Venture Loan and Security Agreement



 Exhibit 10.4 
  
 VENTURE LOAN AND SECURITY AGREEMENT 
  

Dated as of December 30, 2005 
  
 by and among 
  
 HORIZON TECHNOLOGY FUNDING COMPANY LLC, 
 a Delaware limited liability company

 76 Batterson Park Road 
 Farmington, CT 06032 
 as a Lender 
  
 and 
  
 OXFORD FINANCE CORPORATION 
 a Delaware corporation 
 133 N. Fairfax Street 
 Alexandria, VA 22314,

 as a Lender 
  
 And 
  
 NORTHSTAR NEUROSCIENCE, INC., 
 a Washington corporation 
 2401 Fourth Avenue 
 Seattle, WA 98121

  
 as Borrower 
  

										
	 	  	Commitment Amount Loan A

	  	Commitment Amount Loan B

	  	Commitment Amount Loan C


	 Horizon Technology Funding Company LLC:
	  	$	3,000,000.00	  	$	1,200,000	  	$	1,800,000
				
	 Oxford Finance Corporation
	  	$	2,000,000.00	  	$	800,000	  	$	1,200,000

  

	
	 Commitment Termination Date Loan A:    December 31, 2005

	
	 Commitment Termination Date Loan B:    March 31, 2006

	
	 Commitment Termination Date Loan C:    June 30, 2006









 This Venture Loan and Security Agreement (this “Agreement”) is made by and among Northstar Neuroscience,
Inc., a Washington corporation (“Borrower”); Horizon Technology Funding Company LLC, a Delaware limited liability company (“Horizon”) and Oxford Finance Corporation (“Oxford” and collectively with Horizon,
“Lenders”). Lenders and Borrower hereby agree as follows: 
  
 AGREEMENT 
  
 1.
Definitions and Construction. 
  
 1.1 Definitions.
As used in this Agreement, the following capitalized terms shall have the following meanings: 
  
 “Account Control Agreement” means an agreement acceptable to Lenders which perfects via control Lenders’ security interest in Borrower’s deposit accounts and/or accounts holding securities.

  
 “Affiliate” means any Person that owns or
controls directly or indirectly ten percent (10%) or more of the stock of another entity, any Person that controls or is controlled by or is under common control with such Person or any Affiliate of such Person and each of such Person’s
officers, directors, joint venturers or partners. 
  
 “Agreement” means this certain Venture Loan and Security Agreement by and among Borrower and Lenders dated as of the date on the cover page hereto (as it may from time to time be amended or supplemented in writing signed by
the Borrower and Lenders). 
  
 “Borrower” means
the Borrower as set forth on the cover page of this Agreement. 
  
 “Borrower’s Home State” means Washington. 
  
 “Business Day” means any day that is not a Saturday, Sunday, or other day on which banking institutions are authorized or required to close in Connecticut or Borrower’s Home State. 
  
 “Claim” has the meaning given such term in
Section 10.3 of this Agreement 
  
 “Code” means the Uniform Commercial Code as adopted and in effect in the State of Connecticut, as amended from time to time; provided that if by reason of mandatory provisions of law, the creation and/or perfection
or the effect of perfection or non-perfection of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Connecticut, the term “Code” shall also mean the Uniform
Commercial Code as in effect from time to time in such jurisdiction for purposes of the provisions hereof relating to such creation, perfection or effect of perfection or non-perfection. 
  
 “Collateral” has the meaning given such term in Section 4.1 of this Agreement. 







 “Commitment Amount” means collectively, Commitment Amount Loan A, Commitment Amount Loan
B and Commitment Amount Loan C. 
  
 “Commitment Amount
Loan A” means, with respect to each Lender, the amount specified opposite such Lender’s name on the cover page of this Agreement in the column titled “Commitment Amount Loan A.” 
  
 “Commitment Amount Loan B” means, with respect to each
Lender, the amount specified opposite such Lender’s name on the cover page of this Agreement in the column titled “Commitment Amount Loan B.” 
  
 “Commitment Amount Loan C” means, with respect to each Lender, the amount specified opposite such Lender’s name on the cover page of
this Agreement in the column titled “Commitment Amount Loan C.” 
  
 “Commitment Fee” has the meaning given such term in Section 2.6(c) of this Agreement. 
  
 “Commitment Termination Date” means collectively, Commitment Termination Date Loan A, Commitment Termination Date Loan B and Commitment
Termination Date Loan C. 
  
 “Commitment Termination Date
Loan A,” “Commitment Termination Date Loan B”, and “Commitment Termination Date Loan C” each have the respective meanings as set forth on the cover page of this Agreement. 
  
 “Default” means any event which with the passing of time or
the giving of notice or both would become an Event of Default hereunder. 
  
 “Default Rate” means the per annum rate of interest equal to three percent (3%) over the Loan Rate, but such rate shall in no event be more than the highest rate permitted by applicable law to be
charged on commercial loans in a default situation. 
  
 “Disclosure Schedule” means Exhibit A attached hereto. 
  
 “Environmental Laws” means all foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act and the Emergency Planning and Community
Right-to-Know Act. 
  
 “Equity Securities” of any
Person means (a) all common stock, preferred stock, participations, shares, partnership interests, membership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and
(b) all warrants, options and other rights to acquire any of the foregoing. 
  
 “ERISA” has the meaning given to such term in Section 7.12 of this Agreement. 







 “Event of Default” has the meaning given to such term in Section 8 of this
Agreement. 
  
 “Funding Certificate” means a
certificate executed by a Responsible Officer of Borrower substantially in the form of Exhibit B or such other form as Lenders may agree to accept. 
  
 “Funding Date” means any date on which a Loan is made to or on account of Borrower under this Agreement. 
  
 “GAAP” means generally accepted accounting principles as in
effect in the United States of America from time to time, consistently applied. 
  
 “Good Faith Deposit” has the meaning given such term in Section 2.6(a) of this Agreement. 
  
 “Governmental Authority” means (a) any federal, state, county, municipal or foreign government, or political subdivision thereof,
(b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body, (c) any court or administrative tribunal, or (d) with respect to any Person, any arbitration tribunal
or other non-governmental authority to whose jurisdiction that Person has consented. 
  
 “Hazardous Materials” means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste. 
  
 “Indebtedness” means, with respect to Borrower or any
Subsidiary, the aggregate amount of, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of property or services (excluding trade payables aged less than one hundred eighty (180) days), (d) all capital lease obligations of such Person, (e) all obligations or
liabilities of others secured by a Lien on any asset of such Person, whether or not such obligation or liability is assumed, (f) all obligations or liabilities of others guaranteed by such Person, and (g) any other obligations or
liabilities which are required by GAAP to be shown as debt on the balance sheet of such Person. Unless otherwise indicated, the term “Indebtedness” shall include all Indebtedness of Borrower and the Subsidiaries. 
  
 “Indemnified Person” has the meaning given such term in
Section 10.3 of this Agreement. 
  
 “Intellectual Property” means all of Borrower’s right, title and interest in and to patents, patent rights (and applications and registrations therefor), trademarks and service marks (and applications and registrations
therefor), inventions, copyrights, mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs, source code, object code, trade secrets, methods, processes, know how, drawings, specifications,
descriptions, and all memoranda, notes, and records with respect to any research and development, all whether now owned or subsequently acquired or developed by Borrower and whether in tangible or intangible form or contained on magnetic media
readable by machine together with all such magnetic media (but not including embedded computer programs and supporting information included within the definition of “goods” under the Code). 







 “Investment” means the purchase or acquisition of any capital stock, equity interest, or
any obligations or other securities of, or any interest in, any Person, or the extension of any advance, loan, extension of credit or capital contribution to, or any other investment in, or deposit with, any Person. 
  
 “Landlord Agreement” means an agreement substantially in the
form provided by Lenders to Borrower or such other form as Lenders may reasonably request. 
  
 “Lender” means individually, each of the Lenders, and “Lenders” has the meaning given in the preamble to this Agreement. 
  
 “Lenders’ Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees
and expenses) incurred by Lenders in connection with the preparation, negotiation, documentation, administration and funding of the Loan Documents; and Lenders’ reasonable attorneys’ fees, costs and expenses incurred in amending,
modifying, enforcing or defending the Loan Documents (including fees and expenses of appeal or review), including the exercise of any rights or remedies afforded hereunder or under applicable law, whether or not suit is brought, whether before or
after bankruptcy or insolvency, including without limitation all fees and costs incurred by Lenders in connection with Lenders’ enforcement of its rights in a bankruptcy or insolvency proceeding filed by or against Borrower or its Property;
provided however, Borrower’s liability for Lenders’ Expenses incurred in connection with the preparation, negotiation, documentation, administration and funding of the Loan Documents, including the making of Loan B and Loan C, shall not
exceed $15,000. 
  
 “Lien” means any voluntary or
involuntary security interest, pledge, bailment, lease, mortgage, hypothecation, conditional sales and title retention agreement, encumbrance or other lien with respect to any Property in favor of any Person. 
  
 “Loan” means each advance of credit to Borrower made under
this Agreement and, “Loans” means, collectively all such advances of credit. 
  
 “Loan A” means the first advance of credit to Borrower under this Agreement in the Commitment Amount Loan A. 
  
 “Loan B” means the advance of credit to Borrower under this Agreement in the Commitment Amount Loan B. 
  
 “Loan C” means the advance of credit to Borrower under this
Agreement in the Commitment Amount Loan C. 
  
 “Loan
Documents” means, collectively, this Agreement, the Notes, the Warrants, any Landlord Agreement, any Account Control Agreement and all other documents, instruments and agreements entered into in connection with this Agreement, all as
amended or extended from time to time. 







