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EXHIBIT 10.44  

 
 
  SPECIAL DEVICES, INCORPORATED
  Amended and Restated 1999 Stock Option Plan    
  

        1.    PURPOSE.    This Stock Option Plan (the "Plan") is intended as an incentive to encourage stock ownership by
officers and directors and executive and professional employees of Special Devices, Incorporated (the "Company") and its Parent and Subsidiary corporations so that they may acquire or increase their
equity interest in the success of the Company and its Parents and Subsidiaries, and to encourage them to remain in the service of the Company or of its Parents or Subsidiaries. Each option granted
under this Plan will be designated as either an "Incentive Stock Option" or a "Nonqualified Stock Option." It is intended that each option designated as an Incentive Stock Option granted under this
Plan will qualify as an incentive stock option within the meaning of Section 422(b) of the Code. 

        2.    DEFINITIONS.    

        2.1  "Board of Directors" means the board of directors of the Company. 

        2.2  "Change in Control" shall mean the happening of any of the following: 

        2.2.1  any
person who is not a stockholder of the Company or of any Parent on the date of adoption of this Plan (or group of such persons acting in concert)
acquires, during any period of twelve consecutive calendar months, stock of the Company or of a Parent representing a majority of the voting power of all stock of the Company or any Parent having the
right to vote for the election of directors; 

        2.2.2  the
stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) more than eighty percent (80%) of the combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a Recapitalization of the Company; 

        2.2.3  the
stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets or any transaction having a similar effect; or 

        2.2.4  if
the Company enters into an agreement with an unrelated party for the sale of all or substantially all of the assets or outstanding stock of a
Subsidiary (or a transaction having a similar effect), or any other event occurs by reason of which a Subsidiary ceases to be a Subsidiary of the Company, a Change in Control shall be deemed to have
occurred with respect to those Employees who are then employed by such Subsidiary. 

        2.3  "Change in Control Date" shall mean the earliest date on which one of the events described in the definition of "Change
in Control" occurs, as determined by the Board of Directors, in its sole discretion, provided that, if Section 2.2.4 of the definition of "Change of Control" applies, the Change in Control Date
shall be deemed to be the date of the agreement, provided that the transaction does close. 

        2.4  "Change in Control Price" shall mean the highest fair market value, or the highest price paid or offered in any bona fide
transaction related to a Change in Control of the Company, at any time during the sixty (60) days preceding the Change in Control Date. 

        2.5  "Code" means the Internal Revenue Code of 1986, as amended. 

        2.6  "Company" means Special Devices, Incorporated, a Delaware corporation. 

        2.7  "Employee" means any bona fide full or part time common law employee of the Company or of any Parent or Subsidiary of the
Company. 

 

        2.8  "Incentive Stock Option" means an Option granted pursuant to this Plan intended to qualify and designated as an incentive
stock option within the meaning of Section 422 of the Code. 

        2.9  "Nonqualified Stock Option" means any Option granted pursuant to this Plan other than an Incentive Stock Option. 

        2.10 "Option" or "Stock Option" means any stock option granted pursuant to
this Plan. 

        2.11 "Optionee" means any individual to whom an Option is granted pursuant to this Plan. 

        2.12 "Parent" means, at the time of granting any Option, any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain. 

        2.13 "Plan" means the Special Devices, Incorporated 1999 Stock Option Plan. 

        2.14 "Recapitalization" means any reorganization, merger or other subdivision, consolidation, recapitalization,
reclassification, stock split, combination of shares, issuance of warrants, stock dividend or similar event with respect to or affecting the common stock of the Company, par value one cent ($.01) per
share. 

        2.15 "Stock Option Committee" means the committee appointed to administer the Plan pursuant to Article 7 herein, if
such committee is appointed. 

        2.16 "Subsidiary" means, at the time of granting any Option, any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. 

        2.17 "Ten Percent Shareholder" means any person who owns (or is considered by reason of Section 425(d) of the Code to
own) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company. 

        3.    ELIGIBILITY.    The persons who shall be eligible to receive Options shall be such officers, directors and
executive and professional employees of the Company or its Parent or Subsidiary corporations as the Board of Directors shall select from time to time. An Optionee may hold more than one Option, but
only on the terms and subject to the restrictions hereafter set forth. 

        4.    STOCK.    The stock subject to the Options shall be shares of the Company's authorized but unissued or
reacquired common stock, par value one cent ($.01) per share, hereafter sometimes called Stock. The aggregate number of shares which may be issued under Options shall not exceed six hundred
forty-five thousand (645,000) shares of Stock. The limitation established by the preceding sentence shall be subject to adjustment as provided in Section 5.12 of the Plan. If any
outstanding Option for any reason expires or is terminated, the shares of Stock allocable to the unexercised portion of such Option may again be subjected to an Option under the Plan. 

        5.    TERMS AND CONDITIONS    

        5.1  Option Agreement.    Stock Options granted pursuant to the Plan shall be authorized by the Board of Directors
and shall be evidenced by agreements in such form as the Board of Directors shall from time to time approve, which agreements shall comply with and be subject to the terms and conditions set forth in
this Article 5. The agreements shall not impose upon the Company or its Parents or Subsidiaries any obligation to retain the Optionee in their employ for any period. 

