Document:

Venture Loan and Security Agreement

 Exhibit 10.4 
  
 VENTURE LOAN AND SECURITY AGREEMENT 
  

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

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

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

  
 as Borrower 
  

										
	 	  	Commitment Amount Loan A

	  	Commitment Amount Loan B

	  	Commitment Amount Loan C

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

  

	
	 Commitment Termination Date Loan A:    December 31, 2005

	
	 Commitment Termination Date Loan B:    March 31, 2006

	
	 Commitment Termination Date Loan C:    June 30, 2006

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 portions of the Collateral in good operating condition and repair and shall make all necessary replacements thereof and
renewals thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Borrower shall not permit any such material item of Collateral to become a fixture to real estate or an accession to other personal
property, without the prior written consent of Lenders. Borrower shall not permit any such material item of Collateral to be operated or maintained in violation of any applicable law, statute, rule or regulation. With respect to items of leased
equipment (to the extent Lenders have any security interest in any residual Borrower’s interest in such equipment under the lease), Borrower shall keep, maintain, repair, replace and operate such leased equipment in accordance with the terms of
the applicable lease. 
  
 6.8 Insurance. Borrower shall
keep its business and the Collateral insured for risks and in amounts, and as Lenders may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Lenders. All property policies
shall have a lender’s loss payable endorsement showing Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, as an additional loss payee and all liability policies shall show Lenders, or if requested by Lenders, one of
the Lenders, as agent for Lenders, as an additional insured and all policies shall provide that the insurer must give Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, at least thirty (30) days notice before
canceling its policy. At any Lender’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Lenders’ option, be payable to Lenders, or if requested by
Lenders, one of the Lenders, as agent for Lenders, on account of the Obligations. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty
policy, toward the replacement or repair of destroyed or damaged property; provided that (i) any such replaced or repaired property (a) shall be of equal or like value as the replaced or repaired Collateral and (b) shall be deemed
Collateral in which Lenders have been granted a first priority security interest and (ii) after the occurrence and during the continuation of an Event of Default all proceeds payable under such casualty policy shall, at the option of Lenders,
be payable to Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, on account of the Obligations. If Borrower fails to obtain insurance as required under Section 6.8 or to pay any amount or furnish any required
proof of payment to third persons and Lenders, Lenders may make all or part of such payment or obtain such insurance policies required in Section 6.8, and take any action under the policies Lenders deem prudent. On or prior to the first
Funding Date and prior to each policy renewal, Borrower shall furnish to Lenders, or if requested by Lenders, one of the Lenders, as agent for Lenders, certificates of insurance or other evidence satisfactory to Lenders that insurance complying with
all of the above requirements is in effect. 
  
 6.9 Security
Interest. Assuming the proper and effective filing and indexing of one or more financing statement(s) identifying the Collateral with the proper state and/or local authorities, the security interests in the Collateral granted to Lenders pursuant
to this Agreement (in which a security interest may be perfected by the filing of a financing statement) (i) constitute and will continue to constitute first priority security interests (except to the extent any Permitted Liens may have a
superior priority to Lenders’ Lien under this Agreement) and (ii) are and will continue to be superior and prior to the rights of all other creditors of Borrower (except to the extent of such Permitted Liens). 

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

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

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

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

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

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

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

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

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

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

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

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

  

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

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

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

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

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

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

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

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

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

	Name:	 	 Alan Levy

	Title:	 	 President and CEO

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

	Name:	 	 Robert D. Pomeroy, Jr.

	Title:	 	 Managing Member

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

	Name:	 	 Michael J. Altenburger

	Title:	 	 Chief Financial OfficerAmended and Restated 1999 Stock Option Plan and Related Agreements

 Exhibit 10.5 
  
 NORTHSTAR NEUROSCIENCE, INC. 
  

AMENDED AND RESTATED 
  
 1999 STOCK OPTION PLAN 
  
 ARTICLE 1 
 PURPOSE AND EFFECTIVENESS

  
 1.1 Purpose. The purpose of the Amended and
Restated 1999 Stock Option Plan (the “Plan”) is to provide a method by which selected individuals performing services for Northstar Neuroscience, Inc., a Washington corporation (the “Company”), or any of its Affiliates, may be
offered an opportunity to invest in capital stock of the Company, thereby increasing their personal interest in the growth and success of the Company and its Affiliates. 
  
 1.2 Effective Date; Shareholder Approval Requirement. The Plan shall be effective at the time specified in the
resolutions of the Board adopting the Plan (the “Effective Date”). Issuance of Incentive Stock Options within twelve (12) months after the Effective Date shall be subject to the approval of the Plan by the shareholders of the Company
at a duly held meeting of shareholders at which a majority of all outstanding voting stock of the Company is represented in person or by proxy. The approval required shall be a majority of the votes cast on the proposal to approve the Plan. Such
approval may also be provided pursuant to a written consent in lieu of such meeting. No Incentive Stock Option shall be exercisable until this approval requirement has been satisfied. If this requirement is not satisfied within twelve
(12) months after the Effective Date, then (a) no Incentive Stock Options may thereafter be granted, and (b) each Incentive Stock Option granted prior thereto shall automatically be deemed to be a Nonqualified Stock Option (except to
the extent its Option Agreement expressly provides otherwise). 
  
 ARTICLE 2 
 DEFINITIONS 
  
 Capitalized terms in the Plan shall have the following meanings (whether used in the singular or plural): 
  
 “Affiliate” of the Company means any corporation, partnership or
other entity which, through one or more intermediaries, directly or indirectly controls, is controlled by, or is under common control with the Company. 
  
 “Approved Poolable Transaction” is defined in Section 7.2(b)(v). 

 “Approved Transaction” means any of the following transactions consummated with the approval,
recommendation or authorization of the Board: 
  
 (a) any merger, consolidation, statutory or contractual share exchange, or other transaction to which the Company or any of its Affiliates or shareholders is a party if, immediately following the transaction, the persons who
held Common Stock (or securities convertible into Common Stock) immediately before the transaction hold less than a majority of: 
  
 (i) the combined Common Equity of the Company; or 
  
 (ii) if, pursuant to the transaction, shares of Common Stock are changed or converted into or exchanged for,
in whole or part, securities of another corporation or entity, the combined Common Equity of that corporation or entity; without taking into account any person’s Common Equity of the Company or the other corporation or entity that is not
directly attributable (through continued ownership, amendment, reclassification, conversion or exchange) to the person’s holdings of Common Stock (or securities convertible into Common Stock) immediately before the transaction; 
  
 (b) any liquidation or dissolution of the
Company; and 
  
 (c) any sale,
lease, exchange or other transfer not in the ordinary course of business (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company. 
  
 “Board” means the Board of Directors of the Company. 
  
 “Cause” means, in connection with the termination of the Service of
a Holder (a) repeated failures to carry out directions of the Board or the Holder’s supervisors with regard to material matters reasonably consistent with the Holder’s duties; (b) knowing violation of a state or federal law
involving the commission of a crime against the Company or any of its Affiliates or a felony; (c) misuse of alcohol or controlled substances; (d) any misrepresentation, deception, fraud or dishonesty that is materially injurious to the
Company or any of its Affiliates; and (e) any act or omission in willful disregard of the interests of the Company or any of its Affiliates that substantially impairs the goodwill, business or reputation of the Company or any of its Affiliates.

  
 “Code” means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or statutes thereto. Reference to any specific section of the Code shall include any successor section. 
  
 “Committee” is defined in Section 3.1. 
  
 “Common Equity” means the capital stock of a corporation (or corresponding securities of a noncorporate entity) ordinarily, and apart from
rights accruing under special circumstances, having the right to vote in an election for directors (or for members of the governing body of the noncorporate entity). 
  
 “Common Stock” means the Common Stock, no par value per share, of the Company. 
  
 “Company” is defined in Section 1.1. 
  

 2 

 “Computation Date” is defined in Section 6.9(a). 
  
 “Continuing Option” is defined in Section 7.2(b)(v)(A)(1).

  
 “Control Purchase” means any transaction (or series
of related transactions), consummated without the approval, recommendation or authorization of the Board, in which any person, corporation or other entity (including any “person” as defined in Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act) purchases any Common Stock (or securities convertible into Common Stock), pursuant to a tender offer or a request or invitation for tenders (as those terms are defined in Section 14(d)(l) of the Exchange Act) or otherwise,
and thereafter is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than fifty percent (50%) of the combined Common Equity of the Company (twenty-five percent
(25%) of the combined Common Equity of the Company, if the Company at the time of the transaction has any class of Equity Security registered pursuant to Section 12 of the Exchange Act). 
  
 “Disability” means the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

  
 “Effective Date” is defined in Section 1.2.

  
 “Eligible Person” is defined in Article 5.

  
 “Equity Securities” has the meaning given that term
in Rule 3a11-l promulgated under the Exchange Act, as amended from time to time, or any successor rule thereto. 
  
 “Excess Securities” is defined in Section 6.9(a). 
  

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto.
Reference to any specific section of the Exchange Act shall include any successor section. 
  
 “Executive Officer” means any employee of the Company who is an “officer” within the meaning of Rule 16a-l(f) of the Exchange Act, as amended from time to time, or any successor rule thereto.

  
 “Exercise Date” is defined in Section 6.10(a).

  
 “Fair Market Value” for the Common Stock (or any
other security) on any day means, if the Common Stock (or other security) is publicly traded, the last sales price (or, if no last sales price is reported, the average of the high bid and low asked prices) for a share of Common Stock (or unit of the
other security) on that day (or, if that day is not a trading day, on the next preceding trading day), as reported by the principal exchange on which the Common Stock (or other security) is listed, or, if the Common Stock (or other security) is
publicly traded but not listed on an exchange, as reported by The Nasdaq Stock Market, or, if such prices or quotations are not reported by The Nasdaq Stock Market, as reported by any other available source of prices 

  

 3 

 
or quotations selected by the Committee. If the Common Stock (or other security) is not publicly traded, or if the Fair Market Value is not determinable by
any of the foregoing means, the Fair Market Value on any day shall be determined in good faith by the Committee on the basis of such considerations as the Committee determines to be appropriate. 
  
 “Good Reason” means, with respect to a Holder, the occurrence in
connection with an Approved Transaction, without the Holder’s express written consent, of one of the following events or conditions: 
  
 (a) A material reduction in the level of the Holder’s responsibilities in comparison to the level thereof at the time
of the Approved Transaction; 
  
 (b)
The assignment to the Holder of a job title that is not of comparable prestige and status as the Holder’s job title at the time of the Approved Transactions; 
  
 (c) The assignment to the Holder of any duties inconsistent with the Holder’s position at
the time of the Approved Transaction, other than pursuant to the Holder’s promotion; 
  
 (d) A material reduction in the Holder’s salary level; 
  
 (e) A material reduction in the overall level of employee benefits or perquisites available to
the Holder at the time of the Approved Transaction, or the Holder’s right to participate therein, unless such reduction is nondiscriminatory as to the Holder; 
  
 (f) Requiring the Holder to be based anywhere more than fifty (50) miles from the
business location to which the Holder normally reported for work at the time of the Approved Transaction, other than for required business travel not significantly greater than the Holder’s business travel obligations at the time of the
Approved Transaction; or 
  
 (g)
Any of the foregoing events and conditions occurring before the Approved Transaction which the Holder reasonably demonstrates was at the request of a third party or otherwise arose in connection with or in anticipation of the Approved Transaction.

  
 “Holder” means an Eligible Person who has received
an Option or, if rights under the Option continue following the death of the Eligible Person or are transferred in a manner permitted by Section 6.8, the person who succeeds to those rights by will or by the laws of descent and distribution or
by such transfer. 
  
 “Incentive Stock Option” means an
Option that is an incentive stock option within the meaning of Section 422 of the Code. 
  
 “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option. 
  
 “Offer” is defined in Section 6.10(a). 
  
 “Option” means an option with respect to shares of Common Stock awarded pursuant to Article 6. 
  

 4 

 “Option Agreement” is defined in Section 6.5. 
  
 “Option Securities” means (a) the shares of Common Stock or
other securities that a Holder acquires upon exercise of an Option, and (b) any other shares of Common Stock or other securities issued or acquired with respect to the shares or other securities specified in the preceding clause (a) or
this clause (b) in connection with any stock dividend, stock split, reclassification, recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, rights offering, or other transaction or event. 
  
 “Permitted Transferee” of a Holder means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Holder (including any such relative by adoption); any
person sharing the Holder’s household (other than a tenant or employee); a trust in which these persons have more than fifty percent (50%) of the beneficial interest; and any other non-charitable entity in which these persons (or the
Holder) own more than fifty percent (50%) of the voting interests. 
  
 “Plan” is defined in Section 1.1. 
  
 “Replacement Securities” is defined in Section 7.2(b)(v)(A)(2). 
  
 “Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific section of the Securities Act shall include any
successor section. 
  
 “Service” means the performance
of services on a periodic basis for the Company or any of its Affiliates in the capacity of an employee, a nonemployee member of a board of directors or other governing body, or an independent consultant or advisor. 
  
 “Transaction Date” is defined in Section 7.2(b)(i).

  
 “10% Shareholder” means a person who owns (or is
considered as owning within the meaning of Section 424 of the Code) stock possessing more than 10% of the total combined voting power of all classes of capital stock of the Company. 
  
 ARTICLE 3 
 ADMINISTRATION 
  
 3.1 Committee.
The Plan shall be administered by the Board unless the Board appoints a separate committee of the Board to administer the Plan pursuant to Section 3.2 (the Board, or such committee, if it is administering the Plan, will be referred to as the
“Committee”). The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of its members shall constitute a quorum and all determinations shall
be made by a majority of that quorum. Any determination reduced to writing and signed by all of the members of the Committee shall be as effective as if it had been made by a majority vote at a meeting duly called and held. 
  

 5 

 3.2 Appointment of Committee. The Board may appoint a committee consisting of two or more
of its members to administer the Plan. Once appointed, the committee shall continue to serve until otherwise directed by the Board. From time to time the Board may increase the size of the committee and appoint additional members, remove members
(with or without cause) and appoint new members in their place, fill vacancies however caused, and/or remove all members of the committee and thereafter directly administer the Plan. 
  
 3.3 Powers; Regulations. The Committee shall have full power and authority, subject only to the provisions of
the Plan (a) to administer or supervise the administration of the Plan; (b) to interpret the provisions of the Plan and the Option Agreements; (c) to correct any defect, supply any information and reconcile any inconsistency in such
manner and to such extent as it determines to be necessary or advisable to carry out the purpose of the Plan; and (d) to take such other actions in connection with the Plan as it determines to be necessary or advisable. The Committee is
authorized to adopt, amend and rescind such rules, regulations and procedures not inconsistent with the provisions of the Plan as it determines to be necessary or advisable for the proper administration of the Plan, and each Option shall be subject
to all such rules, regulations and procedures (whether the Option was granted before or after promulgation thereof). Without limiting the authority of the Committee to interpret the provisions of the Plan, the Committee shall have the right to
determine that a transaction (or series of related transactions) is not a Control Purchase, even though literally included within the definition of that term, if the Committee determines that the transaction (or series of related transactions) does
not have the effect of significantly changing or influencing the control of the Company on a permanent basis. 
  
 3.4 Limits on Authority. Exercise by the Committee of its authority shall be consistent (a) with the intent that all Incentive Stock
Options be qualified under the terms of Section 422 of the Code, and (b) if the Company registers any class of Equity Security pursuant to Section 12 of the Exchange Act, with the intent that the Plan be administered in a manner so
that, to the extent possible, the grant of Options and all other transactions with respect to the Plan, to Options and to any Common Stock acquired upon exercise of Options, shall be exempt from the operation of Section 16(b) of the Exchange
Act. 
  
 3.5 Exercise of Authority. Each action and
determination made or taken by the Committee, including but not limited to any interpretation of the Plan and the Option Agreements, shall be final, conclusive and binding for all purposes and upon all persons. No member of the Committee shall be
liable for any action or determination made or taken by the member or the Committee in good faith. 
  
 ARTICLE 4 
 SHARES SUBJECT TO THE PLAN 
  
 4.1 Number of Shares. Subject to the provisions of this Article
4, the maximum number of shares of Common Stock for which Options may be granted during the term of the Plan shall be 4,231,250. Shares of Common Stock will be made available from the authorized but unissued shares of the Company or from shares
reacquired by the Company. If an Option terminates for any reason without having been exercised in full, or if Excess Securities are repurchased by the Company pursuant to Section 6.9, then the shares of Common Stock for 

  

 6 

 
which the Option has not been exercised or the Excess Securities, as the case may be, shall again be available for purposes of the Plan. 
  
 4.2 Adjustments. If the Company subdivides its outstanding
shares of Common Stock into a greater number of shares (by stock dividend, stock split, reclassification or otherwise) or combines its outstanding shares of Common Stock into a smaller number of shares (by reverse stock split, reclassification or
otherwise), or if the Committee determines that any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, rights offering, or other transaction or event
that is not an Approved Transaction or Control Purchase affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in
such manner as it determines to be equitable and appropriate, adjust any or all of (a) the number of shares of Common Stock (or number and kind of other securities or property) for which, and the time or times when, outstanding Options may
thereafter be exercised; (b) the purchase price for the shares (or other securities or property) under outstanding Options; and (c) the number of shares of Common Stock (or number and kind of other securities or property) for which Options
may thereafter be granted. In connection with any adjustment made pursuant to this Section 4.2, the Committee may, if deemed equitable and appropriate, provide for a cash payment to be made to the Holder of an Option, in cancellation of the
Option, of such amount as the Committee determines represents the value the Option would then have if it were exercisable for all of the shares under the Option. 
  
