EXHIBIT 10.3
VENTURE LOAN AND SECURITY AGREEMENT
Dated as of December
23, 2014
by and among
HORIZON TECHNOLOGY FINANCE CORPORATION,
a Delaware corporation
312 Farmington Avenue
Farmington, CT 06032
as Lender
And
INTERLEUKIN GENETICS, INC.,
a Delaware corporation
135 Beaver Street
Lexington, MA 02452
as Borrower
Loan A Commitment Amount: $5,000,000
Loan A Commitment Termination Date: December
23, 2014
The Lender 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 (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
“Account Control Agreement” means an agreement
acceptable to Lender which perfects via control Lender’s security interest in Borrower’s deposit accounts and/or securities
accounts.
“Affiliate” means, with respect to any Person,
any other Person that owns or controls directly or indirectly ten percent (10%) or more of the stock of such Person, any other
Person that controls or is controlled by or is under common control with such Person and each of such Person’s executive
officers, directors, managers, joint venturers or partners. For purposes of this definition, the term “control” of
a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting Equity Securities, by contract or otherwise and the terms “controlled
by” and “under common control with” shall have correlative meanings.
“Agreement” means this certain Venture Loan
and Security Agreement by and between Borrower and Lender dated as of the date on the cover page hereto (as it may from time to
time be amended, modified or supplemented in a writing signed by Borrower and Lender).
“Anti-Terrorism Laws” means any laws relating
to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the
laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.
“Blocked Person” means any Person: (a) listed
in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) owned or controlled by, or acting
for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law,
(d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224,
or (e) that is named a “specially designated national” or “blocked person” on the most current list published
by OFAC or other similar list.
“Borrower” means Borrower as set forth on
the cover page of this Agreement.
“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 Massachusetts.
“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 the State of 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 the Loan A Commitment
Amount.
“Commitment Fee” has the meaning given such
term in Section 2.6(c) of this Agreement.
“Consolidated” means the consolidation of
accounts in accordance with GAAP.
“Default” means any Event of Default or 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 five percent (5%) 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 duly authorized Responsible Officer of Borrower substantially in the form of Exhibit B or such other form
as Lender 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.
“Horizon” means Horizon Technology Finance
Corporation.
“Indebtedness” means, with respect to any
Person, 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.
“Indemnified Person” has the meaning given
such term in Section 10.3 of this Agreement.
“Intellectual Property” means, with respect
to any Person, all of such Person’s right, title and interest in and to patents, patent rights (and applications and registrations
therefor and divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same), trademarks and service
marks (and applications and registrations therefor and the goodwill associated therewith), whether registered or not, inventions,
copyrights (including applications and registrations therefor and like protections in each work or authorship and derivative work
thereof), whether published or unpublished, mask works (and applications and registrations therefor), trade names, trade styles,
software and computer programs, source code, object code, trade secrets, licenses, 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 such Person 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).
“Internal Revenue Code” has the meaning given
such term in Section 5.18 of this Agreement.
“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 Lender to Borrower or such other form as Lender may agree to accept.
“Lender” means the Lender as set forth on
the cover page of this Agreement.
“Lender’s Expenses” means all reasonable
costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation,
documentation, drafting, amendment, modification, administration, perfection and funding of the Loan Documents; and all of Lender’s
attorneys’ fees, costs and expenses incurred in 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 all fees and costs incurred by Lender in connection
with such Lender’s enforcement of its rights in a bankruptcy or insolvency proceeding filed by or against Borrower, any Subsidiary
or their respective Property.
“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 by Lender
to Borrower under this Agreement.
“Loan A” means the advance of credit by Lender
to Borrower under this Agreement in the Loan A Commitment Amount.
“Loan A Commitment Amount” has the meaning
set forth on the cover page of this Agreement.
“Loan A Commitment Termination
Date” has the meaning set forth on the cover page of this Agreement.
“Loan A Final Payment”
has the meaning given such term in Section 2.2(g) of this Agreement.
“Loan Amortization Date” means the Payment
Date on which Borrower is required, pursuant to Section 2.2 (a) below, to commence making equal payments of principal plus
accrued interest on the outstanding principal amount of the Loan.
“Loan Documents” means, collectively, this
Agreement, the Note, the Warrant, any Landlord Agreement, any Account Control Agreement and all other documents, instruments and
agreements entered into in connection with this Agreement.
“Loan Rate” means, with respect to each Loan,
the per annum rate of interest equal to 9.00% plus the amount by which the one month LIBOR Rate (rounded to the nearest
one hundredth percent), as reported in the Wall Street Journal exceeds 0.50%. Notwithstanding the foregoing, in no event
shall the Loan Rate be less than 9.00%.
“Material Adverse Effect” means a material
adverse effect on (a) the condition (financial or otherwise), business or operations of Borrower, (b) the ability of Borrower to
perform its Obligations under the Loan Documents or (c) the value of the Collateral or Lender’s security interest in the
Collateral.
“Maturity Date” means, with respect to each
Loan, forty-five (45) months from the first day of the month next following the month in which the Funding Date for such Loan occurs,
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 the Loan in substantially the form of Exhibit C attached hereto.
“Obligations” means all debt, principal,
interest, fees, charges, and other amounts, obligations, covenants, and duties owing by Borrower to Lender of any kind and description
arising under by the Loan Documents (other than the Warrant) 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 Lender’s Expenses.
“OFAC” means the Office of Foreign Assets
Control of the United States Department of the Treasury.
“Officer’s Certificate” means a certificate
executed by a Responsible Officer substantially in the form of Exhibit E or such other form as Lender 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 Lender under this Agreement;
(b) Indebtedness arising from the endorsement
of instruments in the ordinary course of business;
(c) Indebtedness of Borrower existing
on the date hereof and set forth on the Disclosure Schedule;
(d) intercompany Indebtedness owed
by any Subsidiary to Borrower or any wholly-owned Subsidiary, as applicable; provided that, if applicable, such Indebtedness
is also permitted as a Permitted Investment and, in the case of such Indebtedness owed to Borrower, such Indebtedness shall be
evidenced by one or more promissory notes;
(e) Indebtedness secured by Permitted
Liens pursuant to subsection (f) of such definition; and
(f) extensions, refinancings, modifications,
amendments and restatements of any items of Permitted Indebtedness under subsections (c), (d) and (e) above; provided that
the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms
upon Borrower.
“Permitted Investments” means and includes
any of the following Investments as to which Lender has a perfected security interest:
(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 by Borrower and Subsidiaries
in their Subsidiaries outstanding on the date hereof or Investments by Borrower in new Subsidiaries, subject to the terms of this
Agreement;
(f) Investments consisting of the endorsement
of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;
(g) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations
of, and other disputes with, customers or suppliers arising in the ordinary course of business;
(h) Investments consisting of (i) travel
advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans
to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee
stock purchase plans or agreements approved by Borrower's board of directors, not to exceed (in the aggregate for all such Investments
set forth in clauses (i) and (ii) together) One Hundred Thousand Dollars ($100,000.00); and
(i) other Investments aggregating not
in excess of One Hundred Thousand Dollars ($100,000) at any time.
“Permitted Licenses”
means and includes (i) non-exclusive licenses of Intellectual Property entered into in the ordinary course of business and (ii)
exclusive licenses of Intellectual Property entered into in the ordinary course of business, provided that such exclusive licenses
could not result in a legal transfer of title of the licensed Intellectual Property, but may be exclusive in respects other than
territory and may be exclusive as to territory only as to discrete geographical areas outside of the United States.
