Exhibit 10.4
AMENDED AND RESTATED SECURITY AGREEMENT
 
THIS AMENDED AND RESTATED SECURITY AGREEMENT (as may be further amended,
restated, supplemented or otherwise modified, this “Agreement”), is made as of
this 11th day of October, 2012, by and among VISTAGEN THERAPEUTICS, INC., a
Nevada Corporation with an address of 384 Oyster Point Boulevard, No. 8, South
San Francisco, California 94080 (the “Maker”), and PLATINUM LONG TERM GROWTH
VII, LLC a Delaware limited liability company with an address of 152 West 57th
Street, 4th Floor, New York, NY 10019 (together with its successors and assigns,
the “Secured Party”).
 
WHEREAS, the Maker and the Secured Party are entering into that certain Note
Exchange and Purchase Agreement (as amended, restated, supplemented or otherwise
modified, the “Purchase Agreement”), pursuant to which the Secured Party shall
purchase and the Maker shall issue Senior Secured Convertible Promissory Notes
(as amended, restated, supplemented or otherwise modified, together with the
“Notes” defined in the Purchase Agreement, collectively the “Notes”);
 
WHEREAS, in order to induce the Secured Party to extend the loans evidenced by
the Notes, the Maker has agreed to execute and deliver to the Secured Party this
Agreement and to grant the Secured Party a security interest in certain property
of the Maker to secure the prompt satisfaction, either by payment or conversion
into the Maker’s common stock on the terms and conditions set forth in the
Notes, performance and discharge in full of all of the Maker’s obligations under
the Notes;
 
WHEREAS, the Secured Party is not willing to enter into the Purchase Agreement
unless the Obligations are secured by a pledge and perfected security interest
in substantially all of the assets of the Maker, including all of the Maker’s
equity interests in VISTAGEN THERAPEUTICS, INC., a California corporation and
wholly-owned subsidiary of the Maker (the “California Subsidiary”), and the
California Subsidiary’s interest in ARTEMIS NEUROSCIENCE, INC., a Maryland
corporation and a wholly-owned subsidiary of the California Subsidiary (the
“Maryland Subsidiary” and, together with the California Subsidiary, the
“Domestic Subsidiaries”);
 
WHEREAS, the Maker is willing to secure its obligations under the Notes in favor
of the Secured Party;
 
WHEREAS, certain obligations of the Maker to the Secured Party are secured by
all assets of the Maker pursuant to a Security Agreement by and between the
Maker and the Secured Party dated as of July 2, 2012 (as amended, restated,
supplemented or otherwise modified, the “Original Security Agreement”); and
 
WHEREAS, this Agreement amends and restates the Original Security Agreement.
 
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
 
ARTICLE 1 - DEFINITIONS
 
Section 1.1
Terms Generally

 
All capitalized terms used herein or in any certificate or other document
delivered pursuant hereto shall have the meanings assigned to them below (unless
otherwise defined herein). Except as otherwise defined herein, capitalized terms
used herein shall have the respective meanings given in the Purchase Agreement.
 
Section 1.2
Certain Terms

 
As used herein, the following terms have the following meanings:

 
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“Accounts” means all rights of the Maker to payment of monetary obligations,
including rights to payment for goods sold, leased, licensed, assigned or
otherwise disposed of; all rights to payment for services rendered or to be
rendered; all rights under contracts and all sums of money or other proceeds due
or becoming due thereon, and the Maker’s rights pertaining to and interest in
such goods; all other rights and claims to the payment of money, under contracts
or otherwise; and all other property constituting “accounts” or “contract
rights” as such terms are defined in the Uniform Commercial Code.
 
“Collateral” is defined in Article 2 below.
 
“Contract Rights” means all rights of the Maker under all documents and
instruments, including without limitation (i) all rights to payment, (ii) all
rights to make elections, and (iii) all rights to exercise remedies.
 
“Equipment” means all machinery, equipment and fixtures, office furniture,
furnishings and trade fixtures, specialty tools and parts, motor vehicles and
materials handling equipment of the Maker, together with the Maker’s interest
in, and right to, any and all manuals, computer programs, data bases and other
materials relating to the use, operation or structure of any of the foregoing;
and all other property constituting “equipment” as such term is defined in the
Uniform Commercial Code.
 
“Event of Default” is defined in Article 6 below.
 
“General Intangibles” means all Intellectual Property and all and other evidence
of proprietary information (including, without limitation, all computer programs
and electronic data processing materials), all software, customer surveys,
advertising materials, logos, marketing materials, jingles, market analyses,
manuals or operational procedures, designs, programming and engineering logs,
together with any object, source, access or other codes, and any rights of the
Maker to retrieval from third parties of electronically processed information
relating to any of the foregoing types of property; and all other property
constituting “general intangibles” as such term is defined in the Uniform
Commercial Code.
 
“Goods” means all things that are movable, including fixtures, computer programs
and all other property constituting “goods” as defined in the Uniform Commercial
Code.
 
“Intellectual Property” means (a) all tradenames, tradename applications,
trademarks, trademark applications, servicemarks, servicemark applications,
patents, patent applications, copyrights, and copyright applications, in each
case whether owned or licensed, (b) all reissues, continuations and extensions
of the foregoing, (c) all goodwill of the business connected with the use of,
and symbolized by, each of the foregoing, and (d) all products and proceeds of
the foregoing, including, without limitation, any claim by the Maker against
third parties for past, present or future (i) infringement of any patent, (ii)
infringement or dilution of any trademark, (iii) injury to the goodwill
associated with any trademark, and (iv) infringement of any copyright.
 
“Inventory” means all goods, merchandise and other personal property (including
warehouse receipts and other negotiable and non-negotiable documents of title
covering any such property) of the Maker that are held for sale, lease or other
disposition, or for display or demonstration, or leased or consigned, or that
are raw materials, piece goods, work in process or materials used or consumed or
to be used or consumed in the Maker’s business, whether in transit or in the
possession of the Maker or another person or entity, including without
limitation all goods covered by purchase orders and contracts with suppliers and
all goods billed and held by suppliers and goods located on the premises of any
carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or
other third parties; all proprietary rights, patents, plans, drawings, diagrams,
schematics, assembly and display materials relating to any of the foregoing; and
all other property constituting “inventory” as such term is defined in the
Uniform Commercial Code.
 
“Lien” means any mortgage, pledge, security interest, lien or other charge or
encumbrance of any kind or nature upon or with respect to any property.
 