 ARTICLE 5 
 ELIGIBILITY 
  
 The persons eligible to
participate in the Plan and to receive Options (“ Eligible Persons”) shall be persons who are performing or have been hired to perform Service for the Company or any of its Affiliates. 
  
 ARTICLE 6 
 STOCK OPTIONS 
  
 6.1 Grant of Options. The Committee shall from time to time determine (a) the Eligible Persons to whom Options are to be granted; (b) the number of shares of Common Stock for which the Options
are exercisable and the purchase price of such shares; (c) whether the Options are Incentive Stock Options or Nonqualified Stock Options; and (d) all of the other terms and conditions (which need not be identical) of the Options;
provided, however, that all such determinations shall be subject to the express limitations of the Plan. 
  
 6.2 Purchase Price. The price at which shares of Common Stock may be purchased upon exercise of an Option may be more than, less than or
equal to the Fair Market Value of the shares on the date the Option is granted; provided, however, that the purchase price of each share of Common Stock under an Incentive Stock Option shall be (a) at least 110% of the Fair Market
Value of such share on the date of grant of the Option, if it is granted to a 10% Shareholder, and (b) at least 100% of the Fair Market Value of such share on the date of grant of the Option, if it is granted to any other Eligible Person.

  

 7 

 6.3 Limitations on Incentive Stock Options. 
  
 (a) Grants Only to Employees.
Incentive Stock Options may only be granted to Eligible Persons who are employees of the Company or an Affiliate that constitutes a “parent corporation” or a “subsidiary corporation” within the meaning of Section 424 of the
Code. 
  
 (b) Limitation on
Shares. The aggregate Fair Market Value of the shares of Common Stock for which, during any calendar year, one or more Incentive Stock Options under the Plan (and/or one or more options under any other plan maintained by the Company or any
of its Affiliates for the granting of options intended to qualify under Section 422 of the Code) become exercisable for the first time by a Holder shall not exceed $100,000 (said value to be determined as of the respective dates on which the
options are granted to the Holder). If an Option that would otherwise qualify as an Incentive Stock Option becomes exercisable for the first time in any calendar year for shares of Common Stock that would cause such aggregate Fair Market Value to
exceed $100,000, then the portion of the Option in respect of such shares shall be deemed to be a Nonqualified Stock Option. 
  
 6.4 Term of Options. Subject to the provisions of the Plan with respect to termination of Options upon or following death, Disability or
other termination of Service, the Committee shall determine the term of each Option, which term shall not be more than (a) five (5) years from the date of grant in the case of an Incentive Stock Option granted to a 10% Shareholder, and
(b) ten (10) years from the date of grant in the case of any other Incentive Stock Option. 
  
 6.5 Option Agreement. Each Option shall be evidenced by an agreement (the “Option Agreement”) containing the terms and conditions
of the Option as determined by the Committee. Each grantee of an Option shall be notified promptly of the grant, an Option Agreement shall be executed and delivered by the Company to the grantee within sixty (60) days after the date the
Committee approves the grant, and the Committee may terminate the grant if the Option Agreement is not signed by the grantee and delivered to the Company within sixty (60) days after it is delivered to the grantee. An Option Agreement may
contain (but shall not be required to contain) such terms and conditions as the Committee determines to be necessary or appropriate to ensure that the penalty provisions of Section 4999 of the Code will not apply to any stock received by the
Holder from the Company. An Option Agreement may be amended from time to time pursuant to Section 7.6(c). 
  
 6.6 Exercise of Options.  
  
 (a) Time Exercisable. An Option shall become and remain exercisable to the extent provided in its Option
Agreement and in the Plan. However, if an Option is granted prior to the date its Holder first performs Service for the Company or any of its Affiliates, the Option shall not be exercisable prior to the date the Holder first performs such Service.
If an Option is scheduled to become exercisable on one or more dates specified in its Option Agreement, and its Holder has a leave of absence without pay, such date or dates shall be postponed for a period equal to the duration of the leave unless
the Committee determines otherwise. 
  

 8 

 (b) Manner of Exercise. An Option shall be exercised by
written notice to the Company in compliance with the terms and conditions of its Option Agreement and such procedures for exercise of Options as the Committee may adopt from time to time. The method or methods of payment of the purchase price of the
shares to be purchased upon exercise of the Option and of any amounts required by Section 7.8 shall be determined by the Committee and set forth in the Option Agreement for the Option. Such method or methods may consist of (i) check,
(ii) promissory note, (iii) whole shares of Common Stock already owned by the Holder, (iv) the withholding of shares of Common Stock issuable upon exercise of the Option, (v) the delivery, together with a properly executed
exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the purchase price, (vi) any combination of the foregoing methods of payment, or (vii) such
other consideration and method of payment as may be permitted for the issuance of shares under applicable securities and other laws. The Committee may specify a minimum number of shares of Common Stock for which an Option must be exercised, but such
minimum shall not prevent exercise of an Option for the full number of shares for which it is exercisable. 
  
 (c) Value of Shares. Shares of Common Stock delivered in payment of all or any part of the amounts payable
upon exercise of an Option, and shares of Common Stock withheld for such payment, shall be valued at their Fair Market Value on the exercise date of the Option. 
  
 (d) Issuance of Shares. The Company shall issue the shares of Common Stock
purchased under an Option as soon as practicable after the Option has been duly exercised; provided, however, that no fractional shares shall be issuable under the Plan, and any fractional shares that would otherwise be issuable shall
be disregarded. Following exercise of an Incentive Stock Option, the Committee shall cause the information statement required by Section 6039 of the Code to be furnished to the Holder within the time and in the manner prescribed by law.

  
 6.7 Legends. Each certificate representing
shares of Common Stock issued upon exercise of an Option shall, unless the Committee otherwise determines, contain on its face the notice “SEE TRANSFER RESTRICTIONS ON REVERSE” and on its reverse a legend in form substantially as follows,
together with any other legends that are required by the provisions of the Plan or that the Committee determines to be necessary or appropriate: 
  
 NOTICE: TRANSFER AND OTHER RESTRICTIONS 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UPON SATISFACTION OF CERTAIN CONDITIONS. INFORMATION CONCERNING THESE RESTRICTIONS MAY BE OBTAINED FROM THE CORPORATION. ANY OFFER OR DISPOSITION OF THESE SECURITIES WITHOUT
SATISFACTION OF SAID CONDITIONS WILL BE WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER OWNERSHIP OF THE SECURITIES WITH THE CORPORATION. 
  

 9 

 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO RESTRICTIONS ON TRANSFER, AND MAY
BE SUBJECT TO REPURCHASE BY THE CORPORATION OR ONE OR MORE OF ITS SHAREHOLDERS, OR RIGHTS OF FIRST REFUSAL OR OTHER RESTRICTIONS, PURSUANT TO THE PROVISIONS OF THE CORPORATION’S 1999 STOCK OPTION PLAN AND/OR AN AGREEMENT BETWEEN THE HOLDER AND
THE CORPORATION AND/OR AN AGREEMENT AMONG THE SHAREHOLDERS OF THE CORPORATION. INFORMATION CONCERNING THESE RESTRICTIONS MAY BE OBTAINED FROM THE CORPORATION. 
  
 The Company may cause the transfer agent for the Common Stock to place a stop transfer order with respect to such shares. 
  
 6.8 Transferability. Except to the extent the Committee limits
this Section 6.8 at the time a Nonqualified Stock Option is granted, the original Holder of the Nonqualified Stock Option may transfer the Option to any Permitted Transferee, so long as the transfer is without value, and the Permitted
Transferee may transfer the Option without value to any other Permitted Transferee of the original Holder. Neither (a) a transfer under a domestic relations order in settlement of marital property rights, nor (b) a transfer to an entity in
which more than fifty percent (50%) of the voting interests are owned by Permitted Transferees (or the original Holder) in exchange for an interest in that entity, will constitute a transfer for value. Except as expressly permitted by this
Section 6.8, an Option will not be transferable by its Holder other than by will or by the laws of descent and distribution, will not be involuntarily alienable by legal process or otherwise by operation of law, and will be exercisable during
the Holder’s lifetime only by the Holder. If the Holder of an Option dies prior to its full exercise, the Option may be exercised, to the extent it does not thereby terminate, by the person or persons to whom the rights of the holder under the
Option pass by will or by applicable laws of descent and distribution. 
  