“Permitted Liens” means
and includes:
(a) the Liens 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) Permitted Licenses;
(f) purchase money Liens (i) on Equipment
acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Seven Hundred Fifty
Thousand Dollars ($750,000.00) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;
(g) Liens incurred in the extension,
renewal or refinancing of the indebtedness secured by Liens described in (c), (e) and (g) above, but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may
not increase;
(h) Liens to secure payment of workers’
compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course
of business (other than Liens imposed by ERISA);
(i) leases or subleases of real
property granted in the ordinary course of Borrower’s business, and leases, subleases, licenses or sublicenses of personal
property granted in the ordinary course of Borrower’s business;
(j) Liens arising from attachments
or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.7 and 8.9;
(k) banker’s liens, rights
of setoff and Liens in favor of financial institutions incurred made in the ordinary course of business arising in connection with
Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar
costs and expenses and provided such accounts are maintained in compliance with Section 7.13 hereof; and
(l) precautionary Liens filed
in connection with operating leases so long as such Liens are limited to applicable leased Equipment.
“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.
“Restricted License”
means any license or other agreement with respect to which Borrower is the licensee and such license or agreement is material to
Borrower’s business and (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s
interest in such license or agreement or any other property or (b) for which a default under or termination of could interfere
with Lender’s right to sell any Collateral.
“Right to Payment” has
the meaning given such term in Section 4.1 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 5.12 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.
“Transfer” has the meaning
given such term in Section 7.4 of this Agreement.
“Warrant” means the separate
warrant or warrants dated on or about the date hereof in favor of each Lender or its 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 (subject, in the case of clauses (b) and (c), to any restrictions
on such replacement, amendment, modification or supplement set forth in the Loan Documents). 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 the context
requires otherwise, any reference in this Agreement or any other Loan Document to any Person shall be construed to include such
Person’s successors and assigns. 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; provided that if at any time any change in GAAP would affect the computation of any requirement set forth in any
Loan Document, and either Borrower or Lender shall so request, Borrower and Lender shall negotiate in good faith to amend such
requirement to preserve the original intent thereof in light of such change in GAAP; provided, further, that, until so amended,
(a) such requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower shall
provide Lender financial statements and other documents required under this Agreement or as reasonably requested hereunder setting
forth a reconciliation between calculations of such requirement made before and after giving effect to such change in GAAP. Notwithstanding
any provision of this Agreement to the contrary, all leases and obligations under any leases of any Person that are or would be
characterized as operating leases and/or operating lease obligations in accordance with GAAP on January 1, 2014 (whether or not
such operating leases and/or operating lease obligations were in effect on such date) shall continue to be accounted for as operating
leases (and not as capitalized leases) for purposes of this Agreement regardless of any change in GAAP following the date that
would otherwise require such obligations to be recharacterized as capitalized leases. The terms and information set forth on the
cover page of this Agreement are incorporated into this Agreement.
2. Loan; Repayment.
2.1 Commitments.
(a) The Commitment Amounts.
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, Horizon agrees to lend to Borrower prior to the Loan A Commitment Termination Date, Loan A.
(b) The Loan and the Note. The
obligation of Borrower to repay the unpaid principal amount of and interest on the Loan shall be evidenced by a Note issued to
the relevant Lender.
(c) Use of Proceeds. The proceeds
of the 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, the Lender’s obligation to lend the undisbursed portion of the
Commitment Amount to Borrower hereunder shall terminate on the earlier of (i) at Lender’s election exercised in good
faith and in a commercially reasonable manner, the occurrence of any Event of Default hereunder, and (ii) with respect to
Loan A, the Loan A Commitment Termination Date. Notwithstanding the foregoing, Lender’s obligation to lend the undisbursed
portion of the Commitment Amount to Borrower shall terminate if, in Lender’ discretion exercised in good faith and in a commercially
reasonable manner, there has been a material adverse change in the general affairs, management, results of operations or financial
condition 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 Lender on or before the date of this Agreement.
2.2 Payments.
(a) Scheduled Payments. Borrower
shall make (i) a payment of accrued interest only to Lender on the outstanding principal amount of the Loan on the first fifteen
(15) Payment Dates specified in the Note applicable to the Loan and (ii) an equal payment of principal plus accrued interest to
Lender on the outstanding principal amount of the Loan on the next thirty (30) Payment Dates as set forth in the Note (collectively,
the “Scheduled Payments”). Borrower shall make such Scheduled Payments commencing on the date set forth in the
Note 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.
(b) Interim Payment. Unless
the Funding Date for the 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 the 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. The Loan Rate shall initially be calculated
using the LIBOR Rate reported in the Wall Street Journal on the date which is five (5) Business Days prior to the proposed
date of disbursement of the Loan, but shall thereafter be calculated for each calendar month using the LIBOR Rate reported in the
Wall Street Journal on the first calendar day of such month, provided, however, that if the first calendar day of any month
is not a Business Day, the Loan Rate shall be calculated using the LIBOR Rate reported in the Wall Street Journal on the
Business Day immediately preceding the first calendar day of such month. Interest (including interest at the Default Rate, if applicable)
shall be computed on the basis of a 360-day year for the actual number of days elapsed. 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 Lender prior to an Event of Default shall be applied as follows: (i) first, to Lender’s Expenses
then due and owing; and (ii) second, ratably, 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 amounts 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 Lender a late payment fee equal to six percent (6%) of any Scheduled Payment not paid when due to such Lender.
(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 to Lender under
this Agreement or the other Loan Documents (including Scheduled Payments), payable with respect to the 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 Lender’s 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.
(g) Final Payment. Borrower
shall pay to Horizon a payment in the amount of Two Hundred Twenty-Five Thousand Dollars ($225,000) (the “Loan A Final
Payment”) upon the earlier of (A) payment in full of the principal balance of Loan A, (B) an Event of Default and demand
by any Lender of payment in full of Loan A or (C) the Maturity Date, as applicable.
2.3 Prepayments.
(a) Mandatory Prepayment Upon an
Acceleration. If the Loan is 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 Lender the amount
set forth in Section 2.3(b) below, as if Borrower had opted to prepay on the date of such acceleration.
(b) Optional Prepayment. Upon
ten (10) Business Days’ prior written notice to Lender, Borrower may, at its option, at any time, prepay all (and not less
than all) of the outstanding Loan by simultaneously paying to Lender an amount equal to (i) any accrued and unpaid interest on
the outstanding principal balance of the Loan being prepaid; plus (ii) an amount equal to (A) if such Loan is prepaid on
or before the date that is fifteen (15) months from the Funding Date thereof, four percent (4%) of the then outstanding principal
balance of such Loan, (B) if such Loan is prepaid more than fifteen (15) months from the Funding Date thereof but on or before
the date that is twenty-seven (27) months from such Funding Date, two percent (2%) of the then outstanding principal balance of
such Loan, or (C) if such Loan is prepaid more than twenty-seven (27) months from the Funding Date thereof, one percent (1%) of
the then outstanding principal balance of such Loan; plus (iii) the outstanding principal balance of such Loan; plus
(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 Lender 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 10:00 a.m. Connecticut
time, on the date on which such payment is due. Borrower shall make such payments to Lender via wire transfer or ACH as instructed
by Lender from time to time.
(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.
(c) Taxes.
(i) Unless otherwise required under
applicable law, any and all payments made hereunder or under the Notes shall be made free and clear of and without deduction for
any taxes; provided that if Borrower shall be required to deduct any taxes from such payments, then (A) the sum payable
shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums
payable under this Section 2.4(c)) the Lender receives an amount equal to the sum it would have received had no such deductions
been made, (B) Borrower shall make such deductions and (C) Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(ii) Borrower shall indemnify Lender,
within 10 days after written demand therefor, for the full amount of any taxes imposed or asserted directly on Lender by any Governmental
Authority on or attributable to amounts payable under this Agreement solely as a result of Lender entering into this Agreement
to the extent such taxes are paid by Lender, and any penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided,
however, that such indemnified taxes shall not include income or franchise taxes imposed on (or measured by) Lender’s net
income by the jurisdiction, or any political subdivision thereof or taxing authority therein, under the laws of which such recipient
is organized or in which its principal office is located or in which its applicable lending office is located. A certificate as
to the amount of such payment or liability delivered to Borrower by Lender shall be conclusive absent manifest error.
(iii) Promptly after any payment of
taxes by Borrower hereunder to a Governmental Authority, Borrower shall deliver to Lender the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence
of such payment reasonably satisfactory to Lender.
