lender) that may be imposed on, incurred by, or asserted against
Collateral Agent or any of its Related Persons in any matter relating to or
arising out of, in connection with or as a result of any Loan Document or any
other act, event or transaction related, contemplated in or attendant to any
such document, or, in each case, any action taken or omitted to be taken by
Collateral Agent or any of its Related Persons under or with respect to the
foregoing; provided that no Lender shall be liable to Collateral Agent or any of
its Related Persons under this Section 6 of this Exhibit B to the extent such
liability has resulted from the gross negligence or willful misconduct of
Collateral Agent or, as the case may be, such Related Person, as determined by a
final non-appealable judgment of a court of competent jurisdiction. To the
extent required by any applicable Requirement of Law, Collateral Agent may
withhold from any payment to any Lender under a Loan Document an amount equal to
any applicable withholding tax. If the Internal Revenue Service or any other
Governmental Authority asserts a claim that Collateral Agent did not properly
withhold tax from amounts paid to or for the account of any Lender for any
reason, or if Collateral Agent reasonably determines that it was required to
withhold taxes from a prior payment to or for the account of any Lender but
failed to do so, such Lender shall promptly indemnify Collateral Agent fully for
all amounts paid, directly or indirectly, by Collateral Agent as tax or
otherwise, including penalties and interest, and together with all expenses
incurred by Collateral Agent. Collateral Agent may offset against any payment to
any Lender under a Loan Document, any applicable withholding tax that was
required to be withheld from any prior payment to such Lender but which was not
so withheld, as well as any other amounts for which Collateral Agent is entitled
to indemnification from such Lender under the immediately preceding sentence of
this Section 6 of this Exhibit B.

7. Successor Collateral Agent. Collateral Agent may resign at any time by
delivering notice of such resignation to the Lenders and Borrower, effective on
the date set forth in such notice or, if no such date is set forth therein, upon
the date such notice shall be effective, in accordance with the terms of this
Section 7 of this Exhibit B. If Collateral Agent delivers any such notice, the
Supermajority Lenders shall have the right to appoint a

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successor Collateral Agent. If, after 30 days after the date of the retiring
Collateral Agent’s notice of resignation, no successor Collateral Agent has been
appointed by the Supermajority Lenders that has accepted such appointment, then
the retiring Collateral Agent may, on behalf of the Lenders, appoint a successor
Collateral Agent from among the Lenders. Effective immediately upon its
resignation, (a) the retiring Collateral Agent shall be discharged from its
duties and obligations under the Loan Documents, (b) the Lenders shall assume
and perform all of the duties of Collateral Agent until a successor Collateral
Agent shall have accepted a valid appointment hereunder, (c) the retiring
Collateral Agent and its Related Persons shall no longer have the benefit of any
provision of any Loan Document other than with respect to any actions taken or
omitted to be taken while such retiring Collateral Agent was, or because such
Collateral Agent had been, validly acting as Collateral Agent under the Loan
Documents, and (iv) subject to its rights under Section 2(b) of this Exhibit B,
the retiring Collateral Agent shall take such action as may be reasonably
necessary to assign to the successor Collateral Agent its rights as Collateral
Agent under the Loan Documents. Effective immediately upon its acceptance of a
valid appointment as Collateral Agent, a successor Collateral Agent shall
succeed to, and become vested with, all the rights, powers, privileges and
duties of the retiring Collateral Agent under the Loan Documents.

8. Release of Collateral. Each Lender hereby consents to the release and hereby
directs Collateral Agent to release (or in the case of clause (b)(ii) below,
release or subordinate) the following:

(a) any Guarantor if all of the stock of such Subsidiary owned by Borrower is
sold or transferred in a transaction permitted under the Loan Documents
(including pursuant to a valid waiver or consent), to the extent that, after
giving effect to such transaction, such Subsidiary would not be required to
guaranty any Obligations pursuant to any Loan Document; and

(b) any Lien held by Collateral Agent for the benefit of itself and the Lenders
against (i) any Collateral that is sold or otherwise disposed of by Borrower in
a transaction permitted by the Loan Documents (including pursuant to a valid
waiver or consent), (ii) any Collateral subject to a Lien that is expressly
permitted under clause (c) of the definition of the term “Permitted Lien” and
(iii) all of the Collateral and Borrower, upon (A) termination of all of the
Commitments, (B) payment in full in cash of all of the Obligations that
Collateral Agent has theretofore been notified in writing by the holder of such
Obligation are then due and payable, and (C) to the extent requested by
Collateral Agent, receipt by Collateral Agent and Lenders of liability releases
from Borrower in form and substance acceptable to Collateral Agent (the
satisfaction of the conditions in this clause (iii), the “Termination Date”).

9. Setoff and Sharing of Payments. In addition to any rights now or hereafter
granted under any applicable requirement of law and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 10(d) of this Exhibit B, each Lender is hereby
authorized at any time or from time to time upon the direction of Collateral
Agent, without notice to Borrower or any other Person, any such notice being
hereby expressly waived, to setoff and to appropriate and to apply any and all
balances held by it at any of its offices for the account of Borrower
(regardless of whether such balances are then due to Borrower) and any other
properties or assets at any time held or owing by that Lender or that holder to
or for the credit or for the account of Borrower against and on account of any
of the Obligations that are not paid when due. Any Lender exercising a right of
setoff or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender’s
or holder’s Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share the amount so offset or otherwise received with each other
Lender or holder in accordance with their respective Pro Rata Shares of the
Obligations. Borrower agrees, to the fullest extent permitted by law, that
(a) any Lender may exercise its right to offset with respect to amounts in
excess of its Pro Rata Share of the Obligations and may purchase participations
in accordance with the preceding sentence and (b) any Lender so purchasing a
participation in the Term Loans made or other Obligations held by other Lenders
or holders may exercise all rights of offset, bankers’ lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of the Term Loans and the other Obligations in the
amount of such participation. Notwithstanding the foregoing, if all or any
portion of the offset amount or payment otherwise received is thereafter
recovered from the Lender that has exercised the right of offset, the purchase
of participations by that Lender shall be rescinded and the purchase price
restored without interest.

10. Advances; Payments; Non-Funding Lenders; Actions in Concert.

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(a) Advances; Payments. If Collateral Agent receives any payment with respect to
a Term Loan for the account of Lenders on or prior to 2:00 p.m. (New York time)
on any Business Day, Collateral Agent shall pay to each applicable Lender such
Lender’s Pro Rata Share of such payment on such Business Day. If Collateral
Agent receives any payment with respect to a Term Loan for the account
of Lenders after 2:00 p.m. (New York time) on any Business Day, Collateral Agent
shall pay to each applicable Lender such Lender’s Pro Rata Share of such payment
on the next Business Day.

(b) Return of Payments.

(i) If Collateral Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Collateral Agent from Borrower and such related payment is not received by
Collateral Agent, then Collateral Agent will be entitled to recover such amount
(including interest accruing on such amount at the rate otherwise applicable to
such Obligation) from such Lender on demand without setoff, counterclaim or
deduction of any kind.

(ii) If Collateral Agent determines at any time that any amount received by
Collateral Agent under any Loan Document must be returned to Borrower or paid to
any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of any Loan Document, Collateral
Agent will not be required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to Collateral Agent on demand any portion of
such amount that Collateral Agent has distributed to such Lender, together with
interest at such rate, if any, as Collateral Agent is required to pay to
Borrower or such other Person, without setoff, counterclaim or deduction of any
kind and Collateral Agent will be entitled to set off against future
distributions to such Lender any such amounts (with interest) that are not
repaid on demand.

(c) Non-Funding Lenders.

(i) Unless Collateral Agent shall have received notice from a Lender prior to
the date of any Term Loan that such Lender will not make available to Collateral
Agent such Lender’s Pro Rata Share of such Term Loan, Collateral Agent may
assume that such Lender will make such amount available to it on the date of
such Term Loan in accordance with Section 2(b) of this Exhibit B, and Collateral
Agent may (but shall not be obligated to), in reliance upon such assumption,
make available a corresponding amount for the account of Borrower on such date.
If and to the extent that such Lender shall not have made such amount available
to Collateral Agent, such Lender and Borrower severally agree to repay to
Collateral Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the day such amount is made available to
Borrower until the day such amount is repaid to Collateral Agent, at a rate per
annum equal to the interest rate applicable to the Obligation that would have
been created when Collateral Agent made available such amount to Borrower had
such Lender made a corresponding payment available. If such Lender shall repay
such corresponding amount to Collateral Agent, the amount so repaid shall
constitute such Lender’s portion of such Term Loan for purposes of this
Agreement.

(ii) To the extent that any Lender has failed to fund any Term Loan or any other
payments required to be made by it under the Loan Documents after any such Term
Loan is required to be made or such payment is due (a “Non-Funding Lender”),
Collateral Agent shall be entitled to set off the funding short-fall against
that Non-Funding Lender’s Pro Rata Share of all payments received from Borrower.
The failure of any Non-Funding Lender to make any Term Loan or any payment
required by it hereunder shall not relieve any other Lender (each such other
Lender, an “Other Lender”) of its obligations to make such Term Loan, but
neither any Other Lender nor Collateral Agent shall be responsible for the
failure of any Non-Funding Lender to make such Term Loan or make any other
payment required hereunder. Notwithstanding anything set forth herein to the
contrary, a Non-Funding Lender shall not have any voting or consent rights under
or with respect to any Loan Document or constitute a “Lender” (or be included in
the calculation of “Required Lender” hereunder) for any voting or consent rights
under or with respect to any Loan Document. At Borrower’s request, Collateral
Agent or a Person reasonably acceptable to Collateral Agent shall have the right
with Collateral Agent’s consent and in Collateral Agent’s sole discretion (but
Collateral Agent or any such Person shall have no obligation) to purchase from
any Non-Funding Lender, and each Lender agrees that if it becomes a Non-Funding
Lender it shall, at Collateral Agent’s request, sell and assign to Collateral
Agent or such Person, all of the Term Loan Commitment (if any), and all of the
outstanding Term Loan of that Non-Funding Lender for an amount equal to the
aggregate

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outstanding principal balance of the Term Loan held by such Non-Funding Lender
and all accrued interest with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed assignment agreement
in form and substance reasonably satisfactory to, and acknowledged by,
Collateral Agent.

(d) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of any Loan
Document (including exercising any rights of setoff) without first obtaining the
prior written consent of Collateral Agent or Required Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under any
Loan Document shall be taken in concert and at the direction or with the consent
of Collateral Agent or Required Lenders.

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EXHIBIT C

Loan Payment Request Form

 

 Fax To: Date:                                                         

 

 LOAN PAYMENT:

[                                                         ]

 

 From Account #                                 
                                      
To Account #                                  
                                                                      (Deposit
Account #) (Loan Account #)  Principal $                                  
                                                 
and/or Interest $                                 
                                                                 
 Authorized Signature:                                 
                                             Phone Number:                   
                                                             
 Print Name/Title:                                 
                                     

 

 LOAN ADVANCE:

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

 

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

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

 

 Authorized Signature:                                 
                                             Phone Number:                   
                                                             
 Print Name/Title:                                 
                                     

 

 OUTGOING WIRE REQUEST:

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

 

 Beneficiary Name:                                 
                                  
                Amount of Wire: $                 
                                                                  
 Beneficiary Bank:                                 
                                    
                Account Number:                   
                                                                   
 City and State:                                 
                                           
 Beneficiary Bank Transit (ABA) #:                                    
        Beneficiary Bank Code (Swift, Sort, Chip,
etc.):                                                         (For
International Wire Only)  Intermediary Bank:                                 
                                          Transit (ABA)
#:                                        
                                                        
 For Further Credit to:                             
                                         
                                         
                                         
                                                      
 Special Instruction:                               
                                         
                                         
                                         
                                                        

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

 

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

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EXHIBIT D

Compliance Certificate

 

TO:

NSPH Funding LLC, as Collateral Agent and Lender

SWK Funding LLC, as Lender

FROM: NANOSPHERE, INC., as Borrower

The undersigned authorized officer (“Officer”) of Nanosphere, Inc. (“Borrower”),
hereby certifies in her sole capacity as Officer, and not in any individual
capacity, that in accordance with the terms and conditions of the Loan and
Security Agreement dated as of May 14, 2015, by and among Borrower, Collateral
Agent, and the Lenders from time to time party thereto (the “Loan Agreement;”
capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Loan Agreement),

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

(b) There are no Defaults or Events of Default, except as noted below;

(c) Except as noted below, all representations and warranties of Borrower stated
in the Loan Documents are true and correct in all material respects on this date
and for the period described in (a), above; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date.

(d) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required
tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has
timely paid all foreign, federal, state, and local taxes, assessments, deposits
and contributions owed by Borrower, or Subsidiary, except as otherwise permitted
pursuant to the terms of Section 5.8 of the Loan Agreement;

(e) No Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Collateral Agent and the
Lenders.

Attached are the required documents, if any, supporting our certification(s).
The Officer, on behalf of Borrower, in her sole capacity as Officer, and not in
any individual capacity, further certifies that the attached financial
statements are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes and except, in the
case of unaudited financial statements, for the absence of footnotes and subject
to year-end audit adjustments as to the interim financial statements.

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

Please indicate compliance status since the last Compliance Certificate by
circling Yes, No, or N/A under “Complies” column.

 

     Reporting Covenant    Requirement    Actual      Complies 1)    Financial
statements    quarterly within 45 days       Yes    No    N/A 2)    Annual (CPA
Audited) statements    Within 90 days after FYE       Yes    No    N/A 3)   
Annual Financial Projections/Budget (prepared on a monthly basis)    Annually
(within earlier 10 days of approval or 45 days of FYE), and when revised (no
later than 7 days of approval)       Yes    No    N/A 4)    8-K, 10-K and 10-Q
Filings    If applicable, within 5 days of filing       Yes    No    N/A 5)   
Compliance Certificate    Monthly within 30 days       Yes    No    N/A 6)    IP
Report    When required       Yes    No    N/A 7)    Total amount of Borrower’s
cash and cash equivalents at the last day of the measurement period       $
                   Yes    No    N/A 8)    Total amount of Borrower’s
Subsidiaries’ cash and cash equivalents at the last day of the measurement
period       $                    Yes    No    N/A

Negative Covenant Compliance

 

     Negative Covenant              Complies 1)    Dispositions (§ 7.1)    Yes
   No    N/A 2)    Changes in Business, Management, Ownership, or Business
Locations (§ 7.2)    Yes    No    N/A 3)    Mergers or Acquisitions (§ 7.3)   
Yes    No    N/A 4)    Indebtedness (§ 7.4)    Yes    No    N/A 5)   
Encumbrance (§ 7.5)    Yes    No    N/A 6)    Maintenance of Collateral Accounts
(§ 7.6)    Yes    No    N/A 7)    Restricted Payments (§ 7.7)    Yes    No   
N/A 8)    Investments (§ 7.8)    Yes    No    N/A 9)    Transactions with
Affiliates (§ 7.9)    Yes    No    N/A 10)    Subordinated Debt (§ 7.10)    Yes
   No    N/A 11)    Compliance (§ 7.11)    Yes    No    N/A 12)    Compliance
with Anti-Terrorism Laws (§ 7.12)    Yes    No    N/A 13)    Material Agreements
(§ 7.13)    Yes    No    N/A 14)    Financial Covenants (§ 7.14)    Yes    No   
N/A 15)    Inconsistent Agreements (§ 7.15)    Yes    No    N/A 16)    Equity
Raise (§ 7.16)    Yes    No    N/A

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Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

     Institution Name    Account Number    New Account?   
Account Control Agreement in place?

1)

         Yes    No    Yes    No

2)

         Yes    No    Yes    No

3)

         Yes    No    Yes    No

4)

         Yes    No    Yes    No

Other Matters

 

1)    Have there been any changes in any Key Person since the last Compliance
Certificate?    Yes            No 2)    Have there been any
transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan
Agreement?    Yes            No 3)    Have there been any new or pending claims
or causes of action against Borrower that involve more than Two Hundred Fifty
Thousand Dollars ($250,000.00)?    Yes            No 4)    Have there been any
amendments of or other changes to the capitalization table of Borrower and to
the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide
copies of any such amendments or changes with this Compliance Certificate.   
Yes            No 5)    Has Borrower or any Subsidiary entered into or amended
any Material Agreement? If yes, please explain and provide a copy of the
Material Agreement(s) and/or amendment(s).    Yes            No 6)    Has
Borrower provided the Collateral Agent with all notices required to be delivered
under Sections 6.2(a) and 6.2(b) of the Loan Agreement?    Yes            No 7)
   Are any material updates to the contents of the Perfection Certificate last
delivered required under the terms of the Loan Agreement? If yes, please attach
an updated Perfection Certificate.    Yes            No

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Exceptions

Please explain any exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions.” Attach separate sheet if additional
space needed.)

NANOSPHERE, INC.

 

By:

 

Name:

 

Title:

 

Date:

 

COLLATERAL AGENT USE ONLY Received by:

 

     Date:

 

Verified by:

 

     Date:

 

Compliance Status:                 Yes                              No