Exhibit 10.24

 

 

 

 

 

 

RIGEL PHARMACEUTICALS, INC.

LOAN AND SECURITY AGREEMENT

 

 

 

 

 

 

 

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This LOAN AND SECURITY AGREEMENT is entered into as of July 12, 2002, by and
between COMERICA BANK - CALIFORNIA (“Bank”) and RIGEL PHARMACEUTICALS, INC.
(“Borrower”).

 

RECITALS

 

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

 

AGREEMENT

 

The parties agree as follows:

 

1.          DEFINITIONS AND CONSTRUCTION.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code.

 

“Collateral” means the property described on Exhibit A attached hereto.

 

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

 

“Credit Extension” means each Equipment Advance, or any other extension of
credit by Bank for the benefit of Borrower hereunder.

 

“Daily Balance” means the amount of the Obligations owed at the end of a given
day.

 

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

 

“Equipment Advance” has the meaning set forth in Section 2.1(a).

 

“Equipment Line” means a credit extension of up to Fifteen Million Dollars
($15,000,000).

 

“Equipment Maturity Date” means January 12, 2006.

 

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

 

“Event of Default” has the meaning assigned in Article 0.

 

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

 

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

 

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

 

“Inventory” means all present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower’s Books relating to any of
the foregoing.

 

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

 

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

 

“Landlord Accounts” means amounts owing to Borrower by Slough Estates pursuant
to the Slough / Rigel Build-to-Suite Lease dated May 16, 2001, provided that
such accounts shall represent unconditional obligations of landlord and shall
have been outstanding less than 45 days from invoice date and provided further
that the total amount of all “Landlord Accounts” cannot exceed $18,300,000 in
aggregate at any given time.

 

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

 

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

 

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

 

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

 

“Obligations” means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.

 

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

 

“Permitted Indebtedness” means:

 

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

 

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

 

(c)                                  Indebtedness secured by a lien described in
clause 0 of the defined term “Permitted Liens,” provided such Indebtedness does
not exceed the cost of the equipment financed with such Indebtedness;

 

(d)                                 Subordinated Debt;

 

(e)                                  Indebtedness not otherwise permitted by
Section 7.4 incurred in the ordinary course of Borrower’s business not exceeding
$250,000 in the aggregate outstanding at any time; and

 

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(f)                                    Extensions, refinancings, modifications,
amendments and restatements of any items of Permitted Indebtedness (a) through
(e) 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, and provided that such extension,
refinancing, modification, amendment or restatement is permitted by any
applicable subordination agreement.

 

“Permitted Investment” means:

 

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

 

(b)                                 Investments in other entities in connection
with acquisitions, joint ventures or other strategic transactions in the
ordinary course of Borrower’s business, provided that (A) no Event of Default
has occurred which is continuing or would exist after giving effect to such
Investment and (B) the consideration paid by Borrower in exchange for such
Investments consists solely of (i) equity interests of the Borrower or its
Subsidiaries, (ii) licenses, sublicenses, leases or subleases in the ordinary
course of business, (iii) technical or scientific support or services, and/or
(iv) the contribution of intellectual property;

 

(c)                                  (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having rating of at least A-2 or P-2 from either
Standard & Poor’s Corporation or Moody’s Investors Service, (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank and (iv) Bank’s money market accounts;

 

(d)                                 Investments consisting of notes receivable
or, prepaid royalties and other credit extensions to customers and suppliers who
are not Affiliates, in the ordinary course of business which do not exceed
$250,000 in the aggregate at any given time;

 

(e)                                  Investments which do not exceed $250,000 in
the aggregate consisting of (i) travel advances, 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;

 

(f)                                    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; and

 

(g)                                 Investments not otherwise permitted by
Section 7.7 not exceeding $250,000 in the aggregate outstanding at any time.

 

“Permitted Liens” means the following:

 

(a)                                  Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;

 

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

 

(c)                                  Liens (i) upon or in any equipment which
was not financed by Bank acquired or held by Borrower or any of its Subsidiaries
to secure the purchase price of such equipment or indebtedness incurred solely
for the purpose of financing the acquisition of such equipment, or (ii) existing
on such equipment at the time of its acquisition, provided that the Lien is
confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;

 

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(d)                                 Liens securing Subordinated Debt;

 

(e)                                  Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
8.8;

 

(f)                                    Leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower’s business, not
interfering in any material respect with the business of Borrower and its
Subsidiaries taken as a whole, if the leases, subleases, license and sublicenses
permit Bank by their terms or under applicable law to have a security interest
in such leases, subleases, nonexclusive licenses, and sublicenses;

 

(g)                                 Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances affecting real property not constituting a Material Adverse
Effect;

 

(h)                                 Deposits or Liens in the ordinary course of
business under worker’s compensation, unemployment insurance, social security
and other similar laws, or to secure the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to secure
indemnity, performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds, provided that all of the foregoing do not
exceed $25,000 in the aggregate at any given time;

 

(i)                                     Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in
connection with the importation of goods;

 

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

 

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

 

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

 

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

 

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

 

“Quick Assets” means, at any date as of which the amount thereof shall be
determined, the sum of the unrestricted cash (excluding any cash specifically
pledged to support any Obligation) plus cash-equivalents, plus net billed
accounts receivable plus interest receivable on cash or short term investments
plus 100% of Landlord Accounts, of Borrower each determined in accordance with
GAAP.

