Exhibit 10.1

 

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LOAN AND SECURITY AGREEMENT

 

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POINT THERAPEUTICS, INC.

and

DARA BIOSCIENCES, INC.

Dated as of October 9, 2007

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Table of Contents

 

         Page

SECTION I. DEFINITIONS AND INTERPRETATION

   1  

1.1. Terms Defined

   1  

1.2. Accounting Principles

   6  

1.3. Construction

   6

SECTION II. THE LOAN

   6  

2.1. Loan – Description

   6  

2.2. Advances and Payments

   7  

2.3. Interest

   7  

2.4. Additional Interest Provisions

   7  

2.5. Prepayments

   8  

2.6. Use of Proceeds

   8  

2.7. Forgiveness

   8

SECTION III. COLLATERAL

   8  

3.1. Collateral

   8  

3.2. Lien Documents

   9  

3.3. Other Actions

   10  

3.4. Searches, Certificates

   10  

3.5. Filing Security Agreement

   10  

3.6. Power of Attorney

   10

SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

   11  

4.1. Resolutions, Opinions, and Other Documents

   11  

4.2. Absence of Certain Events

   11  

4.3. Warranties and Representations at Closing

   11  

4.4. Compliance with this Agreement

   11  

4.5. Closing

   11  

4.6. Waiver of Rights

   12  

4.7. Conditions for Future Advances

   12

SECTION V. REPRESENTATIONS AND WARRANTIES

   12  

5.1. Validity

   12  

5.2. Places of Business

   13  

5.3. Government Regulations, etc.

   13  

5.4. Names

   13  

5.5. Solvency

   13  

5.6. Perfection and Priority

   13  

5.7. Commercial Tort Claims

   14  

5.8. Deposit Accounts

   14  

5.9. Anti-Terrorism Laws

   14  

5.10. Letter of Credit Rights

   14

SECTION VI. BORROWER’S AFFIRMATIVE COVENANTS

   14  

6.1. Payment of Taxes and Claims

   14  

6.2. Maintenance of Properties and Corporate Existence

   15  

6.3. Business Conducted

   16

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Table of Contents

(continued)

         Page  

6.4. Litigation

   16  

6.5. Issue Taxes

   16  

6.6. Financial and Business Information

   16  

6.7. Audits and Inspection

   16  

6.8. Information to Participant

   17  

6.9. Material Adverse Developments

   17  

6.10. Places of Business

   17  

6.11. Commercial Tort Claims

   17  

6.12. Letter of Credit Rights

   17

SECTION VII. BORROWER’S NEGATIVE COVENANTS

   17  

7.1. Merger, Consolidation, Dissolution or Liquidation

   17  

7.2. Acquisitions

   18  

7.3. Liens and Encumbrances

   18  

7.4. Transactions With Affiliates or Subsidiaries

   18  

7.5. Guarantees

   18  

7.6. Distributions, Bonuses and Other Indebtedness

   18  

7.7. Loans and Investments

   18  

7.8. Use of Lenders’ Name

   18  

7.9. Miscellaneous Covenants

   19  

7.10. Jurisdiction of Organization

   19  

7.11. Management Fees

   19

SECTION VIII. DEFAULT

   19  

8.1. Events of Default

   19  

8.2. Cure

   21  

8.3. Rights and Remedies on Default

   21  

8.4. Nature of Remedies

   22

SECTION IX. MISCELLANEOUS

   22  

9.1. Governing Law

   22  

9.2. Integrated Agreement

   22  

9.3. Waiver

   22  

9.4. Indemnity

   23  

9.5. Time

   23  

9.6. Expenses of Lender

   23  

9.7. Brokerage

   24  

9.8. Notices

   24  

9.9. Headings

   25  

9.10. Survival

   25  

9.11. Successors and Assigns

   25  

9.12. Duplicate Originals

   25  

9.13. Modification

   25  

9.14. Signatories

   25  

9.15. Third Parties

   25

 

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Table of Contents

(continued)

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9.16. Discharge of Taxes, Borrower’s Obligations, Etc.

   26  

9.17. Withholding and Other Tax Liabilities

   26  

9.18. Consent to Jurisdiction

   26  

9.19. Additional Documentation

   26  

9.20. Waiver of Jury Trial

   27  

9.21. Consequential Damages

   27  

9.22. Confidentiality

   27

 

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LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (“Agreement”) is dated as of this the 9th day
of October 2007, by and between Point Therapeutics, Inc., a Delaware corporation
(“Borrower”), and DARA Biosciences, Inc., a Delaware corporation (“Lender”).

BACKGROUND

WHEREAS, Borrower has requested that Lender enter into a financing arrangement
with Borrower pursuant to which Lender may make loans to Borrower;

WHEREAS, Lender is willing to agree to make such loans to Borrower on the terms
and conditions set forth herein; and

WHEREAS, this Agreement is intended to aid the completion of the transactions
contemplated by the Agreement and Plan of Merger dated as of October 9, 2007 by
and among Borrower, Lender and DARA Acquisition Corp. (the “Merger Agreement”).

NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

SECTION I. DEFINITIONS AND INTERPRETATION

1.1. Terms Defined: As used in this Agreement, the following terms have the
following respective meanings:

Advance(s) – Any monies advanced or credit extended to Borrower by Lender under
the Loan, including, without limitation, cash advances.

Advance Request – Section 2.2(b).

Affiliate – With respect to any Person, (a) any other Person which, directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person, or
(iii) any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, directly or indirectly, (x) to vote
10% or more of the Capital Stock having ordinary voting power for the election
of directors (or comparable equivalent) of such Person, or (y) to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise. Control may be by ownership, contract, or otherwise.

Agreement – This Loan and Security Agreement, as it may hereafter from time to
time be amended, modified, restated or replaced.

Anti-Terrorism Laws – Any statute, treaty, law (including common law),
ordinance, regulation, rule, order, opinion, release, injunction, writ, decree
or award of any Governmental Authority relating to terrorism or money
laundering, including Executive Order No. 13224 and the USA Patriot Act.

 

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Asset Sale – The sale, transfer, lease, license or other disposition, by
Borrower or by any Subsidiary of Borrower to any Person other than Borrower of
any Property now owned or hereafter acquired, of any nature whatsoever in any
transaction or series of related transactions other than in the ordinary course
of business. An Asset Sale includes, without limitation, a division.

Authorized Officer – The President, Treasurer or Secretary of Borrower or any
other officer (or comparable equivalent) of Borrower authorized by specific
resolution of Borrower to request Advances as set forth in the authorization
certificate delivered to Lender substantially in the form of Exhibit “A”
attached hereto.

Business Day – A day other than Saturday or Sunday when Lender is open for
business in Philadelphia, Pennsylvania.

Capitalized Lease Obligations – Any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, consistently applied.

Capital Expenditures – For any period, the aggregate of all expenditures
(including that portion of Capitalized Lease Obligations attributable to that
period) made in respect of the purchase, construction or other acquisition of
fixed or capital assets, determined in accordance with GAAP.

Capital Stock – Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
other ownership interests in a Person (other than a corporation), including,
without limitation, all partnership interests of any kind in a partnership and
all membership interests of any kind in a limited liability company, and any and
all warrants or options to purchase any of the foregoing.

Change of Control – With respect to Borrower, the result caused by the
occurrence of any event which results in the stockholders of Borrower owning
(beneficially, legally or otherwise), in the aggregate, less than fifty-one
(51%) of the Capital Stock of Borrower.

Closing – Section 4.6.

Closing Date – Section 4.6.

Collateral – All of the Property and interests in Property described in
Section 3.1 of this Agreement and all other interests in Property that now or
hereafter secure payment of the Obligations and satisfaction by Borrower of all
covenants and undertakings contained in this Agreement and the other Loan
Documents.

Default – Any event, act, condition or occurrence which with notice, or lapse of
time or both, would constitute an Event of Default hereunder.

 

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Disqualified Stock – Any Capital Stock which by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable) or
upon the happening of any event (i) matures or is mandatorily redeemable for any
reason, (ii) is convertible or exchangeable for Indebtedness or Capital Stock
that meets the requirements of clause (i), or (iii) is redeemable at the option
of the holder thereof, in whole or in part, in each case on or prior to the Loan
Maturity Date.

Distribution –

a. Cash dividends or other cash distributions (including Permitted Tax
Distributions, if any) on any now or hereafter outstanding Capital Stock of
Borrower;

b. The redemption, repurchase, defeasance or acquisition of Capital Stock of
Borrower or of warrants, rights or other options to purchase such Capital Stock;
and

c. Any loans or advances (other than salaries), to any shareholder(s),
partner(s) or member(s) of Borrower.