 “Loan Rate” means, with respect to each Loan, the per annum rate of interest (based on a
year of twelve 30-day months) equal to the greater of (a) 11.50% or (b) 11.50% plus the positive difference, if any, between (i) the one month LIBOR Rate, as reported in the Wall Street Journal, on the date which is five (5) days
before the Funding Date for such Loan (or, if such date is not a Business Day, the next earlier Business Day) and (ii) 3.30%. 
  
 “Maturity Date” means, with respect to each Loan, January 1, 2009, or if earlier, the date of acceleration of such Loan following an
Event of Default or the date of prepayment, whichever is applicable. 
  
 “Note” means each promissory note executed in connection with a Loan in substantially the form of Exhibit C attached hereto, and, collectively, “Notes” means all such promissory notes. 
  
 “Obligations” means all debt, principal, interest, fees,
charges, expenses and attorneys’ fees and costs and other amounts, obligations, covenants, and duties owing by Borrower to Lenders of any kind and description (whether pursuant to or evidenced by the Loan Documents (other than the Warrant), or
by any other agreement between any Lender and Borrower, and whether or not for the payment of money), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all Lenders’ Expenses.

  
 “Officer’s Certificate” means a
certificate executed by a Responsible Officer substantially in the form of Exhibit E or such other form as Lenders may agree to accept. 
  
 “Payment Date” has the meaning given such term in Section 2.2(a) of this Agreement. 
  
 “Permitted Indebtedness” means and includes: 
  
 (a) Indebtedness of Borrower to Lenders; 
  
 (b) Indebtedness of Borrower in an aggregate outstanding principal amount
not to exceed Two Million Dollars ($2,000,000) which is secured solely by Liens permitted under clause (e) of the definition of Permitted Liens; 
  
 (c) Indebtedness arising from the endorsement of instruments in the ordinary course of business; 
  
 (d) Trade debt and other unsecured Indebtedness incurred in the ordinary
course of business; 
  
 (e) Guaranties by Borrower of obligations
or liabilities of its Subsidiaries incurred in the ordinary course of business in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000); 
  
 (f) Indebtedness of Borrower to any of its Subsidiaries in an aggregate amount not to exceed Two Hundred Fifty Thousand
Dollars ($250,000) in any fiscal year; 







 (g) Surety, performance and similar bonds incurred in the ordinary course of business not securing
Indebtedness for borrowed money; 
  
 (h) Indebtedness of Borrower
in respect of standby letters of credit to secure its obligations and those of its Subsidiaries regarding real property leases; 
  
 (i) Indebtedness that is subordinated on terms acceptable to the Lenders in their sole discretion; and 
  
 (j) Indebtedness existing on the date hereof and set forth on the Disclosure
Schedule. 
  
 “Permitted Investments” means and
includes any of the following Investments: 
  
 (a) Deposits and
deposit accounts with commercial banks organized under the laws of the United States or a state thereof to the extent: (i) the deposit accounts of each such institution are insured by the Federal Deposit Insurance Corporation up to the legal
limit; and (ii) each such institution has an aggregate capital and surplus of not less than One Hundred Million Dollars ($100,000,000); 
  
 (b) Investments in marketable obligations issued or fully guaranteed by the United States and maturing not more than one (1) year from the date of
issuance; 
  
 (c) Investments in open market commercial paper
rated at least “A1” or “P1” or higher by a national credit rating agency and maturing not more than one (1) year from the creation thereof; 
  
 (d) Investments pursuant to or arising under currency agreements or interest rate agreements entered into in the ordinary
course of business; 
  
 (e) Investments in Subsidiaries in an
aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year; 
  
 (f) Investments in joint ventures in the ordinary course of business in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000)
in any fiscal year; 
  
 (g) Investments consisting of
(i) travel advances, in the ordinary course of business, to employees and service providers; and (ii) cashless loans to service providers in respect of the purchase of Equity Securities of Borrower pursuant to employee stock purchase plans
approved by Borrower’s board of directors; 
  
 (h)
Investments pursuant to the Borrower’s “Recommended Investment Policy Guidelines” in effect on the date hereof and as modified by the Borrower’s Board of Directors; and 
  
 (i) Other Investments aggregating not in excess of Two Hundred Fifty
Thousand Dollars ($250,000) at any time. 







 “Permitted Liens” means and includes: 
  
 (a) the Lien created by this Agreement; 
  
 (b) Liens for fees, taxes, levies, imposts, duties or other governmental
charges of any kind which are not yet delinquent or which are being contested in good faith by appropriate proceedings which suspend the collection thereof (provided that such appropriate proceedings do not involve any substantial danger of
the sale, forfeiture or loss of any material item of Collateral which in the aggregate is material to Borrower and that Borrower has adequately bonded such Lien or reserves sufficient to discharge such Lien have been provided on the books of
Borrower); 
  
 (c) Liens identified on the Disclosure Schedule;

  
 (d) carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings
(provided that such appropriate proceedings do not involve any substantial danger of the sale, forfeiture or loss of any material item of Collateral or Collateral which in the aggregate is material to Borrower and that Borrower has adequately
bonded such Lien or reserves sufficient to discharge such Lien have been provided on the books of Borrower); 
  
 (e) Liens upon any equipment or other personal property acquired by Borrower after the date hereof to secure (i) the purchase price of such
equipment or other personal property, or (ii) lease obligations or indebtedness incurred solely for the purpose of financing the acquisition of such equipment or other personal property; provided that (A) such Liens are confined
solely to the equipment or other personal property so acquired and the amount secured does not exceed the acquisition price thereof, and (B) no such Lien shall be created, incurred, assumed or suffered to exist in favor of Borrower’s
officers, directors or shareholders holding five percent (5%) or more of Borrower’s Equity Securities; 
  
 (f) Licenses of components of Borrower’s Intellectual Property in connection with joint ventures and corporate collaborations; 
  
 (g) Liens and rights of setoff in favor of financial institutions arising in
the ordinary course of business in connection with Borrower’s deposit accounts held at such institutions; 
  
 (h) cash pledges and deposits in an aggregate amount not to exceed One Million Dollars ($1,000,000) at any time to secure the performance of bids, trade
contracts, leases, statutory obligations or governmental franchise obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, as well as cash deposits to collateralize letters of credit issued to serve such
functions, in each case in the ordinary course of business; and 
  
 (i) Judgment Liens in respect of judgments that do not constitute an Event of Default under Section 8.8 below. 







 “Person” means and includes any individual, any partnership, any corporation, any
business trust, any joint stock company, any limited liability company, any unincorporated association or any other entity and any domestic or foreign national, state or local government, any political subdivision thereof, and any department,
agency, authority or bureau of any of the foregoing. 
  
 “Property” means any interest in any kind of property or asset, whether real, personal or mixed, whether tangible or intangible. 
  
 “Responsible Officer” has the meaning given such term in Section 6.3 of this Agreement. 
  
 “Scheduled Payments” has the meaning given such term in
Section 2.2(a) of this Agreement. 
  
 “Solvent” has the meaning given such term in Section 5.11 of this Agreement. 
  
 “Subsidiary” means any corporation or other entity of which a majority of the outstanding Equity Securities entitled to vote for the
election of directors or other governing body (otherwise than as the result of a default) is owned by Borrower directly or indirectly through Subsidiaries. 
  
 “Third Party Equipment” has the meaning given such term in Section 4.8 of this Agreement. 
  
 “Transfer” has the meaning given such term in
Section 7.4 of this Agreement. 
  
 “Warrants” means the separate warrant or warrants dated on or about the date hereof in favor of the Lenders or their designees to purchase securities of Borrower. 
  
 1.2 Construction. References in this Agreement to
“Articles,” “Sections,” “Exhibits,” “Schedules” and “Annexes” are to recitals, articles, sections, exhibits, schedules and annexes herein and hereto unless otherwise indicated. References in this
Agreement and each of the other Loan Documents to any document, instrument or agreement shall include (a) all exhibits, schedules, annexes and other attachments thereto, (b) all documents, instruments or agreements issued or executed in
replacement thereof, and (c) such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words “hereof,”
“herein” and “hereunder” and words of similar import when used in this Agreement or any other Loan Document shall refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Loan Document, as the case may be. The words “include” and “including” and words of similar import when used in this Agreement or any other Loan Document shall not be construed to be
limiting or exclusive. Unless otherwise indicated in this Agreement or any other Loan Document, all accounting terms used in this Agreement or any other Loan Document shall be construed, and all accounting and financial computations hereunder or
thereunder shall be computed, in accordance with GAAP, and all terms describing Collateral shall be construed in accordance with the Code. The terms and information set forth on the cover page of this Agreement are incorporated into this Agreement.








 2. Loans; Repayment. 
  
 2.1 Commitment. 
  
 (a) The Commitment Amount. Subject to the terms and conditions of this Agreement and relying upon the representations and warranties herein set
forth as and when made or deemed to be made, each Lender agrees and commits, severally and not jointly (i) to lend to Borrower at any time prior to the Commitment Termination Date Loan A, Loan A in the amount of Commitment Amount Loan A,
(ii) to lend to Borrower at any time prior to the Commitment Termination Date Loan B, Loan B in the amount of Commitment Amount Loan B and (iii) to lend to Borrower at any time prior to the Commitment Termination Date Loan C, Loan C in the
amount of Commitment Amount Loan C. 
  
 (b) The Loans and the
Notes. The obligation of Borrower to repay the unpaid principal amount of and interest on each Loan made under this Agreement shall be evidenced by a single promissory note in favor of such Lender in the form of Exhibit C attached hereto, duly
completed, executed and delivered to such Lender dated on or about the Funding Date for such Loan and made payable to such Lender. Borrower hereby authorizes each Lender to record on each Note or on its internal computerized records, the principal
amount of such Loan and of each payment of principal received by such Lender on account of such Loan, which recordance, in the absence of manifest error, shall be conclusive as to the outstanding principal balance of such Loan; provided that,
the failure to make such recordation with respect to any Loan or payment shall not limit or otherwise affect the obligations of the Borrower under this Agreement, the Notes or the other Loan Documents. 
  