“Necessary Endorsement” means undated stock powers endorsed in blank or other
proper instruments of assignment duly executed and such other instruments or
documents as the Secured Party may reasonably request.

 
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“Obligation(s)” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing, of the Maker
and/or any Domestic Subsidiary to the Secured Party, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on, the Notes and the loans extended
pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations
and liabilities of the Maker and/or any Domestic Subsidiary from time to time
under or in connection with this Agreement, the Notes, the Warrants, any other
Transaction Document, and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith; (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Maker; and (iv)
all amounts due to the Secured Party under the Notes.
 
“Organizational Documents” means, with respect to the Maker, the documents by
which the Maker was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred stock or other
forms of preferred equity) and which relate to the internal governance of the
Maker (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).
 
“Permitted Liens” shall have the meaning assigned to such term in the Purchase
Agreement.
 
“Pledged Securities” shall have the meaning ascribed to such term in Section 4.5
below.
 
“Prohibited Actions” means: (a) any sale, transfer, assignment, mortgage,
pledge, lease, grant of a security interest in, or any other encumbrance of all
or any portion of the Pledged Securities to any person or entity other than the
Secured Party without the express written consent of the Secured Party; and (b)
any vote of all or any portion of the Pledged Securities now held or hereafter
acquired by the Maker to authorize or approve any of the following without the
express written consent of the Secured Party, which consent may be withheld in
the Secured Party’ s sole and absolute discretion: (1) any increase in the
number of shares of securities that any subsidiary of the Maker shall be
authorized to issue; (2) any issuance of any shares of securities of any
subsidiary of the Maker; and/or (3) the creation of any new classes or series of
securities by any subsidiary of the Maker.
 
“Transaction Documents” means and includes the Notes, the Purchase Agreement,
the Warrants, the IP Security Agreement, the Negative Covenant Agreement, this
Agreement, the “Transaction Documents” defined in the Purchase Agreement, and
all documents and instruments executed and delivered in connection therewith, in
each case, as amended, restated, supplemented or otherwise modified.
 
“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect in the State of New York.
 
Section 1.3
UCC Terms

 
As used herein, each of the following terms, whether or not capitalized, has the
meaning specified in the Uniform Commercial Code: (a) Chattel Paper; (b)
Commercial Tort Claim; (c) Deposit Account; (d) Documents; (e) Electronic
Chattel Paper; (f) Instruments; (g) Investment Property; (h) Letter of Credit
Right; and (i) Securities.

 
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ARTICLE 2 - Grant
 
As an inducement for the Secured Party to extend the loans evidenced by the
Notes and to secure the payment and performance of the Obligations, the Maker
hereby assigns and pledges to the Secured Party all of the Maker’s rights, title
and interest in, and grants to the Secured Party a continuing security interest
in: (a) all personal property and fixtures of every kind and nature, whether now
owned or hereafter arising or acquired by the Maker, including, without
limitation, all Accounts, Chattel Paper, Commercial Tort Claims, Contract
Rights, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment,
General Intangibles, Goods, Instruments, Investment Property, Inventory, Letter
of Credit Rights, Securities, furniture, fixtures, machinery, motor vehicles,
appliances, tools, contracts, all policies of insurance, as well as any proceeds
and unearned premiums pertaining to such policies, insurance refund claims and
all other insurance claims and proceeds, all monies, all management contracts,
all contract rights, chattel paper, all files, records, books of accounts,
business papers, all franchise or similar distribution rights or agreements, and
all permits, licenses and agreements of any kind or nature pursuant to which the
Maker possesses, uses or has authority to possess or use property (whether
tangible or intangible) of others or others possess, use or have authority to
possess or use property (whether tangible or intangible) of the Maker, all
proceeds and rights from any franchise agreement or distribution agreement, in
each case whether now owned or hereafter arising; and (b) all additions,
accessions, accessories, amendments, attachments, modifications, substitutions,
and replacements, proceeds and products of any of the foregoing (all of the
foregoing, collectively the “Collateral”).
 
Notwithstanding anything to the contrary contained herein, the Maker hereby
pledges to the Secured Party the Securities constituting all equity of the
Domestic Subsidiaries.
 
ARTICLE 3 - Delivery of Certain Collateral
 
Contemporaneously with or prior to the execution of this Agreement, the Maker
shall deliver or cause to be delivered to the Secured Party (a) any and all
certificates and other instruments representing or evidencing the Pledged
Securities, and (b) any and all certificates and other instruments or documents
representing any of the other Collateral, in each case, together with all
Necessary Endorsements. The Maker is, contemporaneously with the execution
hereof, delivering to the Secured Party, or has previously delivered to the
Secured Party, a true and correct copy of each Organizational Document governing
any of the Pledged Securities.
 
ARTICLE 4 - Representations, Warranties and Covenants
 
The Maker represents and warrants to, and covenants and agrees with, the Secured
Party as follows, each of which representations, warranties and covenants shall
be continuing and in force so long as any Obligations remain outstanding:
 
Section 4.1
Ownership and Location of Collateral; Absence of Liens and Restrictions

 
The Maker is the sole legal and equitable owner of the Collateral pledged by the
Maker hereunder, holding good and marketable title to the same free and clear of
all Liens except for the security interests granted hereunder and Permitted
Liens, and has legal power and authority to execute, deliver and perform its
obligations hereunder, and to collaterally assign, deliver and create a security
interest in the Collateral in the manner herein contemplated. Except for the
restrictions set forth herein and in the Notes and as may exist in respect of
the Permitted Liens, the Collateral is not subject to any restriction that would
prohibit or restrict the assignment, delivery or creation of the security
interests contemplated hereunder.
 
The Maker represents and warrants to the Secured Party that Schedule 4.1 hereto
lists all Intellectual Property of the Maker, that this Agreement is effective
to create a valid and continuing lien on and, upon the filing hereof with the
United States Patent and Trademark Office and the United States Copyright Office
and the filing of appropriate financing statements, perfected security interests
in favor of the Secured Party in all of the Maker’s Intellectual Property and
such perfected security interests are enforceable as such as against any and all
creditors of, and purchasers from, the Maker. Upon filing of this Agreement with
the United States Patent and Trademark Office and the United States Copyright
Office and the filing of appropriate financing statements, all action necessary
or desirable to protect and perfect the Secured Party’s lien on all of the
Maker’s Intellectual Property shall have been duly taken. The Maker represents
and warrants to the Secured Party that, other than such consents as have been
delivered to the Secured Party, no consent of any person or entity is required
in connection with the grant to the Secured Party of a security interest in the
Collateral hereunder.

