Document:

Loan Agreement, Connecticut Innovations, Incorporated, dated March 30, 2001

 Exhibit 10.28 
  
 LOAN AGREEMENT 
  
 by and between 
  
 CONNECTICUT INNOVATIONS, INCORPORATED 
  
 and 
  
 ACHILLION PHARMACEUTICALS,
INC. 
  
 March 30,2001 

 TABLE OF CONTENTS 
  

			
	 SECTION 1. DEFINITIONS
	  	1
		
	 SECTION 1.1. AFFILIATE
	  	1
	 SECTION 1.2. AGREEMENT
	  	1
	 SECTION 1.3. ASSIGNMENT AND ASSUMPTION
AGREEMENT
	  	2
	 SECTION 1.4. “CII”
	  	2
	 SECTION 1.5. CII AFFILIATE OR CII AFFILIATES
	  	2
	 SECTION 1.6. CII AGENTS
	  	2
	 SECTION 1.7. BANKRUPTCY CODE
	  	2
	 SECTION 1.8. BORROWER
	  	2
	 SECTION 1.9. BUSINESS DAY
	  	2
	 SECTION 1.10. CAPITAL LEASE
	  	2
	 SECTION 1.11. CLOSING DATE
	  	2
	 SECTION 1.12. CODE
	  	2
	 SECTION 1.13. COLLATERAL
	  	2
	 SECTION 1.14. COLLATERAL ASSIGNMENT OF LEASE
	  	2
	 SECTION 1.15. CONTRACTUAL OBLIGATION
	  	2
	 SECTION 1.16. CONTROLLED GROUP
	  	2
	 SECTION 1.17. CREDIT TERMINATION DATE
	  	2
	 SECTION 1.18. DEFAULT
	  	2
	 SECTION 1.19. DEFAULT RATE
	  	3
	 SECTION 1.20. DIVIDEND OR DIVIDENDS
	  	3
	 SECTION 1.21. DRAWING OR DRAWINGS
	  	3
	 SECTION 1.22. ENCUMBRANCE OR ENCUMBRANCES
	  	3
	 SECTION 1.23. ENVIRONMENTAL CERTIFICATE.
	  	3
	 SECTION 1.24. ENVIRONMENTAL LAWS.
	  	 
	 SECTION 1.25. EVENT OF DEFAULT.
	  	3
	 SECTION 1.26. “EXCESS REIMBURSEMENT COSTS”
	  	3
	 SECTION 1.27. FINANCIAL STATEMENT OR FINANCIAL
STATEMENTS
	  	3
	 SECTION 1.28. FISCAL QUARTER
	  	3
	 SECTION 1.29. FISCAL YEAR
	  	3
	 SECTION 1.30. GAAP
	  	3
	 SECTION 1.31. Governmental Authority
	  	4
	 SECTION 1.32. GUARANTEES
	  	4
	 SECTION 1.33. HAZARDOUS MATERIALS
	  	4
	 SECTION 1.34. INDEBTEDNESS
	  	4
	 SECTION 1.35. LEASE AND LEASES
	  	4
	 SECTION 1.36. LESSOR’S CONSENT
	  	4
	 SECTION 1.37. LOAN
	  	4
	 SECTION 1.38. LOANS
	  	4
	 SECTION 1.39. LOAN AMOUNT
	  	4
	 SECTION 1.40. MATERIAL ADVERSE EFFECT
	  	4
	 SECTION 1.41. NOTE
	  	5
	 SECTION 1.42. NOTES
	  	5
	 SECTION 1.43. OBLIGATIONS
	  	5
	 SECTION 1.44. OTHER DOCUMENTS
	  	5
	 SECTION 1.45. PERSON
	  	5
	 SECTION 1.46. REIMBURSEMENT OBLIGATIONS
	  	5
	 SECTION 1.47. RELEASE
	  	5
	 SECTION 1.48. REPORTABLE EVENT
	  	5
	 SECTION 1.49. SOLVENT
	  	5
	 SECTION 1.50. SUBSIDIARY
	  	6
	 Section 1.51. Term Note
	  	6
	 SECTION 1.52. TERM LOAN
	  	6

			
	 SECTION 1.53. YALE
	  	6
	 Section 1.54. Warrant
	  	6
		
	 SECTION 2. THE CREDIT FACILITIES
	  	6
		
	 SECTION 2.1. Guaranty and Reimbursement Obligations.
	  	6
	 SECTION 2.1.1. ISSUANCE
	  	6
	 SECTION 2.1.2. REIMBURSEMENT
	  	6
	 SECTION 2.1.3. OBLIGATIONS ABSOLUTE
	  	7
	 SECTION 2.1.4. INDEMNIFICATION
	  	7
	 SECTION 2.1.5. Liability of CII
	  	7
	 SECTION 2.2. Term Loan.
	  	8
	 SECTION 2.2.1. AMOUNT OF LOAN
	  	8
	 SECTION 2.2.2. TERM NOTE
	  	8
	 SECTION 2.2.3. PAYMENT OF PRINCIPAL
	  	8
	 SECTION 2.2.4. INTEREST
	  	8
	 SECTION 2.2.5. OPTIONAL PREPAYMENTS OF
PRINCIPAL.
	  	9
	 SECTION 2.2.6. USE OF PROCEEDS
	  	9
	 SECTION 2.2.7. COMMITMENT FEE
	  	9
	 SECTION 2.3. General Terms Applicable to Any Term Loan.
	  	9
	 SECTION 2.3.1. INTEREST
	  	9
	 SECTION 2.3.2. LATE PAYMENT
	  	9
	 Section 2.3.3. Method of Payment
	  	9
	 SECTION 2.3.4. DEFAULT RATE
	  	9
		
	 SECTION 3. SECURITY FOR THE OBLIGATIONS
	  	10
		
	 SECTION 4. REPRESENTATIONS AND WARRANTIES
	  	10
		
	 SECTION 4.1. CORPORATE EXISTENCE AND GOOD
STANDING
	  	10
	 SECTION 4.2. CORPORATE POWER, CONSENTS; ABSENCE
OF CONFLICT WITH OTHER AGREEMENT, ETC.
	  	10
	 SECTION 4.3. BINDING OBLIGATIONS
	  	11
	 SECTION 4.4. NONCONTRAVENTION
	  	11
	 SECTION 4.5. PERMITS
	  	11
	 SECTION 4.6. NO CONSENTS
	  	11
	 SECTION 4.7. FINANCIAL STATEMENTS
	  	11
	 SECTION 4.8. FINANCIAL INFORMATION
	  	11
	 SECTION 4.9. BROKERS
	  	12
	 SECTION 4.10. STATUTORY COMPLIANCE
	  	12
	 SECTION 4.11. EVENTS OF DEFAULT
	  	12
	 SECTION 4.12. OTHER DEFAULTS
	  	12
	 SECTION 4.13. TAXES
	  	12
	 SECTION 4.14. SOLVENCY
	  	12
	 SECTION 4.15. BUSINESS NAME
	  	12
	 SECTION 4.16. AFFILIATE CONTRACTS
	  	12
	 SECTION 4.17. LITIGATION
	  	12
	 SECTION 4.18. LABOR RELATIONS
	  	13
	 SECTION 4.19. GUARANTEES
	  	13
	 Section 4.20. Subsidiaries
	  	13
		
	 SECTION 5. CONDITIONS TO OBLIGATION OF CII
	  	13
		
	 SECTION 5.1. REPRESENTATIONS AND WARRANTIES
TRUE
	  	13
	 SECTION 5.2. DELIVERY OF DOCUMENTS
	  	13
	 SECTION 5.3. VALIDITY OF LIENS
	  	14
	 SECTION 5.4. OPINION OF COUNSEL
	  	14
	 Section 5.5. Payment of Fees
	  	14
	 Section 5.6. Legal Matters
	  	14

  

 -2- 

			
	 SECTION 6. CONDITIONS TO TERM LOAN
	  	14
		
	 SECTION 6.1. NOTICE OF BORROWING
	  	15
	 SECTION 6.2. NO MATERIAL ADVERSE CHANGE
	  	15
	 SECTION 6.3. TRUTH OF REPRESENTATIONS AND
WARRANTIES
	  	15
	 SECTION 6.4. NO DEFAULT
	  	15
	 SECTION 6.5. PAYMENT OF FEES
	  	15
	 SECTION 6.6. CORPORATE ACTION
	  	15
	 SECTION 6.7. LEGAL MATTERS
	  	15
	 SECTION 6.8. CONDITIONS TO TERM LOAN
	  	15
	 SECTION 6.9. Documents
	  	15
		
	 SECTION 7. AFFIRMATIVE COVENANTS OF BORROWER
	  	15
		
	 SECTION 7.1. FINANCIAL STATEMENTS AND REPORTING
REQUIREMENTS
	  	16
	 SECTION 7.2. FIRE AND HAZARD INSURANCE
	  	16
	 SECTION 7.3. MAINTENANCE OF EXISTENCE
	  	16
	 SECTION 7.4. TAXES AND OTHER ASSESSMENTS
	  	16
	 SECTION 7.5. NOTICES
	  	16
	 SECTION 7.6. LITIGATION
	  	17
	 SECTION 7.7. MAINTENANCE OF BOOKS AND
RECORDS
	  	17
	 SECTION 7.8. MAINTENANCE OF PERMITS
	  	17
	 SECTION 7.9. USE OF PROCEEDS
	  	17
	 SECTION 7.10. PAYMENT OF INDEBTEDNESS
	  	17
	 SECTION 7.11. COMPLIANCE WITH LAWS
	  	17
		
	 SECTION 8. NEGATIVE COVENANTS
	  	17
		
	 SECTION 8.1. LIMITATION ON MORTGAGES, LIENS AND
ENCUMBRANCES
	  	17
	 SECTION 8.2. CHANGE NAME OR LOCATION
	  	18
	 SECTION 8.3. CONTRACTS
	  	18
	 SECTION 8.4. COMPLIANCE WITH ENVIRONMENTAL
LAWS
	  	18
	 Section 8.5. Fiscal Year
	  	18
		
	 SECTION 9. CONNECTICUT PRESENCE
	  	18
		
	 SECTION 9.1. MAINTENANCE OF CONNECTICUT PRESENCE
AND REMEDY FOR FAILURE TO MAINTAIN CONNECTICUT PRESENCE
	  	18
	 SECTION 9.2. CONNECTICUT EMPLOYMENT.
	  	19
	 Section 9.3. Equal Opportunity
	  	19
		
	 SECTION 10. DEFAULT
	  	20
		
	 SECTION 10.1. DEFAULT
	  	20
		
	 SECTION 11. REMEDIES
	  	22
		
	 SECTION 11.1. REMEDIES
	  	22
	 SECTION 11.2. DEFAULT INTEREST RATE
	  	22
		
	SECTION 12. MISCELLANEOUS	  	22
		
	 SECTION 12.1. CROSS COLLATERAL
	  	22
	 SECTION 12.2. WAIVERS.
	  	22
	 SECTION 12.2.1. IN GENERAL
	  	22
	 SECTION 12.2.2. PREJUDGMENT REMEDY
	  	23
	 SECTION 12.2.3. JURY TRIAL
	  	23
	 SECTION 12.2.4. CLAIMS
	  	23
	 SECTION 12.3. NOTICES
	  	23
	 SECTION 12.4. FEES AND EXPENSES
	  	24
	 SECTION 12.5. TERM OF AGREEMENT
	  	24
	 SECTION 12.6. STAMP TAX
	  	24

  

 -3- 

			
	 SECTION 12.7. SCHEDULES AND EXHIBITS
	  	24
	 SECTION 12.8. GOVERNING LAW; CONSENT TO
JURISDICTION
	  	24
	 SECTION 12.9. SURVIVAL OF REPRESENTATIONS
	  	25
	 SECTION 12.10. AMENDMENTS
	  	25
	 SECTION 12.11. BINDING EFFECT OF AGREEMENT
	  	25
	 SECTION 12.12. INTEREST RATE
	  	25
	 SECTION 12.13. COUNTERPARTS
	  	25
	 SECTION 12.14. NO AGENCY RELATIONSHIP
	  	25
	 SECTION 12.15. SEVERABILITY
	  	25
	 SECTION 12.16. HEADINGS
	  	25
	 SECTION 12.17. REINSTATEMENT
	  	26
	 SECTION 12.18. INTERPRETATION AND CONSTRUCTION
	  	26
	 SECTION 12.19. RELATION TO OTHER DOCUMENTS
	  	26

  

 -4- 

 LOAN AGREEMENT 
  
 This LOAN AGREEMENT (the “Agreement”) is made as of this 30th day of March, 2001 by and between CONNECTICUT INNOVATIONS, INCORPORATED, with an office and place of business located at 999 West Street, Rocky Hill,
Connecticut 06067 (“CII”) and ACHILLION PHARMACEUTICALS, INC., a Delaware Corporation, with its chief executive office located at 300 George Street, New Haven, Connecticut (the “Borrower”). 
  