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        5.2  Number of Shares.    Each Option shall state the number of shares of Stock to which it pertains. 

        5.3  Option Price.    Each Option shall state the option price, which in the case of an Incentive Stock Option shall
be not less than (i) one hundred percent (100%) of the fair market value of the shares of Stock on the date of the granting of the Option if the Optionee is not a Ten Percent Shareholder, or
(ii) one hundred ten percent (110%) of the fair market value of the shares of Stock on the date of the granting of the Option if the Optionee is a Ten Percent Shareholder. The fair market value
of the shares of Stock shall be determined pursuant to Section 7.2. 

        5.4  Medium and Time of Payment.    The option price shall be payable upon the exercise of the Option and may be
paid in cash or by good check. At the sole option of the Company, if approved by the Board of Directors, a portion of the purchase price may be paid by delivery of shares of Stock previously owned
by the Optionee, duly endorsed for transfer to the Company, with a fair market value (as determined by the Board of Directors) on the date of delivery equal to the option price, or by delivery of a
recourse promissory note bearing interest at such rate, on such other terms and in form and with security satisfactory to the Company, or any combination of the foregoing approved by the Board of
Directors. Exercise of an Option shall not be effective until the Company has received written notice of exercise, specifying the number of whole and fractional shares of Stock to be purchased,
accompanied by payment in full of the aggregate option price of the number of shares purchased. 

        5.5  Term of Options.    Each Option, by its terms, shall not be exercisable after the expiration of ten years from
the date the Option is granted, provided, however, that any Incentive Stock Option granted to a Ten Percent Shareholder, by its terms, shall not be exercisable after the expiration of five years from
the date the Option is granted. Any Option may provide that it will expire within a shorter period than the maximum permitted hereby. 

        5.6  Installments.    Each Option shall be exercisable on such dates and in such amounts (subject to the other
provisions hereof) as shall be determined by the Board of Directors. It is not required that each Option have the same installment provisions. In its sole discretion, the Board of Directors may
accelerate the exercise date of part or all of any Option. 

        5.7  Transferability.    Each Option, by its terms, shall not be transferable by the individual to whom granted
otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the Optionee's lifetime, only by the Optionee. 

        5.8  Limits on Exercise.    Each Option shall be subject to the requirement that, if at any time the Board of
Directors, in its discretion, shall determine that the listing, registration, or qualification of the shares subject to such Option upon any securities exchange or under any state or federal law, or
the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option, or the issue or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. 

        5.9  Limit on Options.    An Option shall not be an Incentive Stock Option to the extent that the aggregate fair
market value of stock with respect to which such Option is exercisable for the first time by any individual during any calendar year (taking into account all Incentive Stock Options simultaneously or
previously granted under all stock option plans of the Company and its Parents and Subsidiaries) exceeds One Hundred Thousand Dollars ($100,000). 

        5.10 Termination of Employment.    Each Option by its terms shall not be exercisable after thirty (30) days
after the termination of employment of the individual to whom the Option was granted, unless such termination was a result of the death or disability of the employee, and may provide 

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that it shall not be exercisable after the date of termination of employment of the individual to whom the Option was granted. 

        5.11 Expiration of Plan.    No Option shall be granted under this Plan more than ten years from the date on which
this Plan was adopted or approved by the stockholders of the Company, whichever is earlier. No Option granted under this Plan shall be valid unless the Plan is approved by the stockholders of the
Company within twelve (12) months before or after its adoption by the Board of Directors. 

        5.12 Recapitalization.    Upon any Recapitalization, the Board of Directors shall make an appropriate and equitable
adjustment in the number and kind of securities with respect to which rights may be granted under this Plan and the price at which such securities may be purchased, and an appropriate and equitable
adjustment in the number and kind of securities that may be purchased under each outstanding Option and the price at which shares may be purchased under each such Option. 

        The
grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustments, recapitalizations, reorganizations, or
other changes in the Company's capital structure or business, any merger or consolidation, any issuance of bonds, debentures, preferred shares or common shares, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of the Company's assets or business, or any other act, whether or not similar to the events described above. 

        5.13 Rights as a Stockholder.    An Optionee or a transferee of an Option shall have no rights as a stockholder
with respect to any shares covered by the Option until the date of the issuance of a stock certificate for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 5.12 hereof. 

        5.14 Modification, Extension and Renewal of Options.    Subject to the terms and conditions and within the
limitations of the Plan, the Board of Directors may modify, extend or renew outstanding Options granted under the Plan, or accept the surrender of outstanding Options (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution therefore (to the extent not theretofore exercised). Notwithstanding the foregoing, no modification of an Option shall, without the
consent of the Optionee, alter or impair any rights or obligations under any Option theretofore granted under the Plan. 

        5.15 Investment Purpose.    Each Option under the Plan shall be granted on the condition that the purchases of
stock thereunder shall be for investment purposes, and not with a view to resale or distribution unless the stock subject to such Option is registered under the Securities Act of 1933, as amended, and
any applicable state securities laws, or a resale of such stock without such registration
would otherwise be permissible. Each person exercising an Option must represent that such condition is fulfilled, unless in the opinion of counsel for the Company such condition is not required under
the Securities Act of 1933 or any other applicable law, regulation, or rule of any governmental agency. 

