Exhibit 10.1

 

 

TPTX, INC.

LOAN AND SECURITY AGREEMENT

 

 

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This LOAN AND SECURITY AGREEMENT is entered into as of June 11, 2008, by and
between COMERICA BANK (“Bank”) and TPTX, INC. (“Borrower”).

RECITALS

Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower. This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.

AGREEMENT

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:

“Accounts” means all presently existing and hereafter arising accounts, contract
rights, payment intangibles, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower’s Books relating
to any of the foregoing.

“Affiliate” means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person’s senior
executive officers, directors, and partners.

“Bank Expenses” means all reasonable costs or expenses (including reasonable
attorneys’ fees and expenses, whether generated in-house or by outside counsel)
incurred in connection with the preparation, negotiation, administration, and
enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank’s
reasonable attorneys’ fees and expenses (whether generated in-house or by
outside counsel) incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.

“Borrower State” means Delaware, the state under whose laws Borrower is
organized.

“Borrower’s Books” means all of Borrower’s books and records including: ledgers;
records concerning Borrower’s assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files, and
the equipment, containing such information.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks in the State of California are authorized or required to close.

“Cash” means unrestricted cash and cash equivalents.

“Change in Control” means a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the Board of Directors of Borrower, who did not
have such power before such transaction.

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“Chief Executive Office State” means California, where Borrower’s chief
executive office is located.

“Closing Date” means the date of this Agreement.

“Code” means the California Uniform Commercial Code, as amended or supplemented
from time to time.

“Collateral” means the property described on Exhibit A attached hereto and all
Negotiable Collateral to the extent not described on Exhibit A, except to the
extent any such property (i) is nonassignable by its terms without the consent
of the licensor thereof or another party (but only to the extent such
prohibition on transfer is enforceable under applicable law, including, without
limitation, Sections 9406 and 9408 of the Code), or (ii) the granting of a
security interest therein is contrary to applicable law, provided that upon the
cessation of any such restriction or prohibition, such property shall
automatically become part of the Collateral; provided that in no case shall the
definition of “Collateral” exclude any Accounts, proceeds of the disposition of
any property, or general intangibles consisting of rights to payment.

“Collateral State” means the state or states where the Collateral is located,
which is California.

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable; (ii) any obligations with respect to undrawn letters of credit,
corporate credit cards, or merchant services issued for the account of that
Person; and (iii) all obligations arising under any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term “Contingent Obligation” shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

“Credit Extension” means the Term Loan, or any other extension of credit by Bank
to or for the benefit of Borrower hereunder.

“Environmental Laws” means all laws, rules, regulations, orders and the like
issued by any federal state, local foreign or other governmental or
quasi-governmental authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.

“Equipment” means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.

“Event of Default” has the meaning assigned in Article 8.

“GAAP” means generally accepted accounting principles, consistently applied, as
in effect from time to time.

 

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“Guarantor” means TorreyPines Therapeutics, Inc.

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Inventory” means all present and future inventory in which Borrower has any
interest.

“Investment” means any beneficial ownership of (including stock, partnership or
limited liability company interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

“Loan Documents” means, collectively, this Agreement, any note or notes executed
by Borrower in connection with this Agreement, and any other document,
instrument or agreement entered into in connection with this Agreement, all as
amended or extended from time to time.

“Material Adverse Effect” means a material adverse effect on (i) the business
operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole, (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents, or
(iii) Borrower’s interest in, or the value, perfection or priority of Bank’s
security interest in the Collateral.

“Negotiable Collateral” means all of Borrower’s present and future letters of
credit of which it is a beneficiary, drafts, instruments (including promissory
notes), securities, documents of title, and chattel paper, and Borrower’s Books
relating to any of the foregoing.

“Obligations” means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise;
provided that “Obligations” shall not include any obligations of Borrower under
the terms of any warrants provided to Bank in connection with this Agreement.

“Periodic Payments” means all installments or similar recurring payments that
Borrower may now or hereafter become obligated to pay to Bank pursuant to the
terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.

“Permitted Indebtedness” means:

(a) Indebtedness of Borrower in favor of Bank arising under this Agreement or
any other Loan Document;

(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;

 

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(c) Indebtedness not to exceed One Hundred Thousand Dollars ($100,000) in the
aggregate in any fiscal year of Borrower secured by a lien described in clause
(c) of the defined term “Permitted Liens;” provided that such Indebtedness does
not exceed the lesser of the cost or fair market value of the equipment financed
with such Indebtedness;

(d) Subordinated Debt;

(e) Indebtedness to trade creditors incurred in the ordinary course of business;

(f) Indebtedness arising from the endorsement of instruments in the ordinary
course of business;

(g) Performance bonds, surety bonds or other indemnities or similar obligations
issued in the ordinary course of business;

(h) Indebtedness of a Subsidiary to another Subsidiary, Indebtedness of a
Subsidiary to Borrower and Indebtedness of Borrower in Subsidiaries not to
exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal
year;

(i) Other unsecured Indebtedness in an amount not to exceed One Hundred Thousand
Dollars ($100,000) in the aggregate in any fiscal year; and

(j) Extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon Borrower or its Subsidiary, as the
case may be.

“Permitted Investment” means:

(a) Investments existing on the Closing Date disclosed in the Schedule; and

(b) (i) Marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency or any State thereof maturing within
one (1) year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one (1) year from the date of creation thereof and
currently having rating of at least A-2 or P-2 from either Standard & Poor’s
Corporation or Moody’s Investors Service, (iii) Bank’s certificates of deposit
maturing no more than one year from the date of investment therein, (iv) Bank’s
money market accounts, and (v) Investments made in accordance with Borrower’s
Board of Director’s-approved investment policy, as approved in writing by Bank
from time to time;

(c) Repurchases of stock from employees, officers or directors of Borrower under
the terms of applicable repurchase agreements or stock purchase plans approved
from time to time (i) in an aggregate amount not to exceed One Hundred Thousand
Dollars ($100,000) in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases,
or (ii) in any amount where the consideration for the repurchase is the
cancellation of indebtedness owed by such employees, officers or directors to
Borrower regardless of whether an Event of Default exists;

(d) Investments accepted in connection with Permitted Transfers or asset sales
pursuant to Section 7.1;

(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries not to exceed One Hundred Thousand
Dollars ($100,000) in the aggregate in any fiscal year;

(f) Investments not to exceed One Hundred Thousand Dollars ($100,000) in the
aggregate in any fiscal year consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plan agreements approved by Borrower’s Board of
Directors;

 

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(g) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of Borrower’s business;

(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business; provided that this subparagraph (h) shall not
apply to Investments of Borrower in any Subsidiary;

(i) Investments consisting of the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business;

(j) Acquisitions permitted under Section 7.3 hereof;

(k) Joint ventures or strategic alliances in the ordinary course of Borrower’s
business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash Investments by Borrower do not exceed One Hundred Thousand Dollars
($100,000) in the aggregate in any fiscal year; and

(l) Other Investments not to exceed One Hundred Thousand Dollars ($100,000) in
the aggregate in any fiscal year.

“Permitted Liens” means the following:

(a) Any Liens existing on the Closing Date and disclosed in the Schedule
(excluding Liens to be satisfied with the proceeds of the Advances) or arising
under this Agreement or the other Loan Documents;

(b) Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings and for which Borrower maintains adequate reserves; provided that
the same have no priority over any of Bank’s security interests;

(c) Liens not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate
in any fiscal year (i) upon or in any Equipment acquired or held by Borrower or
any of its Subsidiaries to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the acquisition or
lease of such Equipment, or (ii) existing on such Equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;

(d) Leases or subleases and licenses and sublicenses granted to others in the
ordinary course of Borrower’s business that do not interfere in any material
respect with the business of Borrower and its Subsidiaries taken as a whole;

(e) Liens in favor of customs and revenue authorities arising in the ordinary
course of Borrower’s business and as a matter of law to secure payments of
custom duties in connection with the importation of goods;

(f) Liens of materialmen, mechanics, warehousemen, carriers, artisans or other
similar Liens arising in the ordinary course of Borrower’s business or by
operation of law, which are not past due or which are being contested in good
faith by appropriate proceedings and for which reserves have been established in
accordance with GAAP;

 

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(g) Easements, reservations, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances affecting real
property not causing a material adverse effect on Borrower’s business or
operations;

(h) Deposits in the ordinary course of Borrower’s business under worker’s
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance or other
similar bonds for the performance of bids, tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory obligations (other than
liens arising under ERISA or environmental liens) or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds;

(i) Liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by Liens of the type described in clauses (a) through
(h) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness being extended, renewed or refinanced does not increase;

(j) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Sections 8.5 or 8.9;

(k) Liens in favor of other financial institutions arising in connection with
Borrower’s deposit accounts held at such institutions to secure standard fees
for deposit services charged by, but not financing made available by such
institutions; provided that Bank has a perfected security interest in the
amounts held in such deposit accounts; and

(l) Liens securing Subordinated Debt.