 W  I  T  N  E  S  S  E  T  H: 
  
 WHEREAS, Borrower has requested that CII guarantee certain obligations of Borrower under certain leases Borrower will assume with respect to certain
suites located at the premises known as 300 George Street, New Haven, Connecticut; and 
  
 WHEREAS, Borrower has further requested that CII provide Borrower with certain credit facilities pursuant to which CII would make loans and advances and otherwise extend credit to Borrower; and 
  
 WHEREAS, CII is willing to provide such guarantee and such credit facilities;
and 
  
 WHEREAS, CII and Borrower wish to document the terms and
conditions on which CII will provide said guarantee and credit facilities; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, CII and Borrower hereby agree as follows: 
  
 SECTION 1. DEFINITIONS 
  
 All capitalized terms used in this Agreement, the Notes or the Other Documents, or in any certificate, report or other document, instrument or agreement
executed or delivered pursuant hereto and thereto (unless otherwise indicated therein) shall have the meanings ascribed to such terms below. 
  
 Section 1.1. “Affiliate” means any Person (i) which directly or indirectly controls, or is controlled by, or is under common control
with, such Person; (ii) which directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting stock of such Person; or (iii) ten percent (10%) or more of the voting stock of which is directly or
indirectly beneficially owned or held by such Person. The term “control” (and its correlative meanings “controlled by” and “under common control with”) as used in this Section 1.1. means the possession, directly or
indirectly, of the power to direct, or cause the direction of, the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. 
  
 Section 1.2. “Agreement” means this Agreement, including all schedules and exhibits attached hereto, and any
and all amendments, modifications and supplements hereto. 

 Section 1.3. “Assignment and Assumption Agreement” means that certain Assignment and
Assumption Agreement dated the date hereof by and among Borrower, CII and Yale. 
  
 Section 1.4. “CII” has the meaning set forth in the Preamble hereof. 
  
 Section 1.5. “CII Affiliate” or “CII Affiliates” means any Affiliate of CII. 
  
 Section 1.6. “CII Agents” has the meaning set forth in
Section 12.2.4. hereof. 
  
 Section 1.7.
“Bankruptcy Code” means Title 11 of the United States Code, entitled “Bankruptcy”, as amended from time to time and all rules and regulations promulgated thereunder. 
  
 Section 1.8. “Borrower” has the meaning set forth in the Preamble hereof. 
  
 Section 1.9. “Business Day” means any day on which dealings
and exchanges between banks may be carried on in Hartford, Connecticut. 
  
 Section 1.10. “Capital Lease” means any lease of any property (whether real, personal or mixed) that, in conformity with GAAP, should be accounted for as a capital lease. 
  
 Section 1.11. “Closing Date” means the date hereof.

  
 Section 1.12. “Code” means the Internal Revenue
Code of 1986 and the rules and regulations promulgated thereunder, collectively, as the same may from time to time be supplemented or amended and remain in effect. 
  
 Section 1.13. “Collateral” means all collateral received or delivered as security for the Obligations
pursuant to, and as more particularly described herein. 
  
 Section 1.14. “Collateral Assignment of Lease” means the collateral assignment of Borrower’s right and interest in, to and under a lease, as lessee, for the Leased Premises. 
  
 Section 1.15. “Contractual Obligation” means, as applied to
any Person, any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. 

 
 Section 1.16. “Controlled Group” means all trades or
businesses (whether or not incorporated) under common control that, together with Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. 
  
 Section 1.17. “Credit Termination Date” means August 31,
2006. 
  
 Section 1.18. “Default” means an event or
condition that, but for the lapse of time, the giving of notice, or both, would constitute an Event of Default if that event or condition was not cured or removed within any applicable grace or cure period. 
  

 2 

 Section 1.19. “Default Rate” means the rate of interest determined by increasing the rate
of interest otherwise chargeable under this Agreement to a rate which shall be the lower of (i) the highest rate allowed by law or (ii) five percentage points (5%) above the rate of interest which would otherwise be in effect under
this Agreement. 
  
 Section 1.20. “Dividend” or
“Dividends” means the payment of any dividend or other distribution in respect of the capital stock of a corporation in cash or other property (excepting distribution in the form of such stock) or the redemption or acquisition of any
capital stock or security of a corporation. 
  
 Section 1.21.
“Drawing” or “Drawings” means any payments) or disbursements) made by CII under the Assignment and Assumption Agreement. 
  
 Section 1.22. “Encumbrance or “Encumbrances” means any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title
retention agreement, lessor’s interest under a financing lease or any analogous arrangements in any of Borrower’s properties or assets, intended as, or having the effect of, security. 
  
 Section 1.23. “Environmental Certificate” has the meaning set
forth in Section 5.2.9. hereof. 
  
 Section 1.24.
“Event of Default” has the meaning set forth in Section 10. hereof. 
  
 Section 1.25. “Excess Reimbursement Costs” has the meaning set forth in the Lease. 
  
 Section 1.26. “Financial Statement” or “Financial Statements” means, as of any date, or with respect to any period, as
applicable, a financial report or reports consisting of (i) a balance sheet; (ii) an income statement; (iii) a statement of cash flow; and (iv) a statement of changes in stockholders’ equity. 
  
 Section 1.27. “Fiscal Quarter” means a thirteen/fourteen week
period ending on the Saturday closest to each of March 31, June 30, September 30 and December 31 in each Fiscal Year. 
  
 Section 1.28. “Fiscal Year” means a fifty-two/fifty-three week period ending on the Saturday closest to December 31 in each year;
provided, however, that the first Fiscal Year hereunder shall commence on the Closing Date and end on the Saturday closest to December 31, 2001. 
  
 Section 1.29. “GAAP” means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled
“The Meaning of “Present Fairly in Conformity with Generally Accepted Accounting Principles’ in the Independent Auditor’s Report” issued by the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination. 
  

 3 

 Section 1.30. “Governmental Authority” means any Federal, state, local or foreign court,
commission or tribunal, or governmental, administrative or regulatory agency, department, authority, instrumentality or other body. 
  
 Section 1.31. “Guarantees” means, as applied to Borrower and its Subsidiaries, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of any other Person, whether or not reflected on the consolidated balance sheet of Borrower and its Subsidiaries, including any obligation to furnish funds, directly or indirectly (whether by virtue of
partnership arrangements, by agreement to keep-well or otherwise), through the purchase of goods, supplies or services, or by way of stock purchase, capital contribution, advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person. 
  
 Section 1.32. “Indebtedness” means, as applied to any Person, without duplication: (a) all indebtedness for borrowed money; (b) that portion of obligations with respect to Capital Leases that is properly classified
as a liability on a balance sheet in conformity with GAAP; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due more than six months from the date the obligation is incurred or is evidenced by a note or similar written instrument; and (e) all indebtedness secured by any
Encumbrance on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. 
  
 Section 1.33. “Lease” and “Leases” means those
certain lease agreements by and between Yale and WE George Street, LLC with respect to Suite Nos. 802, 803 and 804 located at 300 George Street, New Haven, Connecticut (“Leased Premises”). 
  
 Section 1.34. “Lessor’s Consent” has the meaning set
forth in Section 5.2.7. hereof. 
  
 Section 1.35.
“Loan” means any Term Loan. 
  
 Section 1.36.
“Loans” means collectively, the Term Loans. 
  
 Section 1.37. “Loan Amount” means up to ONE MILLION SIX HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS ($1,630,000.00) or any lesser amount, including zero (0), resulting from a reduction or termination of such amount in
accordance with Section 2.12.1. or Section 11.1 (a). 
  
 Section 1.38. “Material Adverse Effect” means (i) a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a whole, or
(ii) a material adverse effect on the ability of Borrower to perform its obligations under this Agreement, the Note or the Other Documents or the ability of CII to enforce or collect any of the Obligations. In determining whether any individual
event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such an effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect. 
  

 4 

 Section 1.39. “Note” means a Term Note. 
  
 Section 1.40. “Notes” means collectively, each of the Term
Notes. 
  
 Section 1.41. “Obligations” means any
and all loans, advances, indebtedness, liabilities, obligations, covenants or duties of Borrower to CII of any kind or nature, including obligations to pay money and to perform acts or refrain from taking action, whether arising under a loan, lease,
credit card, line of credit, letter of credit, guaranty, indemnity, confirmation, acceptance, currency exchange, interest rate protection arrangement, overdraft or other type of financing arrangement, and any and all extensions and renewals thereof,
and modifications and amendments thereto, whether in whole or in part, whether created directly by CII or acquired by assignment, purchase, discount or otherwise, whether any of the foregoing are direct or indirect, joint or several, absolute or
contingent under, due or to become due, now existing or hereafter arising, whether any present or future agreement or instrument, and whether or not evidenced by a writing and specifically including but not being limited to (i) the unpaid
principal amount outstanding at any time under the Notes, plus all accrued and unpaid interest thereon, together with all fees, expenses, including attorneys’ fees, penalties, and other amounts owing by or chargeable to by Borrower under this
Agreement, the Notes or the Other Documents, and (ii) unpaid Reimbursement Obligations. 
  
 Section 1.42. “Other Documents” means the Assignment and Assumption Agreement, Collateral Assignment of Lease, the Lessor’s Consent, Environmental Indemnity and any other document, agreement or
instrument executed by Borrower in connection with any Term Loan or in connection with this Agreement and any and all amendments, modifications and supplements thereto. 
  
 Section 1.43. “Person” means an individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture or other entity of whatever nature, whether public or private. 
  
 Section 1.44. “Reimbursement Obligations” means, as of any date as of which the amount thereof shall be determined, the aggregate
obligation of Borrower, as of such date, to reimburse CII in respect of the Assignment and Assumption Agreement in accordance with Section 2.1.2. hereof. 
  

Section 1.45. “Release” means any release, emission, disposal, leaching, or migration into the environment, (including, without
limitation, the abandonment or disposal of any barrels, containers, or other closed receptacles containing any Hazardous Materials), or into or out of any property owned, occupied or used by Borrower. 
  
 Section 1.46. “Reportable Event” means any of the events
described in Section 4043(b) of ERISA. 
  
 Section 1.47.
“Solvent” means, when used with respect to any Person, that as of the date as to which the Person’s solvency is to be determined: 
  
 (a) the fair saleable value of such Person’s properties and assets is in excess of the total amount of its liabilities (including contingent
liabilities) as they become absolute and matured; 
  

 5 

 (b) it has sufficient capital to conduct its business; and 
  
 (c) it is able to meet its debts as they mature. 
  
 Section 1.48. “Subsidiary” means any Person of which fifty
percent (50%) or more of the ordinary voting power for the election of a majority of the members of the board of directors or other governing body of such Person is held or controlled by Borrower or a Subsidiary of Borrower; or any other such
organization the management of which is directly or indirectly controlled by Borrower or Subsidiary of Borrower through the exercise of voting power or otherwise; or any joint venture, whether incorporated or not, in which Borrower has a fifty
percent (50%) or more ownership interest. The term “control” (and its correlative meanings “controlled by” and “under common control with”) as used in this Section 1.48. means the possession, directly or
indirectly, of the power to direct, or cause the direction of, the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. 
  