        5.16 Withholding Taxes.    Whenever under the Plan shares are to be issued or cash is to be paid in satisfaction of
Options, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares or payment of such cash. 

        5.17 Termination of Options.    Each Option, by its terms, shall reserve to the Company the right to terminate the
Option, in connection with a Change in Control for a payment in cash equal to 

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the difference between the exercise price for the shares of Stock subject to the Option and the Change in Control Price of such Stock. 

        5.18 Other Provisions.    The Option agreements authorized under the Plan shall contain such other provisions,
including, without limitation, such rights of redemption, purchase and first refusal, and such other restrictions upon the exercise of Options or the transfer of the Stock issued upon exercise, as the
Board of Directors of the Company shall deem advisable. Any Incentive Stock Option agreement shall contain such limitations and restrictions upon the exercise of the Option as shall be necessary in
order that such Option will be an "Incentive Stock Option" as defined in Section 422 of the Code. 

        6.    EXERCISE OF OPTIONS    

        6.1  Stock Transfer Books.    Notwithstanding any other provision of this Plan or of any Option, no stock shall be
issued by the Company while its stock transfer books are closed. 

        6.2  Securities Laws.    Notwithstanding any other provision of this Plan or of any Option, no Option shall be
exercisable, and no stock shall be issued upon the exercise of any Option, if such exercise or such issuance of stock would result in any violation of law or the imposition on the Company of a
requirement that it commence filing periodic reports under the Securities Exchange Act of 1934 or any similar provision of law. 

        7.    ADMINISTRATION    

        7.1  Administration by Board of Directors.    The Plan shall be administered by the Board of Directors. The
interpretation and construction by the Board of Directors of any provisions of the Plan or of any Option granted under it shall be final. The Board of Directors shall have the authority to appoint a
Stock Option Committee to assume the duties and responsibilities of administering the Plan. The Stock Option Committee, if such be established by the Board of Directors, shall be composed of no less
than three (3) persons (who shall be members of the Board of Directors), each of whom shall be a "disinterested person" as defined herein, and such Stock Option Committee shall have the same
power, authority and rights in the administration of the Plan as the Board of Directors. No director shall be liable for any action or determination made in good faith with respect to the Plan or any
Option granted under it. 

        The
Board of Directors shall determine from time to time the persons who shall receive Options hereunder; provided, however, Options may be granted hereunder only to persons who, at the
time of the grant thereof, are officers, directors or key employees of the Company and its Parents and Subsidiaries, except as otherwise provided in this Plan; provided, further, that any decision to
award Options hereunder to any person or the determination of the maximum number of shares of Stock (as hereinafter defined) which may be subject to Options granted to any such director, employee or
officer shall be made by either (i) the Board of Directors, all of the directors of which and all of the directors acting in such matter shall be disinterested persons as defined herein, or
(ii) the Stock Option Committee appointed by the Board of Directors pursuant to this section. For purposes of this Plan, "disinterested person" shall mean a director who is not, during the one
year prior to service as an administrator of the Plan, or during such service, granted or awarded equity securities pursuant to the Plan or any other plan of the Company or any of its Parents or
Subsidiaries entitling the participants therein to acquire stock, stock options or stock appreciation rights of the Company or any of its Parents or Subsidiaries. 

Page 5

 

        7.2  Determination of Fair Market Value.    For the purpose of granting Incentive Stock Options, the Board of
Directors shall determine the fair market value of the Stock of the Company as follows: 

        7.2.1  If
the Company's Stock is traded on any recognized stock exchange or exchanges, such fair market value shall be deemed to be the highest closing price of
the Stock on such stock exchange or exchanges on the day the Option is granted or if no sale of the Company's Stock shall have been made on any stock exchange on that day, on the next preceding day on
which there was a sale of such stock. 

        7.2.2  During
such time as the Stock is not listed on an established exchange, but is actively traded on the over-the-counter market,
the fair market value per share shall be the mean between dealer "bid" and "ask" prices of the Stock in the over-the-counter market on the day the Option is granted, as
reported by the National Association of Securities Dealers, Inc. 

        7.2.3  During
such time as the Company's Stock is neither listed on any recognized exchange nor actively traded over-the-counter, the
fair market value shall be determined in good faith by the Board of Directors. In making such determination, the Board of Directors may (but shall not be required to) rely on the opinions of one or
more qualified, independent appraisers. 

        7.3  Indemnification.    In addition to such other rights of indemnification as they may have as directors or as
members of the Stock Option Committee, the members of the Board of Directors shall be indemnified by the Company against the reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Board or Stock Option Committee member is liable for negligence or misconduct in the performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding a Board or Stock Option Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. 

        8.    AMENDMENT AND TERMINATION    

        8.1  Amendment.    The Board of Directors of the Company may, insofar as permitted by law, from time to time, with
respect to any shares at the time not subject to Options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without approval of the stockholders, no such
revision or amendment shall change the number of shares subject to the Plan, change the designation of the class of employees eligible to receive Options or decrease the price at which Incentive Stock
Options may be granted, materially increase the benefits accruing to participants under the Plan, materially increase the number of securities which may be issued under the Plan, or materially modify
the requirements as to eligibility for participation in the Plan. 