 
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Section 4.2
Legal, Valid and Binding Agreement; No Conflicts

 
The execution, delivery and performance by the Maker of this Agreement and the
filings contemplated herein have been duly authorized by all necessary action on
the part of the Maker and no further action is required. This Agreement has been
duly executed by the Maker. This Agreement constitutes the legal, valid and
binding obligation of the Maker, enforceable against the Maker in accordance
with its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws of general application
relating to or affecting the rights and remedies of creditors and by general
principles of equity.
 
The execution, delivery and performance of this Agreement by the Maker does not
(i) violate any of the provisions of any Organizational Documents of the Maker
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to the Maker or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any of the Maker’s debt or otherwise) or other
understanding to which the Maker is a party or by which any property or asset of
the Maker is bound or affected. If any, all required consents (including,
without limitation, from stockholders or creditors of the Maker) necessary the
Maker to enter into and perform its obligations hereunder have been obtained.
 
Section 4.3
First Priority Security Interest

 
This Agreement, together with the filing of Uniform Commercial Code financing
statements in the office of the Secretary of State of Nevada, the Maker’s state
of formation, creates a valid and continuing first lien on and perfected
security interest in the Collateral (except for property located in the United
States in which a security interest may not be perfected by filing under the
Uniform Commercial Code), prior to all other Liens (other than Permitted Liens),
and is enforceable as such against creditors of the Maker, any owner of the real
property where any of the Collateral is located, any purchaser of such real
property and any present or future creditor obtaining a lien on such real
property. The Maker has received no written claim that any Collateral, or
Maker’s use of any Collateral, violates the rights of any third party. There has
been no adverse decision to the Maker’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to the Maker’s
right to keep and maintain such Collateral in full force and effect, and there
is no proceeding involving said rights pending or, to the best knowledge of the
Maker, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
 
Section 4.4
Sales and Further Liens

 
The Maker shall not grant to permit to exist any Liens on any of the Collateral
other than Permitted Liens. The Maker shall not sell, grant, assign or transfer
any interest in, any of the Collateral to any person or entity other than the
Secured Party. The Maker shall defend its title to and the Secured Party’s
interest in the Collateral against all material and adverse claims and take any
action necessary to remove any Liens other than Permitted Liens.
 
Section 4.5
Pledged Securities

 
The capital stock and other equity interests pledged to the Secured Party
hereunder (the “Pledged Securities”) represent all of the capital stock and
other equity interests in and to the Domestic Subsidiaries, and represent all
capital stock and other equity interests owned, directly or indirectly, by the
Maker, except for capital stock and other equity interests owned, directly or
indirectly, by the Maker with respect to VistaStem Canada, Inc., an entity
formed under the laws of the province of Ontario (the “Canadian Subsidiary”).
 
The Canadian Subsidiary does not have any assets and does not conduct any
operations.
 
All of the Pledged Securities are validly issued, fully paid and non-assessable,
and the Maker is the legal and beneficial owner of the Pledged Securities, free
and clear of any lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted Liens. The
Maker shall cause the pledge and security interest of the Secured Party to be
duly noted in its corporate books and records. The Maker shall vote the Pledged
Securities to comply with the covenants and agreements set forth herein and in
the Transaction Documents.
 
The Maker agrees that it shall not take any Prohibited Actions with respect to
the Pledged Securities.
 
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Section 4.6
Inspection; Verification of Accounts

The Maker shall at all reasonable times and upon reasonable notice allow the
Secured Party to examine, inspect or make extracts from or copies of the Maker’s
books and records, inspect the Collateral and arrange for verification of
Accounts constituting Collateral directly with the Maker’s accountants, and,
upon and after any Event of Default, the account obligors and account debtors or
by other methods.
 
Section 4.7
Accounts: Collection and Delivery of Proceeds

 
The Maker shall diligently collect all of its Accounts until such time as an
Event of Default has occurred and is continuing and during which the Secured
Party exercises its rights to collect the Accounts pursuant to this Agreement.
After the occurrence and during the continuance of an Event of Default, the
Maker shall, at the request of the Secured Party, notify account debtors of the
security interest of the Secured Party in any Account and that payment thereof
is to be made directly to the Secured Party. After the occurrence and during the
continuance of an Event of Default, upon request of the Secured Party, any
proceeds of Accounts or inventory received by the Maker, whether in the form of
cash, checks, notes or other instruments, shall be held in trust for the Secured
Party and the Maker shall deliver said proceeds daily to the Secured Party,
without commingling, in the identical form received (properly endorsed or
assigned where required to enable the Secured Party to collect the same).
 
Section 4.8
Equipment and Inventory; Insurance

 
The Maker shall keep the Collateral insured at all times by insurance in such
form and amounts as may be reasonably satisfactory to the Secured Party, and in
any event (without specific request by the Secured Party) will insure the
Collateral, with financially sound and reputable insurance companies, in such
amounts and against such risks, and with such deductibles, as in each case are
customarily maintained by companies engaged in the same or similar businesses,
owning similar properties and operating in the same or similar locations. The
Secured Party shall be named as loss payee (in the case of property insurance)
or additional insured (in the case of liability insurance), as applicable.
 
Section 4.9
Equipment and Inventory: Maintenance and Use, Payment of Taxes

 
The Maker shall keep the Collateral in good order and repair, ordinary wear and
tear and damage by casualty excepted and except where the failure to do so could
not reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise) or prospects of the Maker, and will not use
the same in violation of law or any policy of insurance thereon, and will pay
promptly when due all material taxes and assessments on the Collateral or on its
use or operation, except (a) taxes, assessments and governmental charges the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to the Maker and with respect to which adequate
reserves have been set aside on its books and (b) taxes, assessments and
governmental charges for which a valid extension to file the applicable tax
returns or other required documentation, if any, have been granted.
 
Section 4.10
Name or Organizational Change.

 
The Maker shall not change its place of organization, name, identity,
organizational structure, chief executive office or place where its business
records are kept, or merge into or consolidate with any other entity, unless the
Maker shall have given the Secured Party at least 30 days’ prior written notice
thereof and shall have delivered to the Secured Party such new Uniform
Commercial Code financing statements, shall have filed such records with the
United States Patent and Trademark Office, and shall have delivered such other
documents and instruments and taken such other actions as may be reasonably
necessary or required by the Secured Party to ensure the continued perfection
and priority of the security interests granted by this Agreement.
 