 Section 1.49. “Term Note” has the meaning set forth in Section 2.2.2. hereof. 
  
 Section 1.50. “Term Loan” has the meaning set forth in
Section 2.2.1. hereof. 
  
 Section 1.51.
“Yale” means Yale University. 
  
 Section 1.52.
“Warrant” means the Stock Subscription Warrant to be given by Borrower to CII in connection herewith. 
  
 SECTION 2. THE CREDIT FACILITIES 
  
 Section 2.1. Guaranty and Reimbursement Obligations. 
  
 Section 2.1.1. Issuance. Upon the execution of this agreement, CII hereby agrees to guaranty the obligations of Borrower to Yale under and pursuant to the terms of the Assignment and Assumption Agreement up to a
maximum of $1,630,000.00. 
  
 Section 2.1.2. Reimbursement.
Borrower hereby acknowledges and agrees that it shall be obligated to reimburse CII in respect of obligations required to be paid by CII to Yale pursuant to the Assignment and Assumption Agreement: on each date that any Drawing is honored by CII or
a CII Affiliate, or CII or a CII Affiliate otherwise makes a payment with respect thereto, and only to the extent that such Drawing is not deemed to be a Term Loan under Section 2.2.1. hereof, (i) the amount paid by CII or a CII Affiliate
under or with respect to such Drawing, and (ii) the amount of any taxes, fees, charges or other reasonable costs and expenses whatsoever incurred by CII or any CII Affiliate in connection with any payment made by CII or CII Affiliate under, or
with respect to, such payment; 
  

 6 

 Borrower shall pay interest on any amounts due and payable under this Section 2.1.2. from the date
such amounts are payable (whether at maturity, by acceleration or otherwise) until paid in full at the rate of interest applicable to Term Loans for three (3) days and, thereafter, at the Default Rate applicable to the Term Loans. 

 
 Section 2.1.3. Obligations Absolute. The obligations of Borrower with
respect to the guaranty obligations of CII under the Assignment and Assumption Agreement shall be unconditional and irrevocable, shall be paid strictly in accordance with the terms of this Agreement under all circumstances and shall not be reduced
by: (a) any lack of validity or enforceability of any document executed between Borrower and Yale or the Landlord; (b) the existence of any claim, set-off, defense or other right which Borrower may have at any time against Yale, the
transactions contemplated herein or any unrelated transaction; and (c) any statement or any other document presented under the Assignment and Assumption Agreement or the Lease or any Other Document proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate in any respect, unless CII had actual knowledge (without any investigation having been made) that such statement or other document was forged, fraudulent, invalid or
insufficient. 
  
 Section 2.1.4. Indemnification. Borrower
hereby indemnifies and holds CII, and its directors, officers, employees and agents (collectively, the “CII Agents”), harmless from and against any and all claims, damages, losses, liabilities, costs or expenses (including reasonable legal
fees and expenses) which CII or any CII Agents may incur or which may be claimed against CII by any Person by reason of or in connection with the execution and delivery or transfer of, or payment or failure to make lawful payment under, the
Assignment and Assumption Agreement; provided, however, that Borrower shall not be required to indemnify CII or any CII Agents for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by
CII’s (i) failure to act in good faith and in conformity with such laws or regulations, or (ii) honoring a Drawing under the Assignment and Assumption Agreement when at the time of such honoring CII had actual knowledge (without any
investigation having been made) that such Drawing was forged, fraudulent, invalid or insufficient. Nothing in this Section 2.1.4. is intended to limit Borrower’s obligations hereunder. Without prejudice to the survival of any other
obligation of Borrower hereunder, the indemnities and obligations of Borrower contained in this Section 2.1.4. shall survive the payment in full of the Obligations. In case any claim is asserted or any action or proceeding is brought against
CII or any CII Agents, CII or any such CII Agents shall promptly notify Borrower of such claim, action or proceeding and Borrower shall resist, settle or defend with counsel reasonably acceptable to CII, such claim, action or proceeding. If, within
ten (10) days of Borrower’s receipt of such notice, Borrower does not commence and continue to prosecute the defense of such claim, action or proceeding, CII, or any such CII Agents, may retain legal counsel to represent it in such defense
and Borrower shall indemnify CII, or any such CII Agents, for the reasonable fees and expenses of such legal counsel. Subject to the foregoing, CII shall cooperate and join with Borrower, at the expense of Borrower, as may be required in connection
with any action taken or defended by Borrower. 
  
 Section 2.1.5. Liability of CII. Any action, inaction or omission on the part of CII under or in connection with the Assignment and Assumption Agreement or related instruments or documents, if in good faith and in conformity with such
laws, regulations or 
  

 7 

 commercial or customs as CII may reasonably deem to be applicable, shall be binding upon Borrower, shall not place CII
under any liability to Borrower, shall not affect, impair or prevent the vesting of any of CII’s rights or powers hereunder or Borrower’s obligation to make full reimbursement to CII. Borrower assumes all risks of the acts or omissions of
Yale, Landlord or any transferee. CII shall not have any liability for and that Borrower assumes all responsibility for: (a) the genuineness of any signature; (b) the form, correctness, validity, sufficiency, genuineness, falsification and
legal effect of any draft, certification or other document and the authority of the person signing the same; (c) the good faith or acts of any person other than CII and its agents and employees; (d) the existence, form, sufficiency or
breach of or default under any other agreement or instrument of any nature whatsoever; (e) any delay in giving or failure to give any notice, demand or protest; and (f) any error, omission, delay in or nondelivery of any notice or other
communication, however sent. 
  
 Section 2.2. Term Loan.

  
 Section 2.2.1. Amount of Loan. Upon the execution of this
Agreement and up to the Credit Termination Date, Borrower may borrow from CII, and CII agrees to lend to Borrower subject to the terms and conditions of this Agreement on any Early Possession Date (as such term is defined in the Assignment and
Assumption Agreement) or the Effective Date (as such term is defined in the Assignment and Assumption Agreement), an amount equal to the Excess Cost Reimbursement (as such term is defined in the Assignment and Assumption Agreement) obligations of
Achillion that would have been due with respect to any Lease assumed on the Effective Date up to ONE MILLION SEX HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS ($1,630,000.00) (the “Term Loan”). Any amount that CII lends to Borrower shall be
reduced from the amount guaranteed by CII to Yale under the Assignment and Assumption Agreement. Borrower shall deliver ninety (90) days advance notice to CII of its intent to Borrower a Term Loan. 
  
 Section 2.2.2. Term Note. The Term Loan shall be evidenced by one or
more promissory notes executed by Borrower in substantially the form attached hereto as Exhibit A (the “Term Note”), with all blanks therein appropriately completed and payable to the order of CII, which Term Note is hereby
incorporated by reference and made a part hereof. 
  
 Section 2.2.3. Payment of Principal. Commencing on the first day of the first month following the making of the Term Loan, and continuing on the first day of each succeeding month thereafter, the principal amount of the Term Note shall
be payable in consecutive monthly installments, a final installment in the then unpaid principal amount of the Term Loan, together with all other amounts due and owing under the Term Note, shall be due and payable on the last day of the Lease being
assumed by Borrower for which the proceeds of this Term Loan will be used to pay the Excess Reimbursement Costs (“Assumed Lease”). Each Term Note shall be based on an amortization schedule equal to the number of years remaining in the
Assumed Lease. 
  
 Section 2.2.4. Interest. The unpaid
principal amount of the Term Loan, as evidenced by the Term Note, shall bear interest at equal to seven and one half percentage points (7.5%). Interest on the unpaid principal amount of the Term Note in arrears shall be due and payable commencing on
the first day of the month following the making of the Term Loan and continuing on the first day of each succeeding calendar month thereafter until the entire outstanding principal amount of the Term Loan shall be paid in full. 
  

 8 

 Section 2.2.5. Optional Prepayments of Principal. 
  
 Section 2.2.5.1. The Borrower may, on any Business Day, make full or
partial prepayments of principal amounts due on the Loan, and such prepayments may be made without premium or penalty, provided that: (i) the Borrower gives CII at least ten (10) Business Days’ prior written notice; and (ii) each
prepayment is accompanied by payment of accrued interest to the date of prepayment on the principal amount prepaid. 
  
 Section 2.2.5.2. All prepayments shall be applied first to all fees, costs, expenses incurred by CII pursuant to this Agreement, the Notes and the
Other Documents, then to any late charges, then accrued and unpaid interest as of the date of such prepayment and the remainder to installments of principal due hereunder in inverse order of maturity. No amount prepaid by the Borrower may be
reborrowed. 
  
 Section 2.2.6. Use of Proceeds. The proceeds
of any Term Loan shall be used to pay Yale for any Excess Reimbursement Costs on either (a) an Early Possession Date or (b) the Effective Date, as applicable. 
  
 Section 2.2.7. Commitment Fee. Borrower agrees to pay to CII on the Closing Date, a non-refundable commitment fee in
the amount of $16,300.00; $5,000 of which was due prior to the date hereof and the balance of which is payable at Closing. 
  
 Section 2.3. General Terms Applicable to Any Term Loan. 
  
 Section 2.3.1. Interest. Interest shall accrue on the basis of a three hundred sixty (360) day year, and shall be calculated according to the
actual number of days elapsed during each accrual period. 
  
 Section 2.3.2. Late Payment. Any payment of principal or interest due under this Agreement which is not made within ten (10) days of the date specified for payment shall bear a late fee equal to five percent (5%) of the
amount of the payment then due to compensate CII for the costs incurred in processing the late payment. The imposition or collection of a late fee shall not affect CII’s right to exercise any of its rights and remedies upon the occurrence of an
Event of Default. 
  
 Section 2.3.3. Method of Payment. All
payments and prepayments of principal and all payments of interest shall be made by Borrower to CII at 999 West Street, Rocky Hill, Connecticut 06067 in immediately available funds, on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. 
  
 Section 2.3.4. Default Rate. Overdue principal (whether at maturity, by reason of acceleration or otherwise) and, to the extent permitted by applicable law, overdue interest and fees or any other amounts payable under this Agreement
shall bear interest from and including the due date thereof until paid, at the Default Rate, which interest shall be compounded daily and payable on demand. 
  

 9 

 SECTION 3. SECURITY FOR THE OBLIGATIONS 
  
 The Obligations shall be secured by: (1) the Collateral Assignment of Lease, (2) the Lessor’s Consent,
(3) the Warrant, and (4) as to Term Loans only, a first priority security interest in furniture, fixtures and equipment located in the Leased Premises and acquired with the proceeds of the Loan, and other furniture, fixtures and equipment
located in the Leased Premises not otherwise subject to a security interest at the time of the Term Loan or a purchase money security interest. 
  
 SECTION 4. REPRESENTATIONS AND WARRANTIES 
  
 In order to induce CII to enter into this Agreement and to make any Term Loan, Borrower makes the following representations and warranties to CII, which
shall be deemed made as of the date hereof and, except as otherwise provided in this Section 4., the date of each Term Loan. Any knowledge acquired by CII shall not diminish its rights to rely upon such representations and warranties.

  
 Section 4.1. Corporate Existence and Good Standing.

  
 (a) The Borrower is a corporation validly existing and in good
standing under the laws of the State of Delaware; and has the corporate power to own its property and conduct its business substantially as presently conducted by the Borrower; 
  
 (b) The Borrower has the power and authority to enter into and to perform its obligations under this Agreement, the Note and
the Other Documents, and to carry out the transactions contemplated hereby and thereby; 
  
 (c) The Borrower is qualified to do business in every jurisdiction in which its property or business as presently owned, conducted, or contemplated makes such qualification necessary. 
  