“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition
by Borrower or any Subsidiary of:

(a) Inventory in the ordinary course of business;

(b) licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business, including non-exclusive
licenses for the use of the intellectual property of Borrower and licenses that
could not result in a legal transfer of title of the licensed property but that
may be exclusive in respects other than territory and that may be exclusive as
to territory only as to discreet geographical areas outside of the United
States;

(c) Transfers from any Subsidiary to Borrower;

(d) Surplus, worn-out or obsolete Equipment;

(e) Transfers permitted by Section 7.1, Section 7.3, Section 7.6 and Section 7.7
hereof;

(f) the intellectual property disclosed in the Schedule; and

(g) other assets of Borrower or its Subsidiaries that do not in the aggregate
exceed One Hundred Thousand Dollars ($100,000) during any fiscal year.

“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

“Prime Rate” means the variable rate of interest, per annum, most recently
announced by Bank, as its “prime rate,” whether or not such announced rate is
the lowest rate available from Bank.

 

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“Responsible Officer” means each of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer and the Controller of Borrower.

“Schedule” means the schedule of exceptions attached hereto and approved by
Bank.

“Shares” means (i) sixty-five percent (65%) of the issued and outstanding
capital stock, membership units or other securities owned or held of record by
Borrower in any Subsidiary of Borrower which is not an entity organized under
the laws of the United States or any territory thereof, and (ii) one hundred
percent (100%) of the issued and outstanding capital stock, membership units or
other securities owned or held of record by Borrower in any Subsidiary of
Borrower which is an entity organized under the laws of the United States or any
territory thereof.

“SOS Reports” means the official reports from the Secretaries of State of each
Collateral State, Chief Executive Office State and the Borrower State and other
applicable federal, state or local government offices identifying all current
security interests filed in the Collateral and Liens of record as of the date of
such report.

“Subordinated Debt” means any debt incurred by Borrower that is subordinated in
writing to the debt owing by Borrower to Bank on terms reasonably acceptable to
Bank (and identified as being such by Borrower and Bank).

“Subsidiary” means any corporation, partnership or limited liability company or
joint venture in which (i) any general partnership interest or (ii) more than
fifty percent (50%) of the stock, limited liability company interest or joint
venture of which by the terms thereof has the ordinary voting power to elect the
Board of Directors, managers or trustees of the entity, at the time as of which
any determination is being made, is owned by Borrower, either directly or
through an Affiliate.

“Term Loan” has the meaning set forth in Section 2.1(b).

“Term Loan Maturity Date” means June 11, 2011.

1.2 Accounting Terms. Any accounting term not specifically defined herein shall
be construed in accordance with GAAP and all calculations shall be made in
accordance with GAAP. The term “financial statements” shall include the
accompanying notes and schedules.

2. LOAN AND TERMS OF PAYMENT.

2.1 Credit Extensions.

(a) Promise to Pay. Borrower promises to pay to Bank, in lawful money of the
United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower, together with interest on the unpaid
principal amount of such Credit Extensions at rates in accordance with the terms
hereof.

(b) Term Loan.

(i) Subject to and upon the terms and conditions of this Agreement, on the
Closing Date or as soon thereafter as is practical, Bank shall make one term
loan to Borrower in an aggregate amount not to exceed Three Million Six Hundred
Thousand Dollars ($3,600,000) (the “Term Loan”), which amount shall be used to
refinance existing Indebtedness and for general corporate purposes.

(ii) Interest shall accrue from the date the Term Loan is made at the rate
specified in Section 2.3(a), and shall be payable monthly on the second day of
each month commencing on the first day of the first month after the Term Loan is
made. The Term Loan shall be repaid in thirty (30) equal monthly installments of
principal plus accrued but unpaid interest, commencing on January 11, 2009 and
continuing on the same day of each month thereafter through

 

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the Term Loan Maturity Date, at which time all amounts owing under this
Section 2.1(b) shall be immediately due and payable. The Term Loan, once repaid,
may not be reborrowed. Borrower may prepay the Term Loan without penalty or
premium.

2.2 Intentionally Omitted.

2.3 Interest Rates, Payments, and Calculations.

(a) Interest Rate. Except as set forth in Section 2.3(b), the Term Loan shall
bear interest, on the outstanding daily balance thereof, at a rate equal to one
percent (1.00%) above the Prime Rate

(b) Late Fee; Default Rate. If any payment is not made within ten (10) days
after the date such payment is due, Borrower shall pay Bank a late fee equal to
the lesser of (i) five percent (5%) of the amount of such unpaid amount or
(ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.

(c) Payments. Interest hereunder shall be due and payable on the ninth calendar
day of each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts, in which case those amounts shall thereafter accrue interest
at the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased, effective as of the day the Prime Rate is changed, by an amount equal
to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.

2.4 Crediting Payments. Prior to the occurrence and continuance of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence and continuance of an Event of Default, Bank shall have the right, in
its sole discretion, to immediately apply any wire transfer of funds, check, or
other item of payment to conditionally reduce Obligations, but such applications
of funds shall not be considered a payment on account unless such payment is of
immediately available federal funds or unless and until such check or other item
of payment is honored when presented for payment. Notwithstanding anything to
the contrary contained herein, any wire transfer or payment received by Bank
after 12:00 noon Pacific time shall be deemed to have been received by Bank as
of the opening of business on the immediately following Business Day. Whenever
any payment to Bank under the Loan Documents would otherwise be due (except by
reason of acceleration) on a date that is not a Business Day, such payment shall
instead be due on the next Business Day, and additional fees or interest, as the
case may be, shall accrue and be payable for the period of such extension.

2.5 Fees. Borrower shall pay to Bank the following:

(a) Facility Fee. On the Closing Date, a fee equal to $27,000, which shall be
nonrefundable; and

(b) Bank Expenses. On the Closing Date, all Bank Expenses incurred through the
Closing Date, and, after the Closing Date, all Bank Expenses as and when they
become due.

2.6 Term. This Agreement shall become effective on the Closing Date and, subject
to Section 13.7, shall continue in full force and effect for so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.

 

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3. CONDITIONS OF LOANS.

3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:

(a) this Agreement;

(b) an officer’s certificate of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;

(c) UCC National Form Financing Statement naming each of Borrower and Guarantor
as debtor;

(a) an unconditional guaranty and third party security agreement from Guarantor;

(d) an officer’s certificate of Guarantor with respect to incumbency and
resolutions authorizing the execution and delivery of any Loan Documents to
which Guarantor is a party;

(e) a warrant to purchase stock;

(f) the certificate(s) for the Shares, together with Assignment(s) Separate from
Certificate, duly executed by in blank;

(g) current SOS Reports indicating that except for Permitted Liens, there are no
other security interests or Liens of record in the Collateral;

(h) agreement to furnish insurance;

(i) payment of the fees and Bank Expenses then due specified in Section 2.5
hereof;

(j) current financial statements, including audited statements for Borrower’s
most recently ended fiscal year, together with an unqualified opinion, company
prepared consolidated and consolidating balance sheets and income statements for
the most recently ended month in accordance with Section 6.2, and such other
updated financial information as Bank may reasonably request;

(k) current Compliance Certificate in accordance with Section 6.2; and

(l) such other documents or certificates, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.

3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to
make each Credit Extension, including the initial Credit Extension, is further
subject to the following conditions:

(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and

(b) the representations and warranties contained in Section 5 shall be true and
correct in all material respects on and as of the date of such Payment/Advance
Form and on the effective date of each Credit Extension as though made at and as
of each such date, and no Event of Default shall have occurred and be
continuing, or would exist after giving effect to such Credit Extension
(provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2.

 

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4. CREATION OF SECURITY INTEREST.

4.1 Grant of Security Interest. Borrower grants and pledges to Bank a continuing
security interest in the Collateral to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule and except for Permitted Liens, such security interest constitutes a
valid, first priority security interest in the presently existing Collateral,
and, except for Permitted Liens, will constitute a valid, first priority
security interest in later-acquired Collateral. Borrower also hereby agrees to
not sell, transfer, assign, mortgage, pledge, lease, grant a security interest
in, or encumber any of its intellectual property, other than in connection with
a Permitted Transfer. Notwithstanding any termination, Bank’s Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.