(iv) If Lender is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement, Lender shall deliver to Borrower, as reasonably requested
by Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate.
(v) If Lender receives a refund in
respect of taxes paid by Borrower pursuant to this Section 2.4(c), which in the discretion of Lender exercised in good faith
and a commercially reasonable manner is allocable to such payment, it shall promptly pay such refund, together with any other amounts
paid by Borrower in connection with such refunded taxes, to Borrower, net of all reasonable out-of-pocket expenses (including any
taxes to which Lender has become subject as a result of its receipt of such refund) of Lender incurred in obtaining such refund
and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided
that Borrower, upon the request of the Lender, shall repay to Lender amounts paid over pursuant to the preceding clause (plus any
penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that Lender is required to repay
such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (v), in no event will Lender
be required to pay any amount to Borrower pursuant to this paragraph (v) the payment of which would place Lender in a less favorable
net after-tax position than Lender would have been in if the indemnification payments or additional amounts giving rise to such
refund had never been paid. This paragraph shall not be construed to require Lender to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to Borrower or any other Person.
2.5 Procedure for Making the
Loan.
(a) Notice. Borrower shall notify
Lender of the date on which Borrower desires Lender to make any Loan at least five (5) Business Days in advance of the desired
Funding Date, unless the Lender elects at its discretion acting in good faith and a commercially reasonable manner to allow the
Funding Date for a Loan to be made by Lender to be within five (5) Business Days of Borrower’s notice. Borrower’s execution
and delivery to Lender of one or more Notes in respect of a Loan shall be Borrower’s agreement to the terms and calculations
thereunder with respect to such Loan. Lender’s obligation to make any Loan shall be expressly subject to the satisfaction
of the conditions set forth in Section 3.
(b) Loan Rate Calculation. Prior
to each Funding Date for any Loan, Lender shall establish the Loan Rate with respect to such Loan, which shall be set forth in
the Note to be executed by Borrower with respect to such Loan and shall be conclusive in the absence of a manifest error.
(c) Disbursement. Lender shall
disburse the proceeds of the 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 Forty Thousand Dollars ($40,000) (the “Good Faith Deposit”).
The Good Faith Deposit paid to Horizon will be credited to the Commitment Fee payable to the Lender. If the Funding Date does not
occur for any reason other than Lender’s election not to proceed with the funding of the Loan, Lender shall retain the Good
Faith Deposit as compensation for its time, expenses and opportunity cost. If Lender elects not to proceed with the funding of
the Loan, the Lender shall deduct the Lender’s Expenses incurred by Lender from the Good Faith Deposit and return the balance
of the Good Faith Deposit to Borrower.
(b) Legal, Due Diligence and Documentation
Expenses. Concurrently with its execution and delivery of this Agreement, Borrower shall reimburse Lender for Lender’s
reasonable legal, due diligence and documentation expenses incurred in connection with the negotiation and documentation of this
Agreement and the Loan Documents.
(c) Commitment Fee. Borrower
shall pay concurrently with its execution and delivery of this Agreement a commitment fee to Horizon in the amount of Fifty Thousand
Dollars ($50,000) minus the amount of the Good Faith Deposit credited thereto pursuant to Section 2.6(a) above (the “Commitment
Fee”). The Commitment Fee shall be retained by the Lender and be deemed fully earned upon receipt.
3. Conditions of Loan.
3.1 Conditions Precedent to Closing.
At the time of the execution and delivery of this Agreement, Lender shall have received, in form and substance reasonably satisfactory
to Lender, all of the following (unless Lender has 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 Lender.
(b) Warrant. The Warrant duly
executed by Borrower.
(c) Secretary’s Certificate.
A certificate of the secretary or assistant secretary of Borrower, dated as of the date hereof, with copies of the following documents
attached: (i) the certificate of incorporation and bylaws (or equivalent documents) 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 organization and the state in which Borrower’s principal place
of business is located, each dated as of a date no earlier than thirty (30) days prior to the date hereof.
(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
Warrant and the other Loan Documents.
(g) Legal Opinion. A legal opinion
of Borrower’s counsel, dated as of the date hereof, covering the matters set forth in Exhibit D hereto.
(h) Account Control Agreements.
Account Control Agreements for all of Borrower’s deposit accounts and securities accounts duly executed by all of the parties
thereto, in the forms provided by or reasonably acceptable to Lender.
(i) Fees and Expenses. Payment
of all fees and expenses then due hereunder or under any other Loan Document.
(j) Other Documents. Such other
documents and completion of such other matters, as Lender may reasonably deem necessary or appropriate.
3.2 Conditions
Precedent to Making Loan A. The obligation of Lender to make Loan A is further subject to satisfaction of the following conditions
as of the applicable Funding Date:
(a) No Default. No Default or
Event of Default shall have occurred and be continuing.
(b) Landlord Agreements. Borrower
shall have provided Lender with a Landlord Agreement for each location where Borrower’s books and records and the Collateral
is located (unless Borrower is the fee owner thereof).
(c) Note. Borrower shall have
duly executed and delivered a Note in the amount of the Loan A to Horizon.
(d) UCC Financing Statements.
Lender shall have received such documents, instruments and agreements, including UCC financing statements or amendments to UCC
financing statements and UCC financing statement searches, as Lender shall reasonably request to evidence the perfection and priority
of the security interests granted to Lender pursuant to Section 4. Borrower authorizes Lender to file any UCC financing
statements, continuations of or amendments to UCC financing statements Lender deems necessary to perfect its security interest
in the Collateral.
(e) Funding Certificate. Borrower
shall have duly executed and delivered to Lender a Funding Certificate for such Loan.
(f) Sale of Equity Securities.
Borrower shall have provided Lender with evidence reasonably satisfactory to Lender that Borrower has received gross cash proceeds
of not less than Five Million Dollars ($5,000,000) from the sale of Equity Securities.
(g) Representations and Warranties.
The representations and warranties made by Borrower in Section 5 and in the other Loan Documents shall be true and correct
in all material respects as of such Funding Date, except for such statements which speak as of a specific date.
(h) Other Documents. Borrower
shall have provided Lender with such other documents and completion of such other matters, as Lender may reasonably deem necessary
or appropriate.
3.3 Covenant to Deliver.
Borrower agrees (not as a condition but as a covenant) to deliver to Lender each item required to be delivered to Lender as a
condition to Loan, if such Loan is advanced. Borrower expressly agrees that the extension of any Loan prior to the receipt by
Lender of any such item shall not constitute a waiver by Lender of Borrower’s obligation to deliver such item (unless Lender
has waived such item in writing), and any such extension in the absence of a required item shall be in each Lender’s sole
discretion.
4. Creation of Security Interest.
4.1 Grant of Security Interests.
Borrower grants to Lender 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 Warrants). The “Collateral”
shall mean and include all right, title, interest, claims and demands of Borrower in 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 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 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
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 and letters of credit rights (whether or not the letter of credit is evidenced by a writing) and other supporting
obligations, certificates of deposit, instruments, promissory notes, chattel paper (whether tangible or electronic) and investment
property, including 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; and
(f) To the extent not covered by clauses
(a) through (e), all other personal property of the Borrower, whether tangible or intangible, and any and all rights and interests
in any of the above and the foregoing and, any and all claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof, including 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.
Notwithstanding the foregoing, the Collateral
shall not include (i) any equipment that now or hereafter is subject to a Lien permitted by clause (f) of the definition of “Permitted
Liens” or (ii) any Intellectual Property; 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 date hereof,
include the Intellectual Property to the extent necessary to permit perfection of Lender’s security interest in the Rights
to Payment.
4.2 After-Acquired Property.
If Borrower shall at any time acquire a commercial tort claim having a value in excess of Fifty Thousand Dollars ($50,000), as
defined in the Code, Borrower shall immediately notify Lender in writing signed by Borrower of the brief details thereof and grant
to Lender 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 Lender.