 6.9 Repurchase of Shares.  
  
 (a) Right of Repurchase. 
  
 (i) If, through the effective date of repurchase described in Section 6.9(b), the Holder has acquired through exercise of an Option a number of Option Securities in excess of the product (rounded up to the
nearest whole number) of the applicable percentage, as set forth in the table below, multiplied by the total number of Option Securities subject to the Option on the date such Option was granted (the “Excess Securities”), then the Company
shall have the right, but shall not be required, to repurchase from a Holder (or the Holder’s transferee) all or any part of the Excess Securities. Such right of repurchase shall be exercisable at any time and from time to time during the
period of ninety (90) days commencing on the later of (i) the date of termination of the Holder’s Service for any reason, including but not limited to death or Disability, or (ii) as to an Option that is exercised following
termination of the Holder’s Service, the date of such exercise. The repurchase price for each of such Excess Securities that the Company elects to repurchase in the manner provided in Section 6.9(b) below shall be the price paid by the
Holder for each of such Excess Securities. The applicable percentage shall be calculated as follows: based on the time elapsed between (A) the Holder’s initial date of hire, or 

  

 10 

 
such other date as may be specified by the Committee at the time the Option is granted to the Holder (such initial date of hire or other date shall be
referred to below as the “Computation Date”), and (B) the date on which the employment of the Holder terminates for any reason, including but not limited to death or Disability: 
  

			
	 Time Elapsed Since Computation Date

	  	 Applicable Percentage

	 Less than 12 months
	  	 0%

		
	 More than 12 months
	  	 2-1/12 per month in

	 but less than or equal to 48 months
	  	 excess of 12 months

  
 If calculation of the “Time
Elapsed Since Computation Date” results in a fractional month, then a fractional month of .5 or less shall be rounded down, while a fractional month of more than .5 shall be rounded up. 
  
 (ii) The Company may elect to pay the total amount owed to
the Holder (or to the person or entity holding the Excess Security to be repurchased) either (i) in cash, in which case the amount shall be paid, without interest, within thirty (30) days following the effective date of the repurchase, or
(ii) in three equal installments, the first installment payable on the first anniversary of the effective date of the repurchase, and the remaining installments payable on the corresponding date in each of the next two years, with each
installment to include interest on the unpaid principal, computed at the prime rate published in the Wall Street Journal for the first business day of the month in which the effective date of the repurchase occurs, for the period from the effective
date of the repurchase or the date of the most recent installment, as the case may be, to the due date of the installment being paid. 
  
 (iii) In the event of a Control Purchase or an Approved Transaction following which there are no Continuing Options, the right of
repurchase under this Section 6.9 shall terminate. In the event of an Approved Transaction following which there are Continuing Options, the Computation Date applicable to any calculation of the number of Excess Securities following such
Control Purchase or Approved Transaction shall be the date of which the Computation Date immediately prior to such Control Purchase or Approved Transaction is the first anniversary. For example, if the Computation Date immediately prior to a Control
Purchase or an Approved Transaction following which there are Continuing Options was January 1, 1999, the Computation Date following such Control Purchase or Approved Transaction would be January 1, 1998 for purposes of calculating the
number of Excess Securities. 
  
 (b) Exercise of Repurchase Right. To exercise its right of repurchase, the Company shall deliver written notice to the Holder specifying (i) the number of Excess Securities to be repurchased; (ii) the
purchase price(s), and the aggregate purchase price, for such Option Securities; and (iii) the effective date of the repurchase, which date shall not be earlier than the date of the notice nor later than the date of termination of the
Company’s right of repurchase. If a Holder transfers Option Securities that are subject to the Company’s right of repurchase, then, unless otherwise agreed in writing by or on behalf of the Company or the Committee, the Option Securities
shall remain subject to the Company’s right of repurchase 

  

 11 

 
during the period specified in Section 6.9(a)(i) (exercise of the right of repurchase in such event shall be effected by notice to the person or entity
holding the Option Securities at the time of exercise). 
  
 (c) Waiver. The Committee, in its discretion, may elect at the time of grant of an Option or any later time to waive the rights described in this Section 6.9 (any such waiver shall be
expressly set forth in the Option Agreement or in a writing signed by or on behalf of the Company or the Committee). 
  
 6.10 Right of First Refusal.  
  
 (a) Offer of Shares. If a Holder elects to sell all or part of the Option Securities held by the Holder, then
the Holder shall not sell the Option Securities unless the Holder shall have first offered in writing to sell them to the Company at their Fair Market Value on a date specified in the offer (the “Offer”), which date shall be at least three
(3) business days and not more than ten (10) business days following the date of the offer (the “Exercise Date”). 
  
 (b) Exercise of Right of First Refusal. The Company may purchase all or any portion of the Option Securities
covered by the Offer. On or before the Exercise Date, the Company shall give written notice to the Holder of its acceptance or rejection of the Offer and, if the Offer is accepted, the number of Option Securities to be purchased by the Company. If
the Company does not timely exercise its right to purchase all of the Option Securities, the Holder may thereafter sell and transfer the unpurchased Option Securities on the same terms and conditions as set forth in the Offer. 
  
 (c) Purchase Price. The Company
may elect to pay the amount owed to the Holder for the Option Securities to be purchased (or to the person or entity holding the Option Securities) either (i) in cash, in which case the amount shall be paid, without interest, within thirty
(30) days following the Exercise Date, or (ii) in three equal installments, the first installment payable on the first anniversary of the Exercise Date, and the remaining installments payable on the corresponding date in each of the next
two years, with each installment to include interest on the unpaid principal, computed at the prime rate published in the Wall Street Journal for the first business day of the month in which the Exercise Date falls, for the period from the Exercise
Date or the date of the most recent installment, as the case may be, to the due date of the installment being paid. 
  
 (d) Waiver; Termination of Right of First Refusal. The Committee, in its discretion, may elect at the time of
grant of an Option or any later time to waive the rights described in this Section 6.10 (any such waiver shall be expressly set forth in the Option Agreement or in a writing signed by or on behalf of the Company or the Committee). Any right of
first refusal under this Section 6.10 shall terminate upon the earliest to occur of (i) registration by the Company of any class of Equity Security pursuant to Section 12 of the Exchange Act; (ii) a Control Purchase; or
(iii) an Approved Transaction following which there are no Continuing Options. 
  
 (e) Prohibition on Transfer of Excess Securities. Notwithstanding this Section 6.10 or the other
provisions of this Plan, a Holder shall not be permitted to transfer 

  

 12 

 
Option Securities that would, if the Service of such Holder were deemed terminated on the date of the proposed transfer, constitute Excess Securities.

  
 6.11 Market Stand-Off Agreement. By accepting an
Option, the Holder shall be deemed to have agreed that, for a period of one hundred eighty (180) days after the effective date of any Registration Statement filed with the Securities and Exchange Commission pursuant to the Securities Act in
connection with a firm commitment underwritten offering covering the offer and sale to the public of Common Stock for the account of the Company, the Holder will not directly or indirectly (through any put, short sale, collar or other derivative
security or financial instrument) sell or offer to sell or otherwise dispose of any shares of Common Stock, or any securities convertible into or exchangeable for, or any rights to purchase or acquire, Common Stock owned by the Holder, whether owned
on such effective date or thereafter acquired, without the prior written consent of each managing underwriter in the offering, which consent may be withheld at the sole discretion of any managing underwriter. 
  
 6.12 Delegation to Executive Officer of Authority to Grant
Options. The Board may delegate to an Executive Officer the authority to determine from time to time (a) the Eligible Persons to whom Options are to be granted; (b) the number of shares of Common Stock for which the Options are
exercisable and the purchase price of such shares; (c) whether the Options are Incentive Stock Options or Nonqualified Stock Options; and (d) all of the other terms and conditions (which need not be identical) of the Options;
provided, however, that (i) the authority delegated to the Executive Officer under this Section 6.12 shall not exceed that of the Committee under the foregoing provisions of this Article 6 and shall be subject to such
limitations, in addition to those specified in this Section 6.12, as may be specified by the Board at the time of delegation; (ii) the Executive Officer may not be delegated authority under this Section 6.12 to grant any Option to any
person who is an Executive Officer or a director of the Company at the time of the grant; (iii) the purchase price of each share of Common Stock under an Option granted under this Section 6.12 shall not be less than the Fair Market Value
of such share on the date of grant of the Option; and (iv) the Executive Officer shall promptly provide a report to the Committee of each person to whom an Option has been granted under this Section 6.12 and the material terms and
conditions of the Option. 
  
 ARTICLE 7 
 GENERAL PROVISIONS 
  
 The provisions of this Article 7 shall apply to all Options, except to the extent that one or more Option Agreements expressly provide otherwise.

  
 7.1 Termination of Service.  
  
 (a) General. If a Holder’s
Service terminates without Cause prior to the full exercise of an Option, then the Option shall thereafter be exercisable, to the extent the Holder was entitled to exercise the Option on the date of such termination, for a period of three
(3) months following such termination (but not later than the end of the term of the Option); provided, however, that, if the Holder’s Service terminates by reason of death or Disability, the Option shall be exercisable for a
period of one (1) year following such termination (but not later than the end of the term of the Option). At the end of such period, the Option shall terminate. 
  

 13 

 (b) Termination for Cause. If a Holder’s Service is
terminated for Cause, then all Options held by the Holder shall immediately terminate. Following termination of a Holder’s Service, if the Holder engages in any act that would have constituted Cause if the Holder had remained in the Service of
the Company or any of its Affiliates, then the Committee shall be entitled to terminate any Options held by the Holder. 
  
 (c) Miscellaneous. The Committee may determine whether a leave of absence of a Holder constitutes a
termination of the Holder’s Service; provided, however, that neither (i) a leave of absence, duly authorized in writing by the Company or any of its Affiliates for military service or sickness, or for any other purpose
approved by the Company or any of its Affiliates, if the period of the leave does not exceed ninety (90) days, nor (ii) a leave of absence in excess of ninety (90) days, duly authorized in writing by the Company or any of its
Affiliates, provided the Holder’s right to return to Service with the Company or the Affiliate is guaranteed either by statute or by contract, shall be deemed a termination of the Holder’s Service. An Option shall not be affected by any
change in the Holder’s Service so long as the Holder continues to be in the Service of the Company or any of its Affiliates. If a Holder is in the Service of an Affiliate of the Company that ceases to be an Affiliate, such event shall, for
purposes of any Option held by the Holder, be deemed to constitute a termination of the Holder’s Service for a reason other than death or Disability. 
  
 7.2 Certain Events. 
  
 (a) Control Purchase. Effective upon a Control Purchase, if the Holder of an Option is in the Service of the
Company or any of its Affiliates at that time, the Option shall automatically become exercisable for all of the shares under the Option. 
  
 (b) Approved Transaction. The following provisions shall apply if an Approved Transaction occurs: 

 
 (i) The Company shall provide each Holder with notice of
the pendency of the Approved Transaction at least fifteen (15) days before the expected date of consummation thereof (the date on which the Approved Transaction is consummated will be referred to as the “Transaction Date”).

  
 (ii) Effective immediately before the
Transaction Date, if the Holder of an Option is in the Service of the Company or any of its Affiliates on the Transaction Date, the Option shall automatically become exercisable for all of the shares under the Option. 
  
 (iii) Following notice of the Approved Transaction, any
exercise of an Option may be contingent upon consummation of the Approved Transaction, if so elected by the Holder in the notice of exercise, and shall be contingent upon such consummation with respect to any portion of the Option that will only
become exercisable immediately before the Transaction Date. 
  
 (iv) Subject to Section 7.2(b)(v), upon consummation of the Approved Transaction, all Options shall terminate. 
  

 14 

 (v) If an Approved Transaction is a business combination that, for financial accounting
purposes, will be accounted for under the pooling-of-interests method (any such Approved Transaction will be referred to as an “Approved Poolable Transaction”), then Section 7.2(b)(iv) shall not apply and the following provisions
shall apply instead: 
  
 (A) Effective
immediately before the Transaction Date, if the Holder of an Option is in the Service of the Company or any of its Affiliates on the Transaction Date, the Option shall automatically become exercisable for the number of shares for which it would have
been exercisable if the Holder had remained in the Service of the Company until the first (lst) anniversary of the Approved Transaction. 
  
 (B) The Company shall, or shall cause another party to the Approved Transaction to, either: 
  
 (1) make appropriate provision for continuation of the
Option, or for replacement of the Option with a new award on terms that are, as nearly as practicable, the financial equivalent of the Option, taking into account in either event any automatic acceleration of exercisability provided for in
subsection (A) above (the Option as so continued or replaced shall be referred to as a “Continuing Option”); or 
  
 (2) deliver to the Holder equity securities of the Company or another party to the Approved Transaction (the “Replacement
Securities”) having a value equal to the value of the Option on the Transaction Date, taking into account any automatic acceleration of exercisability provided for in subsection (A) above. 
  
 (C) At the time the Holder is given notice of the pendency
of the Approved Transaction under Section 7.2(b)(i)or in a separate notice given before the Transaction Date, the Committee shall inform the Holder of the provision to be made for a Continuing Option or for delivery of Replacement Securities.
Effective automatically upon consummation of the Approved Transaction and without any action by the Holder, the Option shall represent the Continuing Option (if provision is made for a Continuing Option) or terminate (if Replacement Securities are
to be delivered). 
  
 (vi) In connection with an
Approved Transaction other than an Approved Poolable Transaction, the Committee may determine to override the automatic acceleration of exercisability set forth in Section 7.2(b)(ii) above and the other provisions of Section 7.2(b)(ii)
through Section 7.2(b)(iv) that would otherwise apply to an Option. In such event, the following provisions shall apply instead: 
  
 (A) Effective immediately before the Transaction Date, if the Holder of an Option is in the Service of the Company or any of its
Affiliates on the Transaction Date, the Option shall automatically become exercisable for the number of shares for which it would have been exercisable if the Holder had remained in the Service of the Company until the first (lst) anniversary of the
Approved Transaction. 
  
 (B) The Company shall,
or shall cause another party to the Approved Transaction to, make provision for a Continuing Option or for delivery of 

  

 15 

 
Replacement Securities, taking into account in either event any automatic acceleration of exercisability provided for in subsection (A) above.

  
 (C) At the time the Holder is given notice
of the pendency of the Approved Transaction under Section 7.2(b)(i) or in a separate notice given before the Transaction Date, the Committee shall inform the Holder of (1) its determination to override the provisions of
Section 7.2(b)(ii) through Section 7.2(b)(iv), and (2) the provision to be made for a Continuing Option or for delivery of Replacement Securities. Effective automatically upon consummation of the Approved Transaction and without any
action by the Holder, the Option shall represent the Continuing Option (if provision is made for a Continuing Option) or terminate (if Replacement Securities are to be delivered). 
  
 (c) Termination After Certain Approved Transactions. If there are one or more
Continuing Options following an Approved Transaction, and the Service of the Holder of a Continuing Option or Option Securities is terminated without Cause within a period of eighteen (18) months following the Transaction Date, or if the Holder
voluntarily terminates his or her Service for Good Reason during such period, then (i) all Continuing Options held by the Holder shall become exercisable for all of the shares thereunder; (ii) any right of repurchase of the Holder’s
Option Securities under Section 6.9 shall terminate; (iii) all restrictions under the Plan or any Option Agreement with respect to Option Securities issued pursuant to exercise of any such Continuing Option (other than restrictions on
transfer under applicable securities laws), including but not limited to contractual restrictions on transfer, rights of repurchase or first refusal in favor of the Company and restrictions on certificates for the Option Securities (other than
restrictions on certificates designed to promote compliance with applicable securities laws) shall automatically terminate; and (iv) each such Continuing Option shall remain exercisable until a period of eighteen (18) months has elapsed
following the Transaction Date or until the date on which the Continuing Option would have terminated if the Service of the Holder had not terminated, whichever occurs first, notwithstanding any contrary provision in the Option Agreement for the
Continuing Option (other than one expressly providing that this Section 7.2(c) shall not apply). 
  
 7.3 Right to Terminate Service. Nothing contained in the Plan or in any Option Agreement, and no action of the Company or the Committee with
respect thereto, shall confer on any Holder any right to continue in the Service of the Company or any of its Affiliates or interfere in any way with the right of the Company or any of its Affiliates, subject to the terms and conditions of any
agreement between the Holder and the Company or any of its Affiliates, to terminate at any time, with or without Cause, the Service of the Holder. 
  
 7.4 Nonalienation of Benefits. Except as permitted pursuant to Section 6.8, no right or benefit under the Plan or any Option shall be
(a) subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge (and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the
same shall be void); or (b) liable for or subject to the debts, contracts, liabilities or torts of the person entitled to the right or benefit. 
  
 7.5 Shareholders Agreement. If requested by the Company, the Holder of an Option shall be required, as a condition to issuance of the shares
of Common Stock that the 

  

 16 

 
Holder acquires upon exercise of the Option, to execute and deliver to the Company a shareholders agreement in such form as may be required by the Company at
the time of such exercise, or a counterpart thereof, together with, unless the Holder is unmarried, a spousal consent in the form required thereby, unless the Holder has previously executed and delivered such documents and they are in effect at the
time of exercise and apply by their terms to the shares to be issued. 
  
 7.6 Termination and Amendment.  
  
 (a) Termination. The Plan shall terminate on the tenth (10th) anniversary of the Effective Date; provided, however, that the Board or the Committee may terminate the Plan at any earlier time.
No Options may be granted following termination of the Plan, but the provisions of the Plan shall continue in effect until all Options terminate or are exercised in full and all rights of all persons with any interest in the Plan expire. 

 
 (b) Amendment of Plan. The Board or the
Committee may from time to time amend the Plan, whether before or after termination of the Plan, in such respects as it shall deem advisable; provided, however, that any such amendment (i) shall comply with all applicable laws and
stock exchange listing requirements, and (ii) with respect to Incentive Stock Options granted or to be granted under the Plan, shall be subject to any approval by shareholders of the Company required under the Code. No amendment of the Plan may
adversely affect the rights of the Holder of an Option in any material way unless the Holder consents thereto. 
  
 (c) Amendment of Options. The Committee may amend the Option Agreement for an Option in such respects as it shall deem
advisable, including but not limited to any amendment that would accelerate the time or times at which the Option may be exercised or extend the scheduled termination date of the Option; provided, however, that (i) no amendment
may adversely affect the rights of the Holder of the Option in any material way unless the Holder consents thereto, and (ii) the Option Agreement, as amended, shall satisfy all of the requirements of the Plan at the time of the amendment.
Nothing in this Section 7.6 shall prevent the Committee from adopting, amending or rescinding rules, regulations and procedures pursuant to Section 3.3. 
  
 7.7 Government and Other Regulations.  
  
 (a) The obligation of the Company with respect to Options and the issuance of Common Stock
upon the exercise thereof shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including but not limited to the effectiveness of any registration statement required under
the Securities Act, and the rules and regulations of any securities exchange or over-the-counter market on which the Common Stock may be listed or quoted. The Company shall have no obligation to register shares of Common Stock issuable upon exercise
of Options under the Securities Act or to register, qualify or list such shares under the laws of any state or other jurisdiction or the rules of any securities exchange or over-the-counter market. 
  
 (b) As long as the Common Stock is not
registered under the Exchange Act, the Company intends that all offers and sales of Options and shares of Common Stock issuable 

  

 17 

 
upon exercise of Options shall be exempt from registration under the provisions of Section 5 of the Securities Act, and the Plan shall be administered
in a manner so as to preserve such exemption. The Company also intends that the Plan shall constitute a written compensatory benefit plan, within the meaning of Rule 701(b) promulgated under the Securities Act, and that each Option granted at a time
when the Common Stock is not registered under the Exchange Act shall, unless otherwise specified by the Committee at the time the Option is granted or at any time thereafter, be granted in reliance on the exemption from the registration requirements
of Section 5 of the Securities Act provided by Rule 701. 
  
 7.8 Withholding. By accepting an Option, the Holder shall be deemed to have agreed to pay, or make arrangements satisfactory to the Committee for payment to the Company of, all taxes required to be withheld by the Company in
connection with the exercise of the Option or any sale, transfer or other disposition of any shares of Common Stock acquired upon exercise of the Option. If the Holder shall fail to pay, or make arrangements satisfactory to the Committee for the
payment of, all such taxes, then the Company or any of its Affiliates shall, to the extent not prohibited by law, have the right to deduct from any payment of any kind otherwise due to the Holder an amount equal to any taxes of any kind required to
be withheld by the Company or any of its Affiliates with respect to the Option. 
  
 7.9 Separability. With respect to Incentive Stock Options, if the Plan does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be
incorporated herein with the same force and effect as if such provision had been set out in full herein; provided, however, that to the extent any Option that is intended to qualify as an Incentive Stock Option cannot so qualify, the
Option, to that extent, shall be deemed to be a Nonqualified Stock Option for all purposes of the Plan. 
  
 7.10 Plan Not Exclusive. Neither the adoption of the Plan by the Board nor any submission of the Plan to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including but not limited to the granting of stock options and the awarding of stock and cash
outside of the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 
  
 7.11 Exclusion from Pension and Profit-Sharing Computation. By accepting an Option, the Holder shall be deemed to have agreed that the Option is
special incentive compensation that will not be taken into account, in any manner, as salary, compensation or bonus in determining the amount of any payment or other benefit under any pension, retirement or other employee benefit plan, program or
policy of the Company or any of its Affiliates. 
  
 7.12 No
Shareholder Rights. No Holder or other person shall have any voting or other shareholder rights with respect to shares of Common Stock under an Option until the Option has been duly exercised, full payment of the purchase price has been made,
all conditions under the Option and the Plan to issuance of the shares have been satisfied, and a certificate for the shares has been issued. No adjustment shall be made for cash or other dividends or distributions to shareholders for which the
record date is before the date of such issuance. 
  

 18 

 7.13 Governing Law. The Plan and all Options shall be governed by, and interpreted in accordance
with, the laws of the State of Washington. 
  
 7.14
Company’s Rights. The grant of Options shall not affect in any way the right or power of the Company to make reclassifications, reorganizations or other changes of or to its capital or business structure or to merge, consolidate, liquidate,
sell or otherwise dispose of all or any part of its business or assets. 
  

 19 

 FORM: FOR NON-83(b) INTENDED ISSUANCES 
  
 THE SECURITIES OFFERED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND ANY SALE OF SUCH SECURITIES IS SUBJECT TO COMPLIANCE WITH, OR THE AVAILABILITY OF EXEMPTIONS FROM COMPLIANCE WITH, THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH
ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THIS INSTRUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE. TRANSFER OF THIS INSTRUMENT AND THE SECURITIES
OFFERED HEREBY IS RESTRICTED AS PROVIDED IN SECTIONS 6 AND 7 BELOW. 
  
 STOCK OPTION AGREEMENT 
  
 THIS STOCK OPTION
AGREEMENT (this “Agreement”) is entered into, effective as of                         , 200__, by
Northstar Neuroscience, Inc., a Washington corporation (the “Company”), and
                                     (the
“Holder”). 
  
 RECITALS 
  
 A. The Company has adopted the Northstar Neuroscience, Inc. Amended and
Restated 1999 Stock Option Plan (the “Plan”), a copy of which is attached as Exhibit A. Capitalized terms that are used but not defined in this Agreement will have the meanings given those terms in the Plan. 
  
 B. The Holder has been designated to receive an option under the Plan.

  
 NOW, THEREFORE, the Company and the Holder agree as
follows: 
  
 1. Grant of the Option. The Company grants to
the Holder an option (the “Option”) to acquire from the Company
                                    
(            ) shares of Common Stock (the “Shares”) at the price of
$                     per share (the “Purchase Price”). The Option [is/is not] intended to qualify as an Incentive Stock Option.

  
 2. Term of the Option. Unless earlier terminated
pursuant to the Plan, the Option will terminate on the earliest to occur of the following:
(a)                         , 20    ; (b) the expiration of ninety (90) days
following the date of termination of the Holder’s Service for any reason other than death, Disability or Cause; (c) the expiration of one (1) year following the date of termination of the Holder’s Service by reason of death or
Disability; and (d) the date of termination of the Holder’s Service for Cause. 
  

					
	 	 	- 1 -	  	Option No. [ISO/NSO]99-        

 3. Exercisability. The Option will become exercisable (a) for 2-7/8% percent of the shares on
the last day of each one-month period beginning on                      [one year from effective date] and ending on
                 [36 months thereafter, for a total of 4 years]; provided, however, that the number of Shares for which the Option
becomes exercisable on any date shall, if necessary to eliminate a fractional share of Common Stock, be rounded down to the nearest whole number. After the Holder’s Service terminates for any reason, the Option will thereafter be exercisable
only for the Shares for which it was exercisable on the date of termination. 
  
 4. Provisions of Plan. The Option is subject to all of the provisions of the Plan, including but not limited to Section 4.2 (which permits adjustments to the Option upon the occurrence of certain corporate
events such as stock splits, recapitalizations and reorganizations) and Section 7.2 (which will apply if an Approved Transaction or Control Purchase occurs), provided, however, that the Option shall not be subject to
Section 6.9 of the Plan. 
  
 5. Exercise of the
Option. In order to exercise the Option, the Holder must do the following: 
  
 (a) deliver to the Company a written notice, substantially in the form of the attached Exhibit B, specifying the number of Shares
for which the Option is being exercised; 
  
 (b)
surrender this Agreement to the Company; 
  
 (c)
tender payment to the Company of the aggregate Purchase Price for the Shares for which the Option is being exercised, which amount may be paid (i) by check; or (ii) by such other means as the Committee, in its sole discretion, shall permit
at the time of exercise; 
  
 (d) pay, or make
arrangements satisfactory to the Committee for payment to the Company of, all taxes required to be withheld by the Company in connection with the exercise of the Option; 
  
 (e) if requested by the Committee, deliver to the Company, at the Holder’s expense, a legal opinion,
satisfactory in form and substance to the Company, of legal counsel designated by the Holder and satisfactory to the Company, to the effect that exercise of the Option by the Holder, and the acquisition of Shares pursuant thereto, may be effected
without registration or qualification of the Shares under the Securities Act or any applicable state securities laws; and 
  
 (f) execute and deliver to the Company the documents required by Section 7.5 of the Plan and any other documents required from time
to time by the Committee in order to promote compliance with the Securities Act, applicable state securities laws, or any other applicable law, rule or regulation. 
  
 Unless the Option has terminated or been exercised in full, the Company shall affix to this Agreement an appropriate notation indicating the
number of Shares for which the Option was exercised and return this Agreement to the Holder. 
  

					
	 	 	- 2 -	  	Option No. [ISO/NSO]99-        

 6. Representations and Warranties. By executing this Agreement: 
  
 (a) The Holder accepts the Option and agrees to comply with
and be bound by all of the provisions of this Agreement and the Plan, including but not limited to the market stand-off provisions of Section 6.11 of the Plan. 
  
 (b) The Holder acknowledges that no registration statement under the Securities Act, or under any state
securities laws, has been filed with respect to the Option or any Shares that may be acquired upon exercise of the Option, and the Company is under no obligation to do so. 
  
 (c) The Holder represents and warrants that the Option, and any Shares acquired upon exercise of the Option,
will be acquired and held by the Holder for the Holder’s own account, for investment purposes only, and not with a view towards the distribution or public offering thereof nor with any present intention of reselling or distributing the same at
any particular future time. 
  
 (d) The Holder
agrees not to sell, transfer or otherwise dispose of the Option except as specifically permitted by this Agreement, the Plan and any applicable securities laws. 
  
 (e) The Holder agrees not to sell, transfer or otherwise dispose of any Shares acquired upon exercise of the
Option unless (i) there is an effective registration statement under the Securities Act covering the proposed disposition and compliance with governing state securities laws, (ii) the Holder delivers to the Company, at the Holder’s
expense, a “no-action” letter or similar interpretative opinion, satisfactory in form and substance to the Company, from the staff of each appropriate securities agency, to the effect that such Shares may be disposed of by the Holder in
the manner proposed, or (iii) the Holder delivers to the Company, at the Holder’s expense, a legal opinion, satisfactory in form and substance to the Company, of legal counsel designated by the Holder and satisfactory to the Company, to
the effect that the proposed disposition may be effected without registration or qualification of such Shares under the Securities Act or any applicable state securities laws. 
  
 7. Procedures Upon Permitted Transfer. Prior to any sale, transfer or other disposition of any Shares acquired upon
exercise of the Option, the Holder agrees to give written notice to the Company of the Holder’s intention to effect such disposition. The notice must describe the circumstances of the proposed transfer in reasonable detail and must specify the
manner in which the requirements of Section 6(d) will be satisfied in connection with the proposed disposition. After (a) legal counsel to the Company has determined that the requirements of Section 6(d) will be satisfied,
(b) the Holder has executed such documentation as may be necessary to effect the proposed disposition, and (c) the Holder has paid, or made arrangements satisfactory to the Committee for the payment of any taxes, if any, required to be
withheld by the Company in connection with the proposed disposition, the Company will, as soon as practicable, transfer such Shares in accordance with the terms of the notice. Any stock certificate issued upon such transfer will bear a restrictive
legend, in the form required by Section 6.7 of the Plan, unless in the opinion of legal counsel to the Company such legend is not required. 
  

					
	 	 	- 3 -	  	Option No. [ISO/NSO]99-        

 8. Entire Agreement; Amendments; Binding Effect. This Agreement, together with the Plan,
constitutes the entire agreement and understanding between the Company and the Holder regarding the subject matter hereof. Except as permitted by the Plan, no amendment of the Option or this Agreement, or waiver of any provision of this Agreement or
the Plan, shall be valid unless in writing and duly executed by the Company and the Holder. The failure of any party to enforce any of that party’s rights against the other party for breach of any of the terms of this Agreement or the Plan
shall not be construed as a waiver of such rights as to any continued or subsequent breach. This Agreement shall be binding upon the Holder and his or her heirs, successors and assigns. 
  
 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 
  

									
	 “Company”
	 	 	 	Northstar Neuroscience, Inc.
					
	 	 	 	 	 	 	By	 	 
				
	 “Holder”
	 	 	 	 	 	 

  

					
	 	 	- 4 -	  	Option No. [ISO/NSO]99-        

 FORM OF EXERCISE OF OPTION 
  

	To:	 	Northstar Neuroscience, Inc. 

	    	 	________________________ 

	    	 	________________________ 

  
 The undersigned holds Option Number [ISO/NSO99-        ] (the “Option”), represented by a Stock
Option Agreement dated effective as of                     , 200         (the
“Agreement”), granted to the undersigned pursuant to the Northstar Neuroscience, Inc. Amended and Restated 1999 Stock Option Plan (the “Plan”). The undersigned hereby exercises the Option and elects to purchase
                             shares (the “Shares”) of Common Stock of Northstar
Neuroscience, Inc., a Washington corporation (the “Company”) pursuant to the Option. This notice is accompanied by full payment of the Purchase Price for the Shares in cash or by check or in another manner permitted by Section 5(c) of
the Agreement. The undersigned has also paid, or made arrangements satisfactory to the Committee for payment of, all taxes, if any, required to be withheld by the Company in connection with the exercise of the Option. 
  
 Date:
                            ,
                . 

	
	
	 
	 

 FORM: FOR INTENDED 83(b) ISSUANCES 
  
 THE SECURITIES OFFERED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND ANY SALE OF SUCH SECURITIES IS SUBJECT TO COMPLIANCE WITH, OR THE AVAILABILITY OF EXEMPTIONS FROM COMPLIANCE WITH, THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. THIS INSTRUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE. TRANSFER OF THIS INSTRUMENT AND THE SECURITIES OFFERED HEREBY IS RESTRICTED AS PROVIDED
IN SECTIONS 6 AND 7 BELOW. 
  
 STOCK OPTION AGREEMENT

  
 THIS STOCK OPTION AGREEMENT (this
“Agreement”) is entered into, effective as of                         , 200__, by Northstar Neuroscience,
Inc., a Washington corporation (the “Company”), and [NAME OF HOLDER] (the “Holder”). 
  
 RECITALS 
  
 A. The Company has adopted the Northstar Neuroscience, Inc. Amended and Restated 1999 Stock Option Plan (the “Plan”), a copy of which is attached as Exhibit A. Capitalized terms that are used but not defined in this
Agreement will have the meanings given those terms in the Plan. 
  
 B. The Holder has been designated to receive an option under the Plan. 
  
 NOW, THEREFORE, the Company and the Holder agree as follows: 
  
 1. Grant of the Option. The Company grants to the Holder an option (the “Option”) to acquire from the Company
                            
(            ) shares of Common Stock (the “Shares”) at the price of $             per share (the
“Purchase Price”). The Option [is/is not] intended to qualify as an Incentive Stock Option. 
  
 2. Term of the Option. Unless earlier terminated pursuant to the Plan, the Option will terminate on the earliest to occur of the following:
(a)                         , 2        ; (b) the expiration of
ninety (90) days following the date of termination of the Holder’s Service for any reason other than death, Disability or Cause; (c) the expiration of one (1) year following the date of termination of the Holder’s Service by
reason of death or Disability; and (d) the date of termination of the Holder’s Service for Cause. 
  

					
	 	 	- 1 -	  	Option No. [ISO/NSO]99-0-

 3. Exercisability. The Option is fully vested and exercisable for all the Shares hereunder as of
the date first set forth above. 
  
 4. Provisions of Plan.
The Option is subject to all of the provisions of the Plan, including but not limited to Section 4.2 (which permits adjustments to the Option upon the occurrence of certain corporate events such as stock splits, recapitalizations and
reorganizations) and Section 7.2 (which will apply if an Approved Transaction or Control Purchase occurs). Any shares of Common Stock issued upon exercise of the Option shall be subject to the Company’s right of repurchase and right of
first refusal set forth in Section 6.9 and Section 6.10 of the Plan, respectively. For purposes of determining the time Elapsed Since Computation Date as set forth in Section 6.9, the Computation Date shall be
                                        .

  
 5. Exercise of the Option. In order to exercise the
Option, the Holder must do the following: 
  
 (a)
deliver to the Company a written notice, substantially in the form of the attached Exhibit B, specifying the number of Shares for which the Option is being exercised; 
  
 (b) surrender this Agreement to the Company; 
  
 (c) tender payment to the Company of the aggregate Purchase Price for the Shares for which the Option is
being exercised, which amount may be paid (i) by check; or (ii) by such other means as the Committee, in its sole discretion, shall permit at the time of exercise; 
  
 (d) pay, or make arrangements satisfactory to the Committee for payment to the Company of, all taxes
required to be withheld by the Company in connection with the exercise of the Option; 
  
 (e) if requested by the Committee, deliver to the Company, at the Holder’s expense, a legal opinion, satisfactory in form and
substance to the Company, of legal counsel designated by the Holder and satisfactory to the Company, to the effect that exercise of the Option by the Holder, and the acquisition of Shares pursuant thereto, may be effected without registration or
qualification of the Shares under the Securities Act or any applicable state securities laws; and 
  
 (f) execute and deliver to the Company the documents required by Section 7.5 of the Plan and any other documents required from time
to time by the Committee in order to promote compliance with the Securities Act, applicable state securities laws, or any other applicable law, rule or regulation. 
  
 Unless the Option has terminated or been exercised in full, the Company shall affix to this Agreement an appropriate
notation indicating the number of Shares for which the Option was exercised and return this Agreement to the Holder. 
  

					
	 	 	- 2 -	  	Option No. [ISO/NSO]99-0-

 6. Representations and Warranties. By executing this Agreement: 
  
 (a) The Holder accepts the Option and agrees to comply with
and be bound by all of the provisions of this Agreement and the Plan, including but not limited to the market stand-off provisions of Section 6.11 of the Plan. 
  
 (b) The Holder acknowledges that no registration statement under the Securities Act, or under any state
securities laws, has been filed with respect to the Option or any Shares that may be acquired upon exercise of the Option, and the Company is under no obligation to do so. 
  
 (c) The Holder represents and warrants that the Option, and any Shares acquired upon exercise of the Option,
will be acquired and held by the Holder for the Holder’s own account, for investment purposes only, and not with a view towards the distribution or public offering thereof nor with any present intention of reselling or distributing the same at
any particular future time. 
  
 (d) The Holder
agrees not to sell, transfer or otherwise dispose of the Option except as specifically permitted by this Agreement, the Plan and any applicable securities laws. 
  
 (e) The Holder agrees not to sell, transfer or otherwise dispose of any Shares acquired upon exercise of the
Option unless (i) there is an effective registration statement under the Securities Act covering the proposed disposition and compliance with governing state securities laws, (ii) the Holder delivers to the Company, at the Holder’s
expense, a “no-action” letter or similar interpretative opinion, satisfactory in form and substance to the Company, from the staff of each appropriate securities agency, to the effect that such Shares may be disposed of by the Holder in
the manner proposed, or (iii) the Holder delivers to the Company, at the Holder’s expense, a legal opinion, satisfactory in form and substance to the Company, of legal counsel designated by the Holder and satisfactory to the Company, to
the effect that the proposed disposition may be effected without registration or qualification of such Shares under the Securities Act or any applicable state securities laws. 
  
 7. Procedures Upon Permitted Transfer. Prior to any sale, transfer or other disposition of any Shares acquired upon
exercise of the Option, the Holder agrees to give written notice to the Company of the Holder’s intention to effect such disposition. The notice must describe the circumstances of the proposed transfer in reasonable detail and must specify the
manner in which the requirements of Section 6(d) will be satisfied in connection with the proposed disposition. After (a) legal counsel to the Company has determined that the requirements of Section 6(d) will be satisfied,
(b) the Holder has executed such documentation as may be necessary to effect the proposed disposition, and (c) the Holder has paid, or made arrangements satisfactory to the Committee for the payment of any taxes, if any, required to be
withheld by the Company in connection with the proposed disposition, the Company will, as soon as practicable, transfer such Shares in accordance with the terms of the notice. Any stock certificate issued upon such transfer will bear a restrictive
legend, in the form required by Section 6.7 of the Plan, unless in the opinion of legal counsel to the Company such legend is not required. 
  

					
	 	 	- 3 -	  	Option No. [ISO/NSO]99-0-

 8. Entire Agreement; Amendments; Binding Effect. This Agreement, together with the Plan,
constitutes the entire agreement and understanding between the Company and the Holder regarding the subject matter hereof. Except as permitted by the Plan, no amendment of the Option or this Agreement, or waiver of any provision of this Agreement or
the Plan, shall be valid unless in writing and duly executed by the Company and the Holder. The failure of any party to enforce any of that party’s rights against the other party for breach of any of the terms of this Agreement or the Plan
shall not be construed as a waiver of such rights as to any continued or subsequent breach. This Agreement shall be binding upon the Holder and his or her heirs, successors and assigns. 
  
 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 
  

									
	 “Company”
	 	 	 	Northstar Neuroscience, Inc.
					
	 	 	 	 	 	 	By	 	 
			
	 “Holder”
	 	 	 	 
	 	 	 	 	[NAME OF HOLDER]

  

					
	 	 	- 4 -	  	Option No. [ISO/NSO]99-0-

 FORM OF EXERCISE OF OPTION 
  

	To:	 	Northstar Neuroscience, Inc. 

	    	 	________________________ 

	    	 	________________________ 

  
 1. Exercise of Option. The undersigned holds Option Number [ISO/NSO]99-         (the
“Option”), represented by a Stock Option Agreement dated effective as of                         
        , (the “Agreement”), granted to the undersigned pursuant to the Northstar Neuroscience, Inc. Amended and Restated 1999 Stock Option Plan (the “Plan”). The undersigned hereby
exercises the Option and elects to purchase
                                        
shares (the “Shares”) of Common Stock of Northstar Neuroscience, Inc., a Washington corporation (the “Company”) pursuant to the Option. This notice is accompanied by full payment of the Purchase Price for the Shares in cash or by
check or in another manner permitted by Section 5(c) of the Agreement. The undersigned has also paid, or made arrangements satisfactory to the Committee for payment of, all taxes, if any, required to be withheld by the Company in connection
with the exercise of the Option. 
  
 2. Section 83(b)
Election. The undersigned understands that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Shares, if any, and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this context, “restriction” means the right of the Company to buy back the Shares pursuant to its right of repurchase in Section 6.9 of the Plan (the
“Repurchase Right”). The undersigned understands that he or she may elect to be taxed at the time the Shares are received rather than when and as the Repurchase Right expires by filing an election under Section 83(b) of the Code with
the Internal Revenue Service within thirty (30) days from the date of exercise of the option. Even if the fair market value of the Shares equals the amount paid for the Shares, the election must be made to avoid adverse tax consequences in the
future. The form for making this election is attached as Exhibit C. The undersigned understands that failure to make this filing timely will result in the recognition of ordinary income by the undersigned, as the Repurchase Rights lapses, on
the difference between the amount paid for the shares, if any, and the fair market value of the Shares at the time such restrictions lapse. 
  
 THE UNDERSIGNED ACKNOWLEDGES THAT IT IS THE UNDERSIGNED’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE UNDERSIGNED REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE UNDERSIGNED’S BEHALF. 
  

					
			
	 Date:
                                        
                        
	 	 	 	  
	 	 	 	 	 Name

  

 EXHIBIT B 

 ELECTION UNDER SECTION 83(b) 
 OF THE INTERNAL REVENUE CODE OF 1986 
  
 The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in his gross income
for the current taxable year, the amount of any compensation taxable to him in connection with his receipt of the property described below: 
  
 1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows: 
  

			
	 	  	TAXPAYER
		
	NAME:	  	__________________________________
		
	ADDRESS:	  	__________________________________
		
	IDENTIFICATION NO.:	  	__________________________________
		
	TAXABLE YEAR:	  	Calendar Year
                                    

  
 2. The property with
respect to which the election is made is described as follows: 
  
                          shares of Common Stock of Northstar Neuroscience, Inc., a Washington corporation.

  
 3. The date on which the property was transferred is:
                        , 2000. 
  

4. The property is subject to the following restrictions: 
  
 Option to repurchase                     
shares at cost upon termination of status as an employee or consultant. Repurchase Option lapses over a
                         (            ) month period.

  
 5. The fair market value at the time of transfer, determined
without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $                 
  
 6. The amount (if any) paid for such property:
$                 
  

 EXHIBIT C 

 The undersigned has submitted a copy of this statement to the person for whom the services were performed
in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. The undersigned understands that the foregoing
election may not be revoked except with the consent of the Commissioner. 
  

					
			
	 Dated:
                                        
                                
	 	 	 	 ___________________________________________________

			
	 	 	 	 	                                       
              , Taxpayer

	

  
  

 EXHIBIT C

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