Section 4.11
Deposit Accounts

 
For each deposit account that the Maker opens or maintains at any time, the
Maker shall, at the Secured Party’s request and option, pursuant to an agreement
in form and substance satisfactory to the Secured Party, either (i) cause the
depositary bank to agree to comply, without further consent of the Maker, at any
time with instructions from the Secured Party to such depositary bank directing
the disposition of funds from time to time credited to such deposit account, or
(ii) arrange for the Secured Party to become the customer of the depositary bank
with respect to the deposit account, with the Maker being permitted, only with
the consent of the Secured Party, to exercise rights to withdraw funds from such
deposit account. The Secured Party agrees with the Maker that the Secured Party
shall not give any such instructions or withhold any withdrawal rights from the
Maker, unless an Event of Default (as defined below) has occurred and is
continuing. The provisions of this paragraph shall not apply to (x) any deposit
account for which the Maker, the depositary bank and the Secured Party have
entered into a cash collateral agreement specially negotiated by the Maker, the
depositary bank and the Secured Party for the specific purpose set forth
therein, (y) a deposit account for which the Secured Party is the depositary
bank and is in automatic control, and (z) any deposit accounts specially and
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of the Maker’s salaried employees.

 
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Section 4.12
Investment Property

 
If the Maker shall at any time hold or acquire any certificated securities, the
Maker shall forthwith endorse, assign and deliver the same to the Secured Party,
accompanied by such instruments of transfer or assignment duly executed in blank
as the Secured Party may from time to time specify. If any securities now or
hereafter acquired by the Maker are un-certificated and are issued to the Maker
or its nominee directly by the issuer thereof, the Maker shall immediately
notify the Secured Party thereof and, at the Secured Party’s request and option,
pursuant to an agreement in form and substance satisfactory to the Secured
Party, either (i) cause the issuer to agree to comply, without further consent
of the Maker or such nominee, at any time with instructions from the Secured
Party as to such securities, or (ii) arrange for the Secured Party to become the
registered owner of the securities. If any securities, whether certificated or
un-certificated, or other investment property now or hereafter acquired by the
Maker are held by the Maker or its nominee through a securities intermediary or
commodity intermediary, the Maker shall immediately notify the Secured Party
thereof and, at the Secured Party’s request and option, pursuant to an agreement
in form and substance satisfactory to the Secured Party, either (y) cause such
securities intermediary or (as the case may be) commodity intermediary to agree
to comply, in each case without further consent of the Maker or such nominee, at
any time with entitlement orders or other instructions from the Secured Party to
such securities intermediary as to such securities or other investment property,
or (as the case may be) to apply any value distributed on account of any
commodity contract as directed by the Secured Party to such commodity
intermediary, or (z) in the case of financial assets or other investment
property held through a securities intermediary, arrange for the Secured Party
to become the entitlement holder with respect to such investment property, with
the Maker being permitted, only with the consent of the Secured Party, to
exercise rights to withdraw or otherwise deal with such investment property. The
Secured Party agrees with the Maker that the Secured Party shall not give any
such entitlement orders or instructions or directions to any such issuer,
securities intermediary or commodity intermediary, and shall not withhold its
consent to the exercise of any withdrawal or dealing rights by the Maker, unless
an Event of Default has occurred and is continuing. The provisions of this
paragraph shall not apply to any financial assets credited to a securities
account for which the Secured Party is the securities intermediary.
 
Section 4.13
Collateral in the Possession of a Bailee

 
If any Collateral is at any time in the possession of a bailee, the Maker shall
promptly notify the Secured Party thereof and, at the Secured Party’s request
and option, shall promptly obtain an acknowledgement from the bailee, in form
and substance satisfactory to the Secured Party, that the bailee holds such
Collateral for the benefit of the Secured Party and such bailee’s agreement to
comply, without further consent of the Maker, at any time with instructions of
the Secured Party as to such Collateral. The Secured Party agrees with the Maker
that the Secured Party shall not give any such instructions unless an Event of
Default has occurred and is continuing or would occur after taking into account
any action by the Maker with respect to the bailee.
 
Section 4.14
Electronic Chattel Paper

 
If the Maker at any time holds or acquires an interest in any electronic chattel
paper, the Maker shall promptly notify the Secured Party thereof and, at the
request and option of the Secured Party, shall take such action as the Secured
Party may reasonably request to vest in the Secured Party control, under the
UCC, of such electronic chattel paper. The Secured Party agrees with the Maker
that the Secured Party will arrange, pursuant to procedures satisfactory to the
Secured Party amid so long as such procedures will not result in the Secured
Party’s loss of control, for the Maker to make alterations to the electronic
chattel paper permitted under the UCC for a party in control to make without
loss of control, unless an Event of Default has occurred and is continuing or
would occur after taking into account any action by the Maker with respect to
such electronic chattel paper.
 
Section 4.15
Letter-of-Credit Rights

 
If the Maker is at any time a beneficiary under a letter of credit now or
hereafter, the Maker shall promptly notify the Secured Party thereof and, at the
request and option of the Secured Party, the Maker shall, pursuant to an
agreement in form and substance satisfactory to the Secured Party, either (i)
arrange for the issuer and any confirmer or other nominated person of such
letter of credit to consent to an assignment to the Secured Party of the
proceeds of the letter of credit or (ii) arrange for the Secured Party to become
the transferee beneficiary of the letter of credit, with the Secured Party
agreeing, in each case, that the proceeds of the letter to credit are to be
applied to payment of the Obligations.

 
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Section 4.16
Commercial Tort Claims

 
If the Maker shall at any time hold or acquire a Commercial Tort Claim, the
Maker shall promptly notify the Secured Party in a writing signed by the Maker
of the particulars thereof and grant to the Secured Party 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
the Secured Party.
 
