Exhibit 10.3
 
 

 
SECURITY AGREEMENT
 
This SECURITY AGREEMENT (“Agreement”), is made effective as of July 25, 2012
(this “Agreement”), by and among Opexa Therapeutics, Inc., a Texas corporation
(the “Company”), each of the persons executing a copy of this Agreement, and
their respective successors and assigns (each an “Investor” and, collectively,
the “Investors”), and Alkek & Williams Ventures, Ltd., a Texas limited
partnership, as collateral agent for the Investors (in such capacity, the
“Collateral Agent”).
 
1.           Purpose.  This Agreement is granted by the Company in favor of the
Collateral Agent for the benefit of the Investors under (i) that certain Note
Purchase Agreement, effective as of the date hereof, by and among the Company
and the Investors (the “Purchase Agreement”), and (ii) the convertible secured
promissory notes issued to Investors by the Company under the Purchase Agreement
(as may be amended, restated, modified or replaced from time to time, the
“Notes”).  Under the Purchase Agreement and the Notes, Investors may loan the
Company up to the aggregate sum of Eight Million Dollars ($8,000,000).  The
Company has agreed to secure all Liabilities (as hereinafter defined) of the
Company to Investors in accordance with the terms and conditions of this
Agreement.
 
2.          Defined Terms.  Capitalized terms not defined in this Agreement have
the meaning set forth under the Purchase Agreement, and the following terms as
well as all uncapitalized terms which are defined in the Texas Uniform
Commercial Code (as amended, revised or replaced, the “Texas UCC”) have the
meaning set forth therein:  Accounts, Chattel Paper, Commercial Tort Claims,
Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Fixtures,
General Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Payment Intangibles, Proceeds, Supporting Obligations,
and Tangible Chattel Paper.  In addition, the following terms have the meanings
specified below:
 
“Intellectual Property” means, collectively, the Copyright Collateral, the
Patent Collateral, the Trademark Collateral, and the Trade Secrets Collateral.
 
“Copyright Collateral” means all copyrights of the Company, registered or
unregistered and whether published or unpublished, now or hereafter in force
throughout the world including all of the Company’s rights, titles and interests
in and to all copyrights registered in the United States Copyright Office or
anywhere else in the world, and registrations and recordings thereof and all
applications for registration thereof, whether pending or in preparation, all
copyright licenses, the right to sue for past, present and future infringements
of any of the foregoing, all rights corresponding thereto, all extensions and
renewals of any thereof and all proceeds of the foregoing, including licenses,
royalties, income, payments, claims, damages and Proceeds of suit, which are
owned or licensed by the Company.
 
“Patent Collateral” means (a) all inventions and discoveries, whether patentable
or not, all letters patent and applications for letters patent throughout the
world, and any patent applications in preparation for filing, (b) all reissues,
divisions, continuations, continuations in part, extensions, renewals and
reexaminations of any of the items described in clause (a), (c) all patent
licenses, and other agreements providing the Company with the right to use any
items of the type referred to in clauses (a) and (b) above, and (d) all proceeds
of, and rights associated with, the foregoing (including licenses, royalties
income, payments, claims, damages and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any patent or
patent application, and for breach or enforcement of any patent license.
 
 
 

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“Trademark Collateral” means (a) (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos and other source or
business identifiers, and all goodwill of the business associated therewith, now
existing or hereafter adopted or acquired by the Company, whether currently in
use or not, all registrations and recordings thereof and all applications in
connection therewith, whether pending or in preparation for filing, including
further registrations, recordings and applications in the United States Patent
and Trademark Office or in any office or agency of the United States of America,
or any State thereof or any other country or political subdivision thereof or
otherwise, and all common law rights relating to the foregoing, and (ii) the
right to obtain all reissues, extensions or renewals of the foregoing (the
subject matter of clause (a) is collectively referred to as the “Trademark”),
(b) all trademark licenses for the grant by or to the Company of any right to
use any trademark, (c) all of the goodwill of the business connected with the
use of, and symbolized by the items described in, clause (a), and to the extent
applicable clause (b), (d) the right to sue third parties for past, present and
future infringements of any Trademark Collateral described in clause (a) and, to
the extent applicable, clause (b), and (e)  all Proceeds of, and rights
associated with, the foregoing, including any claim by the Company against third
parties for past, present or future infringement or dilution of any Trademark,
Trademark registration, or Trademark license, or for any injury to the goodwill
associated with the use of any such Trademark or for breach or enforcement of
any Trademark license and all rights corresponding thereto throughout the world.
 
“Trade Secrets Collateral” means all common law and statutory trade secrets and
all other confidential, proprietary or useful information and all know how
obtained by or used in or contemplated at any time for use in the business of
the Company, (all of the foregoing being collectively called a “Trade Secret”),
including all documents and things embodying, incorporating or referring in any
way to such Trade Secret, all Trade Secret licenses, and including the right to
sue for and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license.
 
“Vehicles” shall mean all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state.
 
3.          Grant of Security Interest.  The Company hereby grants to Collateral
Agent, for the ratable benefit of the Investors, a continuing security interest
in and continuing lien on the “Collateral” described in Section 4 below to
secure the prompt and complete payment of the Obligations, including all amounts
due under the Notes plus all interest, costs, expenses, and reasonable
attorneys’ fees, which may be made or incurred by the Collateral Agent and/or
Investors in the disbursement, administration, and collection of such amounts,
and in the protection, maintenance, and liquidation of the Collateral
(collectively, “Liabilities”).  This Agreement shall be and become effective
when, and continue in effect, as long as any Liabilities of the Company to
Investors are outstanding and unpaid, and except as expressly permitted herein,
the Company will not sell, assign, transfer, pledge or otherwise dispose of or
encumber any Collateral to any third party while this Agreement is in effect
without the prior written consent of the Collateral Agent and Investors holding
Notes representing at least two thirds (66-2/3%) of the unpaid principal under
all outstanding Notes (the “Required Holders”).
 
 
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4.           Collateral.  The “Collateral” covered by this Agreement is all of
the Company’s right, title and interest in, to and under all assets of the
Company, real and personal, tangible and intangible, which it now owns or shall
hereafter acquire or create, immediately upon the acquisition or creation
thereof, and includes, but is not limited to, the following:
 
(1) all Accounts;
 
(2) all Chattel Paper (whether Tangible Chattel Paper or Electronic Chattel
Paper);
 
(3) all Commercial Tort Claims;
 
(4) all Deposit Accounts other than payroll, withholding tax and other fiduciary
Deposit Accounts;
 
(5) all Documents;
 
(6) all General Intangibles;
 
(7) all Goods (including, without limitation, all Inventory, Equipment and
Fixtures);
 
(8) all Instruments;
 
(9) all Investment Property;
 
(10) all Letter-of-Credit Rights (whether or not the letter of credit is
evidenced by a writing;
 
(11) all Intellectual Property;
 
(12) all Supporting Obligations;
 
(13) all Vehicles;
 
 
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(14) medical, scientific or research-related assets of every kind or nature,
including without limitation, blood samples, databases, research materials, and
medical research and data; all books and records pertaining to the Collateral;
and
 
(15) to the extent not otherwise included, all Proceeds and products of any and
all of the foregoing and all collateral security, guarantees and other
Supporting Obligations given with respect to any of the foregoing.
 
5.           Purchase Money Liens.  The Company hereby agrees not to acquire any
Equipment or Fixtures subject to a purchase money lien unless it obtains the
prior written consent of the Required Holders. Any Equipment or Fixtures
acquired pursuant to this section and subject to a purchase money lien shall not
be a part of the Collateral so long as the liens created hereunder are
specifically prohibited by the terms of such purchase money lien; provided that
this exclusion shall only apply to the specific Equipment and/or Fixtures
acquired with the proceeds of such purchase money lien.
 
6.           Perfection of Security Interest.  The Company shall execute and
deliver to the Collateral Agent, concurrently with the Company’s execution of
this Agreement and at any time or times hereafter (and pay the cost of filing or
recording same in all public offices deemed necessary by Collateral Agent), all
financing statements, assignments, certificates of title, applications for
vehicle titles, affidavits, reports, notices, schedules of Accounts,
designations of inventory, letters of authority and all other documents that
Collateral Agent may reasonably request, in form satisfactory to the Collateral
Agent, to perfect and maintain the Collateral Agent’s perfected security
interests in the Collateral.  The Company further agrees, from time to time as
requested by the Collateral Agent, to execute and deliver to the Collateral
Agent any Patent Security Agreements, Trademark Security Agreements or any other
documents necessary or advisable to perfect the Collateral Agent’s security
interest in any Intellectual Property, and further authorizes Collateral Agent,
its agents, attorneys, and representatives, to file such agreements or
documents, and amendments thereto, at the Company’s expense, in the office of
the appropriate governmental agency.  In addition, the Company irrevocably
authorizes Collateral Agent, its agents, attorneys, and representatives, to file
financing statements, and amendments thereto, at the Company’s expense,
necessary to establish and maintain Collateral Agent’s perfected security
interest in the Collateral.  Any such financing statement to be filed may
describe the assets and property to be encumbered hereby in a generic
description such as “all assets of the debtor,” or words of similar effect.  In
order to fully consummate all of the transactions contemplated hereunder, the
Company shall make appropriate entries on its books and records disclosing
Collateral Agent’s security interests in the Collateral. The Company and the
Collateral Agent shall execute and deliver, within thirty (30) days of closing,
a Deposit Account Control Agreement in such form as shall be mutually
acceptable, pursuant to which the Company will agree to grant the Investors
certain control rights relating to certain of the Company’s bank accounts.
 
