Exhibit 10.10

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective
Date between SILICON VALLEY BANK, a California corporation (“Bank”), and ARCA
Discovery, Inc., a Delaware corporation (“Borrower”), provides the terms on
which Bank shall lend to Borrower and Borrower shall repay Bank. The parties
agree as follows:

 

  1 ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

 

  2 LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

2.1.1 Growth Capital Line A.

(a) Availability. Subject to the terms and conditions of this Agreement, during
the GC Line A Draw Period, Bank shall make advances (each, a “GC Line A Advance”
and, collectively, “GC Line A Advances”) not exceeding the Growth Capital Line
A. After repayment, no GC Line A Advance may be reborrowed. GC Line A Advances
made on or after the Effective Date and on or before December 31, 2007 are
called “GC Line A Tranche One Advances,” and GC Line A Advances made after
December 31, 2007 and on or before the last day of the GC Line A Draw Period are
called “GC Line A Tranche Two Advances.” If Borrower has not advanced all of
Growth Capital Line A by the end of the GC Line A Draw Period, any such amounts
not advanced as of such date shall be added to, and become part of the Growth
Capital Line B.

(b) Repayment. The period of time commencing on the Effective Date and ending on
the day immediately prior to the GC Line A Tranche One Amortization Start Date
is called the “GC Line A Tranche One Interest Only Period,” and the period of
time commencing on January 1, 2008 and ending on June 30, 2008 is called the “GC
Line A Tranche Two Interest Only Period.” During the GC Line A Tranche One
Interest Only Period, Borrower will make monthly payments to Bank of accrued
interest only on the outstanding principal amount of all GC Line A Tranche One
Advances, and during the GC Line A Tranche Two Interest Only Period, Borrower
will make monthly payments to Bank of accrued interest only on the outstanding
principal amount of all GC Line A Tranche Two Advances. GC Line A Advances made
and outstanding on July 31, 2007 are payable in thirty (30) consecutive equal
monthly installments of principal and interest, beginning on the earlier of
(i) the first day of the month following the date which is six months from the
date of the first GC Line A Advance or (ii) July 1, 2008 (the “GC Line A Tranche
One Amortization Start Date”) and ending on the GC Line A Tranche One Maturity
Date (the “GC Line A Tranche One Amortization Period”). Any GC Line A Advances
made after D 31, 2007 and outstanding on the last day of the GC Line A Draw
Period are payable in thirty (30) consecutive equal monthly installments of
principal and interest, beginning on July 1, 2008 (the “GC Line A Tranche Two
Amortization Start Date”) and ending on the GC Line A Tranche Two Maturity Date
(the “GC Line A Tranche Two Amortization Period”).

(c) Prepayment. At Borrower’s option, so long as an Event of Default has not
occurred and is not continuing, Borrower shall have the option to prepay without
penalty or premium all, but not less than all, of Growth Capital Line A advanced
by Bank under this Agreement, provided Borrower (i) provides written notice to
Bank of its election to exercise to prepay the Growth Capital Line A at least
thirty (30) days prior to such prepayment, and (ii) pays, on the date of the
prepayment (A) all accrued and unpaid interest with respect to all outstanding
GC Line A Advances through the date the prepayment is made; (B) all unpaid
principal with respect to all outstanding GC Line A Advances; and (C) all other
sums, if any, that shall have become due and payable hereunder with respect to
Growth Capital Line A.

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

2.1.2 Growth Capital Line B.

(a) Availability. Subject to the terms and conditions of this Agreement, during
the GC Line B Draw Period, Bank shall make advances (each, a “GC Line B Advance”
and, collectively, “GC Line B Advances”) not exceeding the Growth Capital Line
B. After repayment, no GC Line B Advance may be reborrowed. GC Line B Advances
made on or after the Milestone Achievement Date and on or before June 30, 2008
are called “GC Line B Tranche One Advances,” and GC Line B Advances made after
June 30, 2008 and on or before the last day of the GC Line B Draw Period are
called “GC Line B Tranche Two Advances.”

(b) Repayment. The period of time commencing on the Milestone Achievement Date
and ending on the day immediately prior to the GC Line B Tranche One
Amortization Start Date is called the “GC Line B Tranche One Interest Only
Period,” and the period of time commencing on July 1, 2008 and ending on
December 31, 2008 is called the “GC Line B Tranche Two Interest Only Period.”
During the GC Line B Tranche One Interest Only Period, Borrower will make
monthly payments to Bank of accrued interest only on the outstanding principal
amount of all GC Line B Tranche One Advances, and during the GC Line B Tranche
Two Interest Only Period, Borrower will make monthly payments to Bank of accrued
interest only on the outstanding principal amount of all GC Line B Tranche Two
Advances. GC Line B Advances made and outstanding on June 30, 2008 are payable
in twenty-four (24) consecutive equal monthly installments of principal and
interest, beginning on the earlier of (i) the first day of the month following
the date which is six months from the date of the first GC Line B Advance or
(ii) January 1, 2009 (the “GC Line B Tranche One Amortization Start Date”) and
ending on the GC Line B Tranche One Maturity Date (the “GC Line B Tranche One
Amortization Period”). Any GC Line B Advances made after June 30, 2008 and
outstanding on the last day of the GC Line B Draw Period are payable in
twenty-four (24) consecutive equal monthly installments of principal and
interest, beginning on January 1, 2009 (the “GC Line B Tranche Two Amortization
Start Date”) and ending on the GC Line B Tranche Two Maturity Date (the “GC Line
B Tranche Two Amortization Period”).

(c) Prepayment. At Borrower’s option, so long as an Event of Default has not
occurred and is not continuing, Borrower shall have the option to prepay without
penalty or premium all, but not less than all, of Growth Capital Line B advanced
by Bank under this Agreement, provided Borrower (i) provides written notice to
Bank of its election to exercise to prepay the Growth Capital Line B at least
thirty (30) days prior to such prepayment, and (ii) pays, on the date of the
prepayment (A) all accrued and unpaid interest with respect to all outstanding
GC Line B Advances through the date the prepayment is made; (B) all unpaid
principal with respect to all outstanding GC Line B Advances; and (C) all other
sums, if any, that shall have become due and payable hereunder with respect to
Growth Capital Line B.

2.2 Payment of Interest on the Credit Extensions.

(a) Interest Rates. Subject to Section 2.2(b), the principal amounts outstanding
under Growth Capital Line A and Growth Capital Line B, respectively, shall
accrue interest at, during the GC Line A Tranche One Interest Only Period with
respect to GC Line A Tranche One Advances, during the GC Line A Tranche Two
Interest Only Period with respect to GC Line A Tranche Two Advances, during the
GC Line B Tranche One Interest Only Period with respect to GC Line B Tranche One
Advances, and during the GC Line B Tranche Two Interest Only Period with respect
to GC Line B Tranche Two Advances, a floating per annum rate equal to the Prime
Rate, which interest shall be payable monthly in accordance with Section 2.2(f)
below. On the GC Line A Tranche One Amortization Start Date with respect to the
GC Line A Tranche One Amortization Period, on the GC Line A Tranche Two
Amortization Start Date with respect to the GC Line A Tranche Two Amortization
Period, on the GC Line B Tranche One Amortization Start Date with respect to the
GC Line B Tranche One Amortization Period, and on the GC Line B Tranche Two
Amortization Date with respect to the GC Line B Tranche Two Amortization Period,
the principal amounts outstanding under Growth Capital Line A and Growth Capital
Line B, respectively, shall accrue interest at a per annum rate equal to the
Prime Rate, which shall be fixed as of the GC Line A Tranche One Amortization
Start Date the GC Line A Tranche Two Amortization Start Date, the GC Line B
Tranche One Amortization Start Date, and the GC Line B Tranche Two Amortization
Start Date, as the case may be, which interest shall be payable monthly in
accordance with Section 2.2(f) below.

(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall bear interest at a rate per annum which
is five percentage points above the rate that is otherwise applicable thereto
(the “Default Rate”). Payment or acceptance of the increased interest rate
provided in this Section 2.2(b) is not a permitted alternative to timely payment
and shall not constitute a waiver of any Event of Default or otherwise prejudice
or limit any rights or remedies of Bank.

 

-2-

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

(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit
Extension based on changes to the Prime Rate shall be effective on the effective
date of any change to the Prime Rate and to the extent of any such change.

(d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for
the actual number of days elapsed.

(e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes Bank when due. These debits shall not constitute
a set-off.

(f) Payments. Unless otherwise provided, interest is payable monthly on the
first calendar day of each month. Payments of principal and/or interest received
after 12:00 p.m. Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest,
as applicable, shall continue to accrue.

2.3 Fees. Borrower shall pay to Bank:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $7,500.00
(which includes the Bank’s attorney’s fees for drafting and negotiating the
initial Loan Documents), on the Effective Date; and

(b) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses but excluding the Bank’s attorney’s fees for drafting and negotiating
the initial Loan Documents) incurred through and after the Effective Date, when
due.

 

  3 CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Borrower
shall consent to or shall have delivered, in form and substance satisfactory to
Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:

(a) duly executed original signatures to the Loan Documents to which it is a
party;

(b) duly executed original signatures to the completed Corporate Borrowing
Certificate for Borrower, plus all exhibits thereto;

(c) good standing certificates/certificates of foreign qualification from the
Secretaries of State of the States of Delaware and Colorado, dated no later than
30 days prior to the Effective Date.

(d) the Perfection Certificate executed by Borrower;

(e) a copy of its Investors’ Rights Agreement, Right of First Refusal and
Co-Sale Agreement and Voting Agreement and any amendments thereto;

(f) evidence satisfactory to Bank that the insurance policies required by
Section 6.4 hereof are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements
in favor of Bank; and

(g) payment of the fees and Bank Expenses then due as specified in Section 2.3
hereof.

 

-3-

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

3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following:

(a) except as otherwise provided in Section 3.4, timely receipt of an executed
Payment/Advance Form;

(b) the representations and warranties in Section 5 shall be true in all
material respects on the date of the Payment/Advance Form and on the Funding
Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and

(c) there has not been a Material Adverse Change.

3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition to any Credit
Extension. Borrower expressly agrees that the extension of a Credit Extension
prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and any such extension in
the absence of a required item shall be in Bank’s sole discretion.

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of a GC Line A Advance or GC Line B Advance
set forth in this Agreement, to obtain a GC Line A Advance or GC Line B Advance,
as the case may be, Borrower shall notify Bank (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific
time on the Funding Date of such GC Line A Advance or GC Line B Advance.
Together with any such electronic or facsimile notification, Borrower shall
deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form
executed by a Responsible Officer or his or her designee. Bank may rely on any
telephone notice given by a person who Bank believes is a Responsible Officer or
designee. Bank shall credit GC Line A Advances and GC Line B Advances to the
Designated Deposit Account. Bank may make Advances GC Line A Advances or GC Line
B Advances under this Agreement based on instructions from a Responsible Officer
or his or her designee or without instructions if the GC Line A Advances or GC
Line B Advances are necessary to meet Obligations which have become due.

 

  4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower represents, warrants, and covenants that the security interest granted
herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may
have superior priority to Bank’s Lien under this Agreement). If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than those arising under the Warrants and inchoate
indemnity obligations) are repaid in full in cash. Upon payment in full in cash
of the Obligations (other than those arising under the Warrants and inchoate
indemnity obligations) and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall, at Borrower’s sole cost and expense,
release its Liens in the Collateral and all rights therein shall revert to
Borrower.

4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Bank under the Code
except as permitted hereunder.

 

-4-

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

  5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization, Authorization; Power and Authority. Borrower is duly
existing and in good standing as a Registered Organization in its jurisdiction
of formation and is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a material adverse effect on
Borrower’s business. In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower, entitled “Perfection
Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; (b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower’s place of business, or, if more than
one, its chief executive office as well as Borrower’s mailing address (if
different than its chief executive office); (e) other than a reincorporation
from Colorado into Delaware, completed in 2004, Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete in all material respects (it being understood and agreed
that Borrower may from time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one or more
specific provisions in this Agreement).

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect), or (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a material adverse effect on Borrower’s
business.

5.2 Collateral. Borrower has good title to, has rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
has no deposit accounts other than the deposit accounts with Bank, the deposit
accounts, if any, described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice and taken such
actions as are necessary to give Bank a perfected security interest therein.

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate and except
for raw materials and inventory at off-site locations. None of the components of
the Collateral shall be maintained at locations other than as provided in the
Perfection Certificate or as Borrower has given Bank notice pursuant to
Section 7.2, except for raw materials and inventory at off-site locations. In
the event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral, except for raw materials and inventory,
to a bailee not listed on the Perfection Certificate, then Borrower will first
receive the written consent of Bank and such bailee must execute and deliver a
bailee agreement in form and substance satisfactory to Bank.

Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any material license or other agreement with respect to which
Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower’s interest in such license or agreement
or any other property, or (b) for which a default under or termination of would
interfere with the Bank’s right to sell any Collateral. Borrower shall provide
written notice to Bank within ten (10) days of entering or becoming bound by any
such license or agreement not noted on the Perfection Certificate (other than
over-the-counter software that is

 

-5-

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

commercially available to the public). Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (x) all such licenses or agreements to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future, and (y) Bank to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

5.3 Litigation. There are no actions or proceedings pending or, to the knowledge
of the Responsible Officers, threatened in writing by or against Borrower or any
of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000).

5.4 No Material Deviation in Financial Statements. All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations as of the date of such financial
statements. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

5.5 Solvency. The fair salable value of Borrower’s assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.6 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding
Company Act of 2005. Borrower has not violated any laws, ordinances or rules,
the violation of which would reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Government Authorities that are necessary to continue their respective
businesses as currently conducted except where failure to do so would not
reasonably be expected to have a material adverse effect on its business or
operations.

5.7 Subsidiaries; Investments. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

5.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed
or obtained extensions for filing all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower. Borrower may defer
payment of any contested taxes, provided that Borrower (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings, (c) posts
bonds or takes any other steps required to prevent the governmental authority
levying such contested taxes from obtaining a Lien upon any of the Collateral
that is other than a “Permitted Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower’s prior tax years which could result in
additional taxes becoming due and payable by Borrower. Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely as working capital and to fund its general business requirements and not
for personal, family, household or agricultural purposes.

 

-6-

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

5.10 Full Disclosure. No written representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank, as of the date
such representation, warranty, or other statement was made, taken together with
all such written certificates and written statements given to Bank, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the 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 viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected or forecasted results).

 

  6 AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance.

(a) Maintain its and, except as provided in Section 7.3, all its Subsidiaries’
legal existence and good standing in their respective jurisdictions of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on
Borrower’s business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower’s business.

(b) Obtain all of the Governmental Approvals necessary for the performance by
Borrower of its obligations under the Loan Documents to which it is a party and
the grant of a security interest to Bank in all of its property. Borrower shall
promptly upon request provide copies of any such obtained Governmental Approvals
to Bank.

6.2 Financial Statements, Reports, Certificates. Deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the last day of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower’s consolidated operations for such month certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than one hundred fifty (150) days after the last day of Borrower’s fiscal
year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to
Bank in its reasonable discretion; (iii) within five (5) days of delivery,
copies of all statements, reports and notices made generally available to
Borrower’s security holders or to any holders of Subordinated Debt, (iv) in the
event that Borrower becomes subject to the reporting requirements under the
Securities Exchange Act of 1934, as amended, within five (5) days of filing, all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on Borrower’s or another website on the Internet;
(v) a prompt report of any legal actions pending or threatened against Borrower
or any of its Subsidiaries that could result in damages or costs to Borrower or
any of its Subsidiaries of One Hundred Thousand Dollars ($100,000) or more; and
(vi) budgets, sales projections, operating plans and other financial information
reasonably requested by Bank.

6.3 Taxes; Pensions. Make, and cause each of its Subsidiaries to make, timely
payment of all foreign, federal, state, and local taxes or assessments (other
than taxes and assessments which Borrower is contesting pursuant to the terms of
Section 5.8 hereof) and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.

6.4 Insurance. Keep its business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s industry and location as Bank may
reasonably request. Insurance policies shall be in a form, with companies, and
in amounts that are satisfactory to Bank. All property policies shall have a
lender’s loss payable endorsement showing Bank as the sole lender loss payee and
waive subrogation against Bank, and all liability policies shall show, or have
endorsements showing, Bank as an additional insured. All policies (or the loss
payable and additional insured endorsements) shall provide that the insurer
shall endeavor to give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Bank’s request, Borrower shall
deliver certified copies of policies and evidence of all premium payments. So
long as no Event of Default has occurred and is continuing, Borrower shall have
the option of applying the proceeds of any casualty policy toward

 

-7-

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

the replacement or repair of destroyed or damaged property; provided that any
such replaced or repaired property (i) shall be of equal or like value as the
replaced or repaired Collateral and (ii) shall be deemed Collateral in which
Bank has been granted a first priority security interest, and after the
occurrence and during the continuance of an Event of Default, all proceeds
payable under such casualty policy shall, at the option of Bank, be payable to
Bank on account of the Obligations. If Borrower fails to obtain insurance as
required under this Section 6.4 or to pay any amount or furnish any required
proof of payment to third persons and Bank, Bank may make all or part of such
payment or obtain such insurance policies required in this Section 6.4, and take
any action under the policies Bank deems prudent.

6.5 Operating Accounts.

(a) Maintain a majority of its and its Subsidiaries’ primary operating and other
deposit accounts and securities accounts with Bank and Bank’s Affiliates.

(b) Provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or Bank’s Affiliates. For each Collateral Account that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder. The provisions of the previous
sentence shall not apply to deposit accounts exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of Borrower’s employees and identified to Bank by Borrower as such.

6.6 Protection of Intellectual Property Rights. Borrower shall: (a) protect,
defend and maintain the validity and enforceability of the intellectual property
material to Borrower’s business; (b) promptly advise Bank in writing of material
infringements of its intellectual property; and (c) not allow any intellectual
property material to Borrower’s business to be abandoned, forfeited or dedicated
to the public without Bank’s written consent.

6.7 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

6.8 Warrants.

(a) At Closing, Borrower will issue Bank a Warrant to purchase up to 31,790
shares of its Series B Preferred Stock (the “Initial Warrant”), in the form
attached hereto as Exhibit D, at a price per share equal to $2.43975.

(b) Thereafter, for every GC Line A Advance or GC Line B Advance that Bank makes
to Borrower, Borrower will issue Bank an additional Warrant (each an “Additional
Warrant” and together with the Initial Warrant, the “Warrants”), substantially
in the same form as the Initial Warrant, for that number of shares of its Series
B Preferred Stock, determined by multiplying the amount of Such GC Line A
Advance or GC Line B Advance, as the case may be, by two percent (2.0%) and
dividing such number by the most recent price per share at which the Series B
Preferred Stock was sold by Borrower in an arms-length transaction, as may be
adjusted for stock splits, dividends or the like. Each Additional Warrant shall
be executed and delivered to Bank within ten (10) Business Days following such
GC Line A Advance or GC Line B Advance.

6.9 Further Assurances. Execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral
or to effect the purposes of this Agreement.

 

  7 NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any substantial part of its business or property, except (a) for

 

-8-

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

Transfers of Inventory in the ordinary course of business; (b) for Transfers of
worn-out, surplus or obsolete Equipment; (c) in connection with Permitted Liens
and Permitted Investments; (d) for other Transfers which do not exceed One
Hundred Thousand Dollars ($100,000) in any fiscal year, so long as an Event of
Default does not exist at the time of such Transfer and would not exist after
giving effect to such Transfer; and (f) for other Transfers contemplated by the
exceptions to the covenants in Sections 7.7 or 7.8.

7.2 Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve, except as
to Subsidiaries, as permitted by Section 7.3; or (c) (i) have a change in its
Chief Executive Officer, Chief Financial Officer or Chief Operating Officer
(unless a replacement is approved by a majority of Borrower’s Board of
Directors) or (ii) enter into any transaction or series of related transactions
in which the stockholders of Borrower who were not stockholders immediately
prior to the first such transaction own more than 50% of the voting stock of
Borrower immediately after giving effect to such transaction or related series
of such transactions (other than by the sale of Borrower’s equity securities in
a public offering or to venture capital investors so long as Borrower identifies
to Bank the venture capital investors prior to the closing of the transaction).
Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Fifty Thousand
Dollars ($50,000) in Borrower’s assets or property), provided that Borrower may
store raw materials and inventory at off-site locations without notice to Bank,
(2) change its jurisdiction of organization, (3) change its organizational
structure or type, (4) change its legal name, or (5) change any organizational
number (if any) assigned by its jurisdiction of organization.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower, except where (a) no Event
of Default has occurred and is continuing or would result from such transaction,
(b) such transaction would not result in a decrease of more than 25% of
Borrower’s Tangible Net Worth, and (c) Borrower is the surviving entity.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s
intellectual property, except as is otherwise permitted in Section 7.1 hereof
and the definition of “Permitted Lien” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.5(b) hereof.

7.7 Distributions; Investments. (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock, provided that
(i) Borrower may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
therefor, (ii) Borrower may pay dividends solely in common stock, and
(iii) Borrower may repurchase stock of former employees or consultants pursuant
to stock repurchase agreements, in the aggregate in any fiscal year, so long as
an Event of Default does not exist at the time of such repurchase and would not
exist after giving effect to such repurchase; or (b) directly or indirectly make
any Investment other than Permitted Investments, or permit any of its
Subsidiaries to do so, except as permitted by Section 7.3.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
(i) 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 and
(ii) transactions otherwise permitted pursuant to subsection (f) of the
definition of Permitted Investments.

 

-9-

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

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to Bank.

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of any Credit Extension for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation would reasonably be expected to have a material
adverse effect on Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which would reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

 

  8 EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) day grace period shall not apply to payments due on the
GC Line A Maturity Date or GC Line B Maturity Date). During the cure period, the
failure to cure the payment default is not an Event of Default (but no Credit
Extension will be made during the cure period);

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3,
6.4, 6.5 or 6.8 or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence 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 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 cure the default
shall not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period). Grace periods provided under this section shall not
apply, among other things, to financial covenants or any other covenants set
forth in subsection (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

8.4 Attachment. (a) Any material portion of Borrower’s assets is attached,
seized, levied on, or comes into possession of a trustee or receiver; (b) the
service of process seeking to attach, by trustee or similar process, any funds
of Borrower or of any entity under control of Borrower (including a Subsidiary)
on deposit with Bank or any Bank Affiliate; (c) Borrower is enjoined,
restrained, or prevented by court order from conducting any part of its
business; or (d) a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency, and the same under clauses
(a) through (d) hereof are not, within ten (10) days after the occurrence
thereof, discharged or stayed (whether through the posting of a bond or
otherwise); provided, however, no Credit Extensions shall be made during any ten
(10) day cure period;

8.5 Insolvency (a) Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall be made while of any of the conditions described in clause (a) exist
and/or until any Insolvency Proceeding is dismissed);

 

-10-

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

8.6 Other Agreements. There is a default 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 One Hundred Thousand Dollars ($100,000)
or that could have a material adverse effect on Borrower’s business; provided,
however, that the Event of Default under this Section 8.6 caused by the
occurrence of a default under such other agreement shall be cured or waived for
purposes of this Agreement upon Bank receiving written notice from the party
asserting such default of such cure or waiver of the default under such other
agreement, if at the time of such cure or waiver under such other agreement
(a) Bank has not declared an Event of Default under this Agreement and/or
exercised any rights with respect thereto; (b) any such cure or waiver does not
result in an Event of Default under any other provision of this Agreement or any
Loan Document; and (c) in connection with any such cure or waiver under such
other agreement, the terms of any agreement with such third party are not
modified or amended in any manner which could in the good faith judgment of Bank
be materially less advantageous to Borrower;

8.7 Judgments. One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) (not covered by independent third-party insurance as
to which liability has been accepted by such insurance carrier) shall be
rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed
for a period of ten (10) days after the entry thereof (provided that no Credit
Extensions will be made prior to the satisfaction, vacation, or stay of such
judgment, order, or decree);

8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;

8.9 Subordinated Debt. A default or breach occurs under any agreement between
Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement; or

8.11 Governmental Approvals. Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) has, or could reasonably be expected to have, a
Material Adverse Change, or (ii) adversely affects the legal qualifications of
Borrower or any of its Subsidiaries to hold such Governmental Approval in any
applicable jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of Borrower or any of its Subsidiaries to hold any
Governmental Approval in any other jurisdiction.

 

-11-

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

  9 BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. While an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:

(a) declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

(b) stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

(c) settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank’s security interest in such funds, and
verify the amount of such account;

(d) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

(e) apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower;

(f) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property 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, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;

(g) place a “hold” on any account maintained with Bank and/or deliver a notice
of exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of any
Collateral (and Bank agrees not to deliver such notice, order, directions or
instructions unless an Event of Default has occurred and is continuing);

(h) demand and receive possession of Borrower’s Books; and

(i) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).

9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of
an Event of Default, to: (a) endorse Borrower’s name on any checks or other
forms of payment or security; (b) sign Borrower’s name on any invoice or bill of
lading for any Account or drafts against Account Debtors; (c) settle and adjust
disputes and claims about the Accounts directly with Account Debtors, for
amounts and on terms Bank determines reasonable; (d) make, settle, and adjust
all claims under Borrower’s insurance policies; (e) pay, contest or settle any
Lien, charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Bank or a third party as the Code permits. Borrower hereby appoints Bank as
its lawful attorney-in-fact to sign Borrower’s name on any documents necessary
to perfect or continue the perfection of Bank’s security interest in the
Collateral regardless of whether an Event of Default has occurred until all
Obligations (other than those arising under the Warrants and inchoate indemnity
obligations) have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest,
are irrevocable until all Obligations (other than those arising under the
Warrants and inchoate indemnity obligations) have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.

 

-12-

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

9.3 Protective Payments. If Borrower fails to obtain the insurance called for by
Section 6.5 or fails to pay any premium thereon or fails to pay any other amount
which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the Collateral.
Bank will make reasonable efforts to provide Borrower with notice of Bank
obtaining such insurance or making such payment at the time it is obtained or
within a reasonable time thereafter. No payments by Bank are deemed an agreement
to make similar payments in the future or Bank’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds. Borrower shall have no right to
specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrower to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency. If Bank, in its good
faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.

9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Bank, Bank shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of
loss, damage or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it is given. Bank’s
rights and remedies under this Agreement and the other Loan Documents are
cumulative. Bank has all rights and remedies provided under the Code, by law, or
in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s
waiver of any Event of Default is not a continuing waiver. Bank’s delay in
exercising any remedy is not a waiver, election, or acquiescence.

9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

 

  10 NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three
(3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by electronic mail or facsimile transmission; (c) one
(1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below. Bank or Borrower may change
its address or facsimile number by giving the other party written notice thereof
in accordance with the terms of this Section 10.

 

-13-

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

If to Borrower:

  ARCA Discovery, Inc.   1200 17th St., Suite 620   Denver, CO 80202   Attn:   
Patrick Wheeler   Fax:    303-825-0883   Email:    Pat.Wheeler@arcadiscovery.com
If to Bank:   Silicon Valley Bank   380 Interlocken Crescent, Suite 600  
Broomfield, CO 80021   Attn:    Adam Glick   Fax:    303-469-9088   Email:   
aglick@svb.com

 

  11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

California law governs the Loan Documents other than the Warrants without regard
to principles of conflicts of law. Borrower and Bank each submit to the
exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Bank from bringing suit or taking other legal action in any
other jurisdiction to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Bank.
Borrower expressly submits and consents in advance to such jurisdiction in any
action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper
venue, or forum non conveniens and hereby consents to the granting of such legal
or equitable relief as is deemed appropriate by such court. Borrower hereby
waives personal service of the summons, complaints, and other process issued in
such action or suit and agrees that service of such summons, complaints, and
other process may be made by registered or certified mail addressed to Borrower
at the address set forth in Section 10 of this Agreement and that service so
made shall be deemed completed upon the earlier to occur of Borrower’s actual
receipt thereof or three (3) days after deposit in the U.S. mails, proper
postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California

 

-14-

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

Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the
right of any party at any time to exercise self-help remedies, foreclose against
collateral, or obtain provisional remedies. The private judge shall also
determine all issues relating to the applicability, interpretation, and
enforceability of this paragraph.

 

  12 GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has 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 under this Agreement and the other Loan
Documents.

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or arising from transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except, as to (a) and (b), for Claims and/or
losses directly caused by Bank’s gross negligence or willful misconduct.

12.3 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

12.4 Severability of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

12.5 Amendments in Writing; Integration. All amendments to this Agreement must
be in writing and signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter and supersede
prior negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.

12.6 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, are an original, and all taken together, constitute one
Agreement.

12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than those arising under the Warrants and
inchoate indemnity obligations and any other obligations which, by their terms,
are to survive the termination of this Agreement) have been satisfied. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

12.8 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise
required in connection with Bank’s examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (ii) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.

12.9 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between
Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.

 

-15-

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

  13 DEFINITIONS

13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

“Additional Warrant” is defined in Section 6.8(c).

“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

“Agreement” is defined in the preamble hereof.

“Bank” is defined in the preamble hereof.

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.

“Borrower” is defined in the preamble hereof

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank
is closed.

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.

“Change of Control” means (a) any event, transaction, or occurrence as a result
of which any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other
than a trustee or other fiduciary holding securities under an employee benefit
plan of Borrower, is or becomes a beneficial owner (within the meaning Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of securities
of Borrower, representing more than fifty percent (50%) of the combined voting
power of Borrower’s then outstanding securities (other than by the sale of
Borrower’s equity securities to venture capital investors so long as Borrower
identifies to Bank the venture capital investors prior to the closing of the
transaction) or (b) if Borrower sells all, or substantially all, of its assets
in one transaction or a series of related transactions.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of California, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes on the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

 

-16-

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

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

“Communication” is defined in Section 10.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

“Corporate Borrowing Certificate” is attached hereto as Exhibit C.

“Credit Extension” is any GC Line A Advance, GC Line B Advance, or any other
extension of credit by Bank for Borrower’s benefit.

“Default Rate” is defined in Section 2.2(b).

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is Borrower’s deposit account, account number
3300445283, maintained with Bank.

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

“Effective Date” is the date Bank executes this Agreement as indicated on the
signature page hereof.

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.

“Event of Default” is defined in Section 8.

“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.

 

-17-

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

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

“GC Line A Advance” is defined in Section 2.1.1(a).

“GC Line A Tranche One Amortization Start Date” and “GC Line A Tranche Two
Amortization Start Date” are defined in Section 2.1.1(b).

“GC Line A Draw Period” is the period of time from the Effective Date through
June 30, 2008 (unless terminated earlier in accordance with Section 9).

“GC Line A Tranche One Maturity Date” is the date which is twenty-nine
(29) months following the GC Line A Tranche One Amortization Start Date.

“GC Line A Tranche Two Maturity Date” is December 1, 2010.

“GC Line B Advance” is defined in Section 2.1.2(a).

“GC Line B Tranche One Amortization Start Date” and “GC Line B Tranche Two
Amortization Start Date” are defined in Section 2.1.2(b).

“GC Line B Draw Period” is the period of time from the Milestone Achievement
Date through December 31, 2008 (unless terminated earlier in accordance with
Section 9).

“GC Line B Tranche One Maturity Date” is the date which is twenty-three
(23) months following the GC Line B Tranche One Amortization Start Date.

“GC Line B Tranche Two Maturity Date” is December 1, 2010.

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Growth Capital Line A” is a GC Line A Advance or GC Line A Advances in an
aggregate amount of up to Two Million Dollars ($2,000,000).

 

-18-

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

“Growth Capital Line B” is a GC Line B Advance or GC Line B Advances in an
aggregate amount of up to Two Million Dollars ($2,000,000), plus any amounts
from Growth Capital Line A that may be added to such amount pursuant to
Section 2.1.1(a) of this Agreement.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

“Initial Warrant” is defined in Section 6.8(a).

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

“Issue Price” is defined in Section 6.8(a).

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

“Loan Documents” are, collectively, this Agreement, the Initial Warrant, each
Additional Warrant, the Perfection Certificate, any note, or notes or guaranties
executed by Borrower or any guarantor, and any other present or future agreement
between Borrower any guarantor and/or for the benefit of Bank in connection with
this Agreement, all as amended, restated, or otherwise modified.

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.

“Milestone Achievement Date” means the date on which Borrower has (a) received a
fully-executed term sheet for no less than $17,500,000 in new equity financing
(not including convertible debt) from investors acceptable to Bank and
(b) filed, at a minimum, the clinical data section of an Application to Market a
New Drug, Biologic or an Antibiotic Drug for Human Use (FDA Form 356H) with the
U.S. Food and Drug Administration for the pharmaceutical being developed by
Borrower commonly known as “Bucindolol”.

“Obligations” are Borrower’s obligation to pay when due any debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
whether under this Agreement, the Loan Documents, or otherwise, including,
without limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower’s
duties under the Loan Documents.

“Payment/Advance Form” is that certain form attached hereto as Exhibit B.

“Perfection Certificate” is defined in Section 5.1.

“Permitted Indebtedness” is:

(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

 

-19-

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

(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

(c) Subordinated Debt;

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

(e) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

(f) Indebtedness secured by Permitted Liens;

(g) Other unsecured Indebtedness not exceeding Fifty Thousand Dollars ($50,000)
in the aggregate outstanding at any time; provided, however, that, at the time
such Indebtedness is incurred, no Event of Default has occurred, is continuing
or would result from such Indebtedness; and

(h) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (g) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.

“Permitted Investments” are:

(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;

(b) Cash Equivalents and any Investments permitted by Borrower’s investment
policy, as amended from time to time, provided that such investment policy (and
any such amendment thereto) has been approved by Bank;

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

(d) Investments consisting of deposit accounts in which Bank has a perfected
security interest;

(e) Investments accepted in connection with Transfers permitted by Section 7.1;

(f) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors;

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

(h) Investments consisting of 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 paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary;

(i) Investments in joint ventures, strategic alliances, licensing and similar
arrangements customary in Borrower’s industry and which do not require Borrower
to assume or otherwise become liable for the obligations of any third party not
directly related to or arising out of such arrangement or transfer ownership of
non-cash assets to such joint venture or other entity; and

(j) other Investments not otherwise permitted by Section 7.7 not exceeding
$50,000 in the aggregate outstanding at any time; provided, however, that, at
the time such Investment is made, no Event of Default has occurred, is
continuing or would result from such Investment.

 

-20-

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

“Permitted Liens” are:

(a) Liens existing on the Effective Date and shown on the Perfection Certificate
or arising under this Agreement and the other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for which Borrower
maintains adequate reserves on its Books, provided that no notice of any such
Lien has been filed or recorded under the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations adopted thereunder;

(c) purchase money Liens (including capital leases) (i) on Equipment acquired or
held by Borrower incurred for financing the acquisition of the Equipment
securing no more than $500,000 in the aggregate amount outstanding, or
(ii) existing on Equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the Equipment;

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business, and which are
not delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

(e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

(f) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;

(g) non-exclusive licenses of intellectual property granted to third parties in
the ordinary course of business and the rights of licensors under licenses of
intellectual property to Borrower or its Subsidiaries entered into the ordinary
course of business;

(h) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;

(i) Liens in favor of other financial institutions arising in connection with
Borrower’s deposit and/or securities accounts held at such institutions,
provided that Bank has a perfected security interest in the amounts held in such
deposit and/or securities accounts;

(j) bankers’ liens, rights of setoff and similar Liens incurred on deposits made
in the ordinary course of business; and

(k) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (j), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase.

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

“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not
Bank’s lowest rate.

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made

 

-21-

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

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer and Controller of Borrower.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Series A Price” is defined in Section 6.8(b).

“Series B Round” is defined in Section 6.8(a).

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

“Subsidiary” means, with respect to any Person, any Person of which more than
50.0% of the voting stock or other equity interests (in the case of Persons
other than corporations) is owned or controlled directly or indirectly by such
Person or one or more of Affiliates of such Person. A “Subsidiary” without
further attribution means a Subsidiary of Borrower.

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus (a) any amounts attributable to (i) goodwill,
(ii) intangible items such as unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, (iii) notes, accounts receivable and other
obligations owing to Borrower from its officers or other Affiliates, and
(iv) reserves not already deducted from assets, and (b) Total Liabilities.

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.

“Transfer” is defined in Section 7.1.

[Signature page follows.]

 

-22-

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

 

BORROWER: ARCA DISCOVERY, INC. By  

/s/ Patrick Wheeler

Name:  

Patrick Wheeler

Title:  

SVP Finance

BANK: SILICON VALLEY BANK By  

/s/ Adam Glick

Name:  

Adam Glick

Title:  

Relationship Manager

Effective Date:  

July 17, 2007

[Signature page to Loan and Security Agreement]

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

EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, franchise agreements,
General Intangibles (except as provided below), commercial tort claims,
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include any of the
following, whether now owned or hereafter acquired: any copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and any
applications therefor, whether registered or not, and the goodwill of the
business of Borrower connected with and symbolized thereby, know-how, operating
manuals, trade secret rights, rights to unpatented inventions, any and all
intellectual property rights in computer software and computer software
products, any and all design rights, all licenses or other rights to use any
copyrights, patents or trademarks, all amendments, extensions, renewals and
extensions of any copyrights, patents or trademarks, and any claims for damage
by way of any past, present, or future infringement of any of the foregoing
(collectively, “Intellectual Property”); provided, however, the Collateral shall
include all Accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing.

Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its Intellectual Property, without
Bank’s prior written consent.

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

EXHIBIT B

Loan Payment/Advance Request Form

[Omitted]

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

EXHIBIT C

CORPORATE BORROWING CERTIFICATE

[Omitted]

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

EXHIBIT D

FORM OF WARRANT

[Omitted]