4.3 Duration of Security Interest.
Lender’s security interest in the Collateral shall continue until the payment in full and the satisfaction of all Obligations
(other than inchoate indemnification and similar obligations), and termination of Lender’s commitment to fund the Loan,
whereupon such security interest shall automatically terminate. Lender 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 authorizing 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. Borrower shall remain in full possession, enjoyment and control of the Collateral
(except only as may be otherwise required by Lender for perfection of the security interests therein created hereunder) and so
long as no Event of Default has occurred and is continuing, 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 Borrower’s 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 Lender, at the request of Lender, all financing
statements and other documents Lender may reasonably request, in form satisfactory to Lender, to perfect and continue Lender’s
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. Lender
(through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during
Borrower’s usual business hours, to inspect the books and records of Borrower and Subsidiaries 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. Notwithstanding the foregoing, so long as no Event of Default shall be continuing,
the inspection rights shall be exercised no more frequently than one (1) per year.
4.7 Protection of Intellectual
Property. Borrower shall:
(a) protect, defend and maintain the
validity and enforceability of its Intellectual Property and promptly advise Lender in writing of material infringements;
(b) not allow any Intellectual Property
material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Lender’s written consent;
(c) provide written notice to Lender
within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially
available to the public); and
(d) take such commercially reasonable
steps as Lender reasonably requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for
(i) any Restricted License to be deemed “Collateral” and for Lender to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the
future, and (ii) Lender to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance
with or Lender’s rights and remedies under this Agreement and the other Loan Documents.
5. Representations and Warranties.
Except as set forth in the Disclosure Schedule, Borrower represents and warrants as follows:
5.1 Organization and
Qualification. Each of Borrower and its Subsidiaries 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 jurisdiction in
which the conduct of its business or its ownership of Property requires that it be so qualified and licensed, except for such
states as to which any failure to so qualify would not have a Material Adverse Effect.
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 and Subsidiaries have all requisite power and authority to own and operate their Property and
to carry on their businesses as now conducted. Borrower and Subsidiaries have obtained all licenses, permits, approvals and other
authorizations necessary for the operation of their business.
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 certificate of incorporation, the
by-laws, or any other organizational documents of Borrower or any law or any regulation, order, writ, injunction or decree of
any court or Governmental Authority by which Borrower or any Subsidiary or any of their respective property or assets may be
bound or affected, the conflict or breach of which would have a Material Adverse Effect, 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 Loan, 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 (a) the valid execution and
delivery of any Loan Document to which Borrower is a party, (b) the performance of Borrower’s obligations under any
Loan Document or (c) 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 Warrants. 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 is the sole owner
or licensee of the Intellectual Property which it owns or purports to own except for (a) Permitted Licenses, (b) over-the-counter
software that is commercially available to the public and (c) material Intellectual Property licensed to Borrower and noted on
the Disclosure Schedule. Each patent which it owns or purports to own and which is material to Borrower’s business is valid
and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s
business has been judged invalid or unenforceable, in whole or in part. Except as noted on the Disclosure Schedule, Borrower is
not a party to, nor is it bound by, any Restricted License. Borrower has not received any written 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 that would result in a Material Adverse
Effect. The Collateral constitutes substantially all of the assets and property of Borrower (excluding the Intellectual Property),
and Borrower owns or licenses all Intellectual Property associated with the business of Borrower and Subsidiaries, free and clear
of any liens other than Permitted Liens.
5.6 Security Interest.
Assuming the proper filing 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 Lender pursuant to this Agreement (a) constitute and
will continue to constitute first priority security interests and (b) 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).
5.7 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. 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 tangible Collateral is presently
located at the address set forth on the cover page hereof or as set forth in the Disclosure Schedule.
5.8 Litigation. There are
no actions or proceedings pending by or against Borrower or any Subsidiary before any court, arbitral tribunal, regulatory organization,
administrative agency or similar body in which an adverse decision could reasonably be expected to have a Material Adverse Effect.
Borrower does not have knowledge of any such pending or threatened in writing, actions or proceedings.
5.9 Financial Statements.
All financial statements (excluding all projections or forecasts) relating to Borrower or any Subsidiary that have been or may
hereafter be delivered by Borrower to Lender present fairly in all material respects Borrower’s Consolidated financial condition
as of the date thereof and Borrower’s Consolidated results of operations for the period then ended.
5.10 No Material Adverse Effect.
No event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect since December
31, 2013.
5.11 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 Lender 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, or which could in the future be reasonably expected to materially adversely affect, its ability
to perform its obligations under this Agreement (it being recognized by Lender that any projections and forecasts provided by
Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period
or periods covered by such projections and forecasts may differ from the projected or forecasted results and such differences
may be material).
5.12 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 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.
5.13 Subsidiaries. Borrower has
no Subsidiaries.
5.14 Catastrophic Events; Labor Disputes.
None of Borrower, any Subsidiary or any of their respective Property 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. 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 or any Subsidiary 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.
5.15 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, in each case that would result in a Material Adverse Effect, 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 that would result in a Material
Adverse Effect.
(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, has any present intention of terminating his
or her employment or consulting relationship with Borrower.
5.16 No Plan Assets. Neither
Borrower nor any Subsidiary is an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I
of ERISA, and none of the assets of Borrower or any Subsidiary constitutes or will constitute “plan assets” of one
or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) neither Borrower nor any Subsidiary
is a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower
or any Subsidiary are not subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental
plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Internal Revenue Code currently in effect,
which prohibit or otherwise restrict the transactions contemplated by this Loan Agreement.
5.17 Blocked Person. To the
best of Borrower’s knowledge, as of the date hereof and at all times throughout the term of this Agreement, including after
giving effect to any transfers of interests permitted pursuant to the Loan Documents, (a) none of the funds or other assets
of Borrower, any Subsidiary or any of their Affiliates constitute (or will constitute) property of, or are (or will be) beneficially
owned, directly or indirectly, by any Blocked Person; (b) no Blocked Person has (or will have) any interest of any nature
whatsoever in Borrower, any Subsidiary or in their Affiliates, with the result that the investment in the respective party (whether
directly or indirectly), is prohibited by applicable law or the Loan are in violation of applicable law; and (c) none of
the funds of Borrower, any Subsidiary or of their Affiliates have been (or will be) derived from any unlawful activity with the
result that the investment in the respective party (whether directly or indirectly), is prohibited by applicable law or the Loan
are in violation of applicable law.
5.18 Regulatory Compliance. Borrower
is not a “bank holding company” or a direct or indirect subsidiary of a “bank holding company” as defined
in the Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the Board of Governors of the Federal
Reserve System. Neither Borrower nor any Subsidiary is an “investment company” or a company controlled by an “investment
company” under the Investment Company Act of 1940. Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and
no proceeds of any Loan will be used to purchase or carry margin stock or to extend credit to others for the purpose of purchasing
or carrying any margin stock.
5.19 Payment of Taxes. All federal
and other material tax returns, reports and statements (including any attachments thereto or amendments thereof) of Borrower and
its Subsidiaries filed or required to be filed by any of them have been timely filed (or extensions have been have been obtained
and such extensions have not expired) and all taxes shown on such tax returns or otherwise due and payable and all assessments,
fees and other governmental charges upon Borrower, its Subsidiaries and their respective properties, assets, income, businesses
and franchises which are due and payable have been paid when due and payable, except for the payment of any such taxes, assessments,
fees and other governmental charges which are being diligently contested by Borrower in good faith by appropriate proceedings
and for which adequate reserves have been made under GAAP. To the knowledge of Borrower, no tax return of Borrower or any Subsidiary
is currently under an audit or examination, and Borrower has not received written notice of any proposed audit or examination,
in each case, where a material amount of tax is at issue. Borrower is not an “S corporation” within the meaning of
Section 1361(a)(1) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).
6. Affirmative
Covenants. Borrower, until the full and complete payment of the Obligations (other than inchoate indemnification and
similar obligations), covenants and agrees that:
6.1 Good Standing. Borrower
shall maintain, and cause each of its Subsidiaries to 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. Borrower shall maintain, and cause each of its Subsidiaries to maintain, in force all licenses,
approvals and agreements, the loss of which could reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance.