 Section 4.2. Corporate Power, Consents; Absence of Conflict with Other
Agreement, Etc. The execution, delivery and performance of this Agreement, the Notes and the Other Documents, by the Borrower, and the transactions contemplated hereby, 
  
 (a) are within the corporate powers of, and have been duly authorized by the Board of Directors of, and, to the extent
required, by the stockholders, of the Borrower; 
  
 (b) do not
require any approval or consent of, or filing with, any governmental agency or authority bearing on the validity of such instruments and transactions which is required by law or the regulations of any agency or authority and which has not been
obtained or made, and are not in contravention of law or the terms of the charter documents, by-laws, or any amendment thereof, of the Borrower; 
  
 (c) will not conflict with or result in any breach or contravention of or the creation of any lien under, any indenture, agreement, promissory note,
lease, contract, instrument or undertaking to which the Borrower is a party or by which it or any of its properties is bound; and 
  

 10 

 (d) are and will be the valid and legally binding obligations of the Borrower and enforceable in
accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors’ rights, and except that the
availability of specific performance, injunctive relief or any other equitable remedy may be subject to the discretion of the court before which any proceedings for such remedy may be brought. 
  
 Section 4.3. Binding Obligations. This Agreement, the Notes and the
Other Documents constitute the legal, valid and binding obligations of Borrower, enforceable against it in accordance with their respective terms. 
  
 Section 4.4. Noncontravention. The execution, delivery and performance by Borrower of this Agreement, the Notes and the Other Documents will not
violate any existing law, ordinance, rule, regulation or order of any Governmental Authority or result in a breach of any of the terms of, or constitute a default under, any contractual obligation to which Borrower is a party or by which it or any
of its properties or assets are bound or result in or require the imposition of any Encumbrances on any of Borrower’s properties or assets. 
  
 Section 4.5. Permits. Borrower possesses all material permits, authorizations, licenses, approvals, waivers and consents, without unusual
restrictions or limitations, the failure of which to possess would have a Material Adverse Effect, all of which are in full force and effect. 
  
 Section 4.6. No Consents. The execution, delivery and performance of this Agreement, the Notes and the Other Documents does not require any approval,
consent or waiver under any Contractual Obligation not otherwise obtained. No approval, authorization, consent, waiver or order of, or registration, application or filing with, any Governmental Authority is required in connection with the
transactions contemplated by this Agreement, the Notes and the Other Documents. 
  
 Section 4.7. Financial Statements. Borrower has provided to CII its internally prepared consolidated Financial Statements dated as of December 31, 2000, certified by the chief financial officer of Borrower
but subject, however, to normal, recurring year-end adjustments that shall not in the aggregate be material in amount. All Financial Statements of Borrower heretofore provided to CII present fairly the financial condition and results of business
operations of Borrower for the periods indicated in accordance with GAAP. Borrower has no direct or contingent liabilities, liabilities for taxes, unusual commitments or unrealized or unanticipated losses not disclosed in such Financial Statements.
Since the date of the latest dated consolidated balance sheet included in the Financial Statements, there has been no material adverse change in the business operations or financial condition of Borrower from that set forth in the balance sheet
contained in such Financial Statements and no Dividends have been declared or made to stockholders, nor have any shares of its capital stock (or any warrant to purchase, options to acquire or notes convertible, in whole or in part, into any shares
of its capital stock) been purchased or acquired by any Person in any manner. 
  
 Section 4.8. Financial Information. All written data, reports and information which Borrower has supplied to CII or caused to be so supplied by a third party on its behalf in connection with this Agreement are
complete and accurate and contain no material omission or misstatement except such as have been corrected in a writing delivered to CII 
  

 11 

 Section 4.9. Brokers. No broker or finder has brought about the obtaining, making or closing of, and
no broker’s or finder’s fees or commissions will be payable by Borrower to any Person in connection with, the transactions contemplated by this Agreement. 
  
 Section 4.10. Statutory Compliance. Borrower is in compliance with all material laws, ordinances, rules, regulations
and orders of any Governmental Authority applicable to it, its properties and assets and the business conducted by it, including, without limitation, ERISA, the United States Occupational Safety and Health Act of 1970 and all Environmental Laws
except where non-compliance would not have a Material Adverse Effect. 
  
 Section 4.11. Events of Default. No Default or Event of Default has occurred and is continuing. 
  
 Section 4.12. Other Defaults. Borrower is not in default in the performance, observance or fulfillment of any Contractual Obligation, which default
has caused the acceleration or termination of any such Contractual Obligation. 
  
 Section 4.13. Taxes. Borrower has filed all tax returns and reports required to be filed by it with any Governmental Authority and has paid in full, or made adequate provisions or established adequate reserves
for, the payment of all taxes, interest, penalties, assessments or deficiencies shown to be due or claimed to be due on or in respect to such tax returns and reports except where such taxes are contested in good faith. 
  
 Section 4.14. Solvency. Borrower is currently Solvent; and Borrower is
not contemplating either the filing of a petition by it under Bankruptcy Code or any state bankruptcy or insolvency law or the liquidating of all or a major portion of its properties and assets, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it. 
  
 Section 4.15. Business Name. Borrower conducts its business solely through the names set forth in Schedule 4.15 hereof, without the use of any trade name, or the intervention of or through any other Person. Borrower has not,
except as set forth in Schedule 4.15, during the preceding five (5) years, conducted its business through any other name or trade name or been the surviving corporation in a merger or consolidation or acquired all or substantially all of
the assets of any other Person. 
  
 Section 4.16. Affiliate
Contracts. All contracts and transactions between Borrower and any Affiliate or Subsidiary of Borrower have been executed or will be executed on such terms as would be contained in an agreement executed at arms’ length with an unrelated third
party. 
  
 Section 4.17. Litigation. Except as set forth on
Schedule 4.17 attached hereto, there are no actions, suits or proceedings by or before any Governmental Authority or any arbitration or alternate dispute resolution proceeding, pending or, to the knowledge of Borrower or any of
Borrower’s officers, threatened against Borrower or its properties and assets, which if adversely determined, would have a Material Adverse Effect. 
  

 12 

 Section 4.18. Labor Relations. Borrower is not a party to any collective bargaining or other
agreement with any union and there are no material grievances, disputes or controversies with any union or other organization of Borrower’s employees, or threats of strikes, work stoppages or demands by any union or such other organization.

  
 Section 4.19. Guarantees. Borrower is not a party to any
Guarantee or other similar type of agreement, and it has not offered its endorsement to any Person which would in any way create a contingent liability (except by endorsement of negotiable instruments payable at sight for deposit or collection or
similar banking transactions in Borrower’s ordinary course of business). 
  
 Section 4.20. Subsidiaries. As of the date of this Agreement, all of the Subsidiaries and Affiliates of Borrower are set forth on Schedule 4.20 . Borrower or a Subsidiary of Borrower is the owner (subject
to specified minority interests) free and clear of all Encumbrances, of all of the issued and outstanding capital stock of each Subsidiary. All shares of such capital stock have been validly issued and are fully paid and nonassessable, and no rights
to subscribe to any additional shares have been granted, and no options, warrants or similar rights are outstanding. Borrower is not engaged in any joint venture, partnership or other business arrangement with any other Person except as described on
said Schedule 4.20. 
  
 SECTION 5. CONDITIONS TO OBLIGATION
OF CII 
  
 CII shall have no obligation under this Agreement to
enter into the Assignment and Assumption Agreement or make any Term Loan unless and until it is satisfied, in its sole and absolute discretion, that all of the following conditions shall have been satisfied prior to or on the Closing Date:

  
 Section 5.1. Representations and Warranties True. The
representations and warranties contained in Section 4 are true and correct, and Borrower, by its President, shall have so certified to CII. 
  
 Section 5.2. Delivery of Documents. Borrower shall have duly executed and delivered to CII, in form and substance satisfactory to CII and its legal
counsel, this Agreement, the Notes, the Other Documents and all further documents as CII may request to evidence the Obligations or to create, perfect or continue any security interest or mortgage lien contemplated by this Agreement and the Other
Documents. 
  
 Section 5.2.1. Copies of all corporate action
taken by Borrower to authorize the execution and delivery of this Agreement, the Notes and the Other Documents, together with a certificate of the corporate secretary of Borrower certifying that the same are true, correct and complete as of the
Closing Date. 
  
 Section 5.2.2. Copies of Borrower’s
Certificate of Incorporation and Bylaws, if and as amended, together with a certificate of the Secretary of Borrower certifying that the same are true, correct and complete as of the Closing Date. 
  
 Section 5.2.3. [Intentionally Omitted.] 
  

 13 

 Section 5.2.4. A certificate issued by the office of the Secretary of State of the state of
Borrower’s incorporation to the effect that Borrower is legally existing and in good standing under the laws of such states. 
  
 Section 5.2.5. A certificate issued by the office of the Secretary of State of each state in which Borrower is qualified as a foreign corporation to
the effect that Borrower is duly qualified and in good standing as a foreign corporation under the laws of such states. 
  
 Section 5.2.6. A certificate of the Secretary of Borrower certifying to the incumbency and signatures of all officers of Borrower who are authorized
to execute this Agreement, the Notes and the Other Documents. 
  
 Section 5.2.7. The consent of the lessor of the Leased Premises subject to the Collateral Assignment of Lease, such consent to be satisfactory in form and substance to CII and its counsel (the “Lessor’s Consent”).

  
 Section 5.2.8. A UCC-11 Request for Information certified
by the Office of the Secretary of State of the State of Connecticut and Delaware (or an acceptable equivalent thereto) listing the filings against Borrower as debtor under such names at such offices. 
  
 Section 5.2.9. An environmental certificate and indemnity agreement
executed by Borrower, satisfactory in form and substance to CII and its legal counsel (the “Environmental Certificate”). 
  
 Section 5.2.10. Such further documents, instruments and agreements as CII shall reasonable request, all satisfactory in form and substance
satisfactory to CII and its legal counsel. 
  
 Section 5.3.
Validity of Liens. All Encumbrances in the Collateral shall have been created in favor of CII, which Encumbrances shall constitute legal, valid and enforceable and, unless otherwise consented to by CII, first security interests in and liens upon the
Collateral. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the sole and absolute discretion of CII and its legal counsel to create said Encumbrances shall have been made, taken and/or effected.

  
 Section 5.4. Opinion of Counsel. CII shall have received
from counsel for Borrower a written opinion, satisfactory in form and substance to CII and its legal counsel. 
  
 Section 5.5. Payment of Fees. Borrower shall have paid any applicable fees and expenses due to CII at closing, including the fees and expenses of
CII’s legal counsel. 
  
 Section 5.6. Legal Matters. All
legal matters incident to the transactions hereby contemplated shall be satisfactory to CII and its legal counsel. 
  
 SECTION 6. CONDITIONS TO TERM LOAN 
  
 CII shall have no obligation to make any Term Loan unless and until, it is satisfied, in its sole and absolute discretion, that all of the following conditions shall have been fulfilled prior to or contemporaneously
with the making of such Term Loan. 
  

 14 

 Section 6.1. Notice of Borrowing. CII shall have received, in a timely manner, a Notice of Borrowing
in a form satisfactory to CII. 
  
 Section 6.2. No Material
Adverse Change. There has been no change in the financial condition or business operations of Borrower or its Subsidiaries since the date of the last Financial Statements or other financial reports delivered to CII which has a Material Adverse
Effect. 
  
 Section 6.3. Truth of Representations and
Warranties. All of the representations and warranties set forth in Section 4 of this Agreement are true and correct in all material respects as of the date on which the requested Term Loan is made. 
  
 Section 6.4. No Default. No Default or Event of Default shall have
occurred and be continuing or shall occur as a result of the requested Term Loan. 
  
 Section 6.5. Payment of Fees. Borrower shall have paid any applicable fees and expenses due to CII, including any fees and expenses of CII’s legal counsel. 
  
 Section 6.6. Corporate Action. The corporate action of Borrower referred
to in Section 5.2.1. shall remain in full force and effect and the incumbency of officers shall be as stated in the certificates of incumbency delivered pursuant to Section 5.2.6. or as subsequently reflected in a new certificate of
incumbency delivered to CII in connection with the requested Term Loan. 
  
 Section 6.7. Legal Matters. All legal matters incident to the transactions contemplated by the requested Term Loan shall be satisfactory to CII and its legal counsel and no change shall have occurred in any law or regulation or
interpretation thereof, which, in the opinion of CII and its legal counsel, would make it illegal or against the policy of any governmental body, agency or instrumentality for CII to make the requested Term Loan. 
  