4.2 Perfection of Security Interest. Borrower authorizes Bank to file at any
time financing statements, continuation statements, and amendments thereto that
(i) either specifically describe the Collateral or describe the Collateral as
all assets of Borrower of the kind pledged hereunder, and (ii) contain any other
information required by the Code for the sufficiency of filing office acceptance
of any financing statement, continuation statement, or amendment, including
whether Borrower is an organization, the type of organization and any
organizational identification number issued to Borrower, if applicable. Any such
financing statements may be signed by Bank on behalf of Borrower, as provided in
the Code, and may be filed at any time in any jurisdiction whether or not
Revised Article 9 of the Code is then in effect in that jurisdiction. Borrower
shall from time to time endorse and deliver to Bank, at the reasonable request
of Bank, all Negotiable Collateral and other documents that Bank may reasonably
request, in form reasonably satisfactory to Bank, to perfect and continue
perfected Bank’s security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
Borrower shall have possession of the Collateral, except where expressly
otherwise provided in this Agreement or where Bank chooses in its reasonable
business discretion to perfect its security interest by possession in addition
to the filing of a financing statement. Where Collateral is in possession of a
third party bailee, Borrower shall take such steps as Bank reasonably requests
for Bank to (i) obtain an acknowledgment, in form and substance reasonably
satisfactory to Bank, of the bailee that the bailee holds such Collateral for
the benefit of Bank, (ii) obtain “control” of any Collateral consisting of
investment property, deposit accounts, letter-of-credit rights or electronic
chattel paper (as such items and the term “control” are defined in Revised
Article 9 of the Code) by causing the securities intermediary or depositary
institution or issuing bank to execute a control agreement in form and substance
reasonably satisfactory to Bank. Borrower will not create any chattel paper
without placing a legend on the chattel paper acceptable to Bank indicating that
Bank has a security interest in the chattel paper. Borrower from time to time
may deposit with Bank specific cash collateral to secure specific Obligations;
Borrower authorizes Bank to hold such specific balances in pledge and to decline
to honor any drafts thereon or any request by Borrower or any other Person to
pay or otherwise transfer any part of such balances for so long as the specific
Obligations are outstanding.

4.3 Right to Inspect. Bank (through any of its officers, employees, or agents)
shall have the right, upon reasonable prior written notice, from time to time
during Borrower’s usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower’s Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower’s financial condition or the amount, condition of, or
any other matter relating to, the Collateral.

4.4 Pledge of Collateral. Borrower hereby pledges, assigns and grants to Bank a
security interest in all the Shares, together with all proceeds and
substitutions thereof, all cash, stock and other moneys and property paid
thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and noncash proceeds of the foregoing,
as security for the performance of the Obligations. On the Closing Date, the
certificate or certificates for the Shares will be delivered to Bank,
accompanied by an instrument of assignment duly executed in blank by Borrower.
To the extent required by the terms and conditions governing the Shares,
Borrower shall cause the books of each entity whose Shares are part of the
Collateral and any transfer agent to reflect the pledge of the Shares. Upon the
occurrence of an Event of Default hereunder, Bank may effect the transfer of any
securities included in the Collateral (including but not limited to the Shares)
into the name of Bank and cause

 

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new certificates representing such securities to be issued in the name of Bank
or its transferee. Borrower will execute and deliver such documents, and take or
cause to be taken such actions, as Bank may reasonably request to perfect or
continue the perfection of Bank’s security interest in the Shares. Unless an
Event of Default shall have occurred and be continuing, Borrower shall be
entitled to exercise any voting rights with respect to the Shares and to give
consents, waivers and ratifications in respect thereof; provided that no vote
shall be cast or consent, waiver or ratification given or action taken which
would be inconsistent with any of the terms of this Agreement or which would
constitute or create any violation of any of such terms. All such rights to vote
and give consents, waivers and ratifications shall terminate upon the occurrence
and continuance of an Event of Default.

4.5 Cash Collateral. In the event Borrower fails to comply with Section 6.7
hereof, and without any further action on the part of Borrower or Bank and
without limitation on Bank’s other rights and remedies, as additional security
for all present and future indebtedness and other Obligations of Borrower to
Bank under this Agreement or any other agreement, Borrower shall be deemed to
grant to Bank a continuing security interest in all accounts maintained with,
and all certificates of deposit issued by, Bank from time to time, which shall
at all times equal at least the amount of the then outstanding Obligations,
together with all proceeds and substitutions thereof, all interest and dividends
paid thereon, and all other cash and noncash proceeds of the foregoing (all
hereinafter called the “Cash Collateral”). Borrower shall enter into such
control or other agreements as Bank reasonably requests in order to perfect or
ensure the priority of Bank’s security interest in the Cash Collateral.

4.6 Termination of Financing Statement. Upon indefeasible payment in full and
satisfaction by Borrower of all of the Obligations, Bank shall, upon written
request from (and at the expense of) Borrower, promptly file a termination
statement with respect to the Collateral, and provide written evidence of the
same to Borrower.

5. REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants as follows:

5.1 Due Organization and Qualification. Borrower and each Subsidiary is duly
existing under the laws of the state in which it is organized and qualified and
licensed to do business in any state in which the conduct of its business or its
ownership of property requires that it be so qualified or licensed, except where
the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.

5.2 Due Authorization; No Conflict. The execution, delivery, and performance of
the Loan Documents are within Borrower’s powers, have been duly authorized, and
are not in conflict with nor constitute a breach of any provision contained in
Borrower’s Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement by which Borrower is bound.
Borrower is not in default under any agreement by which it is bound, except to
the extent such default could not reasonably be expected to cause a Material
Adverse Effect.

5.3 Collateral. Borrower has rights in or the power to transfer the Collateral,
and its title to the Collateral is free and clear of Liens, adverse claims, and
restrictions on transfer or pledge except for Permitted Liens. Other than mobile
items of personal property, such as laptop computers, having an aggregate book
value not in excess of One Hundred Thousand Dollars ($100,000), all Collateral
is located solely in the Collateral States. All Inventory is in all material
respects of good and merchantable quality, free from all material defects,
except for Inventory for which adequate reserves have been made. Except as set
forth in the Schedule and except as may be permitted pursuant to Section 7.10,
none of the Collateral is maintained or invested with a Person other than Bank
or Bank’s Affiliates.

5.4 Intellectual Property. Borrower is the sole owner of its patents,
trademarks, copyrights and other intellectual property, except for non-exclusive
licenses granted by Borrower to its customers in the ordinary course of
business. To the best of Borrower’s knowledge, each of Borrower’s patents,
trademarks and copyrights is valid and enforceable, and no part of its
intellectual property has been judged invalid or unenforceable, in whole or in
part, and no claim has been made to Borrower that any part of its intellectual
property violates the rights of any third party except to the extent such
invalidity, unenforceability or claim could not reasonably be expected to cause
a Material Adverse Effect.

 

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5.5 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.

5.6 Litigation. Except as set forth in the Schedule, there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court or
administrative agency in which a likely adverse decision could reasonably be
expected to have a Material Adverse Effect.

5.7 No Material Adverse Change in Financial Statements. All consolidated and
consolidating financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower’s consolidated and consolidating financial condition as of the date
thereof and Borrower’s consolidated and consolidating results of operations for
the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.

5.8 Solvency, Payment of Debts. Borrower is able to pay its debts (including
trade debts) as they mature; the fair saleable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; and Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement.

5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower’s failure
to comply with ERISA that is reasonably likely to result in Borrower’s incurring
any liability that could reasonably be expected to have a Material Adverse
Effect. Borrower is not an “investment company” or a company “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of the important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied in all material
respects with all applicable provisions of the Federal Fair Labor Standards Act.
Borrower is in compliance with all applicable environmental laws, regulations
and ordinances except where the failure to comply is not reasonably likely to
have a Material Adverse Effect. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, the violation of which could reasonably be
expected to have a Material Adverse Effect. Borrower and each Subsidiary have
filed or caused to be filed all tax returns required to be filed, and have paid,
or have made adequate provision for the payment of, all taxes reflected therein
except those being contested in good faith with adequate reserves under GAAP or
where the failure to file such returns or pay such taxes could not reasonably be
expected to have a Material Adverse Effect.

5.10 Subsidiaries. Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.

5.11 Government Consents. Borrower and each Subsidiary have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower’s business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Effect.

5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower is not a
party to, nor is bound by, any material license or other similar material
agreement that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower’s interest in such license or agreement or any
other property.

5.13 Shares. Borrower has full power and authority to create a first lien on the
Shares and no disability or contractual obligation exists that would prohibit
Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s
knowledge, there are no subscriptions, warrants, rights of first refusal or
other restrictions on transfer relative to, or options exercisable with respect
to the Shares. The Shares have been and will be duly authorized and validly
issued, and are fully paid and non-assessable. To Borrower’s knowledge, the
Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

 

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5.14 Full Disclosure. No representation, warranty or other statement made by
Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading in light of the circumstances under which they were
made, it being recognized by Bank that the projections and forecasts provided by
Borrower in good faith and based upon reasonable assumptions are not to be
viewed as facts and that actual results during the period or periods covered by
any such projections and forecasts may differ from the projected or forecasted
results.