Environmental Laws – Any and all Federal, foreign, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any
and all common law requirements, rules and bases of liability regulating,
relating to or imposing liability or standards of conduct concerning pollution,
protection of the environment, or the impact of pollutants, contaminants or
toxic or Hazardous Substances on human health or the environment, as now or may
at any time hereafter be in effect.

ERISA – The Employee Retirement Income Security Act of 1974, as the same may be
amended, from time to time.

Event of Default – Section 8.1.

Executive Order No. 13224 – The Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, as the same has been, or shall
hereafter be, renewed, extended, amended or replaced.

Expenses – Section 9.6.

GAAP – Generally accepted accounting principles as in effect in the United
States, applied in a manner consistent with the most recent audited financial
statements of Borrower.

Governmental Authority – Any federal, state or local government or political
subdivision, or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury, or
arbitration.

Hazardous Substances – Any substances defined or designated as hazardous or
toxic waste, hazardous or toxic material, hazardous or toxic substance or
similar term, under any Environmental Law.

 

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Indebtedness – Of any Person at any date, without duplication, (i) all
indebtedness of such Person for borrowed money (including with respect to
Borrower, the Obligations) or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all Capitalized Lease Obligations of such Person,
(iv) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder, (v) all obligations of other Persons
which such Person has guaranteed, (vi) Disqualified Stock, (vii) all Obligations
of such Person under Hedging Agreements, and (viii) all liabilities secured by
any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.

IRS – Internal Revenue Service.

Lien – Any interest of any kind or nature in property securing an obligation
owed to, or a claim of any kind or nature in property by, a Person other than
the owner of the Property, whether such interest is based on the common law,
statute, regulation or contract, and including, but not limited to, a security
interest or lien arising from a mortgage, encumbrance, pledge, conditional sale
or trust receipt, a financing lease, consignment or bailment for security
purposes, a trust, or an assignment. For the purposes of this Agreement,
Borrower shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement or other arrangement pursuant
to which title to the Property has been retained by or vested in some other
Person for security purposes.

Loan – Section 2.1(a).

Loan Documents – Collectively, this Agreement, the Note, any and all
Subordination Agreements and all agreements, instruments and documents executed
and/or delivered in connection therewith, all as may be supplemented, restated,
superseded, amended or replaced from time to time. The Loan Documents shall not
include the Merger Agreement.

Loan Maturity Date – The earlier of (i) the date of commencement of any
bankruptcy, insolvency or similar proceeding with respect to Borrower, (ii) the
date on which the Merger Agreement is terminated pursuant to Section 9.1(a),
9.1(b), 9.1(d), 9.1(e) (other than failure of the Merger to timely occur as a
result of DARA’s failure to fulfill any obligation under the Merger Agreement),
9.1(f), 9.1(h), 9.1(j), 9.1(k) or 9.1(l) of the Merger Agreement, and
(iii) March 31, 2008 or such later date as the parties hereto mutually agree.

Material Adverse Effect – A material adverse effect with respect to (a) the
business, assets, properties, financial condition, contingent liabilities,
material agreements (including the Merger Agreement) or results of operations of
Borrower taken as a whole, or (b) the validity or enforceability of this
Agreement or any of the other Loan Documents or the rights and remedies of
Lender hereunder or thereunder, provided that it is expressly acknowledged
hereunder that a Material Adverse Effect shall not include any fact disclosed in
the Merger Agreement or the Disclosure Schedules thereto.

Maximum Loan Amount – The sum of Four Hundred Thousand Dollars ($400,000) of
principal.

 

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Merger Agreement – Preamble.

Note – Section 2.1(b).

Obligations – All existing and future debts, liabilities and obligations owing
by Borrower to Lender or any other subsidiary or Affiliate of Lender under the
Loan Documents.

Overadvance – Section 2.1(a).

PBGC – The Pension Benefit Guaranty Corporation.

Permitted Indebtedness – (a) Indebtedness to Lender in connection with the Loan
or otherwise pursuant to the Loan Documents; (b) trade payables incurred in the
ordinary course of Borrower’s business; (c) indebtedness existing on the Closing
Date that is identified and described on Schedule 1.1(a) attached hereto and
made part hereof, and (d) Subordinated Debt.

Permitted Investments – investments and advances existing on the Closing Date
that are disclosed on Schedule 5.10(a).

Permitted Liens – (a) Liens securing taxes, assessments or governmental charges
or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, and other like persons not yet due; (b) Liens incurred or deposits
made in the ordinary course of business in connection with workers’
compensation, unemployment insurance, social security and other like laws; and
(c) Liens existing on the Closing Date and shown on Schedule 1.1(b) attached
hereto and made part hereof.

Person – An individual, partnership, corporation, trust, limited liability
company, limited liability partnership, unincorporated association or
organization, joint venture or any other entity.

Property – Any interest of Borrower in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

Regulation D – Regulation D of the Board of Governors of the Federal Reserve
System comprising Part 204 of Title 12, Code of Federal Regulations, as amended,
and any successor thereto.

Subordinated Debt – Indebtedness of Borrower subject to payment terms and
subordination provisions (including payment and enforcement standstills)
acceptable to Lender in its sole discretion, as evidenced by the prior written
consent and/or execution of an acceptable Subordination Agreement by Lender.

Subordination Agreement – Any Subordination Agreement executed by any
subordinated creditor of Borrower with respect to the Subordinated Debt owing to
such subordinated creditor from Borrower, in form and substance satisfactory to
Lender, which shall be executed by each such subordinated creditor prior to or
concurrently with the incurrence by Borrower of such Subordinated Debt.

 

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Subsidiary – With respect to any Person at any time, (i) any corporation more
than fifty percent (50%) of whose voting stock is legally and beneficially owned
by such Person or owned by a corporation more than fifty percent (50%) of whose
voting stock is legally and beneficially owned by such Person; (ii) any trust of
which a majority of the beneficial interest is at such time owned directly or
indirectly, beneficially or of record, by such Person or one or more
Subsidiaries of such Person; and (iii) any partnership, joint venture, limited
liability company or other entity of which ownership interests either having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions for such entity or having direct control
over the operations and/or management of such entity are at such time owned
directly or indirectly, beneficially or of record, by, or which is otherwise
controlled directly, indirectly or through one or more intermediaries by, such
Person or one or more Subsidiaries of such Person.

Other Capitalized Terms – Any other capitalized terms used without further
definition herein shall have the respective meaning set forth in the UCC.

1.2. Accounting Principles: Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP,
consistently applied, to the extent applicable, except as otherwise expressly
provided in this Agreement.

1.3. Construction: No doctrine of construction of ambiguities in agreements or
instruments against the interests of the party controlling the drafting shall
apply to any Loan Documents.

SECTION II. THE LOAN

2.1. Loan – Description:

a. Subject to the terms and conditions of this Agreement, Lender hereby
establishes for the benefit of Borrower a credit facility (collectively, the
“Loan”) which shall include cash Advances extended by Lender to or for the
benefit of Borrower from time to time hereunder. The aggregate principal amount
of unpaid cash Advances shall not at any time exceed the Maximum Loan Amount.
Subject to such limitation, the outstanding balance of Advances under the Loan
may be increased by future Advances which may be made by Lender, to or for the
benefit of Borrower, and, subject to the provisions of Section 8 below, shall be
due and payable on the Loan Maturity Date. If the aggregate principal amount of
unpaid cash Advances at any time exceeds the Maximum Loan Amount (such excess
referred to as “Overadvance”), Borrower, upon notice of such Overadvance from
Lender to Borrower, shall repay the Overadvance in full within three
(3) Business Days.

b. At Closing, Borrower shall execute and deliver a promissory note to Lender
for the Maximum Loan Amount (as it may hereafter from time to time be amended,
modified, restated or replaced, “Note”). The Note shall evidence Borrower’s
unconditional obligation to repay Lender for all Advances made under the Loan,
with interest as herein provided. Each Advance under the Loan shall be deemed
evidenced by the Note, which is deemed incorporated herein by reference and made
part hereof. The Note shall be in form and substance satisfactory to Lender.

 

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c. The term of the Loan shall expire on the Loan Maturity Date. On such date,
unless having been sooner accelerated by Lender pursuant to the terms hereof,
all sums owing under the Loan shall be due and payable in full, and as of and
after such date Borrower shall not request and Lender shall not make any further
Advances under the Loan.