 Section 6.8. Conditions to Term Loan. Borrower shall have satisfied all
of the terms and conditions under the Assignment and Assumption Agreement. 
  
 Section 6.9. Documents. Borrower shall execute and deliver to CII the following documents in form and substance reasonably acceptable to CII: (a) a Term Note with all blanks appropriately completed;
(b) a Collateral Assignment of Lease; (c) an Estoppel Certificate confirming that there are no defaults under any of the Leases by Landlord, Yale or Borrower with respect to the Leased Premises, (d) a Confirmation from Landlord that
the Lessor’s Agreement remains in full force and effect, (e) a security agreement and appropriate UCC-1 financing statements granting CII a first perfected security interest in the fixtures, furniture and equipment of the Borrower, not
otherwise subject to a security interest at the time of the Term Loan or a purchase money security interest, provided however, no furniture, fixtures and equipment acquired under the Lease or from Yale shall be subject to any other security interest
and (f) such other documents, certificates or instruments reasonably requested by CII. 
  

 15 

 SECTION 7. AFFIRMATIVE COVENANTS OF BORROWER 
  
 Borrower covenants and agrees that from the date hereof until the payment and performance in full of the Obligations, unless
CII otherwise consents in writing: 
  
 Section 7.1. Financial
Statements and Reporting Requirements. Borrower shall furnish to CII: 
  
 Section 7.1.1. As soon as available, but in any event no later than ninety (90) days after the end of each fiscal year of Borrower, financial statements of Borrower for such year audited and certified by an independent certified
public accountant reasonably acceptable to CII, which financial statements shall include the balance sheet of Borrower at the end of such year, 
  
 and the related statement of income, statement of retained earnings and statement of cash flows for such year, all of which shall be in reasonable detail and prepared in
accordance with generally acceptable accounting principles. 
  
 Section 7.1.2. With reasonable promptness, such financial information with respect to the Borrower as CII may reasonable require. 
  
 Section 7.2. Fire and Hazard Insurance. Borrower shall keep its properties and assets insured against fire and other hazards (so called “All
Risk Coverage”) in amounts and with companies satisfactory to CII to the same extent and covering such risks as is customary in the state or similar business, but in no event in an aggregate amount less than the Obligations, which policies
shall name CII as first loss payee as its interest may appear. Borrower shall also maintain public liability coverage against claims for personal injuries or death, business interruption, worker’s compensation, employment or similar insurance
with coverage and in amounts satisfactory to CII and as may be required by applicable law. Such all risk policy shall provide for a minimum of thirty (30) days’ written cancellation notice to CII. Borrower agrees to deliver copies of all
of the aforesaid insurance policies to CII. In the event of any loss or damage to the Collateral, Borrower shall give immediate written notice to CII and to its insurers of such loss or damage and shall promptly file proof of loss with its insurers.

  
 Section 7.3. Maintenance of Existence. Borrower shall
preserve and maintain its corporate existence, rights, franchises and privileges, including its corporate name, in the jurisdiction of its incorporation, and qualify and remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in each state in which the failure to do so would have a Material Adverse Effect. 
  
 Section 7.4. Taxes and Other Assessments. Borrower shall pay and discharge, and maintain adequate reserves for the payment and discharge of, all
taxes, assessments, government charges or levies, or claims for labor, supplies, rent or other obligations made against it or its properties and assets which, if unpaid, might become an Encumbrance against Borrower or its properties and assets,
except liabilities which are being contested in good faith in appropriate proceedings. Borrower shall file all Federal, state and local tax returns and other reports that it is required by law to file. Borrower shall promptly notify or cause notice
to be given to CII of any pending or future audits of its income tax returns by the Internal Revenue Service or by any state in which Borrower conducts business operations and the results of each such audit. 
  
 Section 7.5. Notices. Borrower shall promptly upon becoming aware of the
occurrence of a Default or Event of Default notify CII thereof in writing. Borrower shall also promptly advise CII of: 
  
 (a) any labor controversy resulting in or threatening to result in a strike or work stoppage against Borrower or its Subsidiaries; 
  

 16 

 (b) any change of independent public accountants, notice that such change has occurred together with the
name of the new accountants; or 
  
 (c) any other matter which has
resulted or may result in a material adverse change in Borrower’s or its Subsidiaries financial condition or business operations. 
  
 Section 7.6. Litigation. Borrower shall promptly inform CII of any action, suit, or proceeding by or before any Government Authority or arbitration
or alternate dispute resolution proceeding, which might have a Material Adverse Effect. 
  
 Section 7.7. Maintenance of Books and Records. Each of Borrower and its Subsidiaries shall keep adequate books and records of account, in which true and complete entries will be made reflecting all of its
business and financial transactions, and such entries will be made in accordance with GAAP including the maintenance of adequate reserves for depreciation of property, if such reserves are required by GAAP. Each of Borrower and its Subsidiaries
shall maintain duplicate copies of all such books and records (i) on-site at all times and (ii) off-site updated on a monthly basis. 
  
 Section 7.8. Maintenance of Permits. Borrower shall obtain and/or maintain in full force and effect all material permits, authorizations, licenses,
approvals, waivers and consents which it presently possesses or which may become necessary in the future to conduct its business operations, and where the failure to so obtain or possess would have a Material Adverse Effect. 
  
 Section 7.9. Use of Proceeds. Borrower will use the proceeds of any Term
Loan solely for the purposes set forth in this Agreement. 
  
 Section 7.10. Payment of Indebtedness. Borrower shall promptly pay and discharge when due and payable (or within applicable grace periods) all Indebtedness due to any Person from Borrower, except when the amount thereof is being
contested in good faith by appropriate proceedings and with reserves therefor being established as a current liability on the books of Borrower as required by GAAP. 
  
 Section 7.11. Compliance with Laws. Borrower shall comply in all material respects with the requirements of all
applicable laws, ordinances, rules, regulations and orders of any Government Authority, where the failure to so comply would have a Material Adverse Effect. 
  
 SECTION 8. NEGATIVE COVENANTS 
  
 Borrower covenants and agrees that from the date hereof until the payment and performance in full of the Obligations, unless CII otherwise consents in
writing: 
  
 Section 8.1. Limitation on Mortgages, Liens and
Encumbrances. The Borrower will not at any time, create, assume, incur or permit to exist, any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind in respect of the Collateral, whether heretofore or hereafter acquired
by it and given to CII as collateral for the Loan, other than: 
  
 (a) liens for taxes, assessments or other governmental charges or levies payable by the Borrower, to the extent that payment thereof is not yet due or to the extent that such liabilities are being contested by the Borrower in good faith by
appropriate proceedings and adequate reserves therefore are being maintained in accordance with generally accepted accounting principles; 
  

 17 

 (b) judgment liens which shall not have been in existence for a period longer than thirty (30) days
after the creation thereof, or, if a stay of execution shall have been obtained, for a period longer than thirty (30) days after the expiration of such stay; 
  
 (c) security interests and other encumbrances in existence on the date of the Notes; 
  
 (d) the security interests granted to CII; and 
  
 (e) liens incurred or pledges and deposits made in the ordinary course of
business in connection with worker’s compensation, unemployment insurance, old-age pensions and other social security or governmental insurance benefits or to secure the performance of tenders, statutory obligations, surety and appeal bonds,
bids, operating leases of personal property, government contracts and franchises, performance and return-of-money bonds and other similar non-material obligations incurred in the ordinary course of business (exclusive of repayment obligations in
respect of borrowed money). 
  
 Section 8.2. Change Name or
Location. Borrower shall not change its corporate name or conduct its business under any other name or change its chief executive office, place of business. 
  
 Section 8.3. Contracts. Borrower shall not enter into any contract other than on such terms as would be contained in an agreement executed at
arms’ length with an unrelated third party. 
  
 Section 8.4. Compliance with Environmental Laws. Borrower shall not generate, handle, use, store or treat any Hazardous Materials except in compliance with Environmental Laws. 
  
 Section 8.5. Fiscal Year. Borrower shall not change its existing Fiscal
Year. 
  
 SECTION 9. CONNECTICUT PRESENCE 
  
 Section 9.1. Maintenance of Connecticut Presence and Remedy for Failure
to Maintain Connecticut Presence. 
  
 (a) So long as any amount
remains outstanding and unpaid under a Note or CII has any obligations under the Assignment and Assumption Agreement, the Borrower shall maintain a “Connecticut Presence” and shall not relocate (as that term is defined in
Section 32-5a 

  

 18 

 
of the Connecticut General Statutes) outside of the State of Connecticut. A “Connecticut Presence” shall mean (i) maintaining the
Borrower’s principal place of business (including its executive offices) in the State of Connecticut, (ii) basing a majority of its employees in the State of Connecticut, and (iii) having a majority of its internal Borrower payroll
expenses attributable to employees based in the State of Connecticut. 
  
 (b) For purposes of determining whether the Borrower is in compliance with subsection (a) above, the assets, revenues and employees of any business acquired by the Borrower (by stock purchase, asset acquisition or otherwise) after the
date hereof on an arm’s- length basis from a non-affiliate of the Borrower (provided that such acquired business had been operating for at least one year at the time of such acquisition) (each, an “Excluded Acquired Business”) shall
be excluded and disregarded, and the Borrower shall not be deemed in violation of this covenant by virtue of the operations of any Excluded Acquired Business. 
  

(c) Notwithstanding anything to the contrary contained in subsection (a) above, the Board of Directors of the Borrower may determine in its good
faith, reasonable judgment that the best interests of the Borrower and its shareholders shall require that the Borrower cease to maintain a Connecticut Presence and/or relocate. In such case, at least ninety days prior to acting upon such
determination, the Borrower agrees to enter into good faith discussions with CII concerning such proposed change and the circumstances under which the Borrower may be willing not to make such change. Upon the expiration of such ninety (90) day
period, the Borrower may cease to maintain a Connecticut Presence or relocate, provided that all obligations of CII under the Assignment and Assumption Agreement have been terminated and all amounts due and owing under the Notes and the Other
Documents shall be immediately due and payable without further notice or demand. 
  
 Section 9.2. Connecticut Employment. 
  
 (a) The Borrower shall use its reasonable best efforts to create jobs in the State of Connecticut and shall use its reasonable best efforts to employ residents of Connecticut in these jobs, consistent with the
exercise of the good faith business judgment of the Board of Directors of the Borrower. 
  
 (b) The Borrower shall furnish to CII copies of the quarterly reports filed by the Borrower and any of its subsidiaries with the Connecticut Department of Labor and upon request, employment records and such other
personnel records to the extent permitted by law as CII may reasonably request to verify the creation or retention of Connecticut employment. 
  
 (c) The Borrower hereby authorizes CII to examine, and will at any time at the request of CII provide CII with such additional authorization satisfactory
to the Connecticut Department of Labor as may be necessary to enable CII to examine all records of said Department relating to the Borrower and/or any of its subsidiaries, subject to any limitation imposed by applicable law. 
  
 Section 9.3. Equal Opportunity. The Borrower agrees and warrants that it
is an equal opportunity employer and that it does not discriminate. The Borrower further agrees and warrants that: 
  

 19 

 (a) The Borrower will not discriminate or permit discrimination against any employee or applicant for
employment because of sex, sexual orientation, race, color, religious creed, age, marital status, mental retardation, physical disability, National origin, or ancestry. Such action shall include, but not be limited to, the following: employment
upgrading, demotion or transfer; recruitment advertising; lay-off or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. 
  
 (b) The Borrower agrees to take affirmative action to insure that applicants with job-related qualifications are employed.

  
 (c) The Borrower will, in its solicitation for employees,
state that it is an “affirmative action-equal opportunity employer.” 
  
 (d) The Borrower agrees to provide each labor union or representative of workers with which the Borrower has a collective bargaining agreement or other contract or understanding and each vendor with which the Borrower
has a contract or understanding, a notice to be provided by the Commission of Human Rights and Opportunities (the “CHRO”) and to post copies of the notice in conspicuous places available to employees and applicants for employment.