Borrower shall comply, and cause each of its Subsidiaries to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, noncompliance with which could reasonably be expected to have a Material Adverse Effect.
6.3 Financial Statements, Reports,
Certificates. Borrower shall deliver to each Lender: (a) Borrower will provide quarterly financials in the form provided in
its 10-Q, a Borrower prepared Consolidated balance sheet, Consolidated income statement and Consolidated 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 twenty
(120) days after the end of Borrower’s fiscal year, audited Consolidated 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 Lender (Lender acknowledges that Grant Thorton LLP is reasonably acceptable); and (c) as
soon as available, but in any event within sixty (60) days after the earlier of (i) the end of Borrower’s fiscal year or
(ii) 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 Lender 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: (i) 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 (ii) 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 Consolidated
financial statements of Borrower filed with such Form 10-Q. Borrower shall be deemed to deliver its 10-K and 10-Q to Lender
when such materials are posted on the website of the Securities and Exchange Commission. In addition, Borrower shall deliver to
Lender (A) promptly upon becoming available, copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders, which items shall be deemed to have been delivered when posted on the website of the Securities
and Exchange Commission and (B) promptly upon receipt of notice thereof, a report of any material legal actions pending or
threatened in writing against Borrower or any Subsidiary or the commencement of any legal action, proceeding or governmental investigation
involving Borrower or any Subsidiary that is reasonably expected to result in damages or costs to Borrower of Two Hundred Fifty
Thousand Dollars ($250,000).
6.4 Certificates of Compliance.
Each time financial statements are furnished pursuant to Section 6.3 above, Borrower shall deliver to Lender 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 Lender 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, and cause each Subsidiary to 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 Lender, on
demand, appropriate certificates attesting to the payment or deposit thereof; and Borrower will make, and cause each Subsidiary
to 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
Lender with proof satisfactory to Lender indicating that Borrower and each Subsidiary has made such payments or deposits; provided
that Borrower need not make any payment if the amount or validity of such payment is being 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). In addition, Borrower shall not change, and shall not permit any Subsidiary to change, its respective jurisdiction
of residence for taxation purposes.
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 (reasonable wear and tear excepted) 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 Lender. 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 Lender has 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 standard for companies in Borrower’s industry
and location, and as Lender may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that
are reasonably satisfactory to Lender. All property policies shall have a lender’s loss payable endorsement showing Lender
as an additional loss payee and all liability policies shall show Lender as an additional insured and all policies shall provide
that the insurer must give Lender at least thirty (30) days notice before canceling its policy At Lender’s request, Borrower
shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any property policy shall,
at Lender’s option, be payable to Lender 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 property policy, toward
the replacement or repair of destroyed or damaged property; provided that (a) any such replaced or repaired property (i)
shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Lender has
been granted a first priority security interest and (b) after the occurrence and during the continuation of an Event of Default
all proceeds payable under such property policy shall, at the option of Lender, be payable to Lender 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 Lender, Lender 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 Lender deems prudent. On or prior to the first Funding Date and
prior to each policy renewal, Borrower shall furnish to Lender certificates of insurance or other evidence satisfactory to Lender
that insurance complying with all of the above requirements is in effect.
6.9 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 Lender to make effective the purposes of this Agreement, including the continued perfection and
priority of Lender’s security interest in the Collateral.
6.10 Subsidiaries. Borrower, upon
Lender’s request, shall cause any Subsidiary to provide Lender with a guaranty of the Obligations and a security interest
in such Subsidiary’s assets to secure such guaranty.
7. Negative Covenants.
Borrower, until the full and complete payment of the Obligations, 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 Lender.
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,
allow or suffer, or permit any Subsidiary to create, incur, allow or suffer, any Lien on any of its property, or assign or convey
any right to receive income, including the sale of any accounts except for Permitted Liens, or permit any Collateral not to be
subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement
(except with or in favor of Lender) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower
or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s
or any Subsidiary’s Intellectual Property, except (a) as otherwise permitted in Section 7.4 hereof and (b) as permitted
in the definition of “Permitted Liens” herein.
7.4 Other Dispositions of Collateral.
Convey, sell, lease or otherwise dispose, or permit any Subsidiary to convey, sell, lease or otherwise dispose, of all or any
part of the Collateral to any Person (collectively, a “Transfer”), except for: (a) Transfers of inventory in
the ordinary course of business; (b) Transfers of worn-out or obsolete equipment made in the ordinary course of business; (c)
Transfers permitted under subclause (g) of the definition of Permitted Liens with respect to Collateral and (d) Permitted Licenses.
7.5 Distributions. (a)
Pay any dividends or make any distributions, or permit any Subsidiary to pay any dividends or make any distributions, on their
respective Equity Securities; (b) purchase, redeem, retire, defease or otherwise acquire, or permit any Subsidiary to purchase,
redeem, retire, defease or otherwise acquire, for value any of their respective 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 One Hundred Thousand Dollars ($100,000) in any fiscal year); (c) return, or permit any Subsidiary to return, any
capital to any holder of its Equity Securities as such; (iv) make, or permit any Subsidiary to 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 Borrower’s common stock.
7.6 Mergers or Acquisitions.
Merge or consolidate, or permit any Subsidiary to merge or consolidate, with or into any other Person or acquire, or permit any
Subsidiary to acquire, all or substantially all of the capital stock or assets of another Person; provided that (a) any
Subsidiary may merge into another Subsidiary and (b) any Subsidiary may merge into Borrower so long as Borrower is the surviving
entity.
7.7 Change in Business or Ownership.
(i) Engage, or permit any Subsidiary to engage, in any business other than the businesses currently engaged in by Borrower or
such Subsidiary, as applicable, or reasonably related thereto or (ii) enter into any transaction or series of related transactions
in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than
forty percent (40.0%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of
such transactions (other than by the sale of Borrower’s Equity Securities (y) in a public offering or (z) to venture capital
or other institutional investors so long as Borrower identifies to Lender such investors prior to the closing of the transaction
and provides to Lender a description of the material terms of the transaction).
7.8 Transactions With Affiliates;
Creation of Subsidiaries. (a) Enter, or permit any Subsidiary to 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 or such Subsidiary,
as applicable, as an arms-length transaction with Persons who are not Affiliates of Borrower or (b) create a Subsidiary without
providing at least 10 Business Days advance notice thereof to Lender and, if requested by Lender, such Subsidiary guarantees the
Obligations and grants a security interest in its assets to secure such guaranty.
7.9 Indebtedness Payments.
(a) 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, (b) amend, modify
or otherwise change the terms of any Indebtedness for borrowed money or lease obligations so as to accelerate the scheduled repayment
thereof or (c) repay any notes to officers, directors or shareholders.
7.10 Indebtedness. Create, incur,
assume or permit, or permit any Subsidiary to create, incur or permit, to exist any Indebtedness except Permitted Indebtedness.
7.11 Investments. Make, or permit
any Subsidiary to make, any Investment except for Permitted Investments.
7.12 Compliance.
(a) (i) Become, or permit any Subsidiary
to 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 (as defined
in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Loan for that purpose; (ii)
become, or permit any Subsidiary to become, subject to any other federal or state law or regulation which purports to restrict
or regulate its ability to borrow money; or (iii) fail, or permit any Subsidiary to 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, or permit any Subsidiary to permit, a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; (iv) fail,
or permit any Subsidiary to fail, to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if
the violation could reasonably be expected to have Material Adverse Effect.