2.2. Advances and Payments:

a. Except to the extent otherwise set forth in this Agreement, all payments of
principal and of interest on the Loan and all Expenses, fees, indemnification
obligations and all other charges and any other Obligations of Borrower, shall
be made to Lender at its office at 4505 Falls of the Neuse Road, Raleigh, North
Carolina 27609, or such other payment address as Lender may from time to time
direct. Any payments received prior to 2:00 p.m. Eastern time on any Business
Day shall be deemed received on such Business Day. Any payments (including any
payment in full of the Obligations), received after 2:00 p.m. Eastern time on
any Business Day shall be deemed received on the immediately following Business
Day.

b. All cash Advances under the Loan must be requested by 11:00 A.M., Eastern
time, two Business Days prior to the date such cash Advance is to be made. All
requests for an Advance are to be in writing pursuant to a written request
executed by an Authorized Officer in the form of Exhibit “B” (“Advance Request”)
attached hereto and made part hereof. Such request may be sent by facsimile
transmission provided that Lender shall have the right to require that receipt
of such request not be effective unless confirmed via telephone with Lender.

c. Upon receiving a request for an Advance in accordance with subparagraph
(b) above, and subject to the conditions set forth in this Agreement, Lender
shall make the requested Advance available to Borrower by wire transfer as soon
as is reasonably practicable thereafter on the day the requested Advance is to
be made.

2.3. Interest: The unpaid principal balance of cash Advances under the Loan
shall bear interest, subject to the terms hereof, at the per annum rate equal to
five percent (5%) per annum. Interest shall be payable on the Loan Maturity
Date.

2.4. Additional Interest Provisions:

a. Interest on the Loan shall be calculated on the basis of a year of three
hundred sixty (360) days but charged for the actual number of days elapsed.

b. After the occurrence and during the continuance of an Event of Default
hereunder, the per annum effective rate of interest on all outstanding principal
under the Loan, shall be increased by two hundred (200) basis points. All such
increases may be applied retroactively to the date of the occurrence of the
Event of Default. Borrower agrees that the default rate payable to Lender is a
reasonable estimate of Lender’s damages and is not a penalty.

c. Borrower shall not request and Lender shall not make, any Loan while an Event
of Default exists.

 

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d. All contractual rates of interest chargeable on outstanding principal under
the Loan shall continue to accrue and be paid even after an Event of Default,
maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind
or the happening of any event or occurrence similar or dissimilar.

e. In no contingency or event whatsoever shall the aggregate of all amounts
deemed interest hereunder and charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such court determines Lender has charged or received interest
hereunder in excess of the highest applicable rate, Lender shall apply, in its
sole discretion, and set off such excess interest received by Lender against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.

2.5. Prepayments: Borrower may prepay the Loan without premium or penalty in
whole or in part at any time or from time to time. Any partial payment shall
first be applied to accrued and unpaid interest on the Loan being prepaid and
then to the principal balance of the Loan.

2.6. Use of Proceeds: The extensions of credit under and proceeds of the Loan
shall be used for professional and other fees and expenses and other transaction
costs incurred by Borrower in connection with the negotiation, documentation,
execution and consummation of the transactions contemplated in the Merger
Agreement, and the Advance Request shall state the specific uses for such
Advance.

2.7 Forgiveness: The Loan and any accrued and unpaid interest thereon shall be
forgiven and Borrower shall be released from all Obligations hereunder in the
following events:

a. The consummation of the transactions contemplated in the Merger Agreement;

b. A Terminating DARA Breach (as such term is defined in the Merger Agreement)
shall occur giving rise to a right of Borrower to terminate the Merger Agreement
and Borrower so terminates the Merger Agreement.

c. The Merger Agreement is terminated pursuant to Sections 9.1(g) or 9.1(m); or

d. The Merger Agreement is terminated by Lender by reason of the occurrence of
any event or circumstances arising directly out of any fact that has been
expressly disclosed in Borrower’s disclosure schedule delivered to Lender
pursuant to the Merger Agreement.

SECTION III. COLLATERAL

3.1. Collateral: As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents:

 

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a. Personal Property: Borrower hereby assigns and grants to Lender, a continuing
Lien on and security interest in, upon and to all assets of Borrower and all
subsidiaries of Borrower, including but not limited to the following Property,
all whether now owned or hereafter acquired, created or arising and wherever
located:

i. Accounts - All Accounts;

ii. Chattel Paper - All Chattel Paper;

iii. Documents - All Documents;

iv. Instruments - All Instruments;

v. Inventory - All Inventory;

vi. General Intangibles - All General Intangibles;

vii. Equipment - All Equipment,

viii. Fixtures - All Fixtures;

ix. Deposit Accounts - All Deposit Accounts;

x. Goods - All Goods;

xi. Letter of Credit Rights - All Letter of Credit Rights;

xii. Supporting Obligations - All Supporting Obligations;

xiii. Investment Property - All Investment Property;

xiv. Commercial Tort Claims - All Commercial Tort Claims identified and
described on Schedule 5.7 (as amended or supplemented from time to time);

xv. Property in Lender’s Possession - All Property of Borrower, now or hereafter
in Lender’s possession; and

xvi. Proceeds - The Proceeds (including, without limitation, insurance
proceeds), whether cash or non-cash, of all of the foregoing property described
in clauses (i) through (viii).

3.2. Lien Documents: At Closing and thereafter as Lender reasonably deems
necessary, Borrower shall execute and/or deliver to Lender, or have executed and
delivered (all in form and substance reasonably satisfactory to Lender and its
counsel):

a. Financing statements pursuant to the UCC, which Lender may file in the
jurisdiction where Borrower is organized and in any other jurisdiction that
Lender deems appropriate; and

b. Any other agreements, documents, instruments and writings, including, without
limitation, intellectual property security agreements, required by Lender to
evidence, perfect or protect the Liens and security interests in the Collateral
or as Lender may reasonably request from time to time.

 

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3.3. Other Actions:

a. In addition to the foregoing, Borrower shall do anything further that may be
reasonably required by Lender to secure Lender and effectuate the intentions and
objects of this Agreement, including, without limitation, the execution and
delivery of security agreements, contracts and any other documents required
hereunder. At Lender’s reasonable request, Borrower shall also immediately
deliver (with execution by Borrower of all necessary documents or forms to
reflect, implement or enforce the Liens described herein), or cause to be
delivered to Lender all items for which Lender must receive possession to obtain
a perfected security interest, including without limitation, all Deposit
Accounts and all notes, stock powers, letters of credit, certificates and
documents of title, Chattel Paper, Warehouse Receipts, Instruments, and any
other similar instruments constituting Collateral.

b. Lender is hereby authorized to file financing statements and amendments to
financing statements without Borrower’s signature, in accordance with the UCC.
Borrower hereby authorizes Lender to file all such financing statements and
amendments to financing statements describing the Collateral in any filing
office as Lender, in its sole discretion may determine, including financing
statements listing “All Assets” in the collateral description therein. Borrower
agrees to comply with the requests of Lender in order for Lender to have and
maintain a valid and perfected security interest in the Collateral.

3.4. Searches, Certificates:

a. Lender may, as Lender reasonably determines from time to time, at Lender’s
expense, obtain the following searches (the results of which are to be
consistent with the warranties made by Borrower in this Agreement):

i. UCC searches with the Secretary of State and local filing office of each
state where Borrower is organized, maintains its executive office, a place of
business, or assets; and

ii. Judgment, state and federal tax lien and corporate tax lien searches, in all
applicable filing offices of each state searched under subparagraph (i) above.

3.5. Filing Security Agreement: A carbon, photographic or other reproduction or
other copy of this Agreement or of a financing statement is sufficient as and
may be filed in lieu of a financing statement.

3.6. Power of Attorney: Each of the officers of Lender is hereby irrevocably
made, constituted and appointed the true and lawful attorney for Borrower
(without requiring any of them to act as such) with full power of substitution
to do the following: (a) during the continuance of an Event of Default, endorse
the name of Borrower upon any and all checks, drafts, money orders and other
instruments for the payment of monies that are payable to Borrower and
constitute collections on Borrower’s Accounts or proceeds of other Collateral;
(b) execute and/or file in the name of Borrower any financing statements,
schedules, assignments, instruments, documents and statements that Borrower is
obligated to give Lender hereunder or is

 

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necessary to perfect (or continue or evidence the perfection of such security
interest or Lien) Lender’s security interest or Lien in the Collateral; and
(c) during the continuance of an Event of Default, do such other and further
acts and deeds in the name of Borrower that Lender may reasonably deem necessary
or desirable to enforce any Account or other Collateral.

SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

Closing under this Agreement is subject to the following conditions precedent
(all instruments, documents and agreements to be in form and substance
reasonably satisfactory to Lender and Lender’s counsel):

4.1. Resolutions, Opinions, and Other Documents: Borrower shall have delivered,
or caused to be delivered to Lender the following:

a. this Agreement, the Note and each of the other Loan Documents, all properly
executed;

b. each of the other documents to be executed and/or delivered by Borrower or
any other Person pursuant to this Agreement;

c. certified copies of (a) (i) resolutions of Borrower authorizing the
execution, delivery and performance of this Agreement, the Note to be issued
hereunder and each of the other Loan Documents required to be delivered by any
Section hereof and (ii) Borrower’s certificate of incorporation and bylaws;

d. an incumbency certificate for Borrower identifying all Authorized Officers,
with specimen signatures;

e. good standing certificates concerning Borrower from the state of Delaware and
each other state in which Borrower conducts business; and

f. such other documents reasonably required by Lender.

4.2. Absence of Certain Events: At the Closing Date, no Default or Event of
Default hereunder shall have occurred and be continuing.

4.3. Warranties and Representations at Closing: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on and as of that date.

4.4. Compliance with this Agreement: Borrower shall have performed and complied
in all material respects with all agreements, covenants and conditions contained
herein including, without limitation, the provisions of Sections 6 and 7 hereof,
which are required to be performed or complied with by Borrower before or at the
Closing Date.

4.5. Closing: Subject to the conditions of this Section, the Note shall be
entered into on such date (the “Closing Date”) and at such time as may be
mutually agreeable to the parties (“Closing”) at the offices of Wyrick Robbins
Yates & Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina.

 

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4.6. Waiver of Rights: By completing the Closing hereunder, or by making
Advances hereunder, Lender does not thereby waive a breach of any warranty or
representation made by Borrower hereunder or under any agreement, document, or
instrument delivered to Lender or otherwise referred to herein, and any claims
and rights of Lender resulting from any breach or misrepresentation by Borrower
are specifically reserved by Lender.

4.7. Conditions for Future Advances: The making of Advances under the Loan in
any form following the Closing Date is subject to the following conditions
precedent (all instruments, documents and agreements to be in form and substance
reasonably satisfactory to Lender and its counsel) following the Closing Date:

a. This Agreement and each of the other Loan Documents shall be effective;

b. No Material Adverse Effect shall have occurred and be continuing immediately
prior to, or would exist immediately after, the making of the Advance;

c. The Merger Agreement has not been terminated;

d. No Event of Default then exists or would exist immediately after giving
effect to the making of the Advance;

e. Each Advance is within and complies with the terms and conditions of this
Agreement including, without limitation, the notice provisions contained in
Section 2.2 hereof; and

f. Each representation and warranty made by Borrower set forth in Section 5
(other than Section 5.5) and/or in any other Loan Document in effect at such
time (as amended or modified from time to time) is then true and correct in all
material respects as if made on and as of such date except to the extent such
representations and warranties are made only as of a specific earlier date.

SECTION V. REPRESENTATIONS AND WARRANTIES

To induce Lender to complete the Closing and make the initial Advances under the
Loan and additional Advances under the Loan to Borrower, Borrower warrants and
represents to Lender that except as disclosed in the Merger Agreement or the
Disclosure Schedules thereto:

5.1. Validity:

a. The making and performance of this Agreement and the other Loan Documents
will not violate any law, government rule or regulation, court or administrative
order or other such order, or the charter or bylaw provisions of Borrower, or of
Borrower’s operating agreement or partnership agreement, as applicable, or
breach or result in a default (immediately or with the passage of time) under
any contract, agreement or instrument to which Borrower is a party, or by which
Borrower is bound. Borrower is not in violation of any term of any agreement or
instrument to which it is a party or by which it may be bound which violation
has or could reasonably be expected to have a Material Adverse Effect, or of its
charter or bylaw provisions, or of Borrower’s operating agreement or partnership
agreement, as applicable.

 

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b. Borrower has all requisite power and authority to enter into and perform this
Agreement and to incur the obligations herein provided for, and has taken all
proper and necessary action to authorize the execution, delivery and performance
of this Agreement, and the other Loan Documents as applicable.

c. This Agreement, the Note to be issued hereunder, and all of the other Loan
Documents, when delivered, will be valid and binding upon Borrower, and
enforceable in accordance with their respective terms except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles.

5.2. Places of Business: The only places of business of Borrower, and the places
where Borrower keeps and intends to keep its Property, are at the addresses
existing as of the date hereof shown on Schedule 5.2 attached hereto and made
part hereof and any new business locations established after the Closing Date of
which Borrower has given notice to Lender in accordance with Section 6.13.

5.3. Government Regulations: The use of the proceeds of and Borrower’s issuance
of the Note will not directly or indirectly violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation, Regulations U, T and X
of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
Borrower does not own or intend to carry or purchase any “margin stock” within
the meaning of said Regulation U.

5.4. Names: Within five (5) years prior to the Closing Date, Borrower has not
conducted business under or used any other name (whether corporate or assumed)
except for the names shown on Schedule 5.4 attached hereto and made part hereof.
Borrower is the sole owner of all names listed on such Schedule 5.4 and any and
all business done and all invoices issued in such trade names are Borrower’s
sales, business and invoices. Each trade name of Borrower represents a division
or trading style of Borrower and not a separate Subsidiary or Affiliate or
independent entity.

5.5. Solvency: As of the date of this Agreement, after giving effect to the
transactions contemplated under this Agreement, Borrower is solvent, is able to
pay its debts as they become due, and has capital sufficient to carry on its
business as currently conducted. Borrower will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other Loan Documents
executed in connection with this Agreement.

5.6 Perfection and Priority: This Agreement and the other Loan Documents are
effective to create in favor of Lender legal, valid and enforceable Liens in all
right, title and interest of Borrower in the Collateral, and when (i) financing
statements have been filed in the offices of the jurisdictions shown on Schedule
5.6, attached hereto and made part hereof under Borrower’s name, (ii) a control
agreement has been executed among Borrower, Lender and any financial institution
in which a Deposit Account of Borrower is held, and (iii) Borrower has delivered
to Lender any certificates representing its ownership rights in Borrower’s
subsidiaries, Borrower will have granted to Lender, and Lender will have
perfected Liens in the Collateral, superior in right to any and all other Liens
(other than Permitted Liens), existing or future.

 

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5.7. Commercial Tort Claims: As of the Closing Date, Borrower is not, to the
knowledge of Borrower, a party to any Commercial Tort Claims, except as shown on
Schedule 5.7 attached hereto and made part hereof.

5.8. Deposit Accounts: All Deposit Accounts of Borrower are shown on Schedule
5.8, attached hereto and made part hereof.

5.9. Anti-Terrorism Laws:

a. General. Neither Borrower nor any Affiliate of Borrower is in violation of
any Anti-Terrorism Law or engages in or conspires 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 any Anti-Terrorism Law.

b. Executive Order No. 13224. Neither Borrower nor any Affiliate of Borrower, or
to Borrower’s knowledge, any of its respective agents acting or benefiting in
any capacity in connection with the Loan, Letters of Credit or other
transactions hereunder, is any of the following (each a “Blocked Person”):

i. a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

ii. a Person 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,
the Executive Order No. 13224;

iii. a Person with which Lender is prohibited from dealing or otherwise engaging
in any transaction by any Anti-Terrorism Law;

iv. a Person that commits, threatens or conspires to commit or supports
“terrorism” as defined in the Executive Order No. 13224;

v. a Person that is named as a “specially designated national” on the most
current list published by the U.S. Treasury Department Office of Foreign Asset
Control at its official website or any replacement website or other replacement
official publication of such list; or

vi. a Person who is affiliated with a Person listed above.

5.10. Letter of Credit Rights: As of the Closing Date, Borrower has no Letter of
Credit Rights, except as shown on Schedule 5.10, attached hereto and made part
hereof.

SECTION VI. BORROWER’S AFFIRMATIVE COVENANTS

Borrower covenants that until all of the Obligations are paid and satisfied in
full and the Loan has been terminated, that:

6.1 Payment of Taxes and Claims: Borrower shall pay, before they become

 

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delinquent, all taxes, assessments and governmental charges, or levies imposed
upon it, or upon Borrower’s Property, and all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other Persons, entitled to the
benefit of statutory or common law Liens which, in any case, if unpaid, would
result in the imposition of a Lien upon its Property; provided however, that
Borrower shall not be required to pay any such tax, assessment, charge, levy,
claim or demand if the amount, applicability or validity thereof, shall at the
time, be contested in good faith and by appropriate proceedings by Borrower, and
if Borrower shall have set aside on its books adequate reserves in respect
thereof, if so required in accordance with GAAP; which deferment of payment is
permissible so long as no Lien other than a Permitted Lien has been entered and
Borrower’s title to, and its right to use, its Property are not materially
adversely affected thereby.