7.           Warranties.  The Company warrants and agrees that, except as set
forth on SCHEDULE 7, while any of the Liabilities remain unperformed and
unpaid:  (a) the Company is the owner of the Collateral free and clear of all
liens or security interests and all chattel paper constituting Collateral
evidences a perfected security interest in the goods covered by it, free from
all other liens and security interests, and no financing statement other than
that of Collateral Agent’s is on file covering the Collateral or any of it and
if Inventory is represented or covered by documents of title, the Company is the
owner of the documents, free of all liens and security interest other than
Collateral Agent’s security interest; (b) the Company’s exact legal name is as
set forth above; (c) the Company is an organization of the type and organized in
the jurisdiction set forth above; (d) the address of the Company’s principal
office is as set forth below, while the addresses of the Company’s other places
of business where Collateral is now or may in the future be located, and the
Company’s business locations shall not be changed without the prior written
consent of Collateral Agent, and the Company further warrants that the
Collateral, wherever located, is covered by this Agreement; (e) the Collateral
will not be used, nor will the Company permit the Collateral to be used, for any
unlawful purpose, whatever; (f) the Company shall at all times maintain the
Collateral in first class condition and repair; (g) the Company will indemnify
and hold Collateral Agent and Investors harmless against claims of any persons
or entities not party to this Agreement concerning disputes arising over the
Collateral; and (h) the Collateral is or will be located at the following
address: 2635 Technology Forest Blvd., The Woodlands, Texas 77381.
 
 
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8.           Covenants Concerning the Company’s Legal Status.  The Company
covenants with the Collateral Agent and Investors as follows: (a) without
providing at least thirty (30) days prior written notice to the Collateral
Agent, the Company will not change its name, its place of business or, if more
than one, chief executive office, or its mailing address or organizational
identification number if it has one; (b) if the Company does not have an
organizational identification number and later obtains one, the Company shall
forthwith notify the Collateral Agent of such organizational identification
number; and (c) the Company will not change its type of organization,
jurisdiction of organization or other legal structure.  The Company agrees that
all documents, instruments and agreements demanded by Collateral Agent and/or
Investors in response to any of the changes described in this Section shall be
prepared, filed and recorded at the Company’s expense prior to the effective
date of such change.
 
9.           Insurance, Taxes, Etc.  The Company shall:  (a) pay all taxes,
levies, assessments, judgments and charges of any kind upon or relating to the
Collateral, to the Company’s business, and to the Company’s ownership or use of
any of its assets, income or gross receipts; (b) at its own expense, keep and
maintain all of the Collateral insured against loss or damage by fire, theft,
explosion and other risks in such amounts, with such companies, under such
policies and in such form as determined by the Company’s Board of Directors
which policies shall expressly provide that loss thereunder shall be payable to
Collateral Agent, for the ratable benefit of the Investors, as its interest may
appear (and Collateral Agent shall have a security interest in the proceeds of
such insurance and may apply any such proceeds which may be received by it
toward payment of the Liabilities, whether or not due, in such order of
application as Collateral Agent may determine); (c) maintain at its own expense
public liability and property damage insurance in such amounts with such
companies, under such policies and in such form as determined by the Company’s
Board of Directors; and, upon Collateral Agent’s request, shall furnish
Collateral Agent and/or Investors with such policies and evidence of payment of
premiums thereon.  For the avoidance of doubt, the insurance policies maintained
pursuant to this section shall be in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.  If the Company at any time
hereafter should fail to obtain or maintain any of the policies required above
or pay any premium in whole or in part relating thereto, or shall fail to pay
any such tax, assessment, levy, or charge or to discharge any such lien or
encumbrance, then Collateral Agent and/or Investors, without waiving or
releasing any obligation or default of the Company hereunder, may at any time
hereafter (but shall be under no obligation to do so) make such payment or
obtain such discharge or obtain and maintain such policies of insurance and pay
such premiums, and take such action with respect thereto as Investors deems
advisable.  All sums so disbursed by Collateral Agent and/or Investors,
including reasonable attorneys’ fees, court costs, expenses, and other charges
relating thereto, shall be part of the Company’s Liabilities, secured hereby,
and payable on demand.
 