6. AFFIRMATIVE COVENANTS.

Borrower covenants and agrees that, until payment in full of all outstanding
Obligations, and for so long as Bank may have any commitment to make a Credit
Extension hereunder, Borrower shall do all of the following:

6.1 Good Standing and Government Compliance. Borrower shall maintain its and
each of its Subsidiaries’ corporate existence and good standing in the Borrower
State, shall maintain qualification and good standing in each other jurisdiction
in which the failure to maintain or so qualify could reasonably be expected to
have a Material Adverse Effect, and shall furnish to Bank the organizational
identification number issued to Borrower by the authorities of the state in
which Borrower is organized, if applicable. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA, except where the failure to meet
such requirements could not reasonably be expected to have a Material Adverse
Effect. Borrower shall comply in all material respects with all applicable
Environmental Laws, and maintain all material permits, licenses and approvals
required thereunder where the failure to do so could reasonably be expected to
have a Material Adverse Effect. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, and shall maintain, and shall cause each
of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which or failure to comply with which could reasonably
be expected to have a Material Adverse Effect.

6.2 Financial Statements, Reports, Certificates. Borrower shall deliver the
following to Bank: (i) if applicable, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed
with the Securities and Exchange Commission; (ii) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could reasonably be expected to result in
damages or costs to Borrower or any Subsidiary of Two Hundred Fifty Thousand
Dollars ($250,000) or more; (iii) promptly upon receipt, each management letter
prepared by Borrower’s independent certified public accounting firm regarding
Borrower’s management control systems; and (iv) such budgets, sales projections,
operating plans or other financial information as Bank may reasonably request
from time to time.

(a) Within thirty (30) days after the last day of each month, Borrower shall
deliver to Bank a Compliance Certificate certified as of the last day of the
applicable month and signed by a Responsible Officer in substantially the form
of Exhibit C hereto.

(b) As soon as possible and in any event within three (3) calendar days after
becoming aware of the occurrence or existence of an Event of Default hereunder,
a written statement of a Responsible Officer setting forth details of the Event
of Default, and the action which Borrower has taken or proposes to take with
respect thereto.

(c) Bank shall have a right from time to time hereafter to audit Borrower’s
Accounts and appraise Collateral at Borrower’s reasonable expense; provided that
such audits will be conducted no more often than every twelve (12) months unless
an Event of Default has occurred and is continuing; provided further that such
audits shall be conducted during Borrower’s normal business hours.

 

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Borrower may deliver to Bank on an electronic basis any certificates, reports or
information required pursuant to this Section 6.2, and Bank shall be entitled to
rely on the information contained in the electronic files; provided that Bank in
good faith believes that the files were delivered by a Responsible Officer. If
Borrower delivers this information electronically, it shall also deliver to Bank
by U.S. Mail, reputable overnight courier service, hand delivery, facsimile or
.pdf file within five (5) Business Days of submission of the unsigned electronic
copy the intellectual property report and the Compliance Certificate, each
bearing the physical signature of the Responsible Officer.

6.3 Inventory; Returns. Borrower shall keep all Inventory in good and
merchantable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist on the
Closing Date. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims involving more than Two Hundred Fifty Thousand
Dollars ($250,000).

6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due and
timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, other than such failures
that could reasonably be expected to cause a Material Adverse Effect, including,
but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and
state disability, and will execute and deliver to Bank, promptly on demand,
proof reasonably satisfactory to Bank indicating that Borrower or a Subsidiary
has made such payments or deposits and any appropriate certificates attesting to
the payment or deposit thereof; provided that Borrower or a Subsidiary need not
make any payment if the amount or validity of such payment is contested in good
faith by appropriate proceedings and is reserved against (to the extent required
by GAAP) by Borrower.

6.5 Insurance.

(a) Borrower, at its expense, shall keep the Collateral insured against loss or
damage by fire, theft, explosion, sprinklers, and all other hazards and risks,
and in such amounts, as ordinarily insured against by other owners in similar
businesses conducted in the locations where Borrower’s business is conducted on
the date hereof. Borrower shall also maintain liability and other insurance in
amounts and of a type that are customary to businesses similar to Borrower’s.

(b) All such policies of insurance shall be in such form, with such companies,
and in such amounts as are reasonably satisfactory to Bank. All policies of
property insurance shall contain a lender’s loss payable endorsement, in a form
reasonably satisfactory to Bank, showing Bank as an additional loss payee, and
all liability insurance policies shall show the Bank as an additional insured
and shall specify that the insurer must give at least 20 days notice to Bank
before canceling its policy for any reason. Upon Bank’s reasonable request,
Borrower shall deliver to Bank certified copies of the policies of insurance and
evidence of all premium payments. If no Event of Default has occurred and is
continuing, proceeds payable under any casualty policy will, at Borrower’s
option, be payable to Borrower to replace the property subject to the claim;
provided that any such replacement property shall be deemed Collateral in which
Bank has been granted a first priority security interest. If an Event of Default
has occurred and is continuing, all proceeds payable under any such policy
shall, at Bank’s option, be payable to Bank to be applied on account of the
Obligations.

6.6 Accounts. Borrower shall maintain all its depository, operating and
investment accounts with Bank. Notwithstanding the foregoing, Borrower shall be
permitted to maintain no more than Three Million Five Hundred Thousand Dollars
($3,500,000) (U.S.) in an account in Belgium.

6.7 Financial Covenant. Borrower shall at all times maintain a balance of Cash
at Bank of not less Five Million Four Hundred Thousand Dollars ($5,400,000).

6.8 Consent of Inbound Licensors. Prior to entering into or becoming bound by
any inbound license, the failure, breach or termination of which could
reasonably be expected to have a Material Adverse Effect, Borrower shall provide
written notice to Bank of the material terms of such license with a description
of its likely impact on Borrower’s business or financial condition.

 

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6.9 Creation/Acquisition of Subsidiaries. In the event Borrower or any
Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Bank of the creation or acquisition of such new Subsidiary
and take all such action as may be reasonably required by Bank to cause such
Subsidiary to guarantee the Obligations of Borrower under the Loan Documents and
grant a continuing pledge and security interest in and to the collateral of such
Subsidiary (substantially as described on Exhibit A hereto), and Borrower shall
grant and pledge to Bank a perfected security interest in the stock, units or
other evidence of ownership of such Subsidiary.

6.10 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

7. NEGATIVE COVENANTS.

Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until the outstanding Obligations are paid in full or for so long
as Bank may have any commitment to make any Credit Extensions, Borrower will not
do any of the following without Bank’s prior written consent, which shall not be
unreasonably withheld:

7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise dispose of
(collectively, to “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, including its intellectual
property, or move cash balances on deposit with Bank to accounts opened at
another financial institution, other than Permitted Transfers.

7.2 Change in Name, Location, Executive Office, or Executive Management; Change
in Business; Change in Fiscal Year; Change in Control. Change its name or the
Borrower State or relocate its chief executive office without thirty (30) days
prior written notification to Bank; replace its chief executive officer or chief
financial officer without thirty (30) days prior written notification to Bank
(unless any such officer voluntarily resigns or cause exists for (and results
in) immediate termination, in which case Borrower shall promptly notify Bank
upon receipt of such resignation or upon such termination); engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than or reasonably related or incidental to the businesses currently engaged in
by Borrower or any Subsidiary; change its fiscal year end; suffer or permit a
Change in Control.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) such transactions do not in the aggregate exceed One
Hundred Thousand Dollars ($100,000) during any fiscal year, (ii) no Event of
Default has occurred, is continuing or would exist after giving effect to such
transactions, (iii) such transactions do not result in a Change in Control, and
(iv) Borrower is the surviving entity.

7.4 Indebtedness. Create, incur, assume, guarantee or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness, or prepay any Indebtedness or take any actions which
impose on Borrower an obligation to prepay any Indebtedness, except Indebtedness
to Bank or the refinancing of Permitted Indebtedness (as permitted by and in
accordance with the definition of “Permitted Indebtedness”).

7.5 Encumbrances. Create, incur, assume or allow any Lien with respect to any of
its property, or assign or otherwise convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries so to do,
except for Permitted Liens. Agree with any Person other than Bank not to grant a
security interest in, or otherwise encumber, any of its, or covenant to any
other Person that Borrower in the future will refrain from creating, incurring,
assuming or allowing any Lien with respect to any of Borrower’s property, or
permit any Subsidiary to do so.

 

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7.6 Distributions. Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any capital stock,
except that Borrower may (i) repurchase the stock of employees, officers and
directors pursuant to stock repurchase agreements or stock purchase plans as
long as an Event of Default does not exist prior to such repurchase or would not
exist after giving effect to such repurchase, (ii) repurchase the stock of
employees, officers and directors pursuant to stock repurchase agreements or
stock purchase plans by the cancellation of indebtedness owed by such former
employees to Borrower regardless of whether an Event of Default exists,
(iii) pay dividends in capital stock, (iv) convert any of its convertible
securities (including warrants) into other securities pursuant to the terms of
such convertible securities and (v) distribute securities to employees, officers
or directors upon the exercise of their options.