6.2 Maintenance of Properties and Corporate Existence:

a. Property – Borrower shall pay all rentals when due for all real estate leased
by Borrower.

b. Financial Records – Borrower shall keep current and accurate books of records
and accounts in which full and correct entries will be made of all of its
business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP (provided
that all such financial statements may, prior to the end of each fiscal year of
Borrower, be subject to normal year end adjustments and may omit footnotes).
Borrower shall not change its fiscal year end date without the prior written
consent of Lender.

c. Existence and Rights – Borrower shall do (or cause to be done) all things
necessary to preserve and keep in full force and effect its existence, good
standing, rights and franchises.

d. Compliance with Laws – Borrower (x) shall be in compliance with any and all
laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, (including, without limitation, Environmental Laws and government
procurement regulations) and (y) shall obtain any and all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its Property or to the conduct of its businesses, in either case (x) or
(y) except to the extent that any such noncompliance, violation or failure to
obtain would not cause or could not reasonably be expected to cause a Material
Adverse Effect. Borrower shall timely satisfy all assessments, fines, costs and
penalties imposed (after exhaustion of all appeals, provided a stay has been put
in effect during such appeal) by any Governmental Authority against Borrower or
any Property of Borrower.

e. Property Insurance, Public and Products Liability Insurance – Borrower shall
maintain hazard, workmen’s compensation, public liability and product liability
insurance, in each case in such amounts, with such deductibles and with such
insurers as are customarily used by companies operating in the same industry as
Borrower. In the event Borrower fails to procure or cause to be procured any
such insurance or to timely pay or cause to be paid the premium(s) on any such
insurance, Lender may do so for Borrower, but Borrower shall continue to be
liable for the same. The policies of all such casualty insurance shall contain

 

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standard lender loss payable clause (and, with respect to liability and
interruption insurance, additional insured clauses) issued in favor of Lender
under which all losses thereunder shall be paid to Lender as Lender’s interest
may appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Lender and shall insure Lender notwithstanding the act or neglect of Borrower.
Borrower hereby appoints Lender as Borrower’s attorney-in-fact, exercisable at
Lender’s option after and during the continuance of an Event of Default, to
endorse any check which may be payable to Borrower in order to collect the
proceeds of such insurance after and during the continuance of an Event of
Default and any amount or amounts collected by Lender pursuant to the provisions
of this Section may be applied by Lender, in its sole discretion, to any
Obligations or to repair, reconstruct or replace the loss of or damage to
Collateral as Lender in its discretion may from time to time determine. Borrower
further covenants that all insurance premiums owing under its current policies
have been paid. Borrower shall notify Lender, immediately, upon Borrower’s
receipt of a notice of termination, cancellation, or non-renewal from its
insurance company of any such policy.

6.3 Business Conducted: Borrower shall not engage, directly or indirectly, in
any material respect in any line of business substantially different from the
business conducted by Borrower immediately prior to the Closing Date.

6.4 Litigation: Borrower shall give prompt notice to Lender of any litigation
claiming in excess of Ten Thousand Dollars ($10,000) from Borrower.

6.5 Issue Taxes: Borrower shall pay all taxes (other than taxes based upon or
measured by any Lender’s income or revenues or any personal property tax), if
any, in connection with the issuance of the Note. The obligations of Borrower
hereunder shall survive the payment of Borrower’s Obligations hereunder and the
termination of this Agreement.

6.6 Financial and Business Information: Borrower shall deliver or cause to be
delivered to Lender the following:

a. Financial Statements and Collateral Reports: such data, reports, statements
and information, financial or otherwise, as Lender may reasonably request.

b. Notice of Event of Default – promptly upon becoming aware of the existence of
any condition or event which constitutes a Default or an Event of Default under
this Agreement, a written notice specifying the nature and period of existence
thereof and what action Borrower is taking (and proposes to take) with respect
thereto; and

c. Notice of Claimed Default – promptly upon receipt by Borrower, notice of
default, oral or written, given to Borrower by any creditor for Indebtedness for
borrowed money.

6.7 Audits and Inspection: Borrower shall permit any of Lender’s officers or
other representatives to visit and inspect upon reasonable notice during
business hours any of the locations of Borrower, to examine all of Borrower’s
books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers,
employees and independent certified public accountants all at Lender’s expense.

 

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6.8 Information to Participant: Subject to Section 9.22 hereof, Lender may
divulge to any director, officer or advisor of Lender, all information contained
in, and furnish to such Person copies, of any reports, financial statements,
certificates, and documents obtained under any provision of this Agreement, or
related agreements and documents, provided, however, that any such director,
officer or advisor of Lender agrees to keep all non-public information obtained
under any provision of this Agreement confidential.

6.9 Material Adverse Developments: Borrower agrees that promptly upon becoming
aware of any development or other information outside the ordinary course of
business which would reasonably be expected to have a Material Adverse Effect
(including, without limitation, the institution or threatening of any litigation
against Borrower or any investigations (civil or criminal) or Federal or state
regulatory agency proceedings against Borrower, which in any such case, would
reasonably be expected to have such a Material Adverse Effect), but excluding
matters of a general economic, financial or political nature, it shall give to
Lender prompt notice specifying the nature of such development or information
and such anticipated effect. In addition, any verbal communication shall be
confirmed by written notice thereof to Lender on the same day such verbal
communication is made or the next Business Day thereafter.

6.10 Places of Business: Borrower shall give thirty (30) days’ prior written
notice to Lender of (x) any changes in the location of any of its respective
places of business, or the establishment of any new, or the discontinuance of
any existing place of business and (y) the entry by Borrower into any new leases
for real or personal Property and such written notice shall include an updated
version of Schedule 5.2, as applicable; provided that Borrower may not establish
any place of business outside of the United States.

6.11 Commercial Tort Claims: Borrower will promptly notify Lender in writing in
the event that Borrower becomes a party to or obtains any rights with respect to
any Commercial Tort Claim. Such notification shall include information
sufficient to describe such Commercial Tort Claim, including, but not limited
to, the parties to the claim, the court in which the claim was commenced, the
docket number assigned to such claim, if any, and a detailed explanation of the
events that gave rise to the claim. Borrower shall execute and deliver to Lender
all documents and/or agreements reasonably necessary to grant Lender a security
interest in such Commercial Tort Claim to secure the Obligations. Borrower
authorizes Lender to file (without Borrower’s signature) initial financing
statements or amendments, as Lender deems necessary to perfect its security
interest in the Commercial Tort Claim.

6.12 Letter of Credit Rights: Borrower shall provide Lender with written notice
of any letters of credit for which Borrower is the beneficiary. Borrower shall
execute and deliver (or cause to be executed or delivered) to Lender, all
documents and agreements as Lender may require in order to obtain and perfect
its security interest in such Letter of Credit Rights.

SECTION VII. BORROWER’S NEGATIVE COVENANTS:

Borrower covenants that, except as contemplated in the Merger Agreement, until
all of the Obligations are paid and satisfied in full and the Loan has been
terminated, that:

7.1. Merger, Consolidation, Dissolution or Liquidation:

a. Borrower shall not engage in any Asset Sale other than equipment that is
replaced by other equipment of comparable or superior quality and value within
ninety (90) days of such Asset Sale.

 

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b. Except for the Merger, Borrower shall not merge or consolidate with any other
Person or engage in a division, conversion, dissolution or liquidation.

7.2. Acquisitions: Borrower shall not acquire all or a material portion of the
Capital Stock or assets of any Person in any transaction or in any series of
related transactions or enter into any sale and leaseback transaction without
Lender’s prior written consent, which will not be unreasonably withheld.

7.3. Liens and Encumbrances: Borrower shall not: (i) execute a negative pledge
agreement with any Person covering any of its Property, or (ii) cause or permit,
or agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), its Property, whether now owned or hereafter
acquired, to be subject to a Lien or be subject to any claim, except for
Permitted Liens.

7.4. Transactions With Affiliates or Subsidiaries: Except as set forth on
Schedule 7.4(a) hereto and made a part hereof, Borrower shall not enter into any
transaction with any Subsidiary or other Affiliate, including, without
limitation, the purchase, sale, or exchange of Property, or the loaning or
giving of funds to any Affiliate or any Subsidiary unless: (i) such Subsidiary
or Affiliate is engaged in a business substantially related to the business
conducted by Borrower, is a Borrower hereunder and the transaction is in the
ordinary course of and pursuant to the reasonable requirements of Borrower’s
business and upon terms substantially the same and no less favorable to Borrower
as it would obtain in a comparable arm’s length transaction with any Person not
an Affiliate or a Subsidiary, and so long as such transaction is not prohibited
hereunder; or (ii) such transaction is intended for incidental administrative
purposes.