(b) Lender hereby notifies Borrower
that pursuant to the requirements of Anti-Terrorism Laws, and Lender’s policies and practices, Lender is required to obtain,
verify and record certain information and documentation that identifies Borrower and its principals, which information includes
the name and address of Borrower and its principals and such other information that will allow Lender to identify such party in
accordance with Anti-Terrorism Laws. Borrower will not, nor will Borrower permit any Subsidiary to, directly or indirectly, enter
into any documents, instruments, agreements or contracts with any Blocked Person. Borrower shall immediately notify Lender if Borrower
has knowledge that Borrower or any Affiliate is listed on the most current list published by OFAC or (i) is convicted on, (ii)
pleads nolo contendere to, (iii) is indicted on or (iv) is arraigned and held over on charges involving money laundering or predicate
crimes to money laundering. Borrower will not, nor will Borrower permit any Subsidiary or Affiliate to, directly or indirectly,
(A) conduct any business or engage in any transaction or dealing with any Person Borrower or such Subsidiary knows to be a Blocked
Person, including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked
Person, (B) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant
to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law or (C) engage in or conspire to engage in
any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in Executive Order No. 13224 or other Anti-Terrorism Law.
7.13 Maintenance of Accounts.
(a) Maintain any deposit account or securities account except accounts with respect to which Lender is able to take such actions
as Lender deems necessary to obtain a perfected security interest in such accounts through one or more Account Control Agreements
or (b) grant or allow any other Person (other than Lender) to perfect a security interest in, or enter into any agreements with
any Persons (other than Lender) accomplishing perfection via control as to, any of its deposit accounts or securities accounts.
7.14 Negative Pledge Regarding Intellectual
Property. Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist,
any Lien of any kind upon any Intellectual Property or Transfer any Intellectual Property, whether now owned or hereafter acquired,
other than Permitted Licenses.
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: (a) any Scheduled
Payment on the relevant Payment Date or on the relevant Maturity Date; or (b) any other portion of the Obligations within five
(5) days after receipt of written notice from Lender that such payment is due.
8.2 Certain Covenant Defaults.
If Borrower fails to perform any obligation arising under Sections 6.5 or 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 8.14), 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.
8.4 Material Adverse Change.
If there occurs a material adverse effect on (a) the condition (financial or otherwise), business or operations of Borrower,
(b) the ability of Borrower to perform its Obligations under the Loan Documents or (c) the value of the Collateral or Lender’s
security interest in the Collateral.
8.5 Intentionally Omitted.
8.6 Seizure of Assets, Etc. (a)
If any material portion of Borrower’s or any Subsidiary’s assets (i) is attached, seized, subjected to a writ or distress
warrant, or is levied upon or (ii) 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,
(b) if Borrower or any Subsidiary is enjoined, restrained or in any way prevented by court order from continuing to conduct all
or any material part of its business affairs, (c) if a judgment or other claim becomes a lien or encumbrance upon any material
portion of Borrower’s or any Subsidiary’s assets or (d) if a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower’s or any Subsidiary’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 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.
8.7 Service of Process.
(a) The service of process upon Lender seeking to attach by a trustee or other process any funds of Borrower on deposit
or otherwise held by Lender, (b) the delivery upon Lender of a notice of foreclosure by any Person seeking to attach or foreclose
on any funds of Borrower on deposit or otherwise held by Lender or (c) 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
Lender) seeking to foreclose or attach any such accounts or securities.
8.8 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 of Borrower or any Subsidiary 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).
8.9 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 or any Subsidiary and shall remain unsatisfied and unstayed for
a period of ten (10) days or more.
8.10 Misrepresentations. If
any material misrepresentation or material misstatement exists now or hereafter in any warranty, representation, statement, certification,
or report made to Lender by of Borrower.
8.11 Breach of Warrant. If
Borrower shall breach any material term of the Warrant.
8.12 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.
8.13 Involuntary Insolvency Proceeding.
(a) If a proceeding shall have been instituted in a court having jurisdiction in the premises (i) seeking a decree or
order for relief in respect of Borrower or any Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, (ii) for the appointment of a receiver, liquidator, administrator, assignee, custodian,
trustee (or similar official) of Borrower or any Subsidiary or for any substantial part of its Property or (iii) for the winding-up
or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of sixty (60)
consecutive days or (b) such court shall enter a decree or order granting the relief sought in any such proceeding.
8.14 Voluntary Insolvency Proceeding.
If Borrower or any Subsidiary shall (a) commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) consent to the entry of an order for relief in an involuntary case under any such
law, (c) consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian (or other
similar official) of Borrower or any Subsidiary or for any substantial part of its Property, (d) shall make a general assignment
for the benefit of creditors, (e) shall fail generally to pay its debts as they become due or (f) take any corporate action in
furtherance of any of the foregoing.
9. Lender’s Rights
and Remedies.
9.1 Rights and Remedies.
Upon the occurrence of any Default or Event of Default that remains continuing, Lender shall not have any further obligation to
advance money or extend credit to or for the benefit of Borrower. In addition, upon the occurrence of an Event of Default that
remains continuing, Lender 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, Lender may, at its 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 Loan had
been voluntarily prepaid, (iii) the unpaid principal balance of the Loan 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 8.13 or 8.14 all Obligations shall become immediately due and payable without any action by Lender);
(b) Protection of Collateral.
Make such payments and do such acts as Lender considers necessary or reasonable to protect Lender’s security interest in
the Collateral. Borrower agrees to assemble the Collateral if Lender so requires and to make the Collateral available to Lender
as Lender may designate. Borrower authorizes Lender and its 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 Lender’s 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 Lender
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 Lender’s 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. Lender and its agents and any purchasers at or after foreclosure are hereby granted a non-exclusive,
irrevocable, perpetual, fully paid, royalty-free license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower’s Intellectual Property, including labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter, or any Property of a similar nature, now or at any
time hereafter owned or acquired by Borrower or in which Borrower now or at any time hereafter has any rights; provided
that such license shall only be exercisable in connection with the disposition of Collateral upon Lender’s exercise of its
remedies hereunder;
(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 Lender determines 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. Following
the occurrence of an Event of Default that remains continuing, Lender 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 Lender’s 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 Lender, 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 irrevocably appoint Lender (which appointment is coupled with an interest) the true
and lawful attorney in fact of Borrower, with full power of substitution and in its name 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 Lender’s security interests in the Collateral. Borrower does hereby irrevocably appoint
Lender (which appointment is coupled with an interest) on the occurrence of an Event of Default that remains continuing, the true
and lawful attorney in fact of Borrower, with full power of substitution 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 Lender 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
Lender’s possession or under Lender’s control; (c) to make all demands, consents and waivers, or take any other
action with respect to, the Collateral; (d) in 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 Lender may reasonably deem necessary or appropriate to protect
and preserve the right, title and interest of Lender 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 Lender determines reasonable; (i)
transfer the Collateral into the name of Lender or a third party as the Code permits; and (j) to otherwise act with respect
thereto as though Lender were the outright owner of the Collateral.
9.5 Lender’s 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 Lender 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 Lender deems prudent. Any amounts paid or deposited by Lender shall constitute Lender’s
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 Lender shall not constitute an agreement by Lender to make similar payments in the future or a waiver by
Lender of any Event of Default under this Agreement. Borrower shall pay all reasonable fees and expenses, including Lender’s
Expenses, incurred by Lender in the enforcement or attempt to enforce any of the Obligations hereunder not performed when due.
9.6 Remedies Cumulative; Independent
Nature of Lender’s Rights. Lender’s rights and remedies under this Agreement, the Loan Documents, and all other
agreements shall be cumulative. Lender shall have all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender
of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Lender shall constitute a waiver,
election, or acquiescence by it. The Obligations of Borrower to Lender may be enforced by Lender against Borrower in accordance
with the terms of this Agreement and the other Loan Documents and, to the fullest extent permitted by applicable law, it shall
not be necessary for Lender to be joined as an additional party in any proceeding to enforce such Obligations.