Section 4.17
Other Actions as to any and all Collateral

 
The Maker further agrees, upon request of the Secured Party and at the Secured
Party’s option, to take any and all other actions as the Secured Party may
determine to be necessary or useful for the attachment, perfection and first
priority of, and the ability of the Secured Party to enforce, the Secured
Party’s security interest in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC, to the extent, if any,
that the Maker’s signature thereon is required therefor, (ii) causing the
Secured Party’s name to be noted as secured party on any certificate of title
for a titled good if such notation is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party’s
security interest in such Collateral, (iii) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party’s
security interest in such Collateral, (iv) obtaining governmental and other
third party waivers, consents and approvals in form and substance satisfactory
to the Secured Party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, (v) obtaining waivers
from mortgagees and landlords in form and substance satisfactory to the Secured
Party and (vi) taking all actions under any earlier versions of the UCC or under
any other law, as reasonably determined by the Secured Party to be applicable in
any relevant UCC or other jurisdiction, including any foreign jurisdiction.
 
At any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
Secured Party to perfect the security interest created hereby, the Maker shall
deliver such Collateral to the Secured Party.
 
The Maker, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of the Secured Party regarding the Pledged Securities
consistent with the terms of this Agreement without the further consent of the
Maker as contemplated by Section 8-106 (or any successor section) of the UCC.
Further, the Maker agrees that it shall not enter into a similar agreement (or
one that would confer “control” over any Collateral within the meaning of
Article 8 and Article 9 of the UCC) with any person or entity other than the
Secured Party.
 
If there is any investment property or deposit account included as Collateral
that can be perfected by “control” through an account control agreement, the
Maker shall cause such an account control agreement, in form and substance in
each case satisfactory to the Secured Party, to be entered into and delivered to
the Secured Party.
 
Section 4.18
Material Adverse Change in the Collateral

 
The Maker shall, within five (5) days of obtaining knowledge thereof, advise the
Secured Party promptly, in sufficient detail, of any material adverse change in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security
interest therein.
 
Section 4.19
Future Subsidiaries

 
With regard to each future subsidiary (“Future Subsidiary”) of the Maker with
operations or material operations (which, if in doubt, shall be in the sole
determination of the Secured Party), the Maker shall immediately deliver to the
Secured Party all certificates held by the Maker representing equity interests
in in such Future Subsidiary, and such securities shall constitute “Pledged
Securities” hereunder.
 
Section 4.20
Intellectual Property

 
4.20.1 The Maker shall notify the Secured Party immediately if it knows or has
reason to know that any application or registration relating to any Intellectual
Property (now or hereafter existing) may become abandoned or dedicated, or of
any adverse determination or development (including the institution of, or any
such determination or development in, any proceeding in the United States Patent
and Trademark Office, the United States Copyright Office or any court) regarding
the Maker’s ownership of any Intellectual Property, its right to register the
same, or to keep and maintain the same. Notwithstanding the foregoing, nothing
in this Agreement shall obligate the Maker to notify the Secured Party in the
event of an objection, refusal, rejection or any other adverse determination or
development (collectively, a “Development”) in a pending application for any
patent, trademark or copyright where such Development does not result in the
final and non-appealable loss of rights in such pending application.

 
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4.20.2 In no event shall the Maker, either directly or through any agent,
employee, licensee or designee, file an application for any patent or the
registration of any trademark or copyright with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency without promptly thereafter giving the Secured Party written notice
thereof, and, upon request of the Secured Party, the Maker shall execute and
deliver a supplement hereto (in form and substance satisfactory to the Secured
Party) to evidence the Secured Party’s lien on such patent, trademark or
copyright, and the General Intangibles of the Maker relating thereto or
represented thereby.
 
4.20.3 The Maker shall take all actions necessary or reasonably requested by the
Secured Party to (i) maintain and pursue each application, to obtain the
relevant registration and to maintain the registration of each of the trademarks
(now or hereafter existing), including the filing of applications for renewal,
affidavits of use, affidavits of noncontestability and opposition and
interference and cancellation proceedings and (ii) prosecute to allow
applications for patents and maintain the patents (now or hereafter existing).
Notwithstanding anything to the contrary in this Agreement, the Maker shall not
be under any obligation to continue the prosecution of any application for a
patent or any application to register a trademark when it has a commercially
reasonable belief that it will be unsuccessful in its efforts to obtain a
registration for such trademark or obtain commercially meaningful claims for
such patent.
 
4.20.4 In the event that any Intellectual Property is infringed upon,
misappropriated or diluted by a third party, the Maker shall notify the Secured
Party promptly after the Maker learns thereof. The Maker shall, unless its board
of directors shall reasonably determine that such infringement of such
Intellectual Property is either not material to the conduct of its business or
operations, or is otherwise not in the best interests of the Maker and its
shareholders, (i) promptly sue for infringement, misappropriation or dilution
and to recover any and all damages for such infringement, misappropriation or
dilution, and (ii) take such other actions as the Secured Party shall deem
appropriate under the circumstances to protect such Intellectual Property.
 
Section 4.21
Indebtedness

 
The Maker shall not, and shall not permit any Domestic Subsidiary to, directly
or indirectly create, incur, assume, guarantee, or otherwise become or remain
liable with respect to any material Indebtedness, except for (i) “Permitted
Indebtedness” as defined in the Purchase Agreement with respect to the Maker,
and (ii) “Permitted Indebtedness” as defined in the Negative Covenant Agreement
with respect to the Domestic Subsidiaries.
 
Section 4.22
Further Assurances

 
Upon the written request of the Secured Party, and at the sole expense of the
Maker, the Maker shall promptly execute and deliver such further instruments and
documents and take such further actions as the Secured Party reasonably may deem
desirable to obtain the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, filing of any financing
statement under the Uniform Commercial Code, execution of assignments of General
Intangibles, transfer of Collateral (other than inventory, accounts and
equipment) to the Secured Party’s possession where the Secured Party’s
possession is necessary to perfect the Security Interest granted herein;
provided, however, that prior to the occurrence of an Event of Default, the
Maker shall be entitled to retain such Collateral as otherwise permitted herein.
The Maker authorizes the Secured Party to file one or more financing statements
which may describe the Collateral as “all assets”, and to file a copy of this
Agreement in lieu of a financing statement, in such places and with such
governmental offices as the Secured Party reasonably determines to be
appropriate or advisable. The Maker authorizes the Secured Party to record the
Secured Party’s security interest in the Collateral with the United States
Patent and Trademark Office and to supplement such recording from time to time.
If any amount payable under or in connection with any of the Collateral shall be
or become evidenced by any promissory note or other instrument in an amount in
excess of $10,000, such note or instrument shall be, upon the Secured Party’s
request, delivered to the Secured Party, duly endorsed in a manner satisfactory
to it, unless such item is in the process of collection in the ordinary course
of business.

 
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ARTICLE 5 - Secured Party’s Rights With Respect To Collateral
 
Section 5.1
Secured Party’s Rights

 
The Secured Party may, at any time upon and after an Event of Default, and
during the continuation thereof, at its option and, whether or not the
Obligations are due, without notice or demand on the Maker, take the following
actions with respect to the Collateral:
 
5.1.1 with respect to any Accounts (i) notify account debtors of the security
interest of the Secured Party in such Accounts and that payment thereof is to be
made directly to the Secured Party; (ii) demand, collect, and provide receipt
for any amounts relating thereto, as the Secured Party may determine; (iii)
commence and prosecute any actions in any court for the purposes of collecting
any such Accounts and enforcing any other rights in respect thereof; (iv)
defend, settle or compromise any action brought and, in connection therewith,
give such discharges or releases as the Secured Party may deem appropriate; (v)
receive, open and dispose of mail addressed to the Maker and endorse checks,
notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or
other instruments or documents evidencing payment, shipment or storage of the
goods giving rise to such Accounts or securing or relating to such Accounts, on
behalf of and in the name of the Maker; and (vi) sell, assign, transfer, make
any agreement in respect of, or otherwise deal with or exercise rights in
respect of, any such Accounts or the goods or services which have given rise
thereto, as fully and completely as though the Secured Party were the absolute
owner thereof for all purposes; and
 
5.1.2 with respect to any equipment and inventory (i) make, adjust and settle
claims under any insurance policy related thereto and place and pay for
appropriate insurance thereon; (ii) discharge taxes and other Liens at any time
levied or placed thereon; (iii) make repairs or provide maintenance with respect
thereto; and (iv) pay any necessary filing fees and any taxes arising as a
consequence of any such filing. The Secured Party shall have no obligation to
make any such expenditures nor shall the making thereof relieve the Maker of its
obligation to make such expenditures.
 
Except as otherwise provided herein, the Secured Party shall have no duty as to
the collection or protection of the Collateral nor as to the preservation of any
rights pertaining thereto, beyond the safe custody of any Collateral in its
possession.
 
ARTICLE 6 - Defaults
 
Section 6.1
Events of Default

 
The occurrence of any one or more of the following events shall constitute an
“Event of Default” under this Agreement:
 
6.1.1 Payments. If, after the expiration of any applicable cure period, (a) any
payment under the Notes is not punctually paid in full when due and payable, or
(b) any payment under any Obligation is not punctually paid in full when due and
payable.
 
6.1.2 Covenants. If the Maker fails to perform or observe any covenant or
agreement (other than as referred to in Section 6.1.1 above) contained in this
Agreement, and such failure remains un-remedied for the earlier of ten (10) days
after (a) the Secured Party gives written notice thereof to the Maker or (b) the
Maker becomes aware of such failure.
 
6.1.3 Validity Of Documents. If (a) any material provision, in the sole opinion
of Secured Party, of any Transaction Document shall at any time for any reason
cease to be valid, binding and enforceable against the Maker; (b) the validity,
binding effect or enforceability of any Transaction Document against any party
other than the Secured Party shall be contested; or (c) any Transaction Document
shall be terminated, invalidated or set aside, or be declared ineffective or
inoperative or, the result of which in any way ceases to give or provide to
Secured Party the benefits purported to be created thereby.
 
6.1.4 Transaction Documents. If any “Event of Default” shall have occurred under
and as defined in any Transaction Document.
 
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ARTICLE 7 - Secured Party’s Rights and Remedies
 
Section 7.1
Rights of Secured Party Upon an Event of Default

 
So long as any Event of Default shall have occurred and is continuing:
 
7.1.1 the Secured Party may, at its option, without notice or demand, cause all
of the Obligations to become immediately due and payable in accordance with the
Notes and take immediate possession of the Collateral, and for that purpose the
Secured Party may, so far as the Maker can give authority therefor, enter upon
any premises on which any of the Collateral is situated and remove the same
therefrom or remain on such premises and in possession of such Collateral for
purposes of conducting a sale or enforcing the rights of the Secured Party;
 
7.1.2 the Maker will, upon demand, assemble the Collateral and make it available
to the Secured Party at a place and time designated by the Secured Party that is
reasonably convenient to both parties;
 
7.1.3 the Secured Party may collect and receive all income and proceeds in
respect of the Collateral and exercise all rights of the Maker and perform any
of the Maker’s obligations hereunder with respect thereto, all without liability
except to account for property actually received (but the Secured Party shall
have no duty to exercise any of the aforesaid rights, privileges or options and
shall not be responsible for any failure to do so or delay in so doing);
 
7.1.4 the Secured Party may sell, lease or otherwise dispose of the Collateral
at a public or private sale, with or without having the Collateral at the place
of sale, and upon such terms and in such commercially reasonable manner as the
Secured Party may determine, and the Secured Party may purchase any Collateral
at any such sale. Unless the Collateral threatens to decline rapidly in value or
is of the type customarily sold on a recognized market, the Secured Party shall
send to the Maker prior written notice (which, if given at least ten (10) days
prior to any sale, shall be deemed to be reasonable) of the time and place of
any public sale of the Collateral or of the time after which any private sale or
other disposition thereof is to be made. The Maker agrees that upon any such
sale the Collateral shall be held by the purchaser free from all claims or
rights of every kind and nature, including any equity of redemption or similar
rights, and all such equity of redemption and similar rights are hereby
expressly waived and released by the Maker. In the event any consent, approval
or authorization of any governmental agency is necessary to effectuate any such
sale, the Maker shall execute all applications or other instruments as may be
required; and
 
7.1.5 in any jurisdiction where the enforcement of its rights hereunder is
sought, the Secured Party shall have, in addition to all other rights and
remedies provided for in its loan documentation, the rights and remedies of a
Secured Party under the Uniform Commercial Code.
 
Section 7.2
Rights of Secured Party Prior to Disposition of Collateral

 
Prior to any disposition of Collateral pursuant to this Agreement the Secured
Party may, at its option, cause any of the Collateral to be repaired or
reconditioned in such manner and to such extent as to make it saleable.
 
Section 7.3
Grant of License to Secured Party

 
For purposes of Section 7.1 above, upon an Event of Default, the Secured Party
is hereby granted a license or other right to use, without charge, the Maker’s
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any property of a similar nature,
in each case, which constitutes and relates to the Collateral, in completing
production of, advertising for sale and selling any Collateral; and subject to
limitations contained therein, the Maker’s rights under all licenses and all
franchise agreements constituting Collateral shall inure to the Secured Party’s
benefit.
 
Section 7.4
Application of Proceeds

 
The Secured Party shall be entitled to retain and to apply the proceeds of any
disposition of the Collateral, first, to its reasonable expenses of retaking,
holding, protecting and maintaining, and preparing for disposition and disposing
of, the Collateral, including attorneys’ fees and other legal expenses incurred
by it in connection therewith; and second, to the payment of the Obligations in
such order of priority as provided in the Notes. Any surplus remaining after
such application shall be paid to the Maker or to whomever may be legally
entitled thereto, provided that in no event shall the Maker be credited with any
part of the proceeds of the disposition of the Collateral until such proceeds
shall have been received in cash by the Secured Party. The Maker shall remain
liable for any deficiency.

 
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Section 7.5
Remedies are Cumulative

 
The remedies in this Section are in addition to, not in limitation of, any other
right, power, privilege, or remedy, either in law, in equity, or otherwise, to
which the Secured Party may be entitled. No failure or delay on the part of the
Secured Party in exercising any right, power, or remedy will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right hereunder. The
remedies in this Agreement are in addition to, not in limitation of, any other
right, power, privilege, or remedy, either in law, in equity, or otherwise, to
which the Secured Party may be entitled. All Secured Party’s rights and
remedies, whether evidenced by this Agreement or by any other agreement,
instrument or document shall be cumulative and may be exercised singularly or
concurrently.
 
Section 7.6
Default Rate

 
Until paid, all amounts due and payable by the Maker hereunder shall be a debt
secured by the Collateral and shall bear, whether before or after judgment,
interest at the Default Rate (as that term is defined in the Notes).
 
Section 7.7
Commercial Reasonableness

 
To the extent that applicable law imposes duties on the Secured Party to
exercise remedies in a commercially reasonable manner, the Maker acknowledges
and agrees that it is not commercially unreasonable for the Secured Party (i) to
fail to incur expenses reasonably deemed significant by the Secured Party to
prepare Collateral for disposition or otherwise to fail to complete raw material
or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to fail to remove liens or encumbrances on or any adverse
claims against Collateral, (iv) to exercise collection remedies against account
debtors and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as the Maker, for expressions of
interest in acquiring all or any portion of the Collateral, (vi) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (vii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (viii) to dispose of
assets in wholesale rather than retail markets, (ix) to disclaim disposition
warranties, (x) to purchase insurance or credit enhancements to insure the
Secured Party against risks of loss, collection or disposition of Collateral or
to provide to the Secured Party a guaranteed return from the collection or
disposition of Collateral, or (xi) to the extent deemed appropriate by the
Secured Party, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Secured Party in the
collection or disposition of any of the Collateral. Each Maker acknowledges that
the purpose of this Section is to provide non-exhaustive indications of what
actions or omissions by the Secured Party would fulfill the Secured Party’s
duties under the UCC in the Secured Party’s exercise of remedies against the
Collateral and that other actions or omissions by the Secured Party shall not be
deemed to fail to fulfill such duties solely on account of not being indicated
in this Section. Without limitation upon the foregoing, nothing contained in
this Section shall be construed to grant any rights to the Maker or to impose
any duties on the Secured Party that would not have been granted or imposed by
this Agreement or by applicable law in the absence of this Section.
 
ARTICLE 8 - Waivers
 
Except as required by applicable law and cannot be waived, the Maker waives
presentment, demand, notice, protest, notice of acceptance of this Agreement,
notice of any loans made, credit or other extensions granted, collateral
received or delivered or any other action taken in reliance hereon and all other
demands and notices of any description, except for such demands and notices as
are expressly required to be provided to the Maker under this Agreement or any
other document evidencing the Obligations. With respect to both the Obligations
and the Collateral, the Maker assents to any extension or postponement of the
time of payment or any other forgiveness or indulgence, to any substitution,
exchange or release of Collateral, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of partial payment
thereon and the settlement, compromise or adjustment of any thereof, all in such
manner and at such time or times as the Secured Party reasonably may deem
advisable. The Secured Party may exercise its rights with respect to the
Collateral without resorting, or regard, to other collateral or sources of
reimbursement for Obligations. The Secured Party shall not be deemed to have
waived any of its rights with respect to the Obligations or the Collateral
unless such waiver is in writing and signed by the Secured Party. No delay or
omission on the part of the Secured Party in exercising any right shall operate
as a waiver of such right or any other right. A waiver on any one occasion shall
not bar or waive the exercise of any right on any future occasion. All rights
and remedies of the Secured Party in the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, are cumulative and not
exclusive of any remedies provided by law or any other agreement, and may be
exercised separately or concurrently.

 
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ARTICLE 9 - Marshalling
 
The Secured Party shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the extent that
each of them lawfully may, the Maker hereby agrees that each of them will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the enforcement of the Secured Party’s rights and remedies under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that each of them lawfully may, the Maker hereby irrevocably waive
the benefits of all such laws.
 
ARTICLE 10 - Expenses
 
The Maker shall, promptly on demand, pay or reimburse the Secured Party for all
reasonable expenses (including reasonable attorneys’ fees of outside counsel or
allocated costs of in house counsel) incurred or paid by the Secured Party in
connection with the preparation, negotiation, closing, administration or
enforcement of this Agreement, for the Secured Party’s on-site periodic
examinations of the Collateral, and for any other amounts permitted to be
expended by the Secured Party hereunder, including without limitation such
expenses as are incurred to preserve the value of the Collateral and the
validity, perfection, priority and value of any security interest created hereby
and by the IP Security Agreement (including without limitation (a) the costs and
expenses of filing financing statements, continuation statements and other UCC
forms and amendments, and (b) the costs and expenses of recording the Secured
Party’s security interest in the Intellectual Property of the Maker and the
California Subsidiary with the United States Patent and Trademark Office and the
United States Copyright Office), the collection, sale or other disposition of
any of the Collateral or the exercise by the Secured Party of any of the rights
conferred upon it hereunder. The obligation to pay any such amount shall be an
additional Obligation secured hereby and, to the extent permitted by law, each
such amount shall bear interest from the time of demand at the highest Default
Rate (under and as defined in the Notes).
 