7.5. Guarantees: Excepting the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection, Borrower shall not become or
be liable, directly or indirectly, primary or secondary, matured or contingent,
in any manner, whether as guarantor, surety, accommodation maker, or otherwise,
for the existing or future Indebtedness of any kind of any Person.

7.6. Distributions, Bonuses and Other Indebtedness: Borrower shall not: (a) upon
the occurrence and continuation of an Event of Default beyond any applicable
grace or cure period, declare or pay or make any forms of Distribution to
holders of Borrower’s Capital Stock; (b) declare or pay any bonus compensation
to its officers if an Event of Default exists or would result from the payment
thereof; (c) hereafter incur or become liable for any Indebtedness other than
Permitted Indebtedness; (d) make any prepayments on any existing or future
Indebtedness (other than the Obligations); or (e) make any payments on any
Subordinated Debt that may from time to time exist in violation of the
subordination provisions thereof and/or the Subordination Agreement relating
thereto.

7.7. Loans and Investments: Borrower shall not make or have outstanding loans,
advances, extensions of credit or capital contributions to, or investments in,
any Person other than Permitted Investments.

7.8. Use of Lenders’ Name: Borrower shall not use Lender’s name in connection
with any of its business operations. Nothing herein contained is intended to
permit or authorize Borrower to make any contract on behalf of Lender.

 

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7.9. Miscellaneous Covenants:

a. Borrower shall not become or be a party to any contract or agreement which at
the time of becoming a party to such contract or agreement materially impairs
Borrower’s ability to perform under this Agreement, or under any other material
instrument, agreement or document to which Borrower is a party or by which it is
or may be bound.

b. Borrower shall not carry or purchase any “margin stock” within the meaning of
Regulations U, T or X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II.

7.10. Jurisdiction of Organization: If a Registered Organization (as defined in
Article 9 of the Uniform Commercial Code), Borrower shall not change its
jurisdiction of organization, without giving thirty (30) days prior written
notice to Lender.

7.11. Management Fees: Without Lender’s prior written consent, make any payment
of any management fee or other payment under any management agreement other than
pursuant to and in compliance with outstanding consulting agreements with
certain of Borrower’s former senior management team.

SECTION VIII. DEFAULT

8.1. Events of Default: Each of the following events shall constitute an event
of default (“Event of Default”):

a. Payments – if Borrower fails to make any payment of principal or interest
under the Obligations within five (5) Business Days after the date such payment
is due and payable; or

b. Particular Covenant Defaults – if Borrower fails to perform, comply with or
observe any covenant or undertaking contained in this Agreement and (other than
with respect to the covenants contained in Section 7, for which no cure period
shall exist), such failure continues for thirty (30) days after the occurrence
thereof; or

c. Financial Information – if any statement, report, financial statement, or
certificate made or delivered by any of Borrower or any of its directors,
officers, employees or agents, to Lender is not true and correct, in all
material respects, when made; or

d. Warranties or Representations – if any warranty, representation or other
statement by or on behalf of Borrower contained in or pursuant to this
Agreement, the other Loan Documents or in any document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement, is
false, erroneous, or misleading in any material respect when made; or

 

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e. Assignment for Benefit of Creditors, etc. – if Borrower makes or proposes in
writing, an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by
Borrower; or

f. Bankruptcy, Dissolution, etc. – the commencement of any action for the
dissolution or liquidation of Borrower, or the commencement of any proceeding to
avoid any transaction entered into by Borrower, or the commencement of any case
or proceeding for reorganization or liquidation of Borrower’s debts under the
Bankruptcy Code of the United States (11 U.S.C. § 100 et seq.) or any other
state or federal law, now or hereafter enacted for the relief of debtors,
whether instituted by or against Borrower; provided however, that Borrower shall
have sixty (60) days to obtain the dismissal or discharge of involuntary
proceedings filed against it under the Bankruptcy Code of the United States or
any other action or proceeding described in this paragraph, it being understood
that during such sixty (60) day period, Lender shall not be obligated to make
Advances hereunder and Lender may seek adequate protection in any bankruptcy
proceeding; or

g. Receiver – upon the appointment of a receiver, liquidator, custodian, trustee
or similar official or fiduciary for Borrower or for Borrower’s Property; or

h. Execution Process, etc. – the issuance of any execution or distraint process
against any Property of Borrower; or

i. Pension Benefits, etc. – if Borrower fails to comply with ERISA so that
proceedings are commenced to appoint a trustee under ERISA to administer
Borrower’s Pension Plans or the PBGC institutes proceedings to appoint a trustee
to administer such plan(s), or a Lien is entered to secure any deficiency or
claim or a “reportable event” as defined under ERISA occurs; or

j. Other Loan Documents – if any other Person (other than Lender) party to a
Loan Document breaches or violates any term, provision or condition of such Loan
Document; or

k. Uninsured Loss – if there shall occur any uninsured damage to or loss, theft,
or destruction in excess of Ten Thousand Dollars ($10,000) in the aggregate with
respect to any portion of any property of borrower; or

l. Judgments – if any final judgment for the payment of money in excess of Ten
Thousand Dollars ($10,000) in the aggregate (i) which is not fully and
unconditionally covered by insurance subject to customary deductibles or
(ii) for which Borrower has not established a cash or cash equivalent reserve in
the full amount of such judgment, shall be rendered by a court of record against
Borrower and such judgment shall continue unsatisfied and in effect for a period
of sixty (60) consecutive days and without being vacated, discharged, satisfied
or bonded pending appeal; or

m. Agreements with Others – (i) if Borrower shall default beyond any grace
period in the payment of principal or interest of any Indebtedness of Borrower
in excess of Ten Thousand Dollars ($10,000) in the aggregate; or (ii) if
Borrower otherwise defaults under the terms of any such Indebtedness if the
effect of such default is to enable the holder of such Indebtedness to
accelerate the payment of Borrower’s obligations, which are the subject thereof,
prior to the maturity date or prior to the regularly scheduled date of payment;
or

 

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n. Material Adverse Effect – if there is any event that constitutes a Material
Adverse Effect.

8.2. Cure: Nothing contained in this Agreement or the Loan Documents shall be
deemed to compel Lender to accept a cure of any Event of Default hereunder
(provided, that the foregoing shall not be interpreted or construed in any way
and/or under any circumstances to limit or contradict the express provisions
hereof which provide for any cure period that must expire before any particular
Event of Default shall occur).

8.3. Rights and Remedies on Default:

a. In addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), or otherwise available at law or in equity, upon or at
any time after the occurrence and during the continuance of a Default or an
Event of Default, Lender may, in its discretion, withhold or cease making
Advances under the Loan.

b. In addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), or otherwise available at law or in equity, upon or at
any time after the occurrence and during the continuance of an Event of Default
Lender may, in its discretion, terminate the Loan and declare the Obligations
immediately due and payable, all without demand, notice, presentment or protest
or further action of any kind (it also being understood that the occurrence of
any of the events or conditions set forth in Sections 8.1(e),(f) or (g) shall
automatically cause an acceleration of the Obligations).

c. In addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), or otherwise available at law or in equity, upon or at
any time after the acceleration of the Obligations following the occurrence of
an Event of Default (other than the rights with respect to clause (i) below
which Lender may exercise at any time after an Event of Default and regardless
of whether there is an acceleration), Lender may, in its discretion, exercise
all rights under any applicable law or in equity, and under all Loan Documents
permitted to be exercised after the occurrence of an Event of Default, including
the following rights and remedies (which list is given by way of example and is
not intended to be an exhaustive list of all such rights and remedies):

1. The right to modify the terms and conditions upon which Lender may be willing
to consider making Advances under the Loan or to take reserves against the Loan;
or

2. The right to take possession of, send notices regarding and collect directly
the Collateral, with or without judicial process (including without limitation
the right to notify the United States postal authorities to redirect mail
addressed to Borrower to an address designated by Lender); or

 

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3. By its own means or with judicial assistance, enter Borrower’s premises and
take possession of the Collateral, or render it unusable, or dispose of the
Collateral on such premises in compliance with subsection (e) below, without any
liability for rent, storage, utilities or other sums, and Borrower shall not
resist or interfere with such action.

b. Borrower hereby agrees that a notice received by it at least ten (10) days
before the time of any intended public sale or of the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable inventory or Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower. Borrower covenants and
agrees not to interfere with or impose any obstacle to Lender’s exercise of its
rights and remedies with respect to the Collateral, after the occurrence of an
Event of Default hereunder. Lender shall have no obligation to clean up or
prepare the Collateral for sale. If Lender sells any of the Collateral upon
credit, Borrower will only be credited with payments actually made by the
purchaser thereof, that are received by Lender. Lender may, in connection with
any sale of the Collateral specifically disclaim any warranties of title or the
like.