        9.    MISCELLANEOUS    

        9.1  Governing Law.    This Plan shall be governed by, and construed in accordance with, the laws of the State of
Delaware. 

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        9.2  Construction.    In the event any parts of this Plan are found to be void, the remaining provisions of this
Plan shall nevertheless be binding with the same effect as though the void parts were deleted. 

        9.3  Application of Funds.    The proceeds received by the Company from the sale of Stock pursuant to Options will
be used for general corporate purposes. 

        9.4  No Obligation to Exercise Option.    The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option. 

        9.5  Approval of Stockholders.    The Plan shall take effect immediately upon adoption by the Board of Directors.
However, if this Plan is not approved by the stockholders of the Company within the period beginning twelve (12) months before and ending twelve (12) months after the date the Plan is
adopted by the Board of Directors, no Options granted hereunder shall constitute Incentive Stock Options. 

	 	 	SPECIAL DEVICES, INCORPORATED
	

 	
 	

 	

 
	 	 	By:	/s/  THOMAS W. CRESANTE      
 Thomas W. Cresante

President and Chief Executive Officer
	

 	
 	

 	

 
	Dated:  July 19, 2001	 	 	 
	

 	
 	

 	

 
	ATTEST:	 	 	 
	

 	
 	

 	

 
	/s/  LOUIS N. MINTZ      
 Louis N. Mintz, Assistant Secretary	 	 	 
	

 	
 	

 	

 

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Amended and Restated 1999 Stock Option Plan<PAGE>
                                                                    Exhibit 10.1

BOSTON PRIVATE BANK & TRUST COMPANY                               LOAN AGREEMENT

     THIS AGREEMENT made this 14th day of June, 2002 by and between Curis, Inc.,
a Delaware corporation with an address and principal place of business at 61
Moulton Street, Cambridge, MA 02138 (hereinafter called the "Borrower") and
Boston Private Bank & Trust Company, a Massachusetts trust company with a
principal place of business at Ten Post Office Square, Boston, MA 02109.

                              W I T N E S S E T H :

     The following constitutes the agreement of the parties:

                                    SECTION 1

                     AMOUNT AND TERMS OF CREDIT AND INTEREST
                                  THE TERM LOAN

     1.1 Subject to the terms and conditions of this Agreement, the Bank will
make a term loan to the Borrower on the date of execution of this Agreement (the
"Term Loan" or the "Loan"), in the amount of $4,694,804.11, as evidenced by a
Secured Term Note of even date from the Borrower to the Bank in the original
principal amount of $4,696,804.11 (the "Term Note").

     1.2 Interest on the principal balance of the Term Loan shall be payable
monthly in arrears commencing on the first day of the first month next
succeeding the date hereof at the rate of the Bank's Base Rate in effect from
time to time, minus one-half of one percent (.5%) per annum. The Bank's Base
Rate shall mean the annual rate of interest established by the Bank from time to
time as its Base Rate, it being understood that such rate is a reference rate
and not necessarily the lowest rate of interest charged by Bank. The rate of
interest payable by the Borrower shall be changed effective as of that day on
which a change in the Bank's Base Rate becomes effective. Interest shall be
computed on the basis of a 360-day year, for the actual number of days elapsed.
Default interest shall be charged in accordance with the terms of the Term Note.

     1.3 The principal balance of the Term Loan shall be payable in twenty (20)
consecutive quarterly installments of $234,740.20 each (except the last payment,
which shall be in the amount of the outstanding principal balance, together with
accrued but unpaid interest thereon), with payments to be made quarterly in
arrears, as described in the Term Note. On any date on which a payment of
interest or principal is due hereunder, the Bank may charge the Borrower's
demand deposit account maintained with the Bank as a condition for this
financing with the amount thereof. The failure of the Bank so to charge such
account shall not relieve the Borrower of its obligations to make payments
hereunder.

     1.4 The Bank need not enter payments of interest and principal upon the
Term Note, but may maintain a record thereof on a separate ledger maintained by
the Bank.

<PAGE>

     1.5 All of the Borrower's obligations to the Bank, of every kind and
description arising under this Agreement, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument they may be evidenced,
including those arising under any other agreements, instruments or documents
executed in conjunction herewith, including obligations to perform acts and
refrain from taking action, as well as obligations to repay the Loan, shall
constitute the Borrower's "Liabilities" to the Bank, as the same may be
modified, amended, replaced or extended from time to time, in accordance with
the terms hereof.

     1.6 The Term Note, is incorporated herein to the same extent as if it was
set forth in full in this Agreement.

                                    SECTION 2

                         WARRANTIES AND REPRESENTATIONS

     2.1 To induce the Bank to enter into this Loan Agreement and to make the
Loan, the Borrower warrants and represents that, as of this date:

     (a)  The Borrower is a validly organized and existing corporation under the
          laws of the State of Delaware and is in good standing under the laws
          of said State.