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 Lender, at the time of or received by Lender after the occurrence
of an Event of Default hereunder) shall be paid to and applied as follows:
(a) First, to the payment of
reasonable 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 Lender, including Lender’s
Expenses;
(b) Second, to the payment to
Lender of the amount then owing or unpaid on the Loan for any accrued and unpaid interest, the amounts which would have otherwise
come due under Section 2.3(b)(ii), if the Loan had been voluntarily prepaid, the principal balance of the Loan, and all
other Obligations with respect to the Loan (provided, however, if such proceeds shall be insufficient to pay in full the
whole amount so due, owing or unpaid upon the Loan, then first, to the unpaid interest thereon ratably, second,
to the amounts which would have otherwise come due under Section 2.3(b)(ii) ratably, if the Loan had been voluntarily prepaid,
third, to the principal balance of the Loan ratably, and fourth, to the ratable payment of other amounts then payable
to Lender 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.
To the extent that any payment by or on behalf of the Borrower is made to the Lender, or the Lender exercises its right of setoff,
and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement entered into by the Lender in its sole discretion) to
be repaid to a trustee, receiver or any other party, in connection with any proceeding under any bankruptcy or insolvency law
or otherwise, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred.
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 Lender on which Borrower may in any way be liable.
10.2 Lender’s Liability for
Collateral. So long as Lender complies with its obligations, if any, under the Code, and with reasonable practices regarding
the safekeeping of the Collateral in the possession or under the control of Lender, Lender 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 Lender’s 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 Lender for all liabilities, obligations and reasonable out-of-pocket expenses, including
Lender’s Expenses and reasonable fees and expenses of counsel for Lender 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 Lender,
and each of its respective successors, assigns, agents, attorneys, officers, directors, equity holders, 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 Loan
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 any Indemnified Person for any liability incurred
by such Indemnified Person as a direct and sole result of such Indemnified Person’s gross negligence or willful misconduct.
Such indemnities shall continue in full force and effect, notwithstanding the expiration or termination of this Agreement. Upon
Lender’s written demand, Borrower shall assume and diligently conduct, at its sole cost and expense, the entire defense of
Lender, each of its members, partners, and each of their respective, agents, employees, directors, officers, equity holders, 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 Lender without first obtaining Lender’s 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 LENDER 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.
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 Lender, as the case may
be, at their respective addresses set forth below:
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If to Borrower: |
|
Interleukin Genetics, Inc.
135 Beaver Street
Lexington, MA 02452
Attention: Chief Financial Officer
Fax: (781) 398-0720
Ph: (781) 398-0700 |
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|
|
|
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If to Horizon: |
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Horizon Technology Finance Corporation
312 Farmington Avenue
Farmington, CT 06032
Attention: Legal Department
Fax: (860) 676-8655
Ph: (860) 676-8654 |
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
Lender’s prior written consent, which consent may be granted or withheld in Lender’s sole discretion. Lender 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 Lender’s rights and benefits hereunder. Lender may disclose the Loan Documents and any
other financial or other information relating to Borrower to any potential participant or assignee of any of the Loan; 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 severable 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 Lender 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 Lender or any employee, attorney or agent 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 Lender 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 Lender. Borrower and Lender 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 Lender’s
actual intentions.
(c) Amendments and Waivers.
Any and all 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 Lender. Any and all amendments and modifications of this Agreement
or of any of the other Loan Documents shall not be effective without the written consent of Lender and Borrower. 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 Lender and on Borrower.
12.5 Reliance by Lender. All
covenants, agreements, representations and warranties made herein by Borrower shall be deemed to be material to and to have been
relied upon by Lender, notwithstanding any investigation by Lender.
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 (including signatures delivered
by facsimile or other electronic means), 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 Lender 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 Lender have run.
13. Relationship of Parties.
Borrower and Lender acknowledge, understand and agree that the relationship between Borrower, on the one hand, and Lender,
on the other, is, and at all times shall remain solely that of a borrower and lender. Lender shall not, under any circumstances,
be construed to be a partner or a joint venturer of Borrower or any of its Affiliates; nor shall Lender, 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 or any other duty to Borrower or any of its Affiliates. Lender does 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 Lender 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 Lender in connection with such matters is solely for the protection of Lender 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 Lender in writing, orally, electronically, through inspection, or by any other means pursuant to this Agreement shall be considered
confidential. Lender agrees to use the same degree of care to safeguard and prevent disclosure of such confidential information
as Lender uses with its own confidential information, but in any event no less than a reasonable degree of care. Lender shall
disclose such information to any third party (other than (a) to another party hereto, (b) to Lender’s members, partners,
attorneys, governmental regulators (including any self-regulatory authority) or auditors, (c) to Lender’s subsidiaries and
affiliates, (d) on a confidential basis, to any rating agency, (e) to prospective transferees and purchasers of the Loan or any
actual or prospective party (or its Affiliates) to any swap, derivative or other transaction under which payments are to be made
by reference to the Obligations, Borrower, any Loan Document or any payment thereunder, all subject to the same confidentiality
obligation set forth herein or (f) 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 Lender’s rights and the enforcement
of its remedies under this Agreement and the other Loan Documents. The obligations of confidentiality shall not apply to any information
that (i) was known to the public prior to disclosure by Borrower under this Agreement, (ii) becomes known to the public through
no fault of Lender, (iii) is disclosed to Lender on a non-confidential basis by a third party or (iv) is independently developed
by Lender. Notwithstanding the foregoing, Lender’s agreement of confidentiality shall not apply if and solely to the extent
that Lender has acquired indefeasible title to any Collateral or to the extent reasonably required in connection with any enforcement
or exercise of Lender’s rights and remedies under this Agreement following an Event of Default, including the enforcement
of Lender’s security interest in the Collateral.
15. CHOICE OF LAW AND VENUE; JURY
TRIAL WAIVER. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CONNECTICUT. EACH OF BORROWER AND LENDER HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN THE STATE OF CONNECTICUT. BORROWER, AND LENDER 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.
[Remainder of page intentionally
left blank.]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed as of the date first above written.
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BORROWER: |
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INTERLEUKIN GENETICS, INC. |
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By: |
/s/ Kenneth S. Kornman |
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Name: Kenneth S. Kornman |
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Title: CEO |
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LENDER: |
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HORIZON TECHNOLOGY FINANCE CORPORATION |
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By: |
/s/ Robert D. Pomeroy, Jr. |
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Name: Robert D. Pomeroy, Jr. |
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Title: Chief Executive Officer |
[SIGNATURE PAGE TO VENTURE LOAN AND SECURITY
AGREEMENT]
LIST OF EXHIBITS AND SCHEDULES
| Exhibit A | Disclosure Schedule |
| Exhibit B | Funding Certificate |
| Exhibit D | Form of Legal Opinion |
| Exhibit E | Form of Officer’s Certificate |
EXHIBIT A
DISCLOSURE SCHEDULE
Borrower hereby certifies the following information to Lender:
Section 1. Information For
UCC Financing Statements and Searches and Deposit Accounts and Accounts Holding Securities.
(a) The exact corporate name of Borrower
as it appears in its Certificate of Incorporation, as amended to date is:
(b) Borrower’s state of incorporation
is:
(c) The organizational ID number of
Borrower from its jurisdiction of incorporation is:
(d) Borrower’s
taxpayer identification number is:
(e) The following is a list of all
corporate names, dba or trade names used by Borrower in the past five years:
(f) The address of Borrower’s
headquarters and chief executive office is:
(g) The following is a list of all
States where Borrower’s headquarters and chief executive office has been located in the past five years:
(h) The following is a list of all
States where Borrower’s property and assets have been located in the past five years:
(i) The following is a list of all
of Borrower’s accounts (bank name, address and account names and numbers):
| Depository Bank |
Bank Address |
Type of Account |
Acct. No. |
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(j) The following is a list of all
of Borrower’s accounts holding securities (broker/bank name, address and account names and numbers):
EXHIBIT B
FUNDING CERTIFICATE
The undersigned, being the duly elected and acting
of INTERLEUKIN GENETICS, INC., a Delaware corporation (“Borrower”), does hereby certify to HORIZON TECHNOLOGY FINANCE
CORPORATION (the “Lender”) in connection with that certain Venture Loan and Security Agreement dated as of December
__, 2014 by and between Borrower, and Lender (the “Loan Agreement”; with other capitalized terms used below having
the meanings ascribed thereto in the Loan Agreement) that:
1. The
representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true
and correct as of the date hereof.