7.7 Investments. Except as permitted under Section 7.3 and except for Permitted
Investments, directly or indirectly acquire or own, or make any Investment in or
to any Person, or permit any of its Subsidiaries so to do, other than Permitted
Investments, or maintain or invest any of its property with a Person other than
Bank or Bank’s Affiliates or permit any Subsidiary to do so unless such Person
has entered into a control agreement with Bank, in form and substance reasonably
satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be
bound by, an agreement that restricts such Subsidiary from paying dividends or
otherwise distributing property to Borrower.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person or as
otherwise expressly permitted hereunder; provided that the foregoing restriction
shall not apply to (a) reasonable and customary fees paid to members of the
Board of Directors of Borrower and its Subsidiaries, (b) the raising of new
equity for Borrower from Borrower’s investors as of the Closing Date, with
respect to the pricing of such equity, or (c) employment arrangements with
executive officers approved by Borrower’s Board of Directors from time to time.

7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision affecting
Bank’s rights contained in any documentation relating to the Subordinated Debt
without Bank’s prior written consent, which consent shall not be unreasonably
withheld.

7.10 Inventory and Equipment. Store the Inventory or the Equipment with a
bailee, warehouseman, or similar third party unless the third party has been
notified of Bank’s security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank’s benefit or (b) is in possession of the warehouse receipt, where
negotiable, covering such Inventory or Equipment. Except for Permitted
Transfers, mobile items of personal property, such as laptop computers, having
an aggregate book value not in excess of One Hundred Thousand Dollars
($100,000), Inventory sold in the ordinary course of business and except for
such other locations as Bank may approve in writing, Borrower shall keep the
Inventory and Equipment only at the location set forth in Section 10 and such
other locations of which Borrower gives Bank prior written notice and as to
which Bank files a financing statement, or takes other action, where needed to
perfect its security interest.

7.11 No Investment Company; Margin Regulation. Become or be controlled by an
“investment company,” within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.

8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an Event of Default by
Borrower under this Agreement:

8.1 Payment Default. If Borrower fails to pay any of the Obligations when due;

 

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8.2 Covenant Default.

(a) If Borrower fails to perform any obligation under Section 6.2 or 6.4 through
6.7 or violates any of the covenants contained in Article 7 of this Agreement;
or

(b) If Borrower fails or neglects to perform or observe any other material term,
provision, condition, covenant contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition or covenant
that can be cured, has failed to cure such default within ten (10) days after
Borrower receives notice thereof or any officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default but no Credit Extensions
will be made;

8.3 Defective Perfection. If Bank shall receive at any time following the
Closing Date an SOS Report indicating that except for Permitted Liens, Bank’s
security interest in the Collateral is not prior to all other security interests
or Liens of record reflected in such SOS Report;

8.4 Material Adverse Effect. If there occurs any circumstance or circumstances
that could have a Material Adverse Effect;

8.5 Attachment. If any material portion of Borrower’s assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any material portion of Borrower’s assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after Borrower receives notice thereof, provided that none
of the foregoing shall constitute an Event of Default where such action or event
is stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Credit Extensions will be made during such cure
period);

8.6 Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is
commenced by Borrower, or if an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within thirty (30) days (provided that
no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);

8.7 Other Agreements. If there is a default or other failure to perform in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000) or that could reasonably be expected
to have a Material Adverse Effect;

8.8 Subordinated Debt. If Borrower makes any payment on account of Subordinated
Debt, except to the extent such payment is allowed under any subordination
agreement entered into with Bank;

8.9 Judgments. If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars
($250,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Credit Extensions will
be made prior to the satisfaction or stay of such judgment); or

 

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8.10 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.

8.11 Guaranty. If any guaranty of all or a portion of the Obligations (a
“Guaranty”) ceases for any reason to be in full force and effect, or any
guarantor fails to perform any obligation under any Guaranty or a security
agreement securing any Guaranty (collectively, the “Guaranty Documents”), or any
event of default occurs under any Guaranty Document or any guarantor revokes or
purports to revoke a Guaranty, or any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
in any Guaranty Document or in any certificate delivered to Bank in connection
with any Guaranty Document, or if any of the circumstances described in Sections
8.3 through 8.9 occur with respect to any guarantor.

9. BANK’S RIGHTS AND REMEDIES.

9.1 Rights and Remedies. Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section 8.6, all
Obligations shall become immediately due and payable without any action by
Bank);

(b) Demand that Borrower (i) deposit cash with Bank in an amount equal to the
amount of any Letters of Credit remaining undrawn, as collateral security for
the repayment of any future drawings under such Letters of Credit, and (ii) pay
in advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit, and Borrower shall promptly deposit and
pay such amounts;

(c) Cease advancing money or extending credit to or for the benefit of Borrower
under this Agreement or under any other agreement between Borrower and Bank;

(d) Settle or adjust disputes and claims directly with account debtors for
amounts, upon terms and in whatever order that Bank reasonably considers
advisable;

(e) Make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrower agrees
to assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may reasonably designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank’s determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower’s owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

(f) Set off and apply to the Obligations any and all (i) balances and deposits
of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by Bank;

(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Collateral.
Bank is hereby granted a license or other right, solely pursuant to the
provisions of this Section 9.1, to use, without charge, Borrower’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section 9.1, Borrower’s rights under all
licenses and all franchise agreements shall inure to Bank’s benefit;

 

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(h) Sell the Collateral at either a public or private sale, or both, by way of
one or more contracts or transactions, for cash or on terms, in such manner and
at such places (including Borrower’s premises) as Bank determines is
commercially reasonable, and apply any proceeds to the Obligations in whatever
manner or order Bank deems appropriate. Bank may sell the Collateral without
giving any warranties as to the Collateral. Bank may specifically disclaim any
warranties of title or the like. This procedure will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. If Bank
sells any of the Collateral upon credit, Borrower will be credited only with
payments actually made by the purchaser, received by Bank, and applied to the
indebtedness of the purchaser. If the purchaser fails to pay for the Collateral,
Bank may resell the Collateral and Borrower shall be credited with the proceeds
of the sale;

(i) Bank may credit bid and purchase at any public sale;

(j) Apply for the appointment of a receiver, trustee, liquidator or conservator
of the Collateral, without notice and without regard to the adequacy of the
security for the Obligations and without regard to the solvency of Borrower, any
guarantor or any other Person liable for any of the Obligations; and

(k) Any deficiency that exists after disposition of the Collateral as provided
above will be paid immediately by Borrower.

Bank may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.

9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank’s designated officers, or employees) as Borrower’s true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank’s security interest in the Accounts; (b) endorse
Borrower’s name on any checks or other forms of payment or security that may
come into Bank’s possession; (c) sign Borrower’s name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower’s policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; provided Bank may exercise such
power of attorney to sign the name of Borrower on any of the documents described
in clause (g) above, regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower’s attorney in fact, and each and every one of
Bank’s rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank’s
obligation to provide Credit Extensions hereunder is terminated.

9.3 Accounts Collection. At any time after the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank’s security interest in such funds and verify the amount of such
Account. At any time after the occurrence and during the continuance of an Event
of Default, Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank’s trustee, and immediately deliver such
payments to Bank in their original form as received from the account debtor,
with proper endorsements for deposit.

9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms
of this Agreement, then Bank may do any or all of the following after reasonable
notice to Borrower: (a) make payment of the same or any part thereof; (b) set up
such reserves under the Revolving Line as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.5 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.

 

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9.5 Bank’s Liability for Collateral. Bank has no obligation to clean up or
otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.

9.6 No Obligation to Pursue Others. Bank has no obligation to attempt to satisfy
the Obligations by collecting them from any other Person liable for them and
Bank may release, modify or waive any collateral provided by any other Person to
secure any of the Obligations, all without affecting Bank’s rights against
Borrower. Borrower waives any right it may have to require Bank to pursue any
other Person for any of the Obligations.

9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on Borrower’s
part shall be deemed a continuing waiver. No delay by Bank shall constitute a
waiver, election, or acquiescence by it. No waiver by Bank shall be effective
unless made in a written document signed on behalf of Bank and then shall be
effective only in the specific instance and for the specific purpose for which
it was given. Borrower expressly agrees that this Section may not be waived or
modified by Bank by course of performance, conduct, estoppel or otherwise.

9.8 Demand; Protest. Except as otherwise provided in this Agreement, Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment and any other notices relating to the Obligations.

10. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to Borrower or to Bank, as the case may be, at its addresses set
forth below:

 

If to Borrower:    TPTX, INC.    11085 N. Torrey Pines Road, Suite 300    La
Jolla, CA 92037    Attn: Chief Financial Officer    FAX: (858) 623-5666 If to
Bank:    Comerica Bank    75 East Trimble Road, M/C 4770    San Jose, California
95131    Attn: Manager    FAX: (408) 556-5091 with a copy to:    Comerica Bank
   11943 El Camino Real, Suite 110B    San Diego, CA 92130    Attn: Greg Park   
FAX: (858) 509-2365

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

 

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11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the State of California.
THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL
ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT
PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND
FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE
EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER
DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

12. REFERENCE PROVISION.

In the event the Jury Trial Waiver set forth above is not enforceable, the
parties elect to proceed under this Judicial Reference Provision.