8.4. Nature of Remedies: All rights and remedies granted Lender hereunder and
under the Loan Documents, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Lender may
proceed with any number of remedies at the same time until all Obligations are
satisfied in full. The exercise of any one right or remedy shall not be deemed a
waiver or release of any other right or remedy, and Lender, upon or at any time
after the occurrence of an Event of Default, may proceed against Borrower, at
any time, under any agreement, with any available remedy and in any order.

SECTION XI. MISCELLANEOUS

9.1. Governing Law: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS,
AND ALL MATTERS RELATED HERETO OR ARISING HEREUNDER (WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE), SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE. THE PROVISIONS OF THIS
AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE
DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT.

9.2. Integrated Agreement: The Note, the other Loan Documents, all related
agreements, and this Agreement shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender’s
rights and remedies. If, after applying the foregoing, an inconsistency still
exists, the provisions of this Agreement shall constitute an amendment thereto
and shall control.

9.3. Waiver: No omission or delay by Lender in exercising any right or power
under this Agreement or any related agreements and documents will impair such
right or power or be construed to be a waiver of any Default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Borrower no waiver will be valid unless
in writing and signed by Lender and then only to the extent specified.

 

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9.4. Indemnity:

a. In the event Borrower or Lender terminates the Merger Agreement such that the
Loan is not forgiven pursuant to Section 2.7 hereof, Borrower releases and shall
indemnify, defend and hold harmless Lender and its respective officers,
employees and agents, of and from any claims, demands, liabilities, obligations,
judgments, injuries, losses, damages and costs and expenses (including, without
limitation, reasonable legal fees) resulting from any claim by any other
creditor of Borrower against Lender arising out of any transaction whether
hereunder or in any way related to the Loan Documents and all costs, expenses,
fines, penalties or other damages resulting therefrom, unless resulting solely
from acts or conduct of Lender constituting willful misconduct or gross
negligence. Such indemnification shall not exceed the maximum amount of all
Advances made under the Loan.

b. Promptly after receipt by an indemnified party under subsection (a) above of
notice of the commencement of any action by a third party, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof. The omission so to notify the indemnifying
party shall relieve the indemnifying party from any liability which it may have
to any indemnified party under such subsection only if the indemnifying party is
unable to defend such actions or is materially prejudiced as a result of such
failure to so notify. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnified party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation.

9.5. Time: Whenever Borrower shall be required to make any payment, or perform
any act, on a day which is not a Business Day, such payment may be made, or such
act may be performed, on the next succeeding Business Day. Time is of the
essence in Borrower’s performance under all provisions of this Agreement and all
related agreements and documents.

9.6. Expenses of Lender: Provided that the Loan has not been forgiven pursuant
to Section 2.7 hereof, Borrower will pay upon demand of Lender all reasonable
costs, fees and expenses of Lender in connection with (i) the enforcement of
Lender’s rights hereunder, or the collection of any payments owing from,
Borrower under this Agreement and/or the other Loan Documents or the protection,
preservation or defense of the rights of Lender hereunder and under the other
Loan Documents, and (ii) any refinancing or restructuring of the credit
arrangements provided under this Agreement and other Loan Documents in the
nature of a “work-out” or of any insolvency or bankruptcy proceedings, or
otherwise (including the reasonable fees and disbursements of counsel for
Lender) (collectively, the “Expenses”).

 

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9.7. Brokerage: This transaction was brought about and entered into by Lender
and Borrower acting as principals and without any brokers, agents or finders
being the effective procuring cause hereof. Borrower represents that it has not
committed Lender to the payment of any brokerage fee, commission or charge in
connection with this transaction. If any such claim is made on Lender by any
broker, finder or agent or other person, Borrower hereby indemnifies, defends
and saves such party harmless against such claim and further will defend, with
counsel satisfactory to Lender, any action or actions to recover on such claim,
at Borrower’s own cost and expense, including such party’s reasonable counsel
fees. Borrower further agrees that until any such claim or demand is adjudicated
in such party’s favor, the amount demanded shall be deemed an Obligation of
Borrower under this Agreement.

9.8. Notices:

a. All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly delivered (i) four (4) Business
Days after being sent by registered or certified mail (postage prepaid, return
receipt requested), (ii) one (1) Business Day after being sent for next Business
Day delivery, fees prepaid, via a reputable nationwide overnight courier
service, or (iii) on the date of confirmation of receipt (or the first Business
Day following such receipt if the date of such receipt is not a Business Day) of
transmission by facsimile, in each case to the intended recipient at the
following addresses (or at such other address for a party as shall be specified
by like changes of address). A party electing to provide notice by electronic
transmission as provided herein shall also provide mailed copies of any such
notice.

 

  (i) If to DARA or Merger Sub:

DARA BioSciences, Inc.

4505 Falls of the Neuse Road

Raleigh, North Carolina 27609

Telecopier No.: (919) 861-0239

Attention: Richard A. Franco, Chief Executive Officer

With a copy (which shall not constitute notice) to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail

Suite 300

Raleigh, North Carolina 27607

Telecopier No.: (919) 781-4865

Attention: Donald R. Reynolds, Esq.

 

  (ii) If to Point:

Point Therapeutics, Inc.

70 Walnut Street

Wellesley Hills, Massachusetts 02481

Telecopier No.: (781) 239-8005

Attention: Secretary

 

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With a copy (which shall not constitute notice) to:

Ropes & Gray

One International Place

Boston, Massachusetts 02110-2624

Telecopier No.: (617) 951-7050

Attention: Steven A. Wilcox, Esq.

b. Lender shall be fully entitled to rely upon any facsimile transmission or
other writing purported to be sent by any Authorized Officer (whether requesting
an Advance or otherwise) as being genuine and authorized.

9.9. Headings: The headings of any paragraph or Section of this Agreement are
for convenience only and shall not be used to interpret any provision of this
Agreement.

9.10. Survival: All warranties, representations, and covenants made by Borrower
herein, or in any agreement referred to herein or on any certificate, document
or other instrument delivered by it or on its behalf under this Agreement, shall
be considered to have been relied upon by Lender, and shall survive the delivery
to Lender of the Note, regardless of any investigation made by Lender or on its
behalf. All statements in any such certificate or other instrument prepared
and/or delivered for the benefit of Lender shall constitute warranties and
representations by Borrower hereunder. Except as otherwise expressly provided
herein, all covenants made by Borrower hereunder or under any other agreement or
instrument shall be deemed continuing until all Obligations are satisfied in
full. All indemnification obligations under this Agreement shall survive the
termination of this Agreement and payment of the Obligations for a period of one
(1) year.

9.11. Successors and Assigns: This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of each of the parties. Borrower may
not transfer, assign or delegate any of its duties or obligations hereunder.
Borrower acknowledges and agrees that Lender may at any time, and from time to
time, sell, transfer, or assign the Loan and Lender’s rights hereunder, to any
one or more banks or financial institutions, subject (as to Lender’s rights
under this clause (b)) to Borrower’s written consent, which consent shall not be
unreasonably withheld; provided that, no consent under this clause (b) shall be
required if an Event of Default exists at the time of such sale, transfer or
assignment.

9.12. Duplicate Originals: Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.

9.13. Modification: No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed by Borrower and
Lender.

9.14. Signatories: Each individual signatory hereto represents and warrants that
he is duly authorized to execute this Agreement on behalf of his principal and
that he executes the Agreement in such capacity and not as a party.

9.15. Third Parties: No rights are intended to be created hereunder, or under
any related

 

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agreements or documents for the benefit of any third party donee, creditor or
incidental beneficiary of Borrower. Nothing contained in this Agreement shall be
construed as a delegation to Lender of Borrower’s duty of performance,
including, without limitation, Borrower’s duties under any account or contract
with any other Person.

9.16. Discharge of Taxes, Borrower’s Obligations, Etc.: Lender, in its sole
discretion, shall have the right at any time, and from time to time, with at
least ten (10) days prior notice to Borrower if Borrower fail to do so, to:
(a) pay for the performance of any of Borrower’s obligations hereunder, and
(b) discharge taxes or Liens (other than Permitted Liens), at any time levied or
placed on Borrower’s Property in violation of this Agreement unless Borrower is
in good faith with due diligence by appropriate proceedings contesting such
taxes or Liens and maintaining proper reserves therefor in accordance with GAAP.
Expenses and advances shall be added to the Loan, and bear interest at the rate
applicable to the Loan, until reimbursed to Lender. Such payments and advances
made by Lender shall not be construed as a waiver by Lender of a Default or
Event of Default under this Agreement.