 (c) Use of Proceeds. The proceeds of each Loan shall be used solely
for working capital or general corporate purposes of Borrower. 
  
 (d) Termination of Commitment to Lend. Notwithstanding anything in the Loan Documents, each Lender’s obligation to lend the undisbursed portion of its Commitment Amount to Borrower hereunder shall terminate on the earlier of
(i) at each Lender’s sole election, the occurrence of any Event of Default hereunder, and (ii) the applicable Commitment Termination Date. Notwithstanding the foregoing, each Lender’s obligation to lend the undisbursed portion of
the Commitment Amount to Borrower shall terminate if, in such Lenders’ sole judgment, there has been a material adverse change in the general affairs, management, results of operations, condition (financial or otherwise) or prospects of
Borrower, whether or not arising from transactions in the ordinary course of business, or there has been any material adverse deviation by Borrower from the business plan of Borrower presented to Lenders on or before the date of this Agreement.

  
 2.2 Payments. 
  
 (a) Scheduled Payments. Borrower shall make payments of accrued
interest only on the outstanding principal amount of each Loan on each Payment Date through and including July 1, 2006 and thirty (30) level payments of principal plus accrued interest on the outstanding principal amount of each Loan on
each subsequent Payment Date (collectively, the “Scheduled Payments”). Borrower shall make such Scheduled Payments commencing on the 







 date set forth in the Note applicable to such Loan and continuing thereafter on the first Business Day of each calendar
month (each a “Payment Date”) through the Maturity Date. In any event, all unpaid principal and accrued interest shall be due and payable in full on the Maturity Date or, if earlier, the date of prepayment of such Loan. 

 
 (b) Interim Payment. Unless the Funding Date for a Loan is the
first day of a calendar month, Borrower shall pay the per diem interest (accruing at the Loan Rate from the Funding Date through the last day of that month) payable with respect to such Loan on the first Business Day of the next calendar month.

  
 (c) Payment of Interest. Borrower shall pay interest
on each Loan at a per annum rate of interest equal to the Loan Rate applicable to such Loan. All computations of interest (including interest at the Default Rate, if applicable) shall be based on a year of twelve 30-day months. Notwithstanding any
other provision hereof, the amount of interest payable hereunder shall not in any event exceed the maximum amount permitted by the law applicable to interest charged on commercial loans. 
  
 (d) Application of Payments. All payments received by any Lender prior to an Event of Default shall be applied as
follows: (1) first, to Lenders’ Expenses then due and owing; and (2) second to all Scheduled Payments then due and owing (provided, however, if such payments are not sufficient to pay the whole amount then due, such payments shall be
applied first to unpaid interest at the Loan Rate, then to the remaining amount then due). After an Event of Default, all payments and application of proceeds shall be made as set forth in Section 9.7. 
  
 (e) Late Payment Fee. Borrower shall pay to Lenders a late payment
fee equal to four percent (4%) of any Scheduled Payment not paid within three (3) Business Days of when due. 
  
 (f) Default Rate. Borrower shall pay interest at a per annum rate equal to the Default Rate on any amounts required to be paid by Borrower under
this Agreement or the other Loan Documents (including Scheduled Payments), payable with respect to any Loan, accrued and unpaid interest, and any fees or other amounts which remain unpaid after such amounts are due. If an Event of Default has
occurred and the Obligations have been accelerated (whether automatically or by Lenders’ election), Borrower shall pay interest on the aggregate, outstanding accelerated balance hereunder from the date of the Event of Default until all Events
of Default are cured, at a per annum rate equal to the Default Rate. 
  
 2.3 Prepayments. 
  
 (a) Mandatory Prepayment
Upon an Acceleration. If the Loans are accelerated following the occurrence of an Event of Default pursuant to Section 9.1(a) hereof, then Borrower, in addition to any other amounts which may be due and owing hereunder, shall
immediately pay to Lenders the amount set forth in Section 2.3(b) below, as if the Borrower had opted to prepay on the date of such acceleration. 







 (b) Upon ten (10) Business Days’ prior written notice to Lenders, Borrower may, at its
option, at any time, prepay all of the Loans by paying to Lenders an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Loans; (ii) an amount equal to (A) if the Loans are prepaid within
twelve (12) months from the Funding Date of Loan A, four (4%) percent of the then outstanding principal balance of the Loans, (B) if the Loans are prepaid more than twelve (12) months from the date hereof but less than
twenty-four (24) months from the Funding Date of Loan A, three (3%) percent of the then outstanding principal balance of the Loans, or (C) if the Loans are prepaid more than twenty-four (24) months from the Funding Date of Loan
A, two (2%) percent of the then outstanding principal balance of the Loans; (iii) the outstanding principal balance of the Loans and (iv) all other sums, if any, that shall have become due and payable hereunder. 
  
 2.4 Other Payment Terms. 
  
 (a) Place and Manner. Borrower shall make all payments due to
Lenders in lawful money of the United States. All payments of principal, interest, fees and other amounts payable by Borrower hereunder shall be made, in immediately available funds, not later than 1:00 p.m. Connecticut time, on the date on which
such payment is due. Borrower shall make such payments to Lenders as follows: 
  

			
	 Payments to Horizon:
	  	 
	 Credit:
	  	Horizon Technology Funding Company LLC
	 Bank Name:
	  	ABN Amro/LaSalle Bank NA CDO Trust Services
	 Bank Address:
	  	 135 South LaSalle Street, Suite 1625
 Chicago,
Illinois 60603
 Attn: Greg Meyers, 312-904-0283

	 Account No.:
	  	2090067-Trust GL
	 FFCT-Reference Account Number
	  	721771.1
	 ABA Routing No.:
	  	071000505
	 Reference:
	  	Northstar Invoice #
	 Payments to Oxford by Debit From:
	  	 Borrower’s Primary Operating Account
 The
Commerce Bank of Washington
 601 Union Street, Suite 3600
 Seattle, Washington, 98101
 ABA No.: 12500813
 Account
No.: 001167308
 Account Name: Northstar Neuroscience, Inc.


  
 (b) Date.
Whenever any payment is due hereunder on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be.

  
 2.5 Procedure for Making Loans. 
  
 (a) Notice. Whenever Borrower desires that Lenders make a Loan,
Borrower shall notify Lenders of the date on which Borrower desires Lenders to make such Loan. Borrower’s notice shall be made at least five (5) Business Days in advance of the desired 







 Funding Date, unless Lenders elects at their sole discretion to allow the Funding Date to be within five
(5) Business Days of the notice. Borrower’s execution and delivery to each Lender of a Note shall be Borrower’s agreement to the terms and calculations thereunder with respect to such Loan. Lenders’ obligation to make any Loans
shall be expressly subject to the satisfaction of the conditions set forth in Sections 3.1 and 3.2. 
  
 (b) Loan Rate Calculation. Prior to each Funding Date, Lenders shall establish the Loan Rate with respect to such Loan, which shall be set forth
in each Note to be executed by Borrower with respect to such Loan and shall be conclusive in the absence of a manifest error. 
  
 (c) Disbursement. Each Lender shall disburse the proceeds of its Loan by wire transfer to Borrower at the account specified in the Funding
Certificate for such Loan. 
  
 2.6 Good Faith Deposit; Legal
and Closing Expenses; and Commitment Fee. 
  
 (a) Good
Faith Deposit. Borrower has delivered to Horizon a good faith deposit in the amount of Fifty Thousand Dollars ($50,000) (the “Good Faith Deposit”). The Good Faith Deposit will be utilized to pay the Commitment Fee. 

 
 (b) Legal, Due Diligence and Documentation Expenses. Borrower
shall pay to Lenders concurrently with its execution and delivery of this Agreement the aggregate amount of Fifteen Thousand Dollars ($15,000) for Lenders’ legal, due diligence and documentation expenses in connection with the negotiation and
documentation of this Agreement and the Loan Documents. 
  
 (c)
Commitment Fee. Borrower authorizes Lenders concurrently with its execution and delivery of this Agreement to apply the Good Faith Deposit to the commitment fee in an aggregate amount of Fifty Thousand Dollars ($50,000) (the
“Commitment Fee”). The Commitment Fee shall be retained by Lenders and be deemed fully earned upon receipt. 
  
 3. Conditions of Loans. 
  
 3.1 Conditions Precedent to Closing. At the time of the execution and delivery of this Agreement, Lenders shall have received, in form and
substance reasonably satisfactory to Lenders, all of the following (unless Lenders have agreed to waive such condition or document, in which case such condition or document shall be a condition precedent to the making of any Loan and shall be deemed
added to Section 3.2): 
  
 (a) Loan
Agreement. This Agreement duly executed by Borrower and Lenders. 
  
 (b) Warrants. The Warrants duly executed by Borrower. 
  
 (c) Secretary’s Certificate. A certificate of the secretary or assistant secretary of Borrower with copies of the following documents attached: (i) the articles of incorporation and bylaws of Borrower certified by Borrower
as being complete and in full force 







 and effect on the date thereof, (ii) incumbency and representative signatures, and (iii) resolutions
authorizing the execution and delivery of this Agreement and each of the other Loan Documents. 
  
 (d) Good Standing Certificates. A good standing certificate from Borrower’s state of incorporation and the state in which Borrower’s
principal place of business is located, each dated as of a recent date. 
  
 (e) Certificate of Insurance. Evidence of the insurance coverage required by Section 6.8 of this Agreement. 
  

(f) Consents. All necessary consents of shareholders and other third parties with respect to the execution, delivery and performance of this
Agreement, the Warrants and the other Loan Documents. 
  
 (g)
Legal Opinion. A legal opinion of Borrower’s counsel covering the matters set forth in Exhibit D hereto. 
  