12.1 Mechanics.

(a) With the exception of the items specified in clause (b), below, any
controversy, dispute or claim (each, a “Claim”) between the parties arising out
of or relating to this Agreement or any other document, instrument or agreement
between the undersigned parties (collectively in this Section, the “Comerica
Documents”), will be resolved by a reference proceeding in California in
accordance with the provisions of Sections 638 et seq. of the California Code of
Civil Procedure (“CCP”), or their successor sections, which shall constitute the
exclusive remedy for the resolution of any Claim, including whether the Claim is
subject to the reference proceeding. Except as otherwise provided in the
Comerica Documents, venue for the reference proceeding will be in the state or
federal court in the county or district where the real property involved in the
action, if any, is located or in the state or federal court in the county or
district where venue is otherwise appropriate under applicable law (the
“Court”).

(b) The matters that shall not be subject to a reference are the following:
(i) nonjudicial foreclosure of any security interests in real or personal
property, (ii) exercise of self-help remedies (including, without limitation,
set-off), (iii) appointment of a receiver and (iv) temporary, provisional or
ancillary remedies (including, without limitation, writs of attachment, writs of
possession, temporary restraining orders or preliminary injunctions). This
reference provision does not limit the right of any party to exercise or oppose
any of the rights and remedies described in clauses (i) and (ii) or to seek or
oppose from a court of competent jurisdiction any of the items described in
clauses (iii) and (iv). The exercise of, or opposition to, any of those items
does not waive the right of any party to a reference pursuant to this reference
provision as provided herein.

(c) The referee shall be a retired judge or justice selected by mutual written
agreement of the parties. If the parties do not agree within ten (10) days of a
written request to do so by any party, then, upon request of any party, the
referee shall be selected by the Presiding Judge of the Court (or his or her
representative). A request for appointment of a referee may be heard on an ex
parte or expedited basis, and the parties agree that irreparable harm would
result if ex parte relief is not granted. Pursuant to CCP § 170.6, each party
shall have one peremptory challenge to the referee selected by the Presiding
Judge of the Court (or his or her representative).

(d) The parties agree that time is of the essence in conducting the reference
proceedings. Accordingly, the referee shall be requested, subject to change in
the time periods specified herein for good cause shown, to (i) set the matter
for a status and trial-setting conference within fifteen (15) days after the
date of selection of the referee, (ii) if practicable, try all issues of law or
fact within one hundred twenty (120) days after the date of the conference and
(iii) report a statement of decision within twenty (20) days after the matter
has been submitted for decision.

 

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(e) The referee will have power to expand or limit the amount and duration of
discovery. The referee may set or extend discovery deadlines or cutoffs for good
cause, including a party’s failure to provide requested discovery for any reason
whatsoever. Unless otherwise ordered based upon good cause shown, no party shall
be entitled to “priority” in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery shall
be responded to within fifteen (15) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.

12.2 Procedures. Except as expressly set forth herein, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of hearings, the order of presentation of evidence, and all
other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee, and the referee will be provided a courtesy copy of the transcript.
The party making such a request shall have the obligation to arrange for and pay
the court reporter. Subject to the referee’s power to award costs to the
prevailing party, the parties will equally share the cost of the referee and the
court reporter at trial.

12.3 Application of Law. The referee shall be required to determine all issues
in accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, enter equitable orders
that will be binding on the parties and rule on any motion which would be
authorized in a court proceeding, including without limitation motions for
summary judgment or summary adjudication. The referee shall issue a decision at
the close of the reference proceeding which disposes of all claims of the
parties that are the subject of the reference. Pursuant to CCP § 644, such
decision shall be entered by the Court as a judgment or an order in the same
manner as if the action had been tried by the Court and any such decision will
be final, binding and conclusive. The parties reserve the right to appeal from
the final judgment or order or from any appealable decision or order entered by
the referee. The parties reserve the right to findings of fact, conclusions of
laws, a written statement of decision, and the right to move for a new trial or
a different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.

12.4 Repeal. If the enabling legislation which provides for appointment of a
referee is repealed (and no successor statute is enacted), any dispute between
the parties that would otherwise be determined by reference procedure will be
resolved and determined by arbitration. The arbitration will be conducted by a
retired judge or justice, in accordance with the California Arbitration Act
§1280 through §1294.2 of the CCP as amended from time to time. The limitations
with respect to discovery set forth above shall apply to any such arbitration
proceeding.

12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY
A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE
MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY
TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN
ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER COMERICA DOCUMENTS.

13. GENERAL PROVISIONS.

13.1 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the respective successors and permitted assigns of each of the parties and
shall bind all Persons who become bound as a debtor to this Agreement; provided,
however, that neither this Agreement nor any rights hereunder may be assigned by
Borrower without Bank’s prior written consent, which consent may be granted or
withheld in Bank’s sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank’s obligations,
rights and benefits hereunder.

 

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13.2 Indemnification. Borrower shall defend, indemnify and hold harmless Bank
and its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by this Agreement; and (b) all losses or Bank
Expenses in any way suffered, incurred, or paid by Bank, its officers, employees
and agents as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under this
Agreement, or otherwise (including without limitation reasonable attorneys’ fees
and expenses), except for losses caused by Bank’s gross negligence or willful
misconduct.

13.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.

13.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

13.5 Amendments in Writing, Integration. All amendments to or terminations of
this Agreement or the other Loan Documents must be in writing. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement
and the other Loan Documents, if any, are merged into this Agreement and the
Loan Documents.

13.6 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.

13.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Bank has any obligation to make any Credit Extension to
Borrower. The obligations of Borrower to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 13.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.

13.8 Confidentiality. In handling any confidential information, Bank and all
employees and agents of Bank shall exercise the same degree of care that Bank
exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or
received pursuant to this Agreement except that disclosure of such information
may be made (i) to the subsidiaries or Affiliates of Bank in connection with
their present or prospective business relations with Borrower, (ii) to
prospective transferees or purchasers of any interest in the Loans, provided
that they have entered into a comparable confidentiality agreement in favor of
Borrower and have delivered a copy to Borrower, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party; provided that Bank does not have actual
knowledge that such third party is prohibited from disclosing such information.

[Balance of Page Intentionally Left Blank]

 

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

 

TPTX, INC. By:   /s/ Craig A. Johnson Title:   Chief Financial Officer

 

COMERICA BANK

By:

 

/s/ Greg Park

Title:  

Vice President

[Signature Page to Loan and Security Agreement]

 

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DEBTOR    TPTX, INC. SECURED PARTY:    COMERICA BANK

EXHIBIT A

COLLATERAL DESCRIPTION ATTACHMENT

TO LOAN AND SECURITY AGREEMENT

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:

(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including payment intangibles and
software), goods (including fixtures), instruments (including promissory notes),
inventory (including all goods held for sale or lease or to be furnished under a
contract of service, and including returns and repossessions), investment
property (including securities and securities entitlements), letter of credit
rights, money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;
and

(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.

Notwithstanding the foregoing, the Collateral shall not include any copyrights,
patents, trademarks, servicemarks and applications therefor, now owned or
hereafter acquired, or any claims for damages by way of any past, present and
future infringement of any of the foregoing (collectively, the “Intellectual
Property”); provided, however, that the Collateral shall include all accounts
and general intangibles that consist of rights to payment and proceeds from the
sale, licensing or disposition of all or any part, or rights in, the foregoing
(the “Rights to Payment”). Notwithstanding the foregoing, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in
the underlying Intellectual Property is necessary to have a security interest in
the Rights to Payment, then the Collateral shall automatically, and effective as
of June 11, 2008, include the Intellectual Property to the extent necessary to
permit perfection of Bank’s security interest in the Rights to Payment.

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EXHIBIT B

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS [3:00* P.M., Pacific Time/ 3:30 P.M. Eastern
Time]

FORMULA BASED LINES: DEADLINE FOR NEXT DAY PROCESSING IS [3:00* P.M., Pacific
Time/ 3:30 P.M. Eastern Time]

DEADLINE FOR EQUIPMENT ADVANCES IS [3:00 P.M., Pacific Time/ 3:30 P.M. Eastern
Time ]**

DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M. Eastern Time]

[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]

**Subject to 3 day advance notice.

  To: Loan Analysis                                        
                      DATE: ________________    TIME: _________________

  FAX #: (650) 846-6840

FROM:

  

TPTX, INC.

Borrower’s Name

   TELEPHONE REQUEST (For Bank Use Only): FROM:   

__________________________

Authorized Signer’s Name

  

The following person is authorized to request the loan payment

transfer/loan advance on the designated account and is known to me.