 
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10.         Sale, Collections, Etc.
 
10.1    Until an Event of Default (as that term is defined below), Collateral
Agent and each Investor authorizes and permits the Company to collect Accounts
from Account debtors.  This privilege may be terminated by Collateral Agent at
any time upon the occurrence of an Event of Default as set forth in this
Agreement, and Collateral Agent thereupon shall be entitled to and have all of
the ownership, title, rights, securities and guarantees of the Company in
respect of Accounts, and in respect to the property evidenced thereby, including
the right of stoppage in transit, and Collateral Agent may notify any Account
debtor of the assignment of Accounts and collect the same; thereafter the
Company will receive all payments on Account as agent of and for Collateral
Agent and will transmit to Collateral Agent, on the day of receipt thereof, all
original checks, drafts, acceptances, notes and other evidence of payment
received in payment of or on account of Accounts, including all cash monies,
similarly received by the Company.  Until such delivery, the Company shall keep
all such remittances separate and apart from the Company’s own funds, capable of
identification as the property of Collateral Agent, and shall hold the same in
trust for Collateral Agent.
 
10.2    Until an Event of Default and until such time as Collateral Agent has
notified the Company of the revocation of such power and authority, the Company
may (i) only in the ordinary course of its business, at its own expense, sell,
lease or furnish under contracts of service any of the Inventory normally held
by the Company for such purpose, and (ii) use and consume any raw materials,
work in process or materials, the use and consumption of which is necessary in
order to carry on the Company’s business.  The Company shall, at its own
expense, endeavor to collect, as and when due all amounts due with respect to
any of the Collateral, including the taking of such action with respect to such
collection as Collateral Agent may reasonably request or, in the absence of such
request, as the Company may deem advisable.  A sale in the ordinary course of
business does not include a transfer in partial or total satisfaction of a debt.
 
11.        Waiver.  The Company waives all defenses and setoffs which could
hinder or reduce the obligations of the Company under this Agreement.  In
addition, except as expressly prohibited by law, the Company waives any right it
has to require Collateral Agent and/or Investors to give notice of the details
of any public or private sale of personal property security held from the
Company or pursue any remedy available to Collateral Agent and/or Investors.
 
 
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12.         Information.  The Company shall permit Collateral Agent or its
agents upon reasonable request to have access to and to inspect all the
Collateral and from time to time verify Accounts and chattel paper, inspect,
check, make copies of or extracts from the books, records and files of the
Company, and the Company will make same available at any time for such
purposes.  In addition, the Company shall promptly supply Collateral Agent
and/or Investors with financial and such other information concerning its
affairs and assets as Collateral Agent may request from time to time.
 