  
 (e) The Borrower agrees to cooperate with CII, the State of
Connecticut and/or any of its agencies and the CHRO to insure that the purpose of this equal opportunity clause is being carried out. 
  
 (f) The Borrower agrees to comply with all relevant regulations and orders issued by the CHRO, to provide the CHRO with such information as it may
request, and to permit the CHRO access to pertinent books, records and accounts concerning the contractor’s employment practices and procedures. 
  
 (g) The Borrower agrees to comply with all of the requirements set out by Sections 4a-60 and 4a-60a of the Connecticut General Statutes, as it may be
amended. 
  
 (h) The Borrower agrees to post a notice of this
acceptance of the foregoing equal employment opportunity provisions at its place of business, clearly visible, in such form as is satisfactory to CII. 
  
 SECTION 10. DEFAULT 
  
 Section 10.1. Default. The occurrence of any of the following events shall constitute a default under this Agreement, the Notes and the Other
Documents (an “Event of Default”): 
  
 (a) Borrower
shall fail to pay within ten (10) days after due (i) any outstanding principal amount of the Term Notes, (ii) any Reimbursement Obligations, or (iii) any accrued and unpaid interest on the Loans or any fees or expenses payable
under this Agreement, the Notes or the Other Documents; or 
  

 20 

 (b) Borrower shall fail to perform any term, covenant or agreement contained in this Agreement (except
for subsection a and c-k) and such failure shall continue unremedied for a period of thirty (30) days after notice from CII; or 
  
 (c) any representation or warranty of Borrower made in this Agreement, the Notes or the Other Documents or in any certificate or report delivered
hereunder or thereunder shall prove to have been false in any material respect upon the date when made or deemed to have been made; or 
  
 (d) if the Borrower makes an assignment for the benefit of creditors, or admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or of any substantial part of the assets of the Borrower or commences any case or other proceeding
relating to the Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or takes any action to authorize or in
furtherance of any of the foregoing; or if any such petition or application is filed or any such case or other proceeding is commenced against the Borrower, or 
  

(e) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower in an involuntary case under Federal bankruptcy laws as now or hereafter constituted and such decree or order shall
remain in effect for more than ninety (90) days, whether or not consecutive; or 
  
 (f) if there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final uninsured judgment in excess of $250,000 against the Borrower; or

  
 (g) if there shall have occurred any changes in the assets,
liabilities, financial condition, business, operations or prospects of the Borrower or which, individually or in the aggregate, are materially adverse; or 
  
 (h) if there shall have occurred a default or an event of default under any of the Other Documents beyond any applicable notice and cure period, if any;
or 
  
 (i) Any Government Authority shall condemn, seize or
otherwise appropriate, or take custody or control of, or file a lien, levy or assessment in respect of, all or any substantial portion of the properties or assets of Borrower; or 
  
 (j) If these shall occur a default or an event of default (beyond any applicable notice and cure period, if any) under any
Lease; or 
  
 (k) If there shall occur a default or an event of
default (beyond any applicable notice and cure periods, if any) under any other loan made by CII to Borrower. 
  

 21 

 SECTION 11. REMEDIES 
  
 Section 11.1. Remedies. Upon the occurrence of an Event of Default, and at any time thereafter while such Event of
Default is continuing, immediately and automatically in the case of an event of Default specified in Section 11.1 (d) or 11.1 .(e), and in all other cases, at CII’s option and upon CII’s declaration: 
  
 (a) CII’s obligation to make any Term Loan shall terminate; 

 
 (b) the unpaid principal amount of the Loans, together with accrued
interest thereon, and all other Obligations shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived; 
  
 (c) CII may exercise any and all other rights and remedies it has under this
Agreement, the Notes or the Other Documents or at law or in equity, and proceed to protect and enforce CII’s rights by any action at law, in equity or other appropriate proceeding. 
  
 Section 11.2. Default Interest Rate. At CII’s option, which may be exercised following any Event of Default and
during the continuance thereof, whether or not CII exercises any other right or remedy, the Obligations shall bear interest thereafter at the Default Rate. 
  
 SECTION 12. MISCELLANEOUS 
  
 Section 12.1. Cross Collateral. The security interests, liens and other rights and interests in and relative to any collateral now or hereafter
granted to CII by Borrower by or in any instrument or agreement, including but not limited to this Agreement and the Other Documents, shall serve as security for any and all obligations of Borrower to CII, and, for the repayment thereof, CII may
resort to any security held by it in such order and manner as it may elect. 
  
 Section 12.2. Waivers. 
  
 Section 12.2.1. In General. Borrower waives presentment, demand, notice, protest, notice of acceptance, notice of loans made, credit extended, collateral received or delivered or other action taken in reliance hereon and all other
demands and notices of any description. With respect both to the Obligations and the Collateral, Borrower assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of the
Collateral, to the addition or release of any party or Person primarily or secondarily liable therefor, to the acceptance of partial payments thereon and the settlement, compromising or adjusting of any thereof, all in such manner and at such time
or times as CII may deem advisable in its sole and absolute discretion. CII shall have no duty, other than to act in a commercially reasonable manner, as to the collection or protection of the Collateral or any income thereon, as to the preservation
of rights or remedies against prior parties, or as to the preservation of any rights and remedies pertaining thereto. CII may exercise its rights and remedies with respect to the Collateral without resorting or regard to other collateral or sources
of reimbursement for liability. CII shall not be deemed to have waived any of its rights and remedies with respect to the Obligations or the Collateral unless such waiver be in writing and signed by CII. No delay or omission on the part of CII in
exercising any right or remedy shall 
  

 22 

 operate as a waiver of such right or remedy or any other right or remedy. A waiver on any one occasion shall not be
construed as a bar to any subsequent enforcement by CII. All rights and remedies of CII with respect to the Obligations or the Collateral shall be cumulative and may be exercised singularly or concurrently. 
  
 Section 12.2.2. PREJUDGMENT REMEDY. BORROWER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION AND HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR BY OTHER APPLICABLE LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH CII MAY DESIRE TO USE. 
  
 Section 12.2.3. JURY TRIAL.
BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART AND/OR IN THE ENFORCEMENT BY CII OF ANY OF ITS
RIGHTS AND REMEDIES HEREUNDER OR UNDER APPLICABLE LAW. BORROWER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEY. 
  
 Section 12.2.4. Claims. Borrower does hereby (i) waive any claim in
tort, contract or otherwise which Borrower may have against CII, a CII Affiliate or their officers, directors, agents, or employees (collectively, “CII Agents”) which may arise out of the relationship between Borrower and CII or any CII
Affiliate prior to the Closing Date; and (ii) absolutely and unconditionally release and discharge CII and any CII Affiliate or CII Agents from any and all claims, causes of action, losses, damages or expenses which may arise out of any
relationship between it and CII or any CII Affiliate which Borrower may have as of the Closing Date. Borrower acknowledges that it makes this waiver and release knowingly, voluntarily and only after considering the ramifications of this waiver and
release with its attorney. 
  
 Section 12.3. Notices. All
notices, requests, demands or other communications required by this Agreement shall be made in writing, and unless otherwise specifically provided herein, shall be deemed to have been duly given when delivered by hand or mailed first class mail
postage prepaid, return receipt requested or, in the case of telecopy or facsimile notice, when transmitted, answer back received, addressed as follows, or to such other address as either party may designate in writing: 
  
 If to CII: 
  
 Connecticut Innovations, Incorporated 
 999 West Street 
 Rocky Hill, CT 06067 

			
	Attn:	 	Victor R. Budnick
	 	 	President and Executive Director

  

 23 

 with a copy to: 
  
 Updike, Kelly & Spellacy, P.C. 
 One
State Street 
 P.O. Box 231277 
 Hartford, CT 06123-1277

 Attn.: David E. Sturgess, Esq. 
  
 If to Borrower: 
  
 300 George Street 
 New Haven, CT 06511 
 Attn: William G. Rice, Ph. D. 
  
 with a copy to: 
  
 Wiggin & Dana 
 One Century Tower 
 New Haven, CT 06510 
 Attn: D. Terence Jones, Esq. 
  
 Section 12.4. Fees and Expenses. Borrower will pay on demand all
expenses incurred by CII in connection with (i) the preparation, execution and delivery of this Agreement, the Notes or the Other Documents, (ii) the administration of CII’s obligations under this Agreement or (iii) CII’s
exercise, preservation or enforcement of any of its rights and remedies thereunder, including, without limitation, reasonable fees and expenses of outside legal counsel or the allocated costs of in-house legal counsel, accounting, appraisal,
auditing, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the Obligations or the
Collateral. 
  
 Section 12.5. Term of Agreement. This
Agreement shall continue in force and effect so long as CII has any commitment to extend credit hereunder or any of the Obligations shall be outstanding. 
  
 Section 12.6. Stamp Tax. Borrower will pay any stamp, franchise or other recording tax which becomes payable in respect of this Agreement, the Notes
or the Other Documents. 
  
 Section 12.7. Schedules and
Exhibits. The schedules and exhibits which are attached hereto are and shall constitute a part of this Agreement. 
  
 Section 12.8. Governing Law; Consent to Jurisdiction. This Agreement, the Notes and the Other Documents, and the rights and obligations of the
parties hereunder and thereunder, shall be governed by and construed and interpreted in accordance with, the laws of the State of Connecticut. Borrower agrees that any suit for the enforcement of this Agreement, the Notes or the Other Documents may
be brought in the courts of the State of Connecticut or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon Borrower by mail at the address
referred to Section 12.3. hereof. Borrower hereby waives any objection that Borrower may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient court. 
  

 24 

 Section 12.9. Survival of Representations. All representations, warranties, covenants and agreements
contained in this Agreement, the Notes or the Other Documents shall survive the Closing Date and continue in full force and effect until the payment and the performance of the Obligations in full. 
  
 Section 12.10. Amendments. No modification or amendment of this
Agreement, the Notes or the Other Documents shall be effective unless the same shall be in writing and signed by the parties hereto. 
  
 Section 12.11. Binding Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of Borrower and CII and their respective
successors and assigns; provided, however, that Borrower may not assign or transfer its rights or obligations hereunder. CII may sell, transfer or grant participations in the obligations without the prior written consent of Borrower (but after
obtaining an agreement to maintain the confidentiality of any financial and business information of Borrower), and Borrower agrees that any transferee or participant shall be entitled to the benefits of this Agreement to the same extent as if such
transferee or participant were CII; provided, further, that notwithstanding any such transfer or participation, Borrower may, for all purposes of this Agreement, treat CII as the Person entitled to exercise all rights and remedies under this
Agreement and under the Notes and the Other Documents and to receive all payments with respect to the Obligations. 
  
 Section 12.12. Interest Rate. If the rate of interest payable by Borrower under this Agreement, the Notes or the Other Documents shall be or become
usurious or otherwise unlawful under laws applicable thereto, the interest rate shall be reduced to the maximum lawful rate and any amount paid by Borrower in excess of the maximum lawful rate shall be considered a payment in reduction of principal
or, at the sole election of CII, shall be returned to Borrower. 
  
 Section 12.13. Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures hereto and thereto were upon one and the same instrument. 
  
 Section 12.14. No Agency Relationship. CII is not the agent, fiduciary
or representative of Borrower nor is Borrower the agent, fiduciary or representative of CII and this Agreement shall not make CII liable to any third party, including but not limited to, Borrower’s shareholders, directors, officers, creditors
or any other person. 
  
 Section 12.15. Severability. Any
provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other jurisdiction. 
  
 Section 12.16. Headings. All article, section and subsection headings in this Agreement, the Notes and the Other Documents are included for convenience of reference only and shall not constitute a part of this
Agreement, the Notes or the Other Documents for any other purpose. 
  

 25 

 Section 12.17. Reinstatement. This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any amount received by CII in respect of the Obligations is rescinded or must otherwise be restored or returned by CII upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower or upon the
appointment of any intervenor or conservator of, or trustee or similar official for, Borrower or any substantial part of its properties or assets, or otherwise, all as though such payments had not been made. 
  