FROM:   

__________________________

Authorized Signer’s Name

  

_________________________________________________

Authorized Request & Phone #

PHONE #:    __________________________   

_________________________________________________

Received by (Bank) & Phone #

FROM

ACCOUNT#:

      (please include Note number, if applicable)    TO ACCOUNT #:      
Authorized Signature (Bank) (please include Note number, if applicable)   
REQUESTED TRANSACTION TYPE    REQUESTED DOLLAR AMOUNT    For Bank Use Only
PRINCIPAL INCREASE* (ADVANCE)    $______________________________    Date Rec’d:
   PRINCIPAL PAYMENT (ONLY)    $______________________________    Time:         
   Comp. Status:    YES        NO     OTHER INSTRUCTIONS:       Status Date:   
_______________________________________________________________________________
   Time:   
_______________________________________________________________________________
   Approval:                     

All representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties the date expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.

 

*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE   
    YES    NO If YES, the Outgoing Wire Transfer Instructions must be completed
below.       OUTGOING WIRE TRANSFER INSTRUCTIONS    Fed Reference Number   
Bank Transfer Number The items marked with an asterisk (*) are required to be
completed.

*Beneficiary Name

 

*Beneficiary Account Number

 

*Beneficiary Address

 

Currency Type

  US DOLLARS ONLY

*ABA Routing Number (9 Digits)

 

*Receiving Institution Name

 

*Receiving Institution Address

 

*Wire Account

  $

--------------------------------------------------------------------------------

EXHIBIT C

COMPLIANCE CERTIFICATE

 

TO:    COMERICA BANK FROM:    TPTX, INC.

The undersigned authorized officer of TPTX, INC. hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in complete
compliance for the period ending                      with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

10K and 10Q

   When filed    Yes    No

Compliance Cert.

   Monthly within 30 days    Yes    No

A/R Audit

   Annual    Yes    No

Total amount of Borrower’s cash and investments

   Amount: $                Yes    No Total amount of Borrower’s cash and
investments maintained with Bank    Amount: $                Yes    No

Financial Covenant

  

Required

   Actual    Complies

Measured at All Times::

           

Minimum Cash

   $5,400,000    $                 Yes    No

 

Comments Regarding Exceptions: See Attached.       BANK USE ONLY            
Received by: _______________________________   

Sincerely,

                     AUTHORIZED SIGNER            
Date:     ___________________________________      

 

      Verified: __________________________________       SIGNATURE      
AUTHORIZED SIGNER      

 

      Date:     ___________________________________       TITLE            

 

      Compliance Status                             Yes             No        
      DATE         

--------------------------------------------------------------------------------

SCHEDULE OF EXCEPTIONS

Permitted Indebtedness (Section 1.1)

None.

Permitted Investments (Section 1.1)

None.

Permitted Liens (Section 1.1)

None.

Permitted Transfers (Section 1.1)

See Annex I attached hereto.

Invested Collateral (Section 5.3)

Borrower maintains a balance in certain accounts located in Belgium in the
ordinary course of business.

Prior Names (Section 5.5)

TorreyPines Therapeutics, Inc.

Neurogenetics, Inc.

Litigation (Section 5.6)

Several lawsuits were filed against us in February 2005 in the U.S. District
Court for the Southern District of New York asserting claims under Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act and Rule 10b-5 thereunder on behalf of a class of purchasers of our
common stock during the period from June 26, 2003, through and including
February 4, 2005, referred to as the class period. Dr. Marvin S. Hausman, M.D.,
a former director and our former Chief Executive Officer, and Dr. Gosse B.
Bruinsma, M.D., also a former director and our former Chief Executive Officer,
were also named as defendants in the lawsuits. These actions were consolidated
into a single class action lawsuit in January 2006. On April 10, 2006, the class
action plaintiffs filed an amended consolidated complaint. We filed our answer
to that complaint on May 26, 2006. Our motion to dismiss the consolidated
amended complaint was filed on May 26, 2006 and was submitted to the court for a
decision in September 2006. The motion to dismiss is pending.

The class action plaintiffs allege generally that our Phase III phenserine
development program was subject to alleged errors of design and execution which
resulted in the failure of the first Phase III phenserine trial to show
efficacy. Plaintiffs allege the defendants’ failure to disclose the alleged
defects resulted in the artificial inflation of the price of our shares during
the class period.

There is also a shareholder derivative suit pending in New York Supreme Court,
New York County, against our current and former directors and officers. The
named defendants are Marvin S. Hausman, M.D., Gosse B. Bruinsma, M.D., S. Colin
Neill, Louis G. Cornacchia, Steven H. Ferris, Ph.D., Gerard J. Vlak, Ralph
Snyderman, M.D. and Michael A. Griffith. Defendants are alleged to have breached
their duties to the company and misused inside information regarding clinical
trials of phenserine. This action has been stayed pending further developments
in the federal class action.

Inbound Licenses (Section 5.12)

None.

--------------------------------------------------------------------------------

Annex I to the Schedule of Exceptions

1. The Company’s Gamma Secretase Modulator (GSM) Program, including, without
limitation, patent 7,244,739 issued on July 17, 2007 and any other patents,
patent applications, trademarks, trade names, service marks, copyrights,
technology, trade secrets, proprietary information, know-how and processes
relating to such program.

2. The Company’s Alzheimer’s disease genetics program, including, without
limitation, any patents, patent applications, trademarks, trade names, service
marks, copyrights, technology, trade secrets, proprietary information, know-how
and processes relating to such program.

--------------------------------------------------------------------------------

Corporation Resolutions and Incumbency Certification

Authority to Procure Loans

I certify that I am the duly elected and qualified Secretary of TPTX, INC.; that
the following is a true and correct copy of resolutions duly adopted by the
Board of Directors of the Corporation in accordance with its bylaws and
applicable statutes.

Copy of Resolutions:

Be it Resolved, That:

 

1. Any one (1) of the following                              (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the name
of the Corporation to:

 

  (a) Negotiate and procure loans, letters of credit and other credit or
financial accommodations from Comerica Bank (“Bank”), a Texas banking
association, including, without limitation, that certain Loan and Security
Agreement dated as of June 11, 2008, as may subsequently be amended from time to
time.

 

  (b) Discount with the Bank, commercial or other business paper belonging to
the Corporation made or drawn by or upon third parties, without limit as to
amount;

 

  (c) Purchase, sell, exchange, assign, endorse for transfer and/or deliver
certificates and/or instruments representing stocks, bonds, evidences of
Indebtedness or other securities owned by the Corporation, whether or not
registered in the name of the Corporation;

 

  (d) Give security for any liabilities of the Corporation to the Bank by grant,
security interest, assignment, lien, deed of trust or mortgage upon any real or
personal property, tangible or intangible of the Corporation;

 

  (e) Issue a warrant or warrants to purchase the Corporation’s capital stock;
and

 

  (f) Execute and deliver in form and content as may be required by the Bank any
and all notes, evidences of Indebtedness, applications for letters of credit,
guaranties, subordination agreements, loan and security agreements, financing
statements, assignments, liens, deeds of trust, mortgages, trust receipts and
other agreements, instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to substantially all of
the Corporation’s property and assets.

 

2. Said Bank be and it is authorized and directed to pay the proceeds of any
such loans or discounts as directed by the persons so authorized to sign,
whether so payable to the order of any of said persons in their individual
capacities or not, and whether such proceeds are deposited to the individual
credit of any of said persons or not;

 

3. Any and all agreements, instruments and documents previously executed and
acts and things previously done to carry out the purposes of these Resolutions
are ratified, confirmed and approved as the act or acts of the Corporation.

 

4. These Resolutions shall continue in force, and the Bank may consider the
holders of said offices and their signatures to be and continue to be as set
forth in a certified copy of these Resolutions delivered to the Bank, until
notice to the contrary in writing is duly served on the Bank (such notice to
have no effect on any action previously taken by the Bank in reliance on these
Resolutions).

 

- 1 -

--------------------------------------------------------------------------------

5. Any person, corporation or other legal entity dealing with the Bank may rely
upon a certificate signed by an officer of the Bank to effect that these
Resolutions and any agreement, instrument or document executed pursuant to them
are still in full force and effect and binding upon the Corporation.

 

6. The Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.

I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:

(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

 

NAME (Type or Print)

  

TITLE

  

SIGNATURE

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on June 11,
2008.

 

   Secretary

The Above Statements are Correct.            SIGNATURE OF OFFICER OR DIRECTOR
OR, IF NONE. A SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO
SIGN ALONE.

Failure to complete the above when the Secretary is authorized to sign alone
shall constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.

--------------------------------------------------------------------------------

ATTN: TPTX, INC.

USA PATRIOT ACT

NOTICE

OF

CUSTOMER IDENTIFICATION

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account.

WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name,
address, date of birth, and other information that will allow us to identify
you. We may also ask to see your driver’s license or other identifying
documents.

--------------------------------------------------------------------------------

COMERICA BANK

Member FDIC

ITEMIZATION OF AMOUNT FINANCED

DISBURSEMENT INSTRUCTIONS

(Term Loan)

 

Name(s): TPTX, INC.            Date: June 11, 2008

$3,600,000

   credited to deposit account No. ___________ when Advances are requested by
Borrower Amounts paid to others on your behalf:

$

   to Comerica Bank for Loan Fee

$

   to Comerica Bank for Document Fee

$

   to Bank counsel fees and expenses

$

   to _______________

$

   to _______________

$

   TOTAL (AMOUNT FINANCED)

Upon consummation of this transaction, this document will also serve as the
authorization for Comerica Bank to disburse the loan proceeds as stated above.

 

          Signature     Signature

--------------------------------------------------------------------------------

LOGO [g62660img01.jpg]

Agreement to Furnish Insurance

(Herein called “Bank”)

Borrower(s): TPTX, INC.

I understand that the Security Agreement or Deed of Trust which I executed in
connection with this transaction requires me to provide a physical damage
insurance policy including a Lenders Loss Payable Endorsement in favor of the
Bank as shown below, within ten (10) days from the date of this agreement.

The following minimum insurance must be provided according to the terms of the
security documents.

 

¨

  AUTOMOBILES, TRUCKS, RECREATIONAL VEHICLES    ¨    MACHINERY & EQUIPMENT:
MISCELLANEOUS PERSONAL PROPERTY  

Comprehensive & Collision

     

Fire & Extended Coverage

 

Lender’s Loss Payable Endorsement

     

Lender’s Loss Payable Endorsement

       

¨        Breach of Warranty Endorsement

¨

  BOATS    ¨    AIRCRAFT  

All Risk Hull Insurance

     

All Risk Ground & Flight Insurance

 

Lender’s Loss Payable Endorsement

     

Lender’s Loss Payable Endorsement

 

¨        Breach of Warranty Endorsement

     

¨        Breach of Warranty Endorsement

¨

  MOBILE HOMES    ¨    REAL PROPERTY  

Fire, Theft & Combined Additional Coverage

     

Fire & Extended Coverage

 

Lender’s Loss Payable Endorsement

     

Lender’s Loss Payable Endorsement

 

¨        Earthquake

     

¨        All Risk Coverage

       

¨        Special Form Risk Coverage

       

¨        

       

¨        Earthquake

¨

  INVENTORY      

¨        Other _____________________________

¨

 
Other ____________________________________________________________________________________________
 
            ____________________________________________________________________________________________
 
            ____________________________________________________________________________________________

I may obtain the required insurance from any company that is acceptable to the
Bank, and will deliver proof of such coverage with an effective date of June 11,
2008 or earlier.

I understand and agree that if I fail to deliver proof of insurance to the Bank
at the address below, or upon the lapse or cancellation of such insurance, the
Bank may procure Lender’s Single Interest Insurance or other similar coverage on
the property. If the Bank procures insurance to protect its interest in the
property described in the security documents, the cost for the insurance will be
added to my indebtedness as provided in the security documents. Lender’s Single
Interest Insurance shall cover only the Bank’s interest as a secured party, and
shall become effective at the earlier of the funding date of this transaction or
the date my insurance was canceled or expired. I UNDERSTAND THAT LENDER’S SINGLE
INTEREST INSURANCE WILL PROVIDE ME WITH ONLY LIMITED PROTECTION AGAINST PHYSICAL
DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN, HOWEVER, MY EQUITY IN
THE PROPERTY WILL NOT BE INSURED. FURTHER, THE INSURANCE WILL NOT PROVIDE
MINIMUM PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND DOES NOT MEET
THE REQUIREMENTS OF THE FINANCIAL RESPONSIBILITY LAW.

CALIFORNIA CIVIL CODE SECTION 2955.5. HAZARD INSURANCE DISCLOSURE: No lender
shall require a borrower, as a condition of receiving or maintaining a loan
secured by real property, to provide hazard insurance coverage against risks to
the improvements on that real property in an amount exceeding the replacement
value of the improvements on the property.

 

Bank Address for Insurance Documents:

 

Comerica Bank – Collateral Operations, Mail Code 4770

75 East Trimble Road San Jose, California 95131

--------------------------------------------------------------------------------

I acknowledge having read the provisions of this agreement, and agree to its
terms. I authorize the Bank to provide to any person (including any insurance
agent or company) any information necessary to obtain the insurance coverage
required.

 

OWNER(S) OF COLLATERAL:

TPTX, INC.

    DATED: June 11, 2008                    

 

INSURANCE VERIFICATION     Date _________________________  
Phone                                             Agents
Name _______________________________________  
Person Talked To                        

Agents Address                                    
                                         
                                         
                                         
                                                                         
Insurance Company                                        
                                         
                                         
                                         
                                                              Policy
Number(s)                                       
                                         
                                         
                                         
                                                                  

Effective Dates: From _________________________________  
To: __________________________________________  
Deductible $ ________________________________________  
Comments: ____________________________________  

--------------------------------------------------------------------------------

COMERICA BANK

Member FDIC

   AUTOMATIC DEBIT AUTHORIZATION

 

To: Comerica Bank Re: Loan #                                          
                                 

You are hereby authorized and instructed to charge account No.
                                 in the name of TPTX, INC.

 

for principal, interest and other payments due on above referenced loan as set
forth below and credit the loan referenced above.

 

  x Debit each interest payment as it becomes due according to the terms of the
Loan and Security Agreement and any renewals or amendments thereof.

 

  x Debit each principal payment as it becomes due according to the terms of the
Loan and Security Agreement and any renewals or amendments thereof.

 

  x Debit each payment for Bank Expenses as it becomes due according to the
terms of the Loan and Security Agreement and any renewals or amendments thereof.

This Authorization is to remain in full force and effect until revoked in
writing.

 

Borrower Signature

    Date        June 11, 2008        June 11, 2008

--------------------------------------------------------------------------------

COMERICA BANK

Member FDIC

   AUTOMATIC DEBIT AUTHORIZATION

 

To: Comerica Bank Re: Loan #                                          
                                  You are hereby authorized and instructed to
charge account No.                              in the name of TPTX, INC.

for principal, interest and other payments due on above referenced loan as set
forth below and credit the loan referenced above.

 

  x Debit each interest payment as it becomes due according to the terms of the
Loan and Security Agreement and any renewals or amendments thereof.

 

  x Debit each principal payment as it becomes due according to the terms of the
Loan and Security Agreement and any renewals or amendments thereof.

 

  x Debit each payment for Bank Expenses as it becomes due according to the
terms of the Loan and Security Agreement and any renewals or amendments thereof.

This Authorization is to remain in full force and effect until revoked in
writing.

 

Borrower Signature

    Date        June 11, 2008        June 11, 2008

--------------------------------------------------------------------------------

COMERICA BANK

 

     COMERICA BANK      CLIENT AUTHORIZATION

Fax    (858) 509-2365

  

General Authorization

I hereby authorize Comerica Bank to use my company name, logo, and information
relating to our banking relationship in its marketing and advertising campaigns
which is intended for Comerica Bank’s customers, prospects and shareholders.

Comerica Bank will forward any advertising or article including client for prior
review and approval.

 

   Signature    Printed Name                        Title   

Company

  

Mailing Address

  

City, State, Zip Code

  

Phone Number

  

Fax Number

  

E-Mail

June 11, 2008

--------------------------------------------------------------------------------

DEBTOR    TPTX, INC. SECURED PARTY:    COMERICA BANK

EXHIBIT A

COLLATERAL DESCRIPTION ATTACHMENT

TO UCC NATIONAL FORM FINANCING STATEMENT

All personal property of Borrower (herein referred to as “Borrower” or “Debtor”)
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:

(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including payment intangibles and
software), goods (including fixtures), instruments (including promissory notes),
inventory (including all goods held for sale or lease or to be furnished under a
contract of service, and including returns and repossessions), investment
property (including securities and securities entitlements), letter of credit
rights, money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;
and

(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.

Notwithstanding the foregoing, the Collateral shall not include any copyrights,
patents, trademarks, servicemarks and applications therefor, now owned or
hereafter acquired, or any claims for damages by way of any past, present and
future infringement of any of the foregoing (collectively, the “Intellectual
Property”); provided, however, that the Collateral shall include all accounts
and general intangibles that consist of rights to payment and proceeds from the
sale, licensing or disposition of all or any part, or rights in, the foregoing
(the “Rights to Payment”). Notwithstanding the foregoing, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in
the underlying Intellectual Property is necessary to have a security interest in
the Rights to Payment, then the Collateral shall automatically, and effective as
of June 11, 2008, include the Intellectual Property to the extent necessary to
permit perfection of Bank’s security interest in the Rights to Payment.