13.         Event of Default.
 
13.1    An “Event of Default” shall exist as and when provided under the Notes.
 
13.2    Upon the occurrence of an Event of Default, the Notes and all other
Liabilities may (notwithstanding any provisions thereof) at the option of the
Collateral Agent, and without demand or notice of any kind, be declared, and
thereupon immediately shall become due and payable, and the Collateral Agent may
exercise from time to time any rights and remedies, including the right to
immediate possession of the Collateral, available to the Collateral Agent and/or
Investors under the Texas UCC or otherwise applicable Texas law. The Company
agrees, in case of an Event of Default, to assemble, at its expense, all the
Collateral at a convenient place acceptable to the Collateral Agent and to pay
all costs of Collateral Agent and Investors of collection of the Notes and all
other Liabilities, and enforcement of rights hereunder, including attorneys’
fees and legal expenses, participation in bankruptcy proceedings, expense of
locating the Collateral and expenses of any repairs to any realty or other
property to which any of the Collateral may be affixed or be a part.  If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if sent at least seven days before such disposition, postage prepaid, addressed
to the undersigned either at the address shown below, or at any other address of
the undersigned appearing on the records of the Collateral
Agent.  Notwithstanding the foregoing, the Collateral Agent shall not be
obligated to declare the Notes and other Liabilities due or, having done so, to
take any action authorized hereunder or by law with respect to the
Collateral.  If the Collateral Agent fails to take any action pursuant to this
Section 13.2 within sixty (60) days of being notified in writing of an Event of
Default, any Investor may, at its option, exercise the rights granted to the
Collateral Agent under this Section 13.2 or by law (the “Substitute Collateral
Agent”). Provided, however, that any amounts realized from the sale of
Collateral or otherwise hereunder shall first be distributed to reimburse the
costs and expenses, including but not limited to legal expenses and commissions,
of the Collateral Agent and the Substitute Collateral Agent in enforcing the
rights hereunder and, second, to all Investors pro-rata based upon the amount
owed to each Investor pursuant to the Notes or other Obligations held by the
Investor.  Except as provided in the immediately preceding sentence with respect
to proceeds of sale, the Collateral Agent and any Investor exercising rights
pursuant to this Section 13.2 shall not be liable to the Company or other
Investors for any action taken or not taken with respect to the Collateral other
than willful misconduct.
 
 
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14.         Collateral Agent.
 
14.1    Appointment, Duties. Each Investor hereby appoints and authorizes the
Collateral Agent to take such action as the Collateral Agent on its behalf and
to exercise such powers under this Agreement and the other Transaction Documents
as are delegated to the Collateral Agent by the terms hereof and thereof,
together with such other powers as are incidental thereto or as the Collateral
Agent and the Investors may agree.  The Collateral Agent will have no duties,
responsibilities, obligations or liabilities other than those expressly set
forth in this agreement and the other Transaction Documents, and no additional
duties, responsibilities, obligations or liabilities will be inferred from the
provisions of this Agreement or the Transaction Documents or imposed on the
Collateral Agent.  As to actions that the Collateral Agent is not expressly
required to take pursuant to the provisions of this Agreement or the other
Transaction Documents (including enforcement or collection of the Notes), the
Collateral Agent will not exercise any discretion or take any action, but will
be required to act or to refrain from acting (and will be fully protected in so
acting or refraining from acting) solely upon the written instructions of the
Required Holders, and such instructions will be binding upon all of the
Investors, provided that the Collateral Agent will in no event be required to
take any action which exposes the Collateral Agent to personal liability for
which it is not indemnified hereunder, or which is contrary to the Transaction
Documents or law or with respect to which the Collateral Agent does not receive
adequate instructions from the Required Holders.  The Collateral Agent has no
duties or relationship of trust or agency with or to the Company or any of its
Affiliates.
 
14.2    Exercise of Rights and Remedies.
 
(a)      The Collateral Agent shall administer the Collateral in the manner
contemplated by this Agreement and the other Transaction Documents, and
exercise, but, only upon the written instruction of, and on behalf of, the
Required Holders in accordance with this Agreement, such rights and remedies
with respect to the Collateral as are granted to it under this Agreement and
applicable law.
 
(b)      Upon the request of the Collateral Agent or any other Investor, each
Investor will provide the Collateral Agent and each other Investor notice of the
amount of outstanding Liabilities owed by the Company to such Investor under the
Transaction Documents.  In addition, each Investor shall provide the Collateral
Agent any other information that the Collateral Agent may reasonably request in
connection with the Collateral Agent’s duties and responsibilities hereunder.
 
(c)      The Collateral Agent shall take any and all actions and shall exercise
such rights, remedies and options which it may have under this Agreement and the
Transaction Documents as and to the extent directed from time to time by the
Required Holders, including realization and foreclosure on all or any portion of
the Collateral.
 
 
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(d)      The proceeds of any sale, disposition or other realization or
foreclosure by the Collateral Agent upon the Collateral or any portion thereof
pursuant to this Agreement shall be governed by this Section 14.2(d).  Any
non-cash proceeds resulting from any such sale, disposition or other realization
or foreclosure shall, unless otherwise directed by the Required Holders, be held
by the Collateral Agent for the benefit of the Investors until later sold or
otherwise converted into cash at the written direction of the Required Holders,
at which time the Collateral Agent shall apply such cash in accordance with this
Section 14.2(d).  The Collateral Agent shall distribute any cash proceeds net of
expenses resulting from any sale, disposition or other realization or
foreclosure of the Collateral to the Investors, promptly after receipt thereof,
on a pro rata basis in accordance with the respective outstanding amounts of the
Liabilities owed to each.
 