     (b)  The Borrower is duly qualified to do business and in good standing as
          a foreign corporation in each state or other jurisdiction where the
          nature of the business conducted by it or the property owned by it
          requires such qualification except where failure to qualify would not
          be reasonably likely to cause a material adverse change in its
          business ("MAC").

     (c)  The Borrower has good and clear record and marketable title to the
          Collateral free and clear of all mortgages, liens, pledges, charges,
          security interests and encumbrances, other than those being granted to
          the Bank, if any, and those reflected on Exhibit A attached hereto.

     (d)  The Borrower owns and holds or licenses or leases all real and
          personal property necessary or incidental to the present conduct of
          its business, including, without limitation, patents, trademarks,
          service marks, trade names, copyrights and licenses and other rights
          with respect to the foregoing except where failure to so own, license
          or lease would not cause a MAC.

     (e)  All books and records of the Borrower, including, but not limited to,
          minute books, by-laws and books of account are accurate in all
          material respects and reflect in all material respects all matters and
          transactions which should currently be reflected therein.

                                      -2-

<PAGE>

     (f)  The general nature of the Borrower's business is as set forth on
          Exhibit A attached hereto.

     (g)  The Borrower has no subsidiaries and no investments in the stock or
          securities of any other corporation, firm, trust or other entity,
          except as set forth on Exhibit A.

     (h)  Except as set forth on Exhibit A, there are no actions, suits,
          investigations or proceedings pending, or to the knowledge of the
          Borrower threatened, against the Borrower or any of its properties in
          any court, before any governmental authority, arbitration board, or
          any other tribunal which, singly or in the aggregate, if decided
          adversely to the Borrower, would materially and adversely affect the
          business, properties or condition (whether financial or otherwise) of
          the Borrower. The Borrower is not, nor by execution and delivery of
          this Agreement and the performance of its obligations hereunder (with
          or without the passage of time) will the Borrower be in default with
          respect to any order of any court, governmental authority, arbitration
          board or other tribunal.

     (i)  The Borrower has furnished to the Bank the financial statements for
          the time period indicated on Exhibit A attached hereto. Said
          statements fairly present in all material respects the condition of
          the Borrower at the dates thereof, and the statements of operation
          contained therein fairly present in all material respects the results
          of the operations of the Borrower for the periods indicated, all in
          conformity with generally accepted accounting principles consistently
          applied subject to year end adjustments and footnotes.

     (j)  Since the date of the financial statements referred to in Section
          2.1(i), and except as shown on Exhibit A, there has not been:

          (i)  any material adverse change in the condition of the Borrower's
               assets or liabilities, nor has there been any depletion of cash
               or decrease of working capital which has been materially adverse;

          (ii) any damage, destruction or loss, whether or not covered by
               insurance, materially and adversely affecting the Borrower's
               properties or business; or

          (iii) any materially adverse:

               (1)  controversy with any labor organization or employees;

               (2)  claim or controversy involving any federal, state or local
                    governmental agencies; or

                                      -3-

<PAGE>

               (3)  other event or condition materially and adversely affecting
                    the business or properties of the Borrower.

     (k)  The Borrower has filed all federal and state income tax returns,
          excise tax returns, and all other tax returns of every kind and nature
          which are required to be filed by the Borrower as of the date hereof
          and has paid all taxes shown to be due on said returns.

     (l)  The Borrower keeps all records concerning its accounts (as said term
          is defined in the Massachusetts Uniform Commercial Code) and has its
          chief executive office and principal place of business at the address
          set forth at the beginning of the Agreement. The Borrower has no other
          addresses at which the Borrower has an office, conducts business or at
          which a material portion of the Borrower's property is located except
          as set forth on Exhibit A.

     (m)  The execution and delivery of this Agreement, the borrowing by the
          Borrower as herein provided, the execution and delivery by the
          Borrower of all instruments, agreements and documents of every kind
          and nature pursuant hereto and the performance by the Borrower of all
          of its obligations to the Bank hereunder have been duly authorized by
          the Board of Directors of the Borrower and, to the extent required by
          law or otherwise, by the Borrower's stockholders, and this Agreement
          and all instruments, agreements and documents executed pursuant hereto
          are valid and binding obligations of the Borrower enforceable in
          accordance with their terms except to the extent such enforceability
          may be limited by laws of general application affecting the rights of
          creditors.

     (n)  There is no provision in the certificate of incorporation or the
          by-laws of the Borrower, or any indenture, contract or agreement to
          which it is a party or by which it is bound, which prohibits the
          execution and delivery of this Agreement or the performance by the
          Borrower of its obligations hereunder (except license, partnership,
          joint venture or similar arrangements entered into in the ordinary
          course of business that restrict the Borrower from transferring or
          pledging the Borrower's rights thereunder).

     (o)  No event has occurred and no condition exists, which, upon the
          execution and delivery of this Agreement would constitute an Event of
          Default hereunder. No consent, approval, or authorization of or
          filing, registration, or qualification with, any governmental
          authority on the part of the Borrower is required as a condition of
          the execution and delivery of this Agreement or any other instrument,
          agreement or document contemplated hereby, or the performance by the
          Borrower of its obligations hereunder or thereunder.