 (h) Account Control Agreements. Account Control Agreements for all of Borrower’s deposit accounts and accounts holding securities duly
executed by all of the parties thereto, in the forms provided by Lenders. 
  
 (i) Other Documents. Such other documents and completion of such other matters, as Lenders may reasonably deem necessary or appropriate. 
  
 3.2 Conditions Precedent to Making a Loan. The obligation of any Lender to make a Loan is further subject to the
following conditions: 
  
 (a) No Default. No Default or
Event of Default shall have occurred and be continuing. 
  
 (b)
Landlord Agreements. Borrower shall have provided Lenders with a Landlord Agreement for each location where Borrower’s books and records and the Collateral is located other than locations: (i) that Borrower is the fee owner thereof;
(ii) where less than $500,000 of Collateral is located, (iii) where Collateral may be temporarily located for sales, clinical trials, manufacturing, testing or demonstration purposes. 
  
 (c) Note. Borrower shall have duly executed and delivered to such
Lender a Note in the amount of the Loan. 
  
 (d) UCC Financing
Statements. Lenders shall have received such documents, instruments and agreements, including UCC financing statements or amendments to UCC financing statements, as Lenders shall reasonably request to evidence the perfection and priority of the
security interests granted to Lenders pursuant to Section 4. Borrower authorizes Lenders to file any UCC financing statements, continuations of or amendments to UCC financing statements it deems necessary to perfect its security interest
in the Collateral. 
  
 (e) Funding Certificate. Borrower
shall have duly executed and delivered to Lenders a Funding Certificate for such Loan. 







 (f) Other Documents. Such other documents and completion of such other matters, as Lenders may
reasonably deem necessary or appropriate. 
  
 3.3 Covenant to
Deliver. Borrower agrees (not as a condition but as a covenant) to deliver to Lenders each item required to be delivered to Lenders as a condition to each Loan, if such Loan is advanced. Borrower expressly agrees that the extension of any Loan
prior to the receipt by Lenders of any such item shall not constitute a waiver by Lenders of Borrower’s obligation to deliver such item, and any such extension in the absence of a required item shall be in Lenders’ sole discretion.

  
 4. Creation of Security Interest. 
  
 4.1 Grant of Security Interest. Borrower grants to Lenders for the
ratable benefit of the Lenders, a valid continuing security interest in all presently existing and hereafter acquired or arising Collateral in order to secure prompt, full and complete payment of any and all Obligations and in order to secure
prompt, full and complete performance by Borrower of each of its covenants and duties under each of the Loan Documents (other than the Warrant). The “Collateral” shall mean and include all right, title, interest, claims and demands
of Borrower in and to all personal property of Borrower, including without limitation, all of the following: 
  
 (a) All goods (and embedded computer programs and supporting information included within the definition of “goods” under the Code) and
equipment now owned or hereafter acquired, including, without limitation, all laboratory equipment, computer equipment, office equipment, machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; 
  
 (b) All inventory now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products including such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Borrower’s books relating to any of the foregoing; 
  
 (c) All contract rights and general intangibles (except to the extent included within the definition of Intellectual
Property), now owned or hereafter acquired, including, without limitation, goodwill, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, software, computer programs,
computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payment intangibles, commercial tort claims, payments of insurance and rights to payment of any kind; 
  
 (d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights, license fees and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by 







 Borrower (subject, in each case, to the contractual rights of third parties to require funds received by Borrower to be
expended in a particular manner), whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s books relating to
any of the foregoing; 
  
 (e) All documents, cash, deposit
accounts, letters of credit (whether or not the letter of credit is evidenced by a writing), certificates of deposit, instruments, promissory notes, chattel paper (whether tangible or electronic) and investment property, including, without
limitation, all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts and commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, now
owned or hereafter acquired and Borrower’s books relating to the foregoing; 
  
 (f) Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof, including, without limitation, insurance, condemnation, requisition or
similar payments and proceeds of the sale or licensing of Intellectual Property to the extent such proceeds no longer constitute Intellectual Property; but 
  
 (g) Notwithstanding the foregoing, the Collateral shall not include any Intellectual Property or more than sixty-five percent (65%) of the voting
stock of any Subsidiary organized outside of the United States of America; provided, however, that the Collateral shall include all accounts receivables, accounts, and general intangibles that consist of rights to payment and proceeds
from the sale, licensing or disposition of all or any part, or rights in, the foregoing (the “Rights to Payment”). Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the Closing Date, include the Intellectual Property to the extent
necessary to permit perfection of Lenders’ security interests solely with respect to the Rights to Payment. 
  
 4.2 After-Acquired Property. If Borrower shall at any time acquire a commercial tort claim, as defined in the Code, Borrower shall immediately
notify Lenders in writing signed by Borrower of the brief details thereof and grant to Lenders in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to Lenders. 
  
 4.3 Duration of Security
Interest. Lenders’ security interest in the Collateral shall continue until the payment in full and the satisfaction of all Obligations and termination of Lenders’ commitment to fund the Loans, whereupon such security interest shall
terminate. Lenders shall, at Borrower’s sole cost and expense, execute such further documents and take such further actions as may be reasonably necessary to make effective the release contemplated by this Section 4.3, including
duly executing and delivering termination statements for filing in all relevant jurisdictions under the Code. 
  
 4.4 Location and Possession of Collateral. The Collateral is and shall remain in the possession of Borrower at its location listed on the cover
page hereof or as set forth in the Disclosure Schedule or at other locations where less than $500,000 of Collateral may be located 







 at any time or where Collateral may be temporarily located for sales, clinical trials, manufacturing, testing or
demonstration purposes. Except as disclosed to Lenders, in writing, from time to time, Borrower shall remain in full possession, enjoyment and control of the Collateral (except only as may be otherwise required by Lenders for perfection of their
security interests therein) and so long as no Event of Default has occurred, shall be entitled to manage, operate and use the same and each part thereof with the rights and franchises appertaining thereto; provided that the possession,
enjoyment, control and use of the Collateral shall at all time be subject to the observance and performance of the terms of this Agreement. 
  
 4.5 Delivery of Additional Documentation Required. Borrower shall from time to time execute and deliver to Lenders, at the request of Lenders, all
financing statements and other documents Lenders may reasonably request, in form satisfactory to Lenders, to perfect and continue Lenders’ perfected security interests in the Collateral and in order to consummate fully all of the transactions
contemplated under the Loan Documents. 
  
 4.6 Right to
Inspect. Lenders (through any of their officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower’s usual business hours, to inspect Borrower’s books and records and to make
copies thereof and to inspect, test, and appraise the Collateral in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral. 
  
 4.7 Protection of Intellectual Property. Borrower shall
(i) protect, defend and maintain the validity and enforceability of its Intellectual Property and promptly advise Lenders in writing of material infringements, and (ii) not allow any Intellectual Property material to Borrower’s
business to be abandoned, forfeited or dedicated to the public without Lenders’ written consent unless the Borrower’s board of directors determines in good faith that such action is in the best interests of the Company. 
  
 4.8 Lien Subordination. Lenders agree that the Liens granted to them
hereunder in Third Party Equipment shall be subordinate to the Liens of future lenders providing equipment financing and equipment lessors for equipment and other personal property acquired by Borrower after the date hereof (“Third Party
Equipment”); provided that such Liens are confined solely to the equipment so financed and the proceeds thereof and the Indebtedness secured thereby constitutes Indebtedness permitted under subsection (b) of the definition of
Permitted Indebtedness. Notwithstanding the foregoing, the Obligations hereunder shall not be subordinate in right of payment to any obligations to equipment lenders or equipment lessors and Lenders’ rights and remedies hereunder in any
Collateral which does not constitute Third Party Equipment shall not in any way be subordinate to the rights and remedies of any such equipment lenders or equipment lessors. So long as no Event of Default has occurred and is continuing, Lenders
agree to execute and deliver such agreements and documents as may be reasonably requested by Borrower from time to time which set forth the lien subordination described in this Section 4.8 and are reasonably acceptable to Lenders.
Lenders shall have no obligation to execute any agreement or document which would impose obligations, restrictions or lien priority on Lenders which are less favorable to Lenders than those described in this Section 4.8. 







 5. Representations and Warranties. Except as set forth in the Disclosure Schedule, Borrower
represents and warrants as follows: 
  
 5.1 Organization and
Qualification. Borrower is a corporation duly organized and validly existing under the laws of its state of incorporation and qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or
its ownership of Property requires that it be so qualified or in which the Collateral is located, except for such states as to which any failure to so qualify would not have a material adverse effect on Borrower. 
  
 5.2 Authority. Borrower has all necessary power and authority to
execute, deliver, and perform in accordance with the terms thereof, the Loan Documents to which it is a party. Borrower has all requisite power and authority to own and operate its Property and to carry on its businesses as now conducted.

  
 5.3 Conflict with Other Instruments, etc. Neither the
execution and delivery of any Loan Document to which Borrower is a party nor the consummation of the transactions therein contemplated nor compliance with the terms, conditions and provisions thereof will conflict with or result in a breach of any
of the terms, conditions or provisions of the articles of incorporation, the bylaws, or any other organizational documents of Borrower or any law or any regulation, order, writ, injunction or decree of any court or governmental instrumentality or
any material agreement or instrument to which Borrower is a party or by which it or any of its Property is bound or to which it or any of its Property is subject, or constitute a default thereunder or result in the creation or imposition of any
Lien, other than Permitted Liens. 
  
 5.4 Authorization;
Enforceability. The execution and delivery of this Agreement, the granting of the security interest in the Collateral, the incurring of the Loans, the execution and delivery of the other Loan Documents to which Borrower is a party and the
consummation of the transactions herein and therein contemplated have each been duly authorized by all necessary action on the part of Borrower. No authorization, consent, approval, license or exemption of, and no registration, qualification,
designation, declaration or filing with, or notice to, any Person is, was or will be necessary to (i) the valid execution and delivery of any Loan Document to which Borrower is a party, (ii) the performance of Borrower’s obligations
under any Loan Document, or (iii) the granting of the security interest in the Collateral, except for filings in connection with the perfection of the security interest in any of the Collateral or the issuance of the Warrant. The Loan Documents
have been duly executed and delivered and constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of creditors’ rights or by general principles of equity. 
  
 5.5 No Prior Encumbrances. Borrower has good and marketable title to the Collateral, free and clear of Liens except for Permitted Liens. Borrower
has good title and ownership of, or is licensed under, all of Borrower’s current Intellectual Property. Borrower has not received any communications alleging that Borrower has violated, or by conducting its business as proposed, would violate
any proprietary rights of any other Person. Borrower has no knowledge of any infringement or violation by it of the intellectual property rights of any third party and has no knowledge of any violation or infringement by a third party of any of its
Intellectual Property. The Collateral and the Intellectual Property constitute substantially all of the assets and property of Borrower. 







 5.6 Name; Location of Chief Executive Office, Principal Place of Business and Collateral. Borrower
has not done business under any name other than that specified on the signature page hereof and the name “Vertis Neuroscience, Inc.” Borrower’s jurisdiction of incorporation, chief executive office, principal place of business, and
the place where Borrower maintains its records concerning the Collateral are presently located in the state and at the address set forth on the cover page of this Agreement. The Collateral is presently located at the address set forth on the cover
page hereof or as set forth in the Disclosure Schedule. 
  
 5.7
Litigation. There are no actions or proceedings pending by or against Borrower before any court or administrative agency in which an adverse decision could have a material adverse effect on Borrower or the aggregate value of the Collateral.
Borrower does not have knowledge of any such pending or threatened actions or proceedings. 
  
 5.8 Financial Statements. All financial statements relating to Borrower or any Affiliate that have been or may hereafter be delivered by Borrower to Lenders present fairly in all material respects
Borrower’s financial condition as of the date thereof and Borrower’s results of operations for the period then ended. 
  
 5.9 No Material Adverse Effect. No event has occurred and no condition exists which could reasonably be expected to have a material adverse effect
on the financial condition, business or operations of Borrower since December 31, 2004. 
  
 5.10 Full Disclosure. No representation, warranty or other statement made by Borrower in any Loan Document (including the Disclosure Schedule), certificate or written statement furnished to Lenders contains any
untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading. There is no fact known to Borrower which materially adversely affects its
ability to perform its obligations under this Agreement. 
  
 5.11
Solvency, Etc. Borrower is Solvent (as defined below) and, after the execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby, Borrower will be Solvent. “Solvent” means, with
respect to any Person on any date, that on such date (a) the fair value of the property of such Person is greater than the fair value of the liabilities (including, without limitation, contingent liabilities) of such Person, (b) the
present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a
transaction, for which such Person’s property would constitute an unreasonably small capital. 
  
 5.12 Subsidiaries. Borrower has no Subsidiaries. 
  
 5.13 Catastrophic Events; Labor Disputes. Neither Borrower nor its properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or other casualty that could reasonably be expected to have a material adverse effect on the financial condition, business or operations of 







 Borrower. There are no disputes presently subject to grievance procedure, arbitration or litigation under any of the
collective bargaining agreements, employment contracts or employee welfare or incentive plans to which Borrower is a party, and there are no strikes, lockouts, work stoppages or slowdowns, or, to the knowledge of Borrower, jurisdictional disputes or
organizing activity occurring or threatened which could reasonably be expected to have a material adverse effect on the financial condition, business or operations of Borrower. 
  
 5.14 Certain Agreements of Officers, Employees and Consultants. 
  
 (a) No Violation. To the knowledge of Borrower, no officer, employee
or consultant of Borrower is, or is now expected to be, in violation of any term of any employment contract, proprietary information agreement, nondisclosure agreement, noncompetition agreement or any other material contract or agreement or any
restrictive covenant relating to the right of any such officer, employee or consultant to be employed by Borrower because of the nature of the business conducted or to be conducted by Borrower or relating to the use of trade secrets or proprietary
information of others, and to Borrower’s knowledge, the continued employment of Borrower’s officers, employees and consultants does not subject Borrower to any material liability for any claim or claims arising out of or in connection with
any such contract, agreement, or covenant. 
  
 (b) No Present
Intention to Terminate. To the knowledge of Borrower, no officer of Borrower, and no employee or consultant of Borrower whose termination, either individually or in the aggregate, could reasonably be expected to have a material adverse effect on
the financial condition, business or operations of Borrower, has any present intention of terminating his or her employment or consulting relationship with Borrower. 
  
 6. Affirmative Covenants. Borrower, until the full and complete payment of the Obligations (other than those arising
under Section 10.3), covenants and agrees that: 
  
 6.1 Good Standing. Borrower shall maintain its corporate existence and its good standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be
expected to have a material adverse effect on the financial condition, operations or business of Borrower. Borrower shall maintain in force all licenses, approvals and agreements, the loss of which could reasonably be expected to have a material
adverse effect on its financial condition, operations or business. 
  
 6.2 Government Compliance. Borrower shall comply with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which could reasonably be expected to materially adversely affect
the financial condition, operations or business of Borrower. 
  
 6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to each Lender: (a) as soon as available, but in any event within thirty (30) days after the end of each month, a company prepared balance sheet,
income statement and cash flow statement covering Borrower’s operations during such period, certified by Borrower’s president, treasurer or chief financial officer (each, a “Responsible Officer”); (b) as soon as
available, but in any event within one hundred eighty (180) days after the end of Borrower’s fiscal year, audited financial 







 statements of Borrower prepared in accordance with GAAP, together with an unqualified opinion on such financial
statements of a nationally recognized or other independent public accounting firm reasonably acceptable to Lenders; provided, however, the opinion regarding Borrower’s financial statements for fiscal year 2005 may contain a going-concern
qualification; and (c) prior to Borrower becoming a public reporting company, as soon as available, but in any event within ninety (90) days after the end of Borrower’s fiscal year or the date of Borrower’s board of
directors’ adoption, Borrower’s operating budget and plan for the next fiscal year; and (d) such other financial information as Lenders may reasonably request from time to time. From and after such time as Borrower becomes a publicly
reporting company, promptly as they are available and in any event: (x) at the time of filing of Borrower’s Form 10-K with the Securities and Exchange Commission after the end of each fiscal year of Borrower, the financial statements of
Borrower filed with such Form 10-K; and (y) at the time of filing of Borrower’s Form 10-Q with the Securities and Exchange Commission after the end of each of the first three fiscal quarters of Borrower, the financial statements of
Borrower filed with such Form 10-Q. In addition, Borrower shall deliver to Lenders immediately upon receipt of notice thereof, a report of any material legal actions pending or threatened against Borrower or the commencement of any action,
proceeding or governmental investigation involving Borrower is commenced that is reasonably expected to result in damages or costs to Borrower of One Hundred Fifty Thousand Dollars ($150,000) or more. 
  
 6.4 Certificates of Compliance. Each time financial statements are
furnished pursuant to Section 6.3 above, Borrower shall deliver to Lenders an Officer’s Certificate signed by a Responsible Officer in the form of, and certifying to the matters set forth in Exhibit E hereto. 
  
 6.5 Notice of Defaults. As soon as possible, and in any event within
five (5) days after the discovery of a Default or an Event of Default, Borrower shall provide Lenders with an Officer’s Certificate setting forth the facts relating to or giving rise to such Default or Event of Default and the action which
Borrower proposes to take with respect thereto. 
  
 6.6
Taxes. Borrower shall make due and timely payment or deposit of all federal, state, and local taxes, assessments, or contributions required of it by law or imposed upon any Property belonging to it, and will execute and deliver to Lenders, on
demand, appropriate certificates attesting to the payment or deposit thereof; and Borrower will make timely payment or deposit of all tax payments and withholding taxes required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Lenders with proof satisfactory to Lenders indicating that Borrower has made such payments or deposits; provided that Borrower need not
make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings which suspend the collection thereof (provided that such proceedings do not involve any substantial danger of the sale,
forfeiture or loss of any material item of Collateral or Collateral which in the aggregate is material to Borrower and that Borrower has adequately bonded such amounts or reserves sufficient to discharge such amounts have been provided on the books
of Borrower). 
  
 6.7 Use; Maintenance. Borrower shall keep
and maintain all items of equipment and other similar types of personal property that form any significant portion or 







 portions of the Collateral in good operating condition and repair and shall make all necessary replacements thereof and
renewals thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Borrower shall not permit any such material item of Collateral to become a fixture to real estate or an accession to other personal
property, without the prior written consent of Lenders. Borrower shall not permit any such material item of Collateral to be operated or maintained in violation of any applicable law, statute, rule or regulation. With respect to items of leased
equipment (to the extent Lenders have any security interest in any residual Borrower’s interest in such equipment under the lease), Borrower shall keep, maintain, repair, replace and operate such leased equipment in accordance with the terms of
the applicable lease. 
  
 6.8 Insurance. Borrower shall
keep its business and the Collateral insured for risks and in amounts, and as Lenders may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Lenders. All property policies
shall have a lender’s loss payable endorsement showing Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, as an additional loss payee and all liability policies shall show Lenders, or if requested by Lenders, one of
the Lenders, as agent for Lenders, as an additional insured and all policies shall provide that the insurer must give Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, at least thirty (30) days notice before
canceling its policy. At any Lender’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Lenders’ option, be payable to Lenders, or if requested by
Lenders, one of the Lenders, as agent for Lenders, on account of the Obligations. Notwithstanding the foregoing, 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, toward the replacement or repair of destroyed or damaged property; provided that (i) any such replaced or repaired property (a) shall be of equal or like value as the replaced or repaired Collateral and (b) shall be deemed
Collateral in which Lenders have been granted a first priority security interest and (ii) after the occurrence and during the continuation of an Event of Default all proceeds payable under such casualty policy shall, at the option of Lenders,
be payable to Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, on account of the Obligations. If Borrower fails to obtain insurance as required under Section 6.8 or to pay any amount or furnish any required
proof of payment to third persons and Lenders, Lenders may make all or part of such payment or obtain such insurance policies required in Section 6.8, and take any action under the policies Lenders deem prudent. On or prior to the first
Funding Date and prior to each policy renewal, Borrower shall furnish to Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, certificates of insurance or other evidence satisfactory to Lenders that insurance complying with
all of the above requirements is in effect. 
  