(e)      The Investors and the Collateral Agent hereby agree that if, at any
time during the term of this Agreement, any Investor or the Collateral Agent
receives any payment or distribution of assets of the Company of any kind or
character, including monies or cash proceeds resulting from liquidation of the
Collateral, other than in accordance with the terms of this Agreement, such
Investor or the Collateral Agent shall hold such payment or distribution in
trust for the benefit of the Investors and shall immediately remit such payment
or distribution to the Collateral Agent for application or distribution, as the
case may be, in accordance with the terms of this Agreement.
 
14.3    Rights of Collateral Agent.
 
(a)       The Collateral Agent may delegate any of its responsibilities or
duties under this Agreement or the Transaction Documents to one or more agents
or attorneys and the Collateral Agent shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with due
care by it hereunder.
 
(b)      None of the Collateral Agent, its agents, its attorneys or any of their
respective Affiliates will be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or the Transaction
Documents, except that each will be liable for its own gross negligence, willful
misconduct or a material breach of the Collateral Agent’s obligations under this
Agreement.  Without limiting the generality of the foregoing, the Collateral
Agent:  (i) may treat the payee of any Note as the holder thereof until the
Collateral Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Collateral Agent; (ii) may
consult with legal counsel of its selection, independent public accountants and
other experts selected by it and will not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no representation or warranty to
any Investor and will not be responsible to any Investor for any statements,
representations or warranties made in or in connection with the Transaction
Documents; (iv) will not, except to the extent directed and indemnified by the
Required Holders, have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of the Transaction
Documents or to inspect the Collateral or the books and records or any other
properties of the Company; (v) will not be responsible to any Investor for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Transaction Document or any other document or instrument furnished
pursuant thereto, or for the failure of any Person (other than the Collateral
Agent) to perform its obligations under any Transaction Document; and (vi) will
incur no liability under or in respect of this Agreement or any other
Transaction Document or otherwise by acting upon any notice, consent, waiver,
certificate or other writing or instrument (including facsimiles, telexes,
telegrams and cables) believed by it to be genuine and signed or sent by the
proper Person or Persons.
 
 
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(c)      The Collateral Agent will not be deemed to have knowledge or notice of
any Default or Event of Default unless and until it has received written notice
from the Company or an Investor referring to the Notes and this Agreement,
describing the Default or Event of Default and stating that such notice is a
“notice of default.”
 
(d)      In the event not otherwise paid by the Company pursuant to Section 15
of this Agreement, each Investor agrees to pay the Collateral Agent, upon
demand, its pro-rata share of the Collateral Agent’s documented out-of-pocket
expenses, including the fees and expenses of its counsel (and any local counsel)
and of any experts and agents in connection with (i) the administration of this
Agreement and the other Transaction Documents, (ii) the custody or preservation
of, or the sale of, collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement (whether through negotiations,
legal proceedings or otherwise) of any of the rights of the Collateral Agent or
the Investors hereunder or under the Transaction Documents or (vi) the failure
by the Company to perform or observe any of the provisions hereof or of any of
the Transaction Documents.  In the event the Investors have made payments
pursuant to this Section 14.3(d), any corresponding amounts subsequently paid by
the Company to the Collateral Agent pursuant to Section 15 shall be returned to
the Investors on a pro-rata basis.  The agreements in this Section 14.3(d) shall
survive the later of (i) payment and satisfaction in full of the Liabilities,
(ii) the resignation or removal of the Collateral Agent, and (iii) the
termination of this Agreement.
 
(e)      No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
 
(f)      The Collateral Agent shall be provided executed or true and correct
copies of each amendment, notice, waiver, consent or certificate made or
delivered with respect to this Agreement or any of the other Transaction
Documents sufficiently far in advance of the Collateral Agent being required to
take action under this Agreement or any other Transaction Document or in respect
of any such notice, waiver, consent or other certificate delivered in connection
therewith so as to allow the Collateral Agent to take any such action.
 