 

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

 

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

 

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

 

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

 

1.2                                 Accounting Terms.  All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations made hereunder shall be made in accordance with GAAP.  When used
herein, the terms “financial statements” shall include the notes and schedules
thereto.

 

2.                                       LOAN AND TERMS OF PAYMENT.

 

2.1                                 Credit Extensions.

 

Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower hereunder.  Borrower shall also pay interest
on the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.

 

(a)                                  Equipment Advances.

 

(i)                                     Subject to and upon the terms and
conditions of this Agreement, at any time from the date hereof through July 12,
2003, Bank agrees to make advances (each an “Equipment Advance” and,
collectively, the “Equipment Advances”) to Borrower in an aggregate amount not
to exceed the Equipment Line.  Each Equipment Advance shall not exceed one
hundred percent (100%) of the invoice amount of equipment, software, tenant
improvements, and soft costs (which Borrower shall, in any case, have purchased
within 90 days of the date of the corresponding Equipment Advance), including
taxes, shipping, warranty charges, freight discounts and installation expense.

 

(ii)                                  Interest shall accrue from the date of
each Equipment Advance at the rate specified in Section 2.2(a), and shall be
payable monthly on the twelfth (12th) day of each month so long as any Equipment
Advances are outstanding.  Any Equipment Advances that are outstanding on
January 13, 2003 shall be payable in thirty six (36) equal monthly installments
of principal, plus accrued interest, beginning on February 12, 2003, and
continuing on the same day of each month thereafter through the Equipment
Maturity Date.  Any Equipment Advances extended on or after January 13, 2003
that are outstanding on July 13, 2003 shall be payable in thirty (30) equal
monthly installments of principal, plus accrued interest, beginning on August
12, 2003, and continuing on the same day of each month thereafter through the
Equipment Maturity Date, at which time all amounts owing under this
Section 2.1(a) and any other amounts owing under this Agreement shall be
immediately due and payable.  Equipment Advances, once repaid, may not be
reborrowed.  Borrower may prepay any Equipment Advances or portion thereof at
any time without penalty or premium.

 

(iii)                               When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Advance is to be made. 
Such notice shall be substantially in the form of Exhibit B.  The notice shall
be signed by a Responsible Officer or its designee and include a copy of the
invoices (including invoices for progress payments) for any Equipment to be
financed.

 

(iv)                              Borrower shall maintain a money market account
or a certificate of deposit with Bank in an amount equal to or greater than the
amount by which the outstanding principal balance of

 

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the Equipment Advances exceeds $7,500,000 (the “Equipment Cash Collateral”) at
all times.  Sufficient Equipment Cash Collateral shall be deposited with Bank as
a condition precedent to the issuance of any Equipment Advance which shall cause
the aggregate outstanding principal balance of all Equipment Advances to exceed
$7,500,000.

 

2.2                                 Interest Rates, Payments, and Calculations.

 

(a)                                  Interest Rates.

 

(i)                                     Equipment Advances.  Except as set forth
in Section 2.2(b), the portion of the outstanding Equipment Advances which are
not cash secured pursuant to Sections 2.1(a)(iv), 6.9 and 4.4 shall bear
interest, on the outstanding Daily Balance thereof, at a rate equal to six
percent (6.0%) above the Prime Rate.  Except as set forth in Sections
2.1(a)(iv), 6.9 and 4.4, the portion of the outstanding Equipment Advances which
are cash secured pursuant to Section 4.4 shall bear interest, on the outstanding
Daily Balance thereof, at a rate equal to the Prime Rate.

 

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

 

(c)                                  Payments.  Interest hereunder shall be due
and payable on the twelfth (12th) calendar day of each month during the term
hereof.  Bank shall, at its option if an Event of Default has occurred which is
continuing, (i) charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower’s deposit accounts or (ii) against the
Equipment Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder.  Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.  All payments
shall be free and clear of any taxes, withholdings, duties, impositions or other
charges, to the end that Bank will receive the entire amount of any Obligations
payable hereunder, regardless of source of payment.