 6.9 Security
Interest. Assuming the proper and effective filing and indexing of one or more financing statement(s) identifying the Collateral with the proper state and/or local authorities, the security interests in the Collateral granted to Lenders pursuant
to this Agreement (in which a security interest may be perfected by the filing of a financing statement) (i) constitute and will continue to constitute first priority security interests (except to the extent any Permitted Liens may have a
superior priority to Lenders’ Lien under this Agreement) and (ii) are and will continue to be superior and prior to the rights of all other creditors of Borrower (except to the extent of such Permitted Liens). 







 6.10 Further Assurances. At any time and from time to time Borrower shall execute and deliver such
further instruments and take such further action as may reasonably be requested by Lenders to make effective the purposes of this Agreement, including without limitation, the continued perfection and priority of Lenders’ security interest in
the Collateral. 
  
 7. Negative Covenants. Borrower, until
the full and complete payment of the Obligations (other than those arising under Section 10.3), covenants and agrees that Borrower shall not: 
  
 7.1 Chief Executive Office. Change its name, jurisdiction of incorporation, chief executive office, principal place of business or any of the items
set forth in Section 1 of the Disclosure Schedule without thirty (30) days prior written notice to Lenders. 
  
 7.2 Collateral Control. Subject to its rights under Sections 4.4 and 7.4, remove any items of Collateral from Borrower’s
facility located at the address set forth on the cover page hereof or as set forth on the Disclosure Schedule. 
  
 7.3 Liens. Create, incur, assume or suffer to exist any Lien of any kind upon any of Borrower’s Property, whether now owned or hereafter
acquired, except Permitted Liens. 
  
 7.4 Other Dispositions of
Collateral. Convey, sell, lease or otherwise dispose of all or any part of the Collateral to any Person (collectively, a “Transfer”), except for: (i) Transfers of inventory in the ordinary course of business;
(ii) Transfers of surplus, worn-out or obsolete equipment; (iii) Transfers permitted under subclause (f) of the definition of Permitted Liens with respect to Collateral; (iv) Transfers constituting Permitted Investments or
Permitted Liens (including the liquidation of Permitted Investments); (v) licenses of Intellectual Property in the ordinary course of business or in connection with joint ventures; and (vi) Transfers of other property not to exceed Two
Hundred Fifty Thousand ($250,000) in any fiscal year. 
  
 7.5
Distributions. (i) Pay any dividends or make any distributions on its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities (other than repurchases pursuant to the
terms of employee stock purchase plans, employee restricted stock agreements or similar arrangements in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year); (iii) return any capital to any holder
of its Equity Securities as such; (iv) make any distribution of assets, Equity Securities, obligations or securities to any holder of its Equity Securities as such; or (v) set apart any sum for any such purpose; provided,
however, Borrower may pay dividends payable solely in Equity Securities, and Borrower may issue Equity Securities upon conversion of convertible debt, provided such convertible debt constitutes Permitted Indebtedness. 
  
 7.6 Mergers or Acquisitions. Without Lenders’ prior written
consent, merge or consolidate with or into, or be sold to or acquired by, any other Person or acquire all or substantially all of the capital stock or assets of another Person, provided that Borrower may merge or consolidate with or into, or be sold
to or acquired by (including a reverse triangular merger or other transaction in which Borrower is the surviving entity in the transaction), a publicly traded company with a market capitalization of not less than Seven Hundred Million Dollars
($700,000,000) without Lender’s prior written consent. 







 7.7 Change in Ownership. Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related thereto or have a material change in its ownership of greater than twenty five percent (25%) (other than (a) by the sale by Borrower of Borrower’s Equity
Securities in a public offering, (b) to venture capital investors so long as Borrower identifies to Lenders the venture capital investors prior to the closing of the investment or (c) by a merger or consolidation with or into, or sale to
or acquisition by (including a reverse triangular merger or other transaction in which Borrower is the surviving entity in the transaction), a publicly traded company with a market capitalization of not less than Seven Hundred Million Dollars
($700,000,000)). 
  
 7.8 Transactions With Affiliates.
Enter into any contractual obligation with any Affiliate or engage in any other transaction with any Affiliate except upon terms at least as favorable to Borrower as an arms-length transaction with Persons who are not Affiliates of Borrower.

  
 7.9 Indebtedness Payments. (i) Prepay, redeem,
purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Indebtedness for borrowed money (other than amounts due or permitted to be prepaid under this Agreement) or lease obligations in an aggregate amount
greater than Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year, (ii) amend, modify or otherwise change the terms of any Indebtedness for borrowed money or lease obligations so as to accelerate the scheduled repayment of an
aggregate amount greater than Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year or (iii) repay any notes to officers, directors or shareholders in an aggregate amount greater than Two Hundred Fifty Thousand Dollars ($250,000) in
any fiscal year. 
  
 7.10 Indebtedness. Create, incur,
assume or permit to exist any Indebtedness except Permitted Indebtedness. 
  
 7.11 Investments. Make any Investment except for Permitted Investments. 
  
 7.12 Compliance. Become an “investment company” or a company controlled by an “investment company” under the Investment Company
Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Loan for that purpose; fail to meet the minimum funding requirements of the Employment Retirement Income
Security Act of 1974, and its regulations, as amended from time to time (“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, in each case, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business or operations or could reasonably be expected to cause a material adverse change, or
permit any of its Subsidiaries to do so. 
  
 7.13 Maintenance
of Accounts. (i) Maintain any deposit account or account holding securities owned by Borrower except accounts with respect to which Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, are able to take such actions
as they deem necessary to obtain a perfected security interest in such accounts through one or more Account Control Agreements; or (ii) grant or allow any other Person (other than Lenders) to perfect a security interest in, or enter into any
agreements with any Persons (other than Lenders) accomplishing perfection via control as to, any of its deposit accounts or accounts holding securities. 







 7.14 Negative Pledge Regarding Intellectual Property. Sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of its Intellectual Property, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Lenders) with any entity which directly or indirectly prohibits or
has the effect of prohibiting Borrower from selling, transferring, assigning, mortgaging, pledging, leasing, granting a security interest in or upon, or encumbering any of Borrower’s Intellectual Property. 
  
 8. Events of Default. Any one or more of the following events shall
constitute an “Event of Default” by Borrower under this Agreement: 
  
 8.1 Failure to Pay. If Borrower fails to pay when due and payable or when declared due and payable in accordance with the Loan Documents: (i) any Scheduled Payment on the relevant Payment Date or on the
relevant Maturity Date, or (ii) any other portion of the Obligations within five (5) days after receipt of written notice from any Lender that such payment is due. 
  
 8.2 Certain Covenant Defaults. If Borrower fails to perform any obligation under Section 6.8 or violates
any of the covenants contained in Section 7 of this Agreement. 
  
 8.3 Other Covenant Defaults. If Borrower fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained in this Agreement (other than as set forth
in Sections 8.1, 8.2 or 8.4 through 8.13), in any of the other Loan Documents and Borrower has failed to cure such default within fifteen (15) days of the occurrence of such default. During this fifteen (15) day
period, the failure to cure the default is not an Event of Default (but no Loan will be made during the cure period). 
  
 8.4 Intentionally Omitted. 
  
 8.5 Seizure of Assets, Etc. If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or Person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not satisfied, discharged or paid within ten (10) days after Borrower receives notice thereof; provided that none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest by Borrower. 
  
 8.6 Service of Process. The service of process upon any Lender seeking to attach by a trustee or other process any funds of the Borrower on deposit or otherwise held by any Lender, or the delivery upon any
Lender of a notice of foreclosure by any Person seeking to 







 attach or foreclose on any funds of the Borrower on deposit or otherwise held by any Lender, or the delivery of a notice
of foreclosure or exclusive control to any entity holding or maintaining Borrower’s deposit accounts or accounts holding securities by any Person (other than a Lender) seeking to foreclose or attach in the aggregate more than One Hundred
Thousand Dollars ($100,000) in any such accounts. 
  
 8.7
Default on Indebtedness. One or more defaults shall exist under any agreement with any third party or parties which consists of the failure to pay any Indebtedness in an aggregate amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) at maturity or which results in a right by such third party or parties, whether or not exercised, to accelerate the maturity of Indebtedness in an aggregate amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or a default
shall exist under any financing agreement with any Lender. 
  
 8.8
Judgments. If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days or more. 
  
 8.9
Misrepresentations. If any material misrepresentation or material misstatement of a material fact exists now or hereafter in any warranty, representation, statement, certification, or report made to Lenders by Borrower or any officer,
employee, agent, or director of Borrower. 
  
 8.10 Breach of
Warrants. If Borrower shall breach any material term of the Warrants. 
  
 8.11 Unenforceable Loan Document. If any Loan Document shall in any material respect cease to be, or Borrower shall assert that any Loan Document is not, a legal, valid and binding obligation of Borrower
enforceable in accordance with its terms. 
  
 8.12 Involuntary
Insolvency Proceeding. If a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of Borrower in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee (or similar official) of Borrower or for any substantial part of its Property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of thirty (30) consecutive days or such court shall enter a decree or order granting the relief sought in such proceeding. 
  
 8.13 Voluntary Insolvency Proceeding. If Borrower shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian (or other similar official) of Borrower or for any substantial part of its Property, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action in furtherance of any of the foregoing. 







 9. Lenders’ Rights and Remedies. 
  
 9.1 Rights and Remedies. Upon the occurrence of an Event of Default
which has not been waived, Lenders shall not have any further obligation to advance money or extend credit to or for the benefit of Borrower. In addition, upon the occurrence and during the continuance of an Event of Default, Lenders shall have the
rights, options, duties and remedies of a secured party as permitted by law and, in addition to and without limitation of the foregoing, Lenders may, at their election, without notice of election and without demand, do any one or more of the
following, all of which are authorized by Borrower: 
  
 (a)
Acceleration of Obligations. Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, including (i) any accrued and unpaid interest, (ii) the amounts which would have otherwise
come due under Section 2.3(b)(ii) if the Loans had been voluntarily prepaid, (iii) the unpaid principal balance of the Loans and (iv) all other sums, if any, that shall have become due and payable hereunder, immediately due and
payable (provided that upon the occurrence of an Event of Default described in Section 8.12 or 8.13 all Obligations shall become immediately due and payable without any action by Lenders); 
  
 (b) Protection of Collateral. Make such payments and do such acts as
Lenders consider necessary or reasonable to protect Lenders’ security interest in the Collateral. Borrower agrees to assemble the Collateral if Lenders so require and to make the Collateral available to Lenders as Lenders may designate.
Borrower authorizes Lenders and their designees and agents to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any Lien which in
Lenders’ determination appears or is claimed to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower hereby grants Lenders a
license to enter into possession of such premises and to occupy the same, without charge, for up to one hundred twenty (120) days in order to exercise any of Lenders’ rights or remedies provided herein, at law, in equity, or otherwise;

  
 (c) Preparation of Collateral for Sale. Ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral; 
  
 (d) Sale of Collateral. Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower’s premises) as Lenders determine are commercially reasonable; and 
  
 (e) Purchase of Collateral. Credit bid and purchase all or any portion of the Collateral at any public sale. 
  
 Any deficiency that exists after disposition of the Collateral as provided above will be paid
immediately by Borrower. 







 9.2 Set Off Right. Lenders may set off and apply to the Obligations any and all indebtedness at
any time owing to or for the credit or the account of Borrower or any other assets of Borrower in Lenders’ possession or control. 
  
 9.3 Effect of Sale. Upon the occurrence of an Event of Default, to the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit or advantage of, any stay or extension law now or at any time hereafter in force, nor claim, take nor insist upon any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Collateral or any part thereof prior to any sale or sales thereof to be made pursuant to any provision herein contained, or to the decree, judgment or order of any court of
competent jurisdiction; nor, after such sale or sales, claim or exercise any right under any statute now or hereafter made or enacted by any state or otherwise to redeem the property so sold or any part thereof, and, to the full extent legally
permitted, except as to rights expressly provided herein, hereby expressly waives for itself and on behalf of each and every Person, except decree or judgment creditors of Borrower, acquiring any interest in or title to the Collateral or any part
thereof subsequent to the date of this Agreement, all benefit and advantage of any such law or laws, and covenants that it will not invoke or utilize any such law or laws or otherwise hinder, delay or impede the execution of any power herein granted
and delegated to Lenders, but will suffer and permit the execution of every such power as though no such power, law or laws had been made or enacted. Any sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall
operate to divest all right, title, interest, claim and demand whatsoever, either at law or in equity, of Borrower in and to the Property sold, and shall be a perpetual bar, both at law and in equity, against Borrower, its successors and assigns,
and against any and all Persons claiming the Property sold or any part thereof under, by or through Borrower, its successors or assigns. 
  
 9.4 Power of Attorney in Respect of the Collateral. Borrower does hereby authorize each Lender to file any notices of security interests, financing
statements and continuations and amendments thereof pursuant to the Code or federal law, as may be necessary to perfect, or to continue the perfection of Lenders’ security interests in the Collateral. Borrower does hereby irrevocably appoint
Lenders (which appointment is coupled with an interest) on the occurrence and during the continuance of an Event of Default, the true and lawful attorney in fact of Borrower with full power of substitution, for it and in its name: (a) to ask,
demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all rents, issues, profits, avails, distributions, income, payment draws and other sums in which a security interest is granted under Section 4
with full power to settle, adjust or compromise any claim thereunder as fully as if Lenders were Borrower itself; (b) to receive payment of and to endorse the name of Borrower to any items of Collateral (including checks, drafts and other
orders for the payment of money) that come into any Lender’s possession or under any Lender’s control; (c) to make all demands, consents and waivers, or take any other action with respect to, the Collateral; (d) in any
Lender’s discretion to file any claim or take any other action or proceedings, either in its own name or in the name of Borrower or otherwise, which such Lender may reasonably deem necessary or appropriate to protect and preserve the right,
title and interest of Lenders in and to the Collateral; (e) endorse Borrower’s name on any checks or other forms of payment or security; (f) sign Borrower’s name on any invoice or bill of lading for any account or drafts against
account debtors; (g) make, settle, and adjust all claims under Borrower’s insurance policies; (h) settle and adjust disputes and claims about the accounts directly with account 







 debtors, for amounts and on terms such Lender determines reasonable; (i) transfer the Collateral into the name of
Lenders or a third party as the Code permits; and (j) to otherwise act with respect thereto as though Lenders were the outright owner of the Collateral. 
  
 9.5 Lenders’ Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Lenders may do any or all of the following: (a) make payment of the same or any part thereof; or (b) obtain and maintain insurance policies of the type discussed in Section 6.8
of this Agreement, and take any action with respect to such policies as Lenders deem prudent. Any amounts paid or deposited by Lenders shall constitute Lenders’ Expenses, shall be immediately due and payable, shall bear interest at the Default
Rate and shall be secured by the Collateral. Any payments made by Lenders shall not constitute an agreement by Lenders to make similar payments in the future or a waiver by Lenders of any Event of Default under this Agreement. Borrower shall pay all
reasonable fees and expenses, including without limitation, Lenders’ Expenses, incurred by Lenders in the enforcement or attempt to enforce any of the Obligations hereunder not performed when due. 
  
 9.6 Remedies Cumulative. Lenders’ rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative. Lenders shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Lenders of one right or remedy
shall be deemed an election, and no waiver by Lenders of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Lenders shall constitute a waiver, election, or acquiescence by it. 
  
 9.7 Application of Collateral Proceeds. The proceeds and/or avails of
the Collateral, or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other amounts of any kind held by any Lender, at the time of or received by Lenders after the occurrence of an Event of Default hereunder)
shall be paid to and applied as follows: 
  
 (a) First, to the
payment of out-of-pocket costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses,
liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Lenders, including, without limitation, Lenders’ Expenses; 
  
 (b) Second, to the payment to Lenders of any accrued and unpaid interest, the amounts which would have otherwise come due
under Section 2.3(b)(iii), if the Loans had been voluntarily prepaid, the principal balance of the Loans, and all other Obligations with respect to the Loans (provided, however, if such proceeds shall be insufficient to pay
in full the whole amount so due, owing or unpaid upon the Loans, then to the unpaid interest thereon, then to the amounts which would have otherwise come due under Section 2.3(b)(iii), if the Loans had been voluntarily prepaid, then to
the principal balance of the Loans, and then to the payment of other amounts then payable to Lenders under any of the Loan Documents); and 
  
 (c) Third, to the payment of the surplus, if any, to Borrower, its successors and assigns, or to the Person lawfully entitled to receive the same.








 9.8 Reinstatement of Rights. If Lenders shall have proceeded to enforce any right under this
Agreement or any other Loan Document by foreclosure, sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then and in every such case (unless otherwise
ordered by a court of competent jurisdiction), Lenders shall be restored to their former position and rights hereunder with respect to the Property subject to the security interests created under this Agreement. 
  
 10. Waivers; Indemnification. 
  
 10.1 Demand; Protest. Borrower waives demand, protest, notice of
protest, 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 at any
time held by Lenders on which Borrower may in any way be liable. 
  
 10.2 Lenders’ Liability for Collateral. So long as Lenders comply with their obligations, if any, under the Code, Lenders shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or fashion from any cause other than Lenders’ gross negligence or willful misconduct; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person whomsoever. All risk of loss, damage or destruction of the Collateral shall be borne by Borrower. 
  
 10.3 Indemnification and Waiver. Whether or not the transactions contemplated hereby shall be consummated:

  
 (a) General Indemnity. Borrower agrees upon demand to
pay or reimburse Lenders for all liabilities, obligations and out-of-pocket expenses, including Lenders’ Expenses and reasonable fees and expenses of counsel for Lenders from time to time arising in connection with the enforcement or collection
of sums due under the Loan Documents, and in connection with any amendment or modification of the Loan Documents or any “work-out” in connection with the Loan Documents. Borrower shall indemnify, reimburse and hold Lenders, and each of
their respective successors, assigns, agents, attorneys, officers, directors, shareholders, servants, agents and employees (each an “Indemnified Person”) harmless from and against all liabilities, losses, damages, actions, suits,
demands, claims of any kind and nature (including claims relating to environmental discharge, cleanup or compliance), all costs and expenses whatsoever to the extent they may be incurred or suffered by such Indemnified Person in connection therewith
(including reasonable attorneys’ fees and expenses), fines, penalties (and other charges of any applicable Governmental Authority), licensing fees relating to any item of Collateral, damage to or loss of use of property (including consequential
or special damages to third parties or damages to Borrower’s property), or bodily injury to or death of any person (including any agent or employee of Borrower) (each, a “Claim”), directly or indirectly relating to or arising
out of the use of the proceeds of the Loans or otherwise, the falsity of any representation or warranty of Borrower or Borrower’s failure to comply with the terms of this Agreement or any other Loan Document. The foregoing indemnity shall
cover, without limitation, (i) any Claim in connection with a design or other defect (latent or patent) in any item of equipment or product included in the Collateral, (ii) any Claim for infringement of any patent, 







 copyright, trademark or other intellectual property right, (iii) any Claim resulting from the presence on or under
or the escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials on the premises owned, occupied or leased by Borrower, including any Claims asserted or arising under any Environmental Law, (iv) any Claim for
negligence or strict or absolute liability in tort, or (v) any Claim asserted as to or arising under any Account Control Agreement or any Landlord Agreement; provided, however, Borrower shall not indemnify Lenders for any
liability incurred by Lenders as a result of Lenders’ gross negligence or willful misconduct or Lenders’ violation of such agreements. Such indemnities shall continue in full force and effect, notwithstanding the expiration or termination
of this Agreement. Upon any Lender’s written demand, Borrower shall assume and diligently conduct, at its sole cost and expense, the entire defense of such Lender, as applicable, each of its partners, and each of their respective, agents,
employees, directors, officers, shareholders, successors and assigns against any indemnified Claim described in this Section 10.3(a). Borrower shall not settle or compromise any Claim against or involving any Lender without first
obtaining such Lender’s, as applicable, written consent thereto, which consent shall not be unreasonably withheld. 
  