9.17. Withholding and Other Tax Liabilities: Lender shall have the right to
refuse to make any Advances from time to time unless Borrower shall, at Lender’s
request, have given to Lender evidence, reasonably satisfactory to Lender, that
Borrower has properly deposited or paid, as required by law, all withholding
taxes and all federal, state, city, county or other taxes due up to and
including the date of the requested Advance. Copies of deposit slips showing
payment shall constitute satisfactory evidence for such purpose. In the event
that any Lien, assessment or tax liability against Borrower shall arise in favor
of any taxing authority, whether or not notice thereof shall be filed or
recorded as may be required by law, Lender shall have the right (but shall not
be obligated, nor shall Lender hereby assume the duty) to pay any such Lien,
assessment or tax liability by virtue of which such charge shall have arisen;
provided, however, that Lender shall not pay any such tax, assessment or Lien if
the amount, applicability or validity thereof is being contested in good faith
and by appropriate proceedings by Borrower and proper reserves are maintained
therefor in accordance with GAAP. In order to pay any such Lien, assessment or
tax liability, Lender shall not be obliged to wait until such lien, assessment
or tax liability is filed before taking such action as hereinabove set forth.
Any sum or sums which Lender shall have paid for the discharge of any such Lien
shall be added to the Loan and shall be paid by Borrower to Lender with interest
thereon at the rate applicable to the Loan, upon demand, and Lender shall be
subrogated to all rights of such taxing authority against Borrower.

9.18. Consent to Jurisdiction: Borrower and Lender each hereby irrevocably
consent to the non-exclusive jurisdiction of the Courts of the State of Delaware
or any Federal Court located in the State of Delaware in any and all actions and
proceedings whether arising hereunder or under any other agreement or
undertaking. Borrower waives any objection which Borrower may have based upon
lack of personal jurisdiction, improper venue or forum non conveniens. Borrower
irrevocably agrees to service of process by certified mail, return receipt
requested to the address of the appropriate party set forth herein.

9.19. Additional Documentation: Borrower shall execute and/or re-execute, and
cause any other Person party to any Loan Document, to execute and/or re-execute
and to deliver to Lender or Lender’s counsel, as may be deemed reasonably
appropriate, any document or instrument signed in connection with this Agreement
which was incorrectly drafted and/or signed, as well as any document or
instrument which should have been signed at or prior to the Closing, but which
was not so signed and delivered. Borrower agrees to comply with any written
request by Lender within ten (10) days after receipt by Borrower of such
request.

 

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9.20. Waiver of Jury Trial: BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL
RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING
OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF
ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY
PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE,
WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.

9.21. Consequential Damages: Neither Lender nor agent or attorney of Lender,
shall be liable for any consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or
collection of the Obligations.

9.22. Confidentiality: Lender shall hold all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as
confidential by Borrower in accordance with Lender’s customary procedures for
handling confidential information of this nature and in accordance with its
usual practices, it being understood and agreed by Borrower that in any event
Lender may make disclosures (i) to Affiliates of Lender, provided such
Affiliates agree to the confidentiality provisions of this Section 9.22, or
disclosures reasonably required by any bona fide assignee, transferee or
participant (or potential assignee, transferee or participant) in connection
with the contemplated assignment or transfer by Lender of any participations
herein, provided any such assignee, transferee or participant agrees to the
confidentiality provisions of this Section 9.22, or (ii) disclosures required or
requested by any governmental or regulatory agency or representative thereof or
pursuant to legal process; provided that, unless specifically prohibited by
applicable law or court order, Lender shall notify Borrower of any request by
any governmental or regulatory agency or representative thereof (other than any
such request in connection with any examination of the financial condition of
Lender by such governmental or regulatory agency) for disclosure of any such
non-public information prior to disclosure of such information.

[Remainder of Page Left Intentionally Blank]

 

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WITNESS the due execution of this Loan and Security Agreement as a document
under seal as of the date first written above.

 

POINT THERAPEUTICS, INC. By:  

/s/ Donald R. Kiepert, Jr.

Name:   Donald R. Kiepert, Jr. Title:   President DARA BIOSCIENCES, INC. By:  

/s/ Richard A. Franco

Name:   Richard A. Franco Title:   Chief Executive Officer

 

S-1

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LIST OF EXHIBITS AND SCHEDULES

 

EXHIBITS   EXHIBIT A   Authorization Certificate EXHIBIT B   Advance Request
SCHEDULES   SCHEDULE 1.1(a)   Existing Indebtedness SCHEDULE 1.1(b)   Existing
Liens SCHEDULE 5.2   Places of Business and Property Locations SCHEDULE 5.4  
Business Names, Trade Names SCHEDULE 5.6   Perfection SCHEDULE 5.7   Commercial
Tort Claims SCHEDULE 5.8   Deposit Accounts SCHEDULE 5.10   Letters of Credit
SCHEDULE 7.4(a)   Transactions with Affiliates or Subsidiaries

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EXHIBIT “A”

FORM OF AUTHORIZATION CERTIFICATE

(Letterhead of Point Therapeutics, Inc.)

Date:                     , 2007

[or any later date on which an updated or replaced certificate is delivered]

DARA BioSciences, Inc.

4505 Falls of the Neuse Road

Raleigh, North Carolina 27609

Attention: Richard A. Franco

Ladies and Gentlemen:

I, the [secretary/assistant secretary/other appropriate officer of Borrower] of
Point Therapeutics, Inc. (“Borrower”), acting in such capacity, hereby certify
to you, in connection with the Loan and Security Agreement dated as of
October 9, 2007 (as it may hereafter be amended, modified, restated or replaced
from time to time, the “Loan Agreement”) between you and Borrower, that the
following individuals are authorized to request Advances against the Loan
established in favor of Borrower under the Loan Agreement per written
instructions received via fax:

 

Authorized Person

       

Title

       

Signature

1.  

 

     

 

     

 

2.  

 

     

 

     

 

3.  

 

     

 

     

 

Capitalized terms used herein but not otherwise defined shall have the meaning
set forth in the Loan Agreement.

Executed by me in my capacity as the [secretary/assistant secretary/other
appropriate officer of Borrower] of Borrower as of the date first set forth
above.

 

 

Name:

 

 

Title:

 

 

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EXHIBIT “B”

FORM OF LOAN ADVANCE REQUEST

(Letterhead of Point Therapeutics, Inc.)

Point Therapeutics, Inc.

70 Walnut Street

Wellesley Hills, Massachusetts 02481

Telecopier No.: (781) 239-8005

(“Borrower”)

Attention: Secretary

DARA BioSciences, Inc.

4505 Falls of the Neuse Road

Raleigh, North Carolina 27609

Telecopier No.: (919) 861-0239

(“Lender”)

Attention: Richard A. Franco, Chief Executive Officer

Borrower hereby requests an Advance in the amount of $             pursuant to
Section 2.1 of that certain Loan and Security Agreement by and among Borrower
and Lender dated as of October 9, 2007 (as it may hereafter be amended,
modified, restated or replaced, the “Loan Agreement”). Capitalized terms used
herein but not otherwise defined shall have the meanings given to them in the
Loan Agreement.

Borrower hereby represents and warrants to Lender as follows:

 

  a. No Default or Event of Default under the Loan Agreement now exists or would
exist immediately after giving effect to the making of the requested Advance.

 

  b. All representations and warranties made by the Borrower in the Loan
Agreement and/or in any other Loan Document as in effect on the date hereof (as
heretofore amended from time to time) are true and correct in all material
respects as of the date hereof as if made on and as of the date hereof (except
that representations and warranties contained in Section 5.5 of the Loan
Agreement and except to the extent such representations and warranties are made
only as of a specific earlier date).

 

  c. The aggregate principal amount of all Advances outstanding under the Loan
prior to giving effect to the requested Advance is $            .

 

  d. To the best of my knowledge, Borrower is currently in compliance with all
obligations under the Loan Agreement, the Loan Documents and the Merger
Agreement.

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  e. All other conditions to the making of the requested Advance as set forth in
Section 4.7, including section 4.7(f) of the Loan Agreement have been satisfied.

 

    POINT THERAPEUTICS, INC.   By:  

 

  Name:   Date:                     , 200     Title:  

 

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