ARTICLE 11 - Notices
 
Any demand upon or notice to any Maker that the Secured Party may give shall be
effective when delivered by hand, properly deposited in the mails postage
prepaid, or sent by electronic facsimile transmission, receipt acknowledged, or
delivered to an overnight courier, in each case addressed to the Maker at the
address shown on the first page of this Agreement or such other address as the
Maker may advise the Secured Party in writing. Any notice by the Maker to the
Secured Party shall be given as aforesaid, addressed to the Secured Party at the
address shown on the first page of this Agreement or such other address as the
Secured Party may advise the Maker in writing.
 
ARTICLE 12 - Successors and Assigns
 
This Agreement shall be binding upon the Maker, their successors and assigns,
and shall inure to the benefit of and be enforceable by the Secured Party and
its successors and assigns. Without limiting the generality of the foregoing
sentence, the Secured Party may assign or otherwise transfer any agreement or
any note held by it evidencing, securing or otherwise executed in connection
with the Obligations, or sell participations in any interest therein, to any
other person or entity.
 
ARTICLE 13 - Miscellaneous
 
Section 13.1
Amendments

 
This Agreement may not be amended or modified except by a writing signed by the
Maker and the Secured Party, nor may the Maker assign any of its rights
hereunder.

 
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Section 13.2
Governing Law

 
This Agreement and the terms, covenants and conditions hereof shall be construed
in accordance with, and governed by, the laws of the State of New York (without
giving effect to any conflicts of law provisions contained therein).
 
Section 13.3
Consent to Jurisdiction

 
The Maker and the Secured Party (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. The Maker and the Secured Party consent to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address of such party first set forth above and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 13.3 shall affect or limit any right to serve
process in any other manner permitted by law. The Maker and the Secured Party
hereby agrees that the prevailing party in any suit, action or proceeding
arising out of or relating to this Agreement shall be entitled to reimbursement
for reasonable legal fees from the non-prevailing party.
 
Section 13.4
Collateral in the Name of the Maker and others

 
In the event that any Collateral stands in the name of the Maker and another or
others jointly, as between the Secured Party and the Maker, the Secured Party
may deal with the same for all purposes as if it belonged to or stood in the
name of the Maker alone.
 
Section 13.5
Section Headings

 
Article and Section headings are for convenience of reference only and are not a
part of this Agreement.
 
Section 13.6
WAIVER OF JURY TRIAL

 
EACH OF THE MAKER AND THE SECURED PARTY HEREBY WAIVES TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH OR, ARISING OUT OF:
(A) THIS SECURITY AGREEMENT OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN
CONNECTION HEREWITH; (B) THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT
THEREOF; OR (C) ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN THE MAKER AND
THE SECURED PARTY IN RESPECT OF THIS AGREEMENT.
 
ARTICLE 14 - Power of Attorney
 
Section 14.1
Appointment and Powers of Secured Party

 
The Maker hereby irrevocably constitutes and appoints the Secured Party and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorneys-in-fact with full irrevocable power and authority in the place
and stead of the Maker or in the Secured Party’s own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments that may be necessary or
useful to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of the Maker, without notice to or assent by the Maker, to do the
following:
 
14.1.1 upon the occurrence and during the continuance of an Event of Default,
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise dispose of or deal with any of the Collateral in such manner as is
consistent with the UCC and as fully and completely as though the Secured Party
were the absolute owner thereof for all purposes, and to do, at the Maker’ s
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary or useful to protect, preserve or realize upon the
Collateral and the Secured Party’s security interest therein, in order to effect
the intent of this Agreement, all no less fully and effectively as the Maker
might do, including, without limitation, (A) the filing and prosecuting of
registration and transfer applications with the appropriate federal, state or
local agencies or authorities with respect to trademarks, copyrights and
patentable inventions and processes, (B) upon written notice to the Maker, the
exercise of voting rights with respect to voting securities, which rights may be
exercised, if the Secured Party so elects, with a view to causing the
liquidation of assets of the issuer of any such securities and (C) the
execution, delivery and recording, in connection with any sale or other
disposition of any Collateral, of the endorsements, assignments or other
instruments of conveyance or transfer with respect to such Collateral; and
 
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14.1.2 to file financing statements with respect hereto, with or without the
Maker’s signature, or a photocopy of this Agreement in substitution for a
financing statement, as the Secured Party may deem appropriate and to execute in
the Maker’s name such financing statements and amendments thereto and
continuation statements which may require the Maker’s signature.
 
Section 14.2
Ratification by the Maker

 
To the extent permitted by law, the Maker hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and is irrevocable.
 
Section 14.3
No Duty on Secured Party

 
The powers conferred on the Secured Party hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. The Secured Party shall be accountable only for the amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to the Maker for any act or failure to act, except for the Secured
Party’s own gross negligence or willful misconduct.
 
Section 14.4
References to “Domestic Subsidiaries” and “Subsidiaries”

 
In the event that the Maker at any time does not have any subsidiaries, then
references herein to “Domestic Subsidiaries” and “subsidiaries” shall be deemed
to refer to the Maker.
 
ARTICLE 15 - Termination
 
This Agreement and the security interests granted hereunder shall terminate upon
payment, in full, of all the Obligations, whereupon the Secured Party shall
forthwith cause to be assigned, transferred and delivered, upon the request and
at the expense of the Maker, any remaining Collateral to or on the order of the
Maker. At the same time Secured Party shall execute and deliver to the Maker, at
the Maker’s expense, such Uniform Commercial Code termination statements as
shall be reasonably requested by the Maker to effect the termination and release
of the security interests in favor of the Secured Party affecting the
Collateral.
 
ARTICLE 16 - Amendment and Restatement
 
Upon the date first written above, this Agreement shall be deemed to amend,
restate and replace the Original Security Agreement. All Obligations secured by
and under the Original Security Agreement shall be and remain secured under this
Agreement. The Maker agrees that with respect to all matters prior to the date
first written above, all terms of the Original Security Agreement are ratified
and confirmed.
 
[Signature Page follows]
 
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IN WITNESS WHEREOF, the parties have caused this Security Agreement to be duly
executed as of the date first written above.
 

  Maker:           VISTAGEN THERAPEUTICS, INC.           By: /s/ Shawn K. Singh
    Name: Shawn K. Singh     Title: Chief Executive Officer           Secured
Party           PLATINUM LONG TERM GROWTH VII, LLC           By:/s/ Joan
Janczewski     Name: Joan Janczewski     Title: Chief Operating Officer  

 
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Schedule 4.1
Intellectual Property

None