 Section 12.18. Interpretation and Construction. The following rules
shall apply to the interpretation and construction of this Agreement, the Notes and the Other Documents unless the context requires otherwise: (a) the singular includes the plural and the plural includes the singular; (b) words importing
any gender include the other genders; (c) references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute to which reference is made and all regulations promulgated pursuant to
such statutes; (d) references to “writing” shall include printing, photocopy, typing, lithography and other means of reproducing words in a tangible, visible form; (e) the words “including”, “includes” and
“include” shall be deemed to be followed by the words “without limitation”; (f) references to the introductory paragraph, preliminary statements, articles, sections (or subdivisions of sections), exhibits or schedules are to
those of this Agreement unless otherwise indicated; (g) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent that
such amendments and other modifications are permitted or not prohibited by the terms of this Agreement; (h) references to Persons include their respective permitted successors and assigns; and (i) “or” is not exclusive.

  
 Section 12.19. Relation to Other Documents. Nothing in
this Agreement shall be deemed to amend, or relieve Borrower of its obligations under, any of the Other Documents and to the extent that the provisions of any of the Other Documents allow Borrower to take certain actions, or not take certain
actions, with regard for example to the granting of liens, transfers of properties or assets, maintenance of financial ratios and similar matters, Borrower nevertheless shall be fully bound by the provisions of this Agreement. 
  

 26 

 IN WITNESS WHEREOF, Bank and Borrower have executed this Agreement as of the date first above written.

  

			
	 CONNECTICUT INNOVATIONS, INCORPORATED

		
	By	 	  

	 	 	Victor Budnick
	 	 	President and Executive Director
	
	ACHILLION PHARMACEUTICALS, INC.
		
	By	 	 /s/ William Rice

	 	 	William G. Rice, Ph. D.
	 	 	President

  

 27 

 EXHIBIT A 
  
 FORM OF TERM NOTE 
  

 28 

 TERM NOTE 
  

			
	 	  	                    , 2000
	 $                        
	  	                    , Connecticut

  
 FOR VALUE RECEIVED,
the undersigned, ACHILLION PHARMACEUTICALS, INC. (“Maker”), hereby unconditionally promises to pay to the order of CONNECTICUT INNOVATIONS, INCORPORATED (the “Payee” or “CII), or any subsequent assignee or holder (Payee and
any subsequent assignee or holder being sometimes referred to as “Holder”) at the head office of the CII located at 999 West Street, Rocky Hill, Connecticut 06067, the principal amount of
                                        
                                     AND NO/100 DOLLARS
($                    ) advanced to Maker by CII under the terms of that certain Loan Agreement dated
                    , by and between Maker and the CII (the “Loan Agreement”), together with interest thereon as provided herein and
all other sums due from Maker to CII under the Loan Agreement and this Note. 
  
 Commencing on the first day of the first full month immediately following the date hereof, and continuing on the first day of each succeeding month thereafter, the unpaid principal amount of this Note shall be payable
in                      (            ) consecutive monthly installments,
the first                      (            ) of such installments to be in
the amount of
                                        
                     AND 00/100 DOLLARS
($                    ) and, if not sooner paid, a final installment in the then unpaid principal amount of this Note, together with
accrued and unpaid interest thereon and all other amounts due and owing under this Note, shall be due and payable on                 
        ,             (the “Maturity Date”). 
  
 Interest on the unpaid principal amount of this Note shall bear interest at the rate and in the manner set forth in
Section 2.        .        . of the Loan Agreement Interest shall be payable monthly in arrears from the date hereof, commencing on the first day of
the first month after the date hereof, and continuing on the first day of each succeeding calendar month until the entire principal amount of this Note is paid in full. 
  
 This Note is a Term Note referred to in
Section 2.        .        . of the Loan Agreement, the terms and conditions of which are hereby incorporated by this reference. Capitalized terms
used herein without definition shall have the meanings set forth in the Loan Agreement 
  
 If a payment of principal or interest hereunder is not made within ten (10) days of its due date, the undersigned will also pay on demand a late payment charge equal to five percent (5%) of the amount of
such payment. Nothing in the preceding sentence shall affect the CII’s rights to exercise any of its rights and remedies provided in the Loan Agreement if an Event of Default has occurred. 
  
 Overdue payments of principal (whether at maturity, by reason of acceleration
or otherwise), and, to the extent permitted by applicable law, overdue interest and fees or any other amounts payable hereunder shall bear interest from and including the due date thereof until paid at a rate per annum equal to five percentage
points (5.0%) above the rate that would otherwise be applicable hereunder. 

 No reference to the Loan Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the undersigned Maker of this Note to pay the principal of and interest on this Note as herein provided. 
  
 All sums paid under this Note shall be applied first to all fees, costs and expenses incurred by CII under the Loan Agreement and this Note, then to any
late charges payable by Maker, then to any accrued and unpaid interest, with the balance, if any, to be applied to unpaid principal. 
  
 Until notified in writing of the transfer of this Note, Maker shall be entitled to deem Payee or such person who has been so identified by the transferor
in writing to Maker as the holder of this Note, as the owner and holder of this Note. 
  
 The Loan Agreement and this Note shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Connecticut. 
  
 Upon the occurrence of an Event of Default (as defined in Section 10 of the Loan Agreement), the unpaid principal
amount of this Note may become or may be declared to be due and payable in the manner, upon the conditions and with the effect provided in Section 11 of the Loan Agreement. 
  
 The terms of this Note are subject to amendment only in the manner provided in Section
        .        . of the Loan Agreement. 
  
 Any failure by CII to exercise any right under this Note or the Loan Agreement arising or existing as a result of the occurrence of an Event of Default,
or any delay in such exercise, shall not constitute a waiver of the right to exercise such right at a later time so long as such Event of Default shall remain uncured, and shall not constitute a waiver of the right to exercise such right if any
other Event of Default shall occur. The acceptance by CII of the payment of any sum due and payable under this Note after the date specified for such payment shall not be a waiver of CII’s right to require prompt payment when due of all other
sums payable under this Note or of CII’s right to declare a default for failure to make prompt payment in full. 
  
 Maker and each endorser, guarantor and surety of this Note, and each other person liable or who shall become liable for all or any part of the
indebtedness evidenced by this Note: 
  
 (a) waive demand,
presentment, protest, notice of protest, notice of dishonor, diligence in collection, notice of nonpayment and all notices of a like nature; and 
  
 (b) consent to (i) the release, surrender, exchange or substitution of all or any part of the security for the indebtedness evidenced by this Note,
or the taking of any additional security; (ii) the release of any or all other persons from liability, whether primary or contingent, for the indebtedness evidenced by this Note or for any related obligations; and (iii) the granting of any
other indulgences to any such person; and 
  

 2 

 (c) consent to (i) all renewals, extensions or modifications of this Note or the Loan Agreement
(including any affecting the time of payment), and (ii) all advances under this Note or the Agreement. 
  
 Any such renewal, extension, modification, advance, release, surrender, exchange, substitution, taking or indulgence may take place without notice to any such person, and, whether or not any such notice is given,
shall not impair the liability of any such person. 
  
 Maker and
each endorser, guarantor and surety of this Note, and each other person liable or who shall become liable for all or any part of the indebtedness evidenced by this Note, hereby give Holder a lien and right of setoff for all of their respective
liabilities in respect of such indebtedness upon and against all of their respective deposits, credits and property, now or hereafter in the possession or control of Holder or in transit to Holder. Holder may, at any time after the occurrence and
during the continuance of an Event of Default, apply the same, or any part thereof, to any liability of Maker or any such other person, whether matured or unmatured, to Holder. 
  
 If this Note is now, or hereafter shall be, signed by more than one Person, it shall be the joint and several obligation of
all such persons (including, without limitation, all makers, endorsers, guarantors and sureties, if any) and shall be binding on all such Persons and their respective heirs, executors, administrators, legal representatives, successors and assigns.
This Note and all covenants, agreements and provisions set forth in this Note shall inure to the benefit of Holder and its successors and assigns, including any lenders) with which Holder may participate in the making of any loans or advances
evidenced by this Note. 
  
 As used in this Note, words of any
gender shall be deemed to apply equally to any other gender, the plural shall include the singular and the singular shall include the plural (as the context shall require), and the word “person” shall refer to individuals, entities,
authorities and other natural and juridical persons of every type. 
  
 MAKER AND EACH AND EVERY ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND EACH OTHER PERSON WHO IS OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THIS NOTE, HEREBY ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR BY OTHER APPLICABLE LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH HOLDER MAY DESIRE TO USE. 
  
 MAKER AND EACH AND EVERY ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND
EACH OTHER PERSON WHO IS OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THIS NOTE, HEREBY WAIVE TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION, OR PROCEEDING OR ANY MATTER ARISING IN 
  
 CONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTION OF WHICH THIS NOTE IS A PART AND/OR IN THE ENFORCEMENT BY CII OF ANY OF ITS RIGHTS
AND REMEDIES HEREUNDER OR UNDER APPLICABLE LAW. MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER BY ITS ATTORNEY. 
  

 3 

 IN WITNESS WHEREOF, Maker has executed this Note as of the date first set forth above. 
  

			
	 ACHILLION PHARMACEUTICALS, INC.

		
	 By:
	 	 /s/ William G. Rice

	 Its
	 	Duly Authorized President, CEO, CSO

  

 4 

 SCHEDULE 4.15 
  
 Business Name 

 SCHEDULE 4.17. 
  
 Litigation 

 SCHEDULE 4.20. 
  
 Subsidiaries and Affiliates of BorrowerTHIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE SECURITIES ACT,
OR UNLESS SOLD IN FULL COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT.

                            BASELINE OIL & GAS CORP.

                              COMMON STOCK WARRANT

No: __

Date of Issuance: February 1, 2006

      FOR VALUE RECEIVED, Baseline Oil & Gas Corp., a Nevada corporation (the
"Company"), hereby grants to _____________ ("Holder"), as of the Date of
Issuance indicated above. The amount and kind of securities obtainable pursuant
to the rights granted hereunder and the exercise price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.

      This Warrant is subject to the following provisions:

      1. Exercise of Warrant.

            1.1 Purchase of Shares. Subject to the terms and conditions
hereinafter set forth, Holder is entitled, upon surrender of this Warrant at the
principal office of the Company (or at such other place as the Company shall
notify Holder in writing), to purchase from the Company up to __________ shares
of the Company's Common Stock (the "Warrant Shares") for $1.32 per share (the
"Exercise Price").

            1.2 Exercise Period. Holder may exercise this Warrant for a period
("Exercise Period") commencing on the date hereof and terminating on the third
anniversary of the Date of Issuance. Notwithstanding anything herein to the
contrary, in the event Holder has not exercised this Warrant in full prior to
the expiration of the exercise period, this Warrant shall be deemed
automatically exercised pursuant to Section 1.4 on the date immediately
preceding such expiration date without any further action on behalf of the
Holder.

            1.3 Exercise Procedure.

                  (a) This Warrant shall be deemed to have been exercised at
such time when the Company has received all of the following items (the
"Exercise Time"):

                        (i) a completed Exercise Notice, as described in Section
1.5, executed by Holder exercising all or part of the purchase rights
represented by this Warrant;

                        (ii) this Warrant; and

<PAGE>

                        (iii) payment to the Company of an amount equal to the
Exercise Price multiplied by the number of Warrant Shares being purchased, at
the election of Holder, by wire transfer or certified check payable to the order
of the Company, except in cases where the Holder indicates in the Exercise
Notice that it intends to exercise this Warrant in the manner specified in
Section 1.4. The person or persons in whose name(s) any certificate(s)
representing Warrant Shares shall be issuable, upon exercise of this Warrant,
shall be deemed to have become the holders(s) of record of, and shall be treated
for all purposes as the record holder(s) of, the Warrant Shares represented.

                  (b) Certificates for Warrant Shares purchased upon exercise of
this Warrant shall be delivered by the Company to Holder as soon as practicable
after the date of the Exercise Time. Unless this Warrant has expired or all of
the purchase rights represented hereby have been exercised, the Company shall
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and shall as soon as practicable deliver such new Warrant to the person
designated for delivery in the Exercise Notice.