                                      -4-

<PAGE>

                                    SECTION 3

                              AFFIRMATIVE COVENANTS

     3.1 The Borrower will duly and punctually pay all interest and principal
becoming due to the Bank and will duly and punctually perform all things on its
part to be done or performed under this Agreement, or pursuant to any
instrument, document or agreement executed pursuant hereto.

     3.2 The Borrower will, at all times, keep proper books of account in which
full, true and correct entries will be made of its transactions in accordance
with generally accepted accounting principles consistently applied.

     3.3 The Borrower will, at all reasonable times (and upon ten (10) days
prior notice and only once per year absent the occurrence of an Event of Default
hereunder), make its books and records available, in its offices, for
inspection, examination and copying by the Bank and the Bank's representatives
and will, at all reasonable times, permit inspection of its properties by the
Bank and the Bank's representatives.

     3.4 The Borrower will, from time to time, furnish the Bank with such
information and statements as the Bank may reasonably request.

     3.5 The Borrower will furnish the Bank quarterly, within forty-five (45)
days after the close of each fiscal quarter, commencing with the quarterly
period in which this Agreement is executed, a balance sheet and income statement
and statement of cash flows reflecting the financial condition of the Borrower
at the end of each such period and the results of its operation during each such
period. Each statement shall also contain comparative statements for the same
period during the prior fiscal year. Each balance sheet and income statement and
statement of cash flows is to be certified by the President or Treasurer of the
Borrower, such certification to state that such balance sheet and income and
statement of cash flows fairly present the financial condition and the result of
operations of the Borrower at the end of such period and during such period in
accordance with generally accepted accounting principles consistently applied,
subject, however, to ordinary year!end adjustments, none of which are reasonably
expected to be materially adverse.

     3.6 The Borrower will furnish the Bank annually, within one hundred twenty
(120) days after the close of each fiscal year, a balance sheet and income
statement and statement of cash flows reflecting the financial condition of the
Borrower at the end of each such fiscal year and the results of its operation
during such fiscal year. Each such statement shall also contain comparative
statements for the prior fiscal year. Each such balance sheet and income
statement and statement of cash flows is to be audited by an independent
certified public accountant reasonably satisfactory to the Bank with an
unqualified audit letter. Borrower shall submit with its annual statements, its
annual projections in form and substance satisfactory to Bank, together with any
"management letters" or "letters of recommendation" to and from Borrower's
accountants.

                                      -5-

<PAGE>

     3.7 The Borrower will maintain its corporate existence in good standing,
comply with all laws and regulations of the United States, of any state or
states thereof, of any political subdivision thereof and of any governmental
authority which may be applicable to the Borrower or to the Borrower's business
except where failure would not cause a MAC.

     3.8 The Borrower will pay all real and personal property taxes, assessments
and charges and all franchise, income, unemployment, old age benefit,
withholding, sales and other taxes assessed against it or payable by it at such
times and in such manner to prevent any penalty from accruing or any lien or
charge from attaching to its properties; except where the Borrower is contesting
such taxes in good faith and diligently prosecuting any such tax, provided
Borrower maintains adequate reserves. The Borrower shall not be in default under
this Section by reason of the existence of a lien for taxes not then due.

     3.9 The Borrower will maintain its properties in good repair, working
condition and order and, from time to time, make all needful and proper repairs,
renewals and replacements except where failure would not cause a MAC.

     3.10 The Borrower will pay or reimburse the Bank, on demand, for all
expenses (including, without limitation, reasonable counsel fees and expenses)
incurred or paid by the Bank in connection with the preparation, amendment,
interpretation, extension or negotiation of this Agreement, and any instrument,
agreement or document to be delivered pursuant hereto; the enforcement by the
Bank of its rights as against the Borrower or any other person primarily or
secondarily liable to the Bank hereunder or thereunder; protection or
realization on any Collateral held by the Bank as security for the Liabilities
of the Borrower or any other person primarily or secondarily liable with respect
thereto and in the defense of any action against the Bank with respect to its
rights or liabilities hereunder or thereunder.

     3.11 The Borrower will punctually and promptly make all payments and
perform all other obligations which may be required of it with respect to any
indebtedness (whether for money borrowed, goods purchased, services rendered or
however such indebtedness may otherwise arise) owing to persons, firms or
corporations other than the Bank, including, without limitation, indebtedness
which may be secured by a security interest in assets of the Borrower or
property of the Borrower, and all obligations under the terms of any lease in
which the Borrower is the lessee except for payment obligations as to which
Borrower has a bona fide dispute and except where failure would not cause a MAC.
The provisions of this section shall not preclude the Borrower from contesting
in good faith and diligently prosecuting any such indebtedness or obligation.

     3.12 The Borrower shall transfer to and maintain its primary operating
accounts at the Bank, which transfer shall be completed no later than August 31,
2002.

                                      -6-

<PAGE>

                                    SECTION 4

                               NEGATIVE COVENANTS

     4.1 The Borrower will not merge or consolidate or be merged or consolidated
with or into any other corporation, without prior notice to Bank.

     4.2 Except as set forth on Exhibit A, the Borrower will not grant or suffer
to exist any mortgage, pledge, title retention agreement, security interest,
lien, charge or encumbrance with respect to the Collateral for the Loan.

     4.8 The Borrower will not engage in any business other than the business in
which it is currently engaged or a business reasonably allied thereto without
the consent of the Bank, which consent will not be unreasonably withheld or
delayed.

                                    SECTION 5

                                    SECURITY

     5.1 The Bank shall have and hold as security for the repayment of the Loan
and all other Liabilities of the Borrower to the Bank a security interest in a
certificate of deposit pledged to the Bank pursuant to a Security Agreement
(Pledged Collateral) of even date (the "Collateral").

     5.2 Any and all deposits or other sums at any time credited by or due from
the Bank to the Borrower shall at all times constitute additional security for
all Liabilities of the Borrower to the Bank and may be set off against any such
Liabilities at any time after the occurrence of an Event of Default, whether or
not security held by the Bank is deemed to be adequate. Any and all instruments,
documents, policies and certificates of insurance, securities, goods, accounts
receivable, chooses in action, chattel paper, cash, property and the proceeds
thereof owned by the Borrower or in which the Borrower has an interest, which
now or hereafter are at any time in possession or control of the Bank or in
transit by mail or carrier to or from the Bank or in the possession of any third
party acting in the Bank's behalf, without regard to whether the Bank received
the same in pledge, for safekeeping, as agent for collection or transmission or
otherwise or whether the Bank has conditionally released the same, shall
constitute additional security for such Liabilities and may be applied at any
time after the occurrence of an Event of Default, to such obligations, whether
due or not.

                                      -7-

<PAGE>

                                    SECTION 6

                                     DEFAULT

     6.1 The occurrence of any of the following events (after the expiration of
any applicable grace or notice periods) shall be an Event of Default hereunder:

     (a)  The Borrower shall fail to pay any installment of principal or
          interest on account of the Loan or any other Liabilities of the
          Borrower to the Bank within ten (10) days of the date when such
          payment is due, or on demand, if such payment is due on demand.

     (b)  The Borrower shall fail to observe or perform any covenant or
          agreement contained in this Agreement or in any instrument, document
          or agreement executed in connection therewith and the expiration of
          thirty (30) days from written notice of such failure.

     (c)  Any warranty, representation or statement made or furnished to the
          Bank by or on behalf of the Borrower proves to have been false in any
          material respect when made or furnished or deemed made.

     (d)  Any event which results in the acceleration of the maturity of the
          indebtedness of the Borrower to others for borrowed money in excess of
          $300,000.00 under any indenture, agreement, undertaking or otherwise.

     (e)  Dissolution, termination of existence, insolvency, or business failure
          of the Borrower.

     (f)  The Borrower shall: (i) cease, be unable, or admit in writing its
          inability to pay its debts as they mature, or make a general
          assignment for the benefit of, or enter into any composition, trust
          mortgage or other arrangement with creditors; (ii) apply for, or
          consent (by admission of material allegations of a petition or
          otherwise) to the appointment of a receiver, trustee or liquidator of
          the Borrower or of a substantial part of its assets, or authorize such
          application or consent, or proceedings seeking such appointment shall
          be commenced against the Borrower and continue undismissed for ninety
          (90) days; or (iii) apply for, or consent (by admission of material
          allegations of a petition or otherwise) to the application of any
          bankruptcy, reorganization, readjustment of debt, insolvency,
          dissolution, liquidation or other similar law of any jurisdiction, or
          authorize such application or consent, or proceedings to such end
          shall be instituted against the Borrower and remain unstayed and
          undismissed for ninety (90) days, be approved as properly instituted
          or result in adjudication of bankruptcy or insolvency.

     (g)  The occurrence of an Event of Default under any other agreement
          between Borrower and Bank or instrument or paper given to Bank by
          Borrower in connection with this Agreement as amended from time to
          time.

                                      -8-

<PAGE>

     6.2 Upon the occurrence of any Event of Default, all Liabilities of the
Borrower to the Bank shall, at the Bank's option and without demand, and
notwithstanding any terms of payment in any note or other instrument evidencing
such Liabilities, become immediately due and payable.

                                    SECTION 7

                                     NOTICE

     7.1 All notices and other communications hereunder shall be made by
telegram, telex, electronic transmitter, overnight air courier, or certified or
registered mail, return receipt requested, and shall be deemed to be received by
the party to whom it was sent one (1) business day after sending, if sent by
telegram, telex, electronic transmitter, or overnight air courier, and three (3)
business days after mailing if sent by certified or registered mail. All such
notices and other communications to a party hereto shall be addressed to such
party at the address set forth at the beginning of this Agreement or to such
other address as such party may designate for itself in a notice to the other
party given in accordance with this section.

     7.2 The addresses to which such communications shall be sent are as
follows:

     (a)  If intended for the Borrower, to:
          Curis, Inc.
          61 Moulton Street
          Cambridge, MA 02138
          Attn: Michael D. Gray, Senior Director, Finance and Assistant
                Treasurer

          with copies to:
          Hale & Dorr
          60 State Street
          Boston, MA 02109
          Attn:  C. Hall Swaim, Esq.

     (b)  If intended for the Bank, to:
          Boston Private Bank & Trust Company
          Ten Post Office Square
          Boston, MA 02109
          Attn: Andrew K. Michaud, Vice President

          with copies to:
          Brian T. Garrity, Esq.
          Ruberto, Israel & Weiner, P.C.
          100 North Washington Street
          Boston, MA 02114

                                      -9-

<PAGE>

     7.3 The addresses set forth herein may be changed by notice hereunder.

                                    SECTION 8

                                  MISCELLANEOUS

     8.1 The Borrower will from time to time execute and deliver to the Bank all
such other and further instruments and documents and take or cause to be taken
all such other and further action as the Bank may reasonably request in order to
effect and confirm or vest more securely in the Bank all rights contemplated in
this Agreement.

     8.2 The Borrower may take any action herein prohibited or omit to perform
any act required to be performed by the Borrower if the Borrower shall obtain
the Bank's prior written consent to each such action, or omission to act. No
waiver on the Bank's part on any one occasion shall be deemed a waiver on any
other occasion. The Bank shall not be deemed to have waived any of its rights
hereunder unless such waiver shall be in writing and duly signed by an
authorized officer of the Bank.

     8.3 This Agreement may be amended only by an instrument in writing and duly
signed by the Borrower and an authorized officer of the Bank.

     8.4 All covenants, agreements, representations and warranties contained in
this Agreement shall bind the Borrower, its respective successors and assigns,
and shall inure to the Bank's benefit and the benefit of the Bank's successors
and assigns, whether expressed or not.

     8.5 All rights of the Bank hereunder shall be cumulative. The Bank shall
not be required to have recourse to any Collateral before enforcing its rights
or remedies against the Borrower or any Guarantor. The Borrower and any
Guarantor hereby waives presentment and protest of any instrument and any notice
thereof.

     8.6 If any provisions of this Agreement shall be held to be illegal or
unenforceable, such illegality or unenforceability shall relate solely to such
provision and shall not affect the remainder of this Agreement.

     8.7 This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts.

     8.8 This Agreement shall take effect as an instrument under seal.

     8.9 BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Borrower hereby certifies that neither Bank nor any of

                                      -10-

<PAGE>

its representatives, agents or counsel has represented, expressly or otherwise,
that Bank would not, in the event of any such suit, action or proceeding, seek
to enforce this waiver of right to trial by jury. Borrower acknowledges that
Bank has been induced to enter into this Agreement by, among other things, this
waiver. Borrower acknowledges that it has read the provisions of this Agreement
and in particular, this Section; has consulted legal counsel; understands the
right it is granting in this Agreement and is waiving in this Section in
particular, and makes the above waiver knowingly, voluntarily and intentionally.

     8.10 Borrower and Bank agree that any action or proceeding to enforce or
arising out of this Agreement may be commenced in any court of the Commonwealth
of Massachusetts sitting in the counties of Suffolk or Middlesex, or in the
District Court of the United States for the District of Massachusetts, and
Borrower waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and confer personal jurisdiction if served by registered or certified
mail to Borrower or as otherwise provided by the laws of the Commonwealth of
Massachusetts or the United States of America.

     8.11 The exhibit annexed hereto as Exhibit A is the only exhibit to be
annexed to this Agreement, and the material contained therein shall be
incorporated herein.

     8.12 The captions herein contained are inserted as a matter of convenience
only and such captions do not form a part of this Agreement and shall not be
utilized in the construction hereof.

WITNESS:                                  CURIS, INC.
(AS TO BOTH)

/s/ Brian T. Garrity                      By: /s/ Daniel R. Passeri
--------------------                          ----------------------
Brian T. Garrity                              Daniel R. Passeri, President and
                                              Chief Executive Officer

                                          BOSTON PRIVATE BANK & TRUST COMPANY

                                          By: /s/ Andrew K. Michaud
                                              ----------------------
                                              Andrew K. Michaud, Vice President

                                      -11-

<PAGE>

                                    Exhibit A

2.1(c) Encumbrances - None.

2.1(f) General Nature of the Borrower's Business - The general nature of the
Borrower's business is medical research and development.

2.1(g) Subsidiaries and Investments - Curis Securities Corporation, a
Massachusetts corporation, is the wholly-owned subsidiary of the Borrower.

The Borrower's investments are as follows:

o    80.1% of the common equity in Curis NewCo, a joint venture with Elan
     Corporation, plc.

o    298,042 shares of the common equity in Aegera Therapeutics, Inc., a
     privately-held Canadian biotechnology company.

o    3,003 shares of the common equity in Micromet AG, a privately-held German
     biotechnology company.

2.1(h) Litigation - The Borrower is the defendant in a wrongful termination
lawsuit initiated by Hong Wu Xu.

2.1(i) Date and Period Covered of Most Recent Financial Statements Furnished to
the Bank - March 31, 2002. The most recent financial statements furnished to the
Bank cover the three-month period ended March 31, 2002.

2.1(k) Material Changes in Operations - None.

2.1(m) Other Locations - The Borrower maintains other locations at 45 Moulton
Street, Cambridge, MA 02138 and 21 Erie Street, Cambridge, MA 02139.

4.2 - None.

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