 (b) Waiver. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM
LENDERS UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES. 
  
 (c) Survival; Defense. The obligations in this Section 10.3 shall survive payment of all other Obligations pursuant to
Section 12.8. At the election of any Indemnified Person, Borrower shall defend such Indemnified Person using legal counsel satisfactory to such Indemnified Person in such Person’s reasonable discretion, at the sole cost and expense
of Borrower. All amounts owing under this Section 10.3 shall be paid within thirty (30) days after written demand. If it is finally determined that such Indemnified Person is not entitled to indemnification, then such Indemnified
Person shall, promptly after such final determination, reimburse Borrower all amounts Borrower has expended in connection with such defense of such Indemnified Person. 
  
 11. Notices. Unless otherwise provided in this Agreement, all notices or demands by any party relating to this
Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or
sent by certified mail, postage prepaid, return receipt requested, by prepaid nationally recognized overnight courier, or by prepaid facsimile to Borrower or to each Lender, as the case may be, at their respective addresses set forth below:

  

			
	If to Borrower:	 	Northstar Neuroscience, Inc.
	 	 	2401 Fourth Avenue
	 	 	Seattle, WA 98121
	 	 	Attention: Chief Financial Officer
	 	 	Fax:(206)728-1197
	 	 	Ph: (206) 902-1930









			
	If to Horizon:	  	Horizon Technology Funding Company LLC
	 	  	76 Batterson Park Road
	 	  	Farmington, CT 06032
	 	  	Attention: Legal Department
	 	  	Fax: (860) 676-8655
	 	  	Ph: (860) 676-8654
		
	If to Oxford:	  	Oxford Finance Corporation
	 	  	133 N. Fairfax Street
	 	  	Alexandria, VA 22314
	 	  	Attn: Chief Financial Officer
	 	  	Fax: (703)519-4910
	 	  	Ph: (703)519-6017

  
 The parties hereto may change the
address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. 
  
 12. General Provisions. 
  
 12.1 Successors and Assigns. This Agreement and the Loan Documents shall bind and inure to the benefit of the respective successors and permitted
assigns of each of the parties; provided, however, neither this Agreement nor any rights hereunder may be assigned by Borrower without Lenders’ prior written consent, which consent may be granted or withheld in Lenders’ sole
discretion. Lenders shall have the right without the consent of or notice to Borrower to sell, transfer, assign, negotiate, or grant participations in all or any part of, or any interest in Lenders’ rights and benefits hereunder. Lenders may
disclose the Loan Documents and any other financial or other information relating to Borrower or any Subsidiary to any potential participant or assignee of any of the Loans, provided that such participant or assignee agrees to protect the
confidentiality of such documents and information using the same measures that it uses to protect its own confidential information. 
  
 12.2 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement. 
  
 12.3 Severability of Provisions. Each provision of this Agreement
shall be several from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 
  
 12.4 Entire Agreement; Construction; Amendments and Waivers. 
  
 (a) Entire Agreement. This Agreement and each of the other Loan Documents dated as of the date hereof, taken
together, constitute and contain the entire agreement between Borrower and Lenders and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting
the subject matter hereof. Borrower acknowledges that it is not relying on any representation or agreement made by Lenders or any employees, attorneys or agents thereof, other than the specific agreements set forth in this Agreement and the Loan
Documents. 







 (b) Construction. This Agreement is the result of negotiations between and has been reviewed by
each of Borrower and Lenders executing this Agreement as of the date hereof and their respective counsel; accordingly, this Agreement shall be deemed to be the product of the parties hereto, and no ambiguity shall be construed in favor of or against
Borrower or Lenders. Borrower and Lenders agree that they intend the literal words of this Agreement and the other Loan Documents and that no parol evidence shall be necessary or appropriate to establish Borrower’s or Lenders’ actual
intentions. 
  
 (c) Amendments and Waivers. Any and all
amendments, modifications, discharges or waivers of, or consents to any departures from any provision of this Agreement or of any of the other Loan Documents shall not be effective without the written consent of Lenders. Any waiver or consent with
respect to any provision of the Loan Documents shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice
or demand in similar or other circumstances. Any amendment, modification, waiver or consent affected in accordance with this Section 12.4 shall be binding upon Lenders and on Borrower. 
  
 12.5 Reliance by Lenders. All covenants, agreements, representations
and warranties made herein by Borrower shall be deemed to be material to and to have been relied upon by Lenders, notwithstanding any investigation by Lenders. 
  

12.6 No Set-Offs by Borrower. All sums payable by Borrower pursuant to this Agreement or any of the other Loan Documents shall be payable
without notice or demand and shall be payable in United States Dollars without set-off or reduction of any manner whatsoever. 
  
 12.7 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. 
  
 12.8 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any
Obligations or commitment to fund remain outstanding. The obligations of Borrower to indemnify Lenders with respect to the expenses, damages, losses, costs and liabilities described in Section 10.3 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought against Lenders have run. 
  
 12.9 Fees and Costs in Action or Proceeding. Notwithstanding anything to the contrary contained in the Loan Documents, if any action or proceeding
is brought to enforce or interpret the Loan Documents, the prevailing party will be entitled to recover its reasonable attorneys’ fees and costs associated with such action or proceeding. 







 13. Relationship of Parties. Borrower and Lenders acknowledge, understand and agree that the
relationship between Borrower, on the one hand, and each Lender, on the other, is, and at all time shall remain solely that of a borrower and lender. Lenders shall not under any circumstances be construed to be a partner or a joint venturer of
Borrower or any of its Affiliates; nor shall Lenders under any circumstances be deemed to be in a relationship of confidence or trust or a fiduciary relationship with Borrower or any of its Affiliates, or to owe any fiduciary duty to Borrower or any
of its Affiliates. Lenders do not undertake or assume any responsibility or duty to Borrower or any of its Affiliates to select, review, inspect, supervise, pass judgment upon or otherwise inform Borrower or any of its Affiliates of any matter in
connection with its or their Property, any Collateral held by Lenders or the operations of Borrower or any of its Affiliates. Borrower and each of its Affiliates shall rely entirely on their own judgment with respect to such matters, and any review,
inspection, supervision, exercise of judgment or supply of information undertaken or assumed by Lenders in connection with such matters is solely for the protection of Lenders and neither Borrower nor any Affiliate is entitled to rely thereon.

  
 14. Confidentiality. All information (other than
periodic reports filed by Borrower with the Securities and Exchange Commission) disclosed by Borrower to Lenders in writing or through inspection pursuant to this Agreement that is marked confidential shall be considered confidential. Lenders agree
to use the same degree of care to safeguard and prevent disclosure of such confidential information as Lenders use with their own confidential information, but in any event no less than a reasonable degree of care. Lenders shall not disclose such
information to any third party (other than to Lenders’ partners, attorneys, governmental regulators, or auditors, or to Lenders’ subsidiaries and affiliates and prospective transferees and purchasers of the Loans, all subject to the same
confidentiality obligation set forth herein or as required by law, regulation, subpoena or other order to be disclosed) and shall use such information only for purposes of evaluation of its investment in Borrower and the exercise of Lenders’
rights and the enforcement of their remedies under this Agreement and the other Loan Documents. The obligations of confidentiality shall not apply to any information that (a) was known to the public prior to disclosure by Borrower under this
Agreement, (b) becomes known to the public through no fault of Lenders, (c) is disclosed to Lenders by a third party having a legal right to make such disclosure, or (d) is independently developed by Lenders. Notwithstanding the foregoing, solely to
the extent necessary to permit Lenders to realize on the value of their Collateral, Lenders’ agreement of confidentiality shall not apply if Lenders have acquired indefeasible title to any Collateral or in connection with any enforcement or
exercise of Lenders’ rights and remedies under this Agreement following an Event of Default, including the enforcement of Lenders’ security interest in the Collateral. 
  
 15. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF BORROWER AND LENDERS HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN CONNECTICUT. BORROWER AND
LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. 







 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first
above written. 
  

			
	BORROWER:
	NORTHSTAR NEUROSCIENCE, INC.
		
	By:	 	 /s/ Alan Levy


	Name:	 	 Alan Levy


	Title:	 	 President and CEO


	
	LENDERS:
	HORIZON TECHNOLOGY FUNDING COMPANY LLC
	By: Horizon Technology Finance, LLC, its sole member
		
	By:	 	 /s/ Robert D. Pomeroy, Jr.


	Name:	 	 Robert D. Pomeroy, Jr.


	Title:	 	 Managing Member


	
	OXFORD FINANCE CORPORATION
		
	By:	 	 /s/ Michael J. Altenburger


	Name:	 	 Michael J. Altenburger


	Title:	 	 Chief Financial Officer