                  (c) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to Holder at the Exercise Time, and
Holder shall be deemed for all purposes to have become the record holder of such
Common Stock at the Exercise Time.

                  (d) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to Holder for any issuance
tax in respect thereof or other cost incurred by the Company in connection with
such exercise and the related issuance of Warrant Shares (other than any
transfer taxes resulting from the issuance of Warrant Shares to any person other
than Holder).

                  (e) The Company shall not close its books against the transfer
of this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.

                  (f) During the Exercise Period, the Company shall reserve and
keep available out of its authorized but unissued Common Stock such number of
Warrant Shares issuable upon the full exercise of this Warrant. All Warrant
Shares which are so issuable shall, when issued and upon the payment of the
applicable Exercise Price, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges and not subject to the
pre-emptive rights of any holder of Common Stock or any other class or series of
stock of the Company. During the Exercise Period, the Company shall not take any
action which would cause the number of authorized but unissued Common Stock to
be less than the number of such shares required to be reserved hereunder for
issuance upon exercise of this Warrant.

            1.4 Cashless Exercise. Notwithstanding the provisions of Section
1.3(a)(iii) requiring payment by wire transfer or check, the Company agrees
that, unless otherwise prohibited by law, Holder shall have the right at any
time and from time to time to exercise this Warrant in full or in part on a
cashless basis, computed using the following formula:

            X = Y (A - B)
                ---------
                    A

                                       2
<PAGE>

Where:

X = The number of Warrant Shares to be issued to the Holder pursuant to this
cashless exercise;

Y = The number of Warrant Shares in respect of which the net issue election is
made;

A = The Fair Market Value (as defined below) of one Warrant Share at the time
the cashless exercise election is made; and

B = The Exercise Price (as adjusted to the date of the cashless exercise).

The term "Fair Market Value" shall mean (A) if the class of Warrant Shares is
exchange-traded, the closing sale or last sale price per share of the class of
Warrant Shares, (B) if the class of Warrant Shares is regularly traded in any
over-the-counter market, the average of the bid and asked prices per share of
the class of Warrant Shares, and (C) if the class of Warrant Shares is not
traded as described in clause (A) or (B), the per share fair market value of the
class of Warrant Shares as determined in good faith by the Company's Board of
Directors. Fair Market Value as of a given date with respect to clauses (A) and
(B) shall be determined as of the close of business on the day prior to the date
of determination, or if no trading in the class of Warrant Shares takes place on
such date, on the next preceding trading day on which there has been such
trading.

            1.5 "Easy Sale" Exercise. In lieu of the payment methods set forth
above, when permitted by law and applicable regulations, the Holder may pay the
Exercise Price through a "same day sale" commitment from the Holder (and if
applicable a broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD Dealer")), whereby the Holder irrevocably elects to
exercise this Warrant and to sell at least that number of Warrant Shares so
purchased to pay for the Exercise Price (and up to all of the Warrant Shares so
purchased) and the Holder (or, if applicable, the NASD Dealer) commits upon sale
(or, in the case of the NASD Dealer, upon receipt) of such Warrant Shares to
forward the Exercise Price directly to the Company, with any sale proceeds in
excess of the Exercise Price being for the benefit of the Holder.

            1.6 Exercise Notice. Upon any exercise of this Warrant, Holder shall
deliver to the Company an Exercise Notice in substantially the form set forth in
Exhibit A hereto.

            1.7 No Fractional Shares. If a fractional share of Warrant Shares
would, but for the provisions of this Section 1.7, be issuable upon exercise of
the rights represented by this Warrant, the Company shall round up the number of
shares delivered to Holder to the nearest whole share.

      2. Adjustments to Warrant Shares.

            2.1 Capital Reorganizations and Other Reclassifications. In case of
any capital reorganization of the Company, or of any reclassification of the
Common Stock, or in case of the consolidation of the Company with, or the merger
of the Company with, or merger of the Company into, any other corporation (other
than a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock) or of the sale of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation or entity, this Warrant shall, after such capital reorganization,
reclassification of the Common Stock, consolidation, merger, or sale, be

                                       3
<PAGE>

exercisable, upon the terms and conditions specified in this Warrant, for the
kind, amount and number of shares or other securities, assets, or cash to which
a holder of the number of Common Stock purchasable (at the time of such capital
reorganization, reclassification of the Common Stock, consolidation, merger or
sale) upon exercise of such Warrant would have been entitled to receive upon
such capital reorganization, reclassification of the Common Stock,
consolidation, merger, or sale; and in any such case, if necessary, the
provisions set forth in this Section 2 with respect to the rights and interests
thereafter of Holder shall be appropriately adjusted so as to be applicable, as
nearly equivalent as possible, to any shares or other securities, assets, or
cash thereafter deliverable on the exercise of this Warrant. The Company shall
not effect any such consolidation, merger, or sale, unless prior to or
simultaneously with the consummation thereof the successor corporation or entity
(if other than the Company) resulting from such consolidation or merger or the
corporation or entity purchasing such assets or other appropriate corporation or
entity shall assume, by written instrument, the obligation to deliver to Holder
such shares, securities, assets, or cash as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and other obligations
hereunder.

            2.2 Notice of Record Date, etc. In the event the Company shall
propose to take any action of the types requiring an adjustment pursuant to this
Section 2 or a dissolution, liquidation or winding up of the Company shall be
proposed, the Company shall give notice to Holder as provided in Section 8,
which notice shall specify the record date, if any, with respect to any such
action and the date on which such action is to take place. Such notice shall
also set forth such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the number, kind or class of
shares or other securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon the exercise of the
Warrants. In the case of any action which will require the fixing of a record
date, unless otherwise provided in this Warrant, such notice shall be given at
least twenty (20) days prior to the date so fixed, and in case of all other
action, such notice shall be given at least thirty (30) days prior to the taking
of such proposed action.

      3. No Voting Rights. This Warrant shall not entitle Holder to any voting
rights or other rights as a stockholder of the Company.

      4. Transfer of Warrant. The securities represented hereby and the Warrant
Shares issuable upon exercise hereof have not been registered under the
Securities Act and may not be offered, sold or otherwise transferred, pledged or
hypothecated in the absence of a registration statement in effect with respect
to such securities, or delivery of an opinion of counsel in form and substance
satisfactory to the Company that such offer or sale or transfer, pledge or
hypothecation is in compliance with the Securities Act, or unless sold in full
compliance with Rule 144 under the Securities Act.

      5. Representations and Warranties of the Company. The Company represents
and warrants to Holder as follows:

                  (a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms; and

                  (b) The Warrant Shares, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.

                                       4
<PAGE>

      6. Representations and Warranties by Holder. Holder represents and
warrants to the Company as follows:

                  (a) This Warrant is being acquired for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act. Upon exercise of this Warrant, Holder shall, if so requested by the
Company, confirm in writing, in a form reasonably satisfactory to the Company,
that the Warrant Shares issuable upon exercise of this Warrant are being
acquired for investment and not with a view toward distribution or resale;

                  (b) Holder understands that this Warrant and the Warrant
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) thereof and that
this Warrant and the Warrant Shares may be resold without registration under the
Securities Act only in certain limited circumstances;

                  (c) Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Warrant Shares purchasable pursuant to the
terms of this Warrant and of protecting its interest in connection therewith;

                  (d) Holder is able to bear the economic risk of the purchase
of the Warrant Shares pursuant to the terms of this Warrant; and

                  (e) Holder is an accredited investor within the meaning of
Regulation D promulgated under the Securities Act.

      7. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company (an affidavit of Holder shall be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of this Warrant, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company or, in the case of any such mutilation upon
surrender of such Warrant, the Company shall execute and deliver in lieu of such
Warrant a new Warrant of like kind representing the same rights represented by
such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.

      8. Notices. Except as otherwise expressly provided herein, all notices and
deliveries referred to in this Warrant shall be in writing and shall be
delivered personally, sent by reputable overnight courier service (charges
prepaid) or sent by registered or certified mail, return receipt requested,
postage prepaid and shall be deemed to have been given when so delivered (or
when received, if delivered by any other method) if sent (i) to the Company, at
its principal executive offices and (ii) to Holder, at Holder's address as it
appears in the records of the Company.

      9. Amendment and Waiver. The provisions of this Warrant contain the entire
understanding between the parties hereto with respect to the subject matter
hereof and may be amended and waived only if such amendment or waiver is set
forth in writing executed by the Company and the Holder.

                                       5
<PAGE>

      10. Descriptive Headings; Governing Law. The descriptive headings of the
several Sections of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be governed by the laws of
the State of California.

      11. Benefits of Agreement; Successors. This Warrant shall be binding and
inure to the benefit of the parties and their respective successors and assigns
hereunder; provided that this Warrant may be assigned by Holder only in
compliance with the conditions specified in and in accordance with all of the
terms of this Warrant. This Warrant does not create and shall not be construed
as creating any rights enforceable by any other person or corporation.

      12. Severability. If any provision of this Warrant shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions of this Warrant.

      13. Counterparts. This Warrant may be executed in any number of
counterparts and each such counterpart shall for all purposes be deemed an
original, and such counterparts shall together constitute but one and the same
instrument.

                                       6
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers and to be dated the Date of Issuance
hereof.

                                          BASELINE OIL & GAS CORP.

                                          By:
                                             -----------------------------------

                                          Name:
                                               ---------------------------------

                                          Title:
                                                --------------------------------

                                          [Placement Agent]

                                          By:
                                             -----------------------------------

                                          Name:
                                               ---------------------------------

                                          Title:
                                                --------------------------------

                                       7
<PAGE>

                                    EXHIBIT A

                                 EXERCISE NOTICE

                            Baseline Oil & Gas Corp.
                       Attention: Chief Financial Officer

      The undersigned hereby elects to purchase, pursuant to the provisions of
the Common Stock Warrant issued by Baseline Oil & Gas Corp. and held by the
undersigned, the original of which is attached hereto, and (check the applicable
box):

|_|   Tenders herewith payment of the exercise price in full in the form of cash
      or check in the amount of $____________ for _________ such securities.

|_|   Elects the Net Issue Exercise option pursuant to Section 1.4 of the
      Warrant, and accordingly requests delivery of a net of ______________ of
      such securities, according to the following calculation:

      X = Y (A-B)               (    ) =  (____) [(_____) - (_____)]
         -------                           ------------------------
            A                                          (_____)

      Where X = the number of shares of Common Stock to be issued to Holder.

      Y = the number of shares of Common Stock purchasable under the amount of
          the Warrant being exchanged (as adjusted to the date of such
          calculation).

      A = the Fair Market Value of one share of the Company's Common Stock.

      B = Exercise Price (as adjusted to the date of such calculation).

|_|   Elects the Easy Sale Exercise option pursuant to Section 1.5 of the
      Warrant, and accordingly requests delivery of a net of ______________ of
      such securities.

The undersigned hereby represents and warrants that the undersigned is acquiring
such shares for its own account for investment purposes only, and not for resale
or with a view to distribution of such shares or any part thereof.

                                    HOLDER:

                                    --------------------------------------------
                                    Name:
                                    Title:

                                    Date:
                                          --------------------------------------

                                    Address:

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

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

                                    Name in which shares should be registered:

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

|_|   If this box is checked, as long as the Company's transfer agent
      participates in the Depository Trust Company ("DTC") Fast Automated
      Securities Transfer program ("FAST"), and except as otherwise provided in
      the next following sentence, the Company shall effect delivery of the
      shares of Common Stock to the Holder by crediting to the account of the
      Holder or its nominee at DTC (as specified in this Exercise Notice) with
      the number of shares of Common Stock required to be delivered. In the
      event that the Company's transfer agent is not a participant in FAST, or
      if the shares of Common Stock are not otherwise eligible for delivery
      through FAST, the Company shall effect delivery of the shares of Common
      Stock by delivering to Holder or its nominee physical certificates
      representing such shares.

                                       A-1

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