14.4    No Reliance. Each Investor acknowledges that neither the Collateral
Agent nor any of its Affiliates has made any representations or warranties with
respect to the Company or any other matter, and agrees that no review or other
action by the Collateral Agent or any of its Affiliates will be deemed to
constitute any such representation or warranty.  Each Investor acknowledges that
it has, independently and without reliance upon the Collateral Agent or any
other Investor, and based on the documentation and information referred to in
the Purchase Agreement and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Transaction Documents to which it is party.  Each
Investor also acknowledges and agrees that it will, independently and without
reliance upon the Collateral Agent or any other Investor, and based on such
documents and information as it will deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Transaction Documents.  The Collateral Agent will provide to any Investor any
information or documents concerning or relating to the Company or any other
Person or matter that may come into the Collateral Agent’s possession.
 
 
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14.5    Indemnification, Bankruptcy.
 
(a)      Each Investor, by its consent hereto, hereby agrees to indemnify the
Collateral Agent, in its capacity as such, its officers, directors,
shareholders, controlling persons, employees, agents and servants (each
“Indemnified Party”) from and against any and all claims, damages, losses,
liabilities, obligations, penalties, actions, causes of action, judgments,
suits, costs, expenses or disbursements (including, without limitation,
reasonable attorneys’ and consultants’ fees and expenses) (collectively
“Damages”) of any kind or nature whatsoever which may at any time be imposed on,
incurred by or asserted against any Indemnified Party (or which may be claimed
against any Indemnified Party by any Person) by reason of, in connection with or
in any way relating to or arising out of, (i) any Transaction Document, (ii) any
action taken or omitted by the Collateral Agent in compliance with the
provisions of this Agreement and the Transaction Documents or (iii) any claim
based on any misstatement, inaccuracy or omission in any oral or written
information provided by the Collateral Agent or any of its representatives in
connection with this Agreement, the Collateral, the Notes or the other
Transaction Documents, provided that each Investor will not be liable to any
Indemnified Party for any portion of such claims, liabilities, obligations,
losses, damages, penalties, judgments, costs, expenses or disbursements
resulting from such Indemnified Party’s gross negligence or willful misconduct
as determined in a final, non-appealable judgment by a court of competent
jurisdiction.
 
(b)      Nothing contained herein shall limit or restrict the independent right
of any Investor to initiate an action or actions in any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar proceeding in its individual capacity and
to appear or be heard on any matter before the bankruptcy or other applicable
court in any such proceeding, including, without limitation, with respect to any
question concerning post-petition financing arrangements.  The Collateral Agent
is not entitled to initiate such actions on behalf of any Investor or to appear
and be heard on any matter before the bankruptcy or other applicable court in
any such proceeding as the representative of any Investor.  The Collateral Agent
is not authorized in any such proceeding to enter into any agreement for, or
give any authorization or consent with respect to, the post-petition usage of
the Collateral, unless such agreement, authorization or consent has been
approved in writing by the Required Holders.  This Agreement shall survive the
commencement of any such bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
proceeding.
 
 
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14.6    Resignation and Removal of the Collateral Agent.  The Collateral Agent
may resign at any time by giving at least sixty (60) days’ prior written notice
thereof to the Investors and the Company and may be removed at any time by the
Required Holders, with any such resignation or removal to become effective only
upon the appointment of a successor Collateral Agent under this
Section14.6.  Upon any such resignation or removal, (i) the Required Holders
will have the right to appoint a successor Collateral Agent, and (ii) unless a
Default or Event of Default shall have occurred and be continuing, the Company
shall have the right to approve such appointed successor Collateral Agent, such
approval not to be unreasonably withheld.  If no successor Collateral Agent will
have been so appointed by the Required Holders and will have accepted its
appointment within forty-five (45) days after the resignation or removal of the
retiring Collateral Agent, the retiring Collateral Agent or the Required Holders
may, at the expense of the Company, petition a court of competent jurisdiction
for the appointment of a successor Collateral Agent.  Upon the acceptance of its
appointment as Collateral Agent, the successor Collateral Agent will thereupon
succeed to and be vested with all the rights, powers, privileges and duties of
the retiring Collateral Agent, and the retiring Collateral Agent will be
discharged from its duties and obligations under the Security Documents.  After
any retiring Collateral Agent’s resignation or removal, the provisions of this
Agreement will inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent.
 
15.         Expenses. The Company agrees to pay or promptly reimburse the
Collateral Agent and any Investor for all advances, charges, costs and expenses
(including, without limitation, all costs and expenses of holding, preparing for
sale and selling, collecting or otherwise realizing upon the Collateral and all
attorneys’ fees, legal expenses and court costs) incurred by any Investor in
connection with the exercise of its respective rights and remedies under this
Agreement, including, without limitation, any advances, charges, costs and
expenses that may be incurred in any effort to enforce any of the provisions of
this Agreement or any obligation of the Company in respect of the Collateral or
in connection with (i) the preservation of the liens in favor of, or the rights
of the Collateral Agent or any other Investor under this Agreement or (ii) any
actual or attempted sale, lease, disposition, exchange, collection, compromise,
settlement or other realization in respect of, or care of, the Collateral,
including all such costs and expenses incurred in any bankruptcy,
reorganization, workout or other similar proceeding.  All amounts for which the
Company is liable pursuant to this Section 15 shall be due and payable by the
Company to the Collateral Agent or the Investors upon demand.
 
16.         General.  The Company hereby irrevocably appoints the Collateral
Agent (and, as applicable, the Substitute Collateral Agent) as the Company’s
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company, from time to time in its discretion to take any
action and to execute any instrument that it may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement.
 
 
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Time shall be deemed of the very essence of this Agreement.  Collateral Agent,
Substitute Collateral Agent and/or Investors shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in their
possession if they take such action for that purpose as the Company requests in
writing, but failure of Collateral Agent, Substitute Collateral Agent or
Investors to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care, and failure of Collateral Agent, Substitute
Collateral Agent or Investors to preserve or protect any rights with respect to
such Collateral against any prior parties or to do any act with respect to the
preservation of such Collateral not so requested by the Company shall not be
deemed a failure to exercise reasonable care in the custody and preservation of
such Collateral.  Any delay on the part of Collateral Agent, Substitute
Collateral Agent or Investors in exercising any power, privilege or right
hereunder, or under any other instrument executed by the Company to Collateral
Agent, Substitute Collateral Agent or Investors in connection herewith shall not
operate as a waiver thereof, and no single or partial exercise thereof, or the
exercise of any other power, privilege or right shall preclude other or further
exercise thereof, or the exercise of any other power, privilege or right.  The
waiver by Collateral Agent, Substitute Collateral Agent or Investors of any
Event of Default by the Company shall not constitute a waiver of any subsequent
Events of Default, but shall be restricted to the Event of Default so
waived.  All rights, remedies and powers of Collateral Agent, Substitute
Collateral Agent or Investors hereunder are irrevocable and cumulative, and not
alternative or exclusive, and shall be in addition to all rights, remedies and
powers given hereunder or in or by any other instruments or by the Texas UCC, or
any laws now existing or hereafter enacted.
 
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Texas without regard to the choice of law
principles thereof.  Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of Texas located in Harris
County and the United States District Court for the Southern District of Texas
for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Agreement and the transactions contemplated hereby.  Service
of process in connection with any such suit, action or proceeding may be served
on each party hereto anywhere in the world by the same methods as are specified
for the giving of notices under this Agreement.  Each party hereto irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.  Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.  The rights and privileges of Collateral Agent, Substitute Collateral
Agent or Investors hereunder shall inure to the benefit of their successors and
assigns and this Agreement shall be binding on all heirs, executors,
administrators, assigns and successors of the Company.
 
 
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Any notice required or permitted by this Agreement shall be in writing and shall
be deemed sufficient if given in accordance with the Purchase Agreement.
 
This Agreement constitutes the entire understanding of the parties with respect
to the subject matter hereof and supersedes all prior written and oral
communications or understandings.  This Agreement may be amended or
supplemented, and any provision or term hereof may be waived, by a writing
signed on behalf of each of (i) the Company, (ii) the Collateral Agent and
(iii) the Required Holders.  The Company acknowledges receipt of a true and
complete copy of this Agreement.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.  A signature to this Agreement
transmitted electronically shall have the same authority, effect and
enforceability as an original signature.
 
[signature page follows]
 
 
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The parties have executed this Security Agreement as of the date first written
above.
 

 
THE COMPANY:
   
OPEXA THERAPEUTICS, INC.
     
By:
   
Name:
Neil K. Warma
 
Title:
President and Chief Executive Officer
           
COLLATERAL AGENT AND INVESTOR:
   
ALKEK & WILLIAMS VENTURES, LTD.,
 
a Texas limited partnership
         
By:
   
Name:
   
Title:
 

 
[signature page to Security Agreement]
                                                          
 
 

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THE INVESTORS:
                                             
By:
           
Printed Name:
         
Title (if applicable):
       
Entity Name (if applicable):
   

 
[signature page to Security Agreement]
                                                                        
 
 

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SCHEDULE 7
 
None