2. No
event or condition has occurred that would constitute a Default or an Event of Default under the Loan Agreement or any other Loan
Document.
3. Borrower
is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.
4. All
conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof
have been satisfied.
5. No
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, has occurred.
6. The
proceeds for Loan A shall be disbursed as follows:
Disbursement from Horizon:
| Balance of Commitment Fee | $ |
| Net Proceeds due from Horizon: | $ |
7. The
aggregate net proceeds of Loan A in the amount of $_________________ shall be transferred by Horizon to Borrower’s account
as follows:
Account Name:
Bank Name:
Bank Address:
Attention:
Telephone:
Account Number:
ABA Number:
Dated: December __, 2014
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BORROWER: |
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INTERLEUKIN GENETICS, INC. |
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By: |
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Name: |
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Title: |
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[Signature page to Funding Certificate]
EXHIBIT C
SECURED PROMISSORY NOTE
| $5,000,000 |
Dated: December __, 2014 |
FOR VALUE RECEIVED, the undersigned, INTERLEUKIN GENETICS, INC.,
a Delaware corporation (“Borrower”), HEREBY PROMISES TO PAY to HORIZON TECHNOLOGY FINANCE CORPORATION, a Delaware
corporation (“Lender”) the principal amount of Five Million Dollars ($5,000,000) or such lesser amount as shall
equal the outstanding principal balance of Loan A (the “Loan”) made to Borrower by Lender pursuant to the Loan
Agreement (as defined below), and to pay all other amounts due with respect to the Loan on the dates and in the amounts set forth
in the Loan Agreement.
Interest on the principal amount of this Note from the date
of this Note shall accrue at the Loan Rate or, if applicable, the Default Rate, each as established in accordance with the Loan
Agreement (as defined below). Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed.
If the Funding Date is not the first day of the month, interim interest accruing from the Funding Date through the last day of
that month shall be paid on the first calendar day of the next calendar month. Commencing February 1, 2015 through and including
April 1, 2016, on the first day of each month (each an “Interest Payment Date”) Borrower shall make payments
of accrued interest only on the outstanding principal amount of the Loan. Commencing on May 1, 2016, and continuing on the first
day of each month thereafter (each a “Principal and Interest Payment Date” and, collectively with each Interest
Payment Date, each a “Payment Date”), Borrower shall make to Lender thirty (30) equal payments of principal
in the amount of One Hundred Sixty-Six Thousand Six Hundred Sixty-Six and 67/100 ($166,666.67) plus accrued interest on the then
outstanding principal amount due hereunder. On October 1, 2018, or the earlier repayment in full of the Loan, Borrower shall make
a payment of Two Hundred Twenty-Five Thousand and 00/100 Dollars ($225,000) to Lender (the “Final Payment”). If not
sooner paid, all outstanding amounts hereunder and under the Loan Agreement shall become due and payable on October 1, 2018.
Principal, interest and all other amounts due with respect to
the Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement. The principal
amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.
This Note is referred to in, and is entitled to the benefits
of, the Venture Loan and Security Agreement dated as of the date hereof (the “Loan Agreement”), among Borrower
and Lender. The Loan Agreement, among other things, (a) provides for the making of a secured Loan to Borrower, and (b) contains
provisions for acceleration of the maturity hereof upon the happening of certain stated events.
This Note may not be prepaid, except as set forth in Section
2.3 of the Loan Agreement.
This Note and the obligation of Borrower to repay the unpaid
principal amount of the Loan, interest on the Loan and all other amounts due Lender under the Loan Agreement is secured under the
Loan Agreement.
Presentment for payment, demand, notice of protest and all other
demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby
waived.
Borrower shall pay all
reasonable fees and expenses, including reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt
to enforce any of Borrower’s obligations hereunder not performed when due.
Any reference herein
to Lender shall be deemed to include and apply to every subsequent holder of this Note. Reference is made to the Loan Agreement
for provisions concerning optional and mandatory prepayments, Collateral, acceleration and other material terms affecting this
Note.
This Note shall be governed by and construed under the laws
of the State of Connecticut. Borrower agrees that any action or proceeding brought to enforce or arising out of this Note may be
commenced in the state or federal courts located within the State of Connecticut.
IN WITNESS WHEREOF, Borrower has caused
this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.
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BORROWER: |
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INTERLEUKIN GENETICS, INC. |
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By: |
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Name: |
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Title: |
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[SIGNATURE PAGE TO SECURED PROMISSORY NOTE (LOAN A/B)]
EXHIBIT D
ITEMS TO BE COVERED BY OPINION OF BORROWER’S
COUNSEL
1. Borrower is a corporation,
duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified and authorized
to do business in the State of Massachusetts.
2. Borrower has the
full corporate power, authority and legal right, and has obtained all necessary approvals, consents and given all notices to execute
and deliver the Loan Documents and perform the terms thereof.
3. The Loan Documents
have been duly authorized, executed and delivered by Borrower and constitute valid, legal and binding agreements, and are enforceable
in accordance with their terms.
4. To our knowledge,
there is no action, suit, audit, investigation, proceeding or patent claim pending or threatened against Borrower in any court
or before any governmental commission, agency, board or authority which might have a Material Adverse Effect.
5. The Shares (as defined
in the Warrant) issuable pursuant to exercise or conversion of the Warrant have been duly authorized and reserved for issuance
by Borrower and, when issued in accordance with the terms thereof, will be validly issued, fully paid and nonassessable.
6. The shares of Common
Stock issuable upon conversion of the Shares have been duly authorized and reserved and, when issued in accordance with the terms
of Borrower’s Certificate of Incorporation, as amended, will be validly issued, fully paid and nonassessable.
7. The execution and
delivery of the Loan Documents are not, and the issuance of the Shares upon exercise of the Warrant in accordance with the terms
thereof will not be, inconsistent with Borrower’s Certificate of Incorporation, as amended, or Bylaws, do not and will not
contravene any law, governmental rule or regulation, judgment or order applicable to Borrower, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other agreement or instrument
of which Borrower is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration
or filing with or the taking of any action in respect of or by, any federal, state or local government authority or agency or other
person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time
required thereby.
EXHIBIT E
FORM OF OFFICER’S CERTIFICATE
TO: HORIZON TECHNOLOGY FINANCE CORPORATION
Reference is made to the Venture Loan and
Security Agreement dated as of December __, 2014 (as it may be amended from time to time, the “Loan Agreement”)
by and among INTERLEUKIN GENETICS, INC. (“Borrower”), HORIZON TECHNOLOGY FINANCE CORPORATION (“Lender”).
Unless otherwise defined herein, capitalized terms have the meanings given such terms in the Loan Agreement. The undersigned Responsible
Officer of Borrower hereby certifies to Lender that:
| 1. | No Event of Default or Default has occurred under the Loan
Agreement, including, without limitation, any Event of Default or Default caused by a cross-default under any agreement evidencing
Permitted Indebtedness of Borrower to lenders other than Lender. (If a Default or Event of Default has occurred, specify the nature
and extent thereof and the action Borrower proposes to take with respect thereto.) |
| 2. | The information provided in the Disclosure Schedules is
currently true and accurate, except as noted below. |
| 3. | Borrower is in compliance with the provisions of Section
4, 6 and 7 of the Loan Agreement, except as noted below. |
| 4. | Attached herewith are the [monthly financial statements
pursuant to Section 6.3(a) of the Loan Agreement/annual audited financial statements pursuant to Section 6.3(b) of the Loan Agreement].
These have been prepared in accordance with GAAP (subject to the absence of footnotes and normal year-end audit adjustments, in
the case of quarterly financial statements) and are consistent from one period to the next except as noted below. |
NOTES TO ABOVE CERTIFICATIONS:
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BORROWER: |
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INTERLEUKIN GENETICS, INC. |
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By: |
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Name: |
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Title: |
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Date: |
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