 

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

 

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

 

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2.4                                 Fees.  Borrower shall pay to Bank the
following:

 

(a)                                  Facility Fee.  On the Closing Date, a
Facility Fee equal to $56,250, which shall be nonrefundable and has been
received by the Bank prior to the date of this Agreement;

 

(b)                                 Additional Fee.  On the date on which
Borrower requests its first Equipment Advance (and as a condition precedent to
the making of such Equipment Advance), an Additional Fee equal to Twenty Five
Thousand Dollars ($25,000) if Borrower does not have cash balances at Bank or
Comerica Securities, Inc. of at least Ten Million Dollars ($10,000,000) in the
aggregate at the time such Equipment Advance is requested;

 

(c)                                  Bank Expenses.  On the Closing Date, all
Bank Expenses incurred through the Closing Date, including reasonable attorneys’
fees and expenses and, after the Closing Date, all Bank Expenses, including
reasonable attorneys’ fees and expenses, as and when they become due.

 

2.5                                 Additional Costs.  In case any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law):

 

(a)                                  subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United States
of America or any political subdivision thereof);

 

(b)                                 imposes, modifies or deems applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or

 

(c)                                  imposes upon Bank any other condition with
respect to its performance under this Agreement, and the result of any of the
foregoing is to increase the cost to Bank, reduce the income receivable by Bank
or impose any expense upon Bank with respect to the Obligations, Bank shall
notify Borrower thereof.  Borrower agrees to pay to Bank the amount of such
increase in cost, reduction in income or additional expense as and when such
cost, reduction or expense is incurred or determined, upon presentation by Bank
of a statement of the amount and setting forth Bank’s calculation thereof, all
in reasonable detail, which statement shall be deemed true and correct absent
manifest error.

 

2.6                                 Term.  This Agreement shall become effective
on the Closing Date and, subject to Section 0, shall continue in full force and
effect for so long as any Obligations remain outstanding or Bank has any
obligation to make Credit Extensions under this Agreement.  Notwithstanding the
foregoing, Bank shall have the right to terminate its obligation to make Credit
Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default.  Notwithstanding
termination, Bank’s Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.

 

3.                                       CONDITIONS OF LOANS.

 

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

 

(a)                                  this Agreement;

 

(b)                                 a certificate of the Secretary of Borrower
with respect to incumbency and resolutions authorizing the execution and
delivery of this Agreement;

 

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(c)                                  a financing statement (Form UCC-1);

 

(d)                                 agreement to provide insurance;

 

(e)                                  a warrant to purchase stock;

 

(f)                                    payment of the fees and Bank Expenses
then due specified in Section 0 hereof; and

 

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

 

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

 

(a)                                  timely receipt by Bank of the
Payment/Advance Form as provided in Section 0; and

 

(b)                                 the representations and warranties contained
in Section 0 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would exist after giving effect to
such Credit Extension (provided, however, that those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date).  The making of each Credit
Extension shall be deemed to be a representation and warranty by Borrower on the
date of such Credit Extension as to the accuracy of the facts referred to in
this Section 0.

 

4.                                       CREATION OF SECURITY INTEREST.

 

4.1                                 Grant of Security Interest.  Borrower grants
and pledges to Bank a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents.  Except as set forth
in the Schedule and Permitted Liens, such security interest constitutes a valid,
first priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof.  Borrower also hereby agrees not to sell, transfer,
assign, mortgage, pledge, lease, grant a security interest in, or encumber any
of its intellectual property, except in the ordinary course of Borrower’s
business.

 

4.2                                 Delivery of Additional Documentation
Required.  Borrower shall from time to time execute and deliver to Bank, at the
request of Bank, all Negotiable Collateral, all financing statements and other
documents that Bank may reasonably request, in form satisfactory to Bank, to
perfect and continue the perfection of Bank’s security interests in the
Collateral and in order to fully consummate all of the transactions contemplated
under the Loan Documents.

 

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

 

4.4                                 Cash Collateral.  Borrower grants and
pledges to Bank a continuing security interest in all presently existing and
hereafter acquired or arising money market accounts or certificates of deposit
opened by Borrower or on Borrower’s behalf at Bank pursuant to Section
2.1(a)(iv) or Section 6.9 hereof, including without limitation the Liquidity
Cash Collateral and the Equipment Cash Collateral (collectively, the “Cash
Collateral”) in order to secure prompt repayment of any and all Obligations and
in order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents.  Such security interest constitutes a valid,

 

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first priority security interest in the Cash Collateral, and will constitute a
valid, first priority security interest in Cash Collateral acquired after the
date hereof.  Borrower hereby authorizes Bank to place a “hold” or similar
restriction on the Cash Collateral which is required pursuant to Section
2.1(a)(iv) or Section 6.9 of this Agreement to be held at Bank to ensure that
Borrower maintains such Cash Collateral at Bank pursuant to the terms and
conditions of this Agreement.  Prior to the maturity of any Cash Collateral held
by Bank pursuant hereto, Borrower and Bank shall agree upon a security or
instrument similar in form, quality and substance to the original Cash
Collateral in which the proceeds of the Cash Collateral can be reinvested on
maturity.  Upon maturity of the Cash Collateral in accordance with its terms, or
in the event the Cash Collateral otherwise becomes payable during the term of
this Agreement, such maturing Cash Collateral may be presented for payment,
exchange, or otherwise marketed by Bank on behalf of Borrower and the proceeds
therefrom used to purchase the security or instrument agreed to by Borrower and
Bank in accordance with the immediately preceding sentence.  If no agreement has
been made, such proceeds shall be placed into an interest bearing account
offered by Bank in which Bank has a first priority security interest until such
time as an agreement as to the security replacing the original Cash Collateral
can be reached.  Bank may retain its Lien on any such successor collateral and
the proceeds therefrom as Cash Collateral in accordance with the terms of this
Agreement for so long as any Obligations are owing from Borrower to Bank unless
otherwise provided in Sections 2.1(a)(iv) and 6.9.  Notwithstanding termination
of this Agreement, Bank’s Lien on the Cash Collateral shall remain in effect for
so long as any Obligations are outstanding.  Borrower shall execute and deliver
to Bank such pledge agreements as are reasonably requested by Bank to perfect or
continue the perfected status of Bank’s Lien on the Cash Collateral contained in
this Section 4.4.

 

5.                                       REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

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

 

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

 

5.3                                 No Prior Encumbrances.  Borrower has good
and marketable title to its property, free and clear of Liens, except for
Permitted Liens.

 

5.4                                 Bona Fide Accounts.  The Accounts are bona
fide existing obligations.  The property and services giving rise to Eligible
Accounts has been delivered or rendered to the account debtor or to the account
debtor’s agent for immediate and unconditional acceptance by the account debtor.

 

5.5                                 Merchantable Inventory.  All Inventory is in
all material respects of good and marketable quality, free from all material
defects, except for Inventory for which adequate reserves have been made.

 

5.6                                 Intellectual Property.  Borrower is the sole
owner of its federally registered patents, trademarks, and copyrights, except
for licenses granted by Borrower to its customers, collaborators, joint
venturers and strategic partners in the ordinary course of business.  To
Borrower’s knowledge, each of Borrower’s issued patents is valid and
enforceable, and no part of its intellectual property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
its intellectual property violates the rights of any third party, except, in
each case, as disclosed in the Borrower’s filings with the Securities and
Exchange Commission.

 

5.7                                 Name; Location of Chief Executive Office. 
Except as disclosed in the Schedule, Borrower has not done business under any
name other than that specified on the signature page hereof.  The chief

 

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executive office of Borrower is located at the address indicated in Section 0
hereof.  Except as disclosed in the Schedule, all Borrower’s Inventory and
Equipment is located only at the location set forth in Section 10 hereof.

 

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

 

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

 

5.10                           Solvency, Payment of Debts.  Borrower is solvent
and able to pay its debts (including trade debts) as they mature.

 

5.11                           Regulatory Compliance.  Borrower and each
Subsidiary have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA, and no event has occurred resulting
from Borrower’s failure to comply with ERISA that could reasonably be expected
to result in Borrower’s incurring any material liability.  Borrower is not an
“investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940.  Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal Reserve
System).  Borrower has complied with all material provisions of the Federal Fair
Labor Standards Act.  Borrower has not violated any statutes, laws, ordinances
or rules applicable to it, violation of which could reasonably be expected to
have a Material Adverse Effect.

 

5.12                           Environmental Condition.  Except as disclosed in
the Schedule, none of Borrower’s or any Subsidiary’s properties or assets has
ever been used by Borrower or any Subsidiary or, to the best of Borrower’s
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in accordance with applicable law; to the best of
Borrower’s knowledge, none of Borrower’s properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.

 

5.13                           Taxes.  Borrower and each Subsidiary have filed
or caused to be filed all tax returns required to be filed, and have paid, or
have made adequate provision for the payment of, all taxes reflected therein,
except those taxes being contested in good faith with adequate reserves under
GAAP.

 

5.14                           Subsidiaries.  Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments and except as disclosed on the Schedule.

 

5.15                           Government Consents.  Borrower and each
Subsidiary have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of Borrower’s
business as currently conducted, the failure to obtain which could reasonably be
expected to have a Material Adverse Effect.

 

5.16                           Accounts.  Except as set forth on the Schedule,
none of Borrower’s nor any Subsidiary’s cash or cash equivalents or investment
property is maintained or invested with a Person other than Bank.

 

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5.17                           Full Disclosure.  No representation, warranty or
other statement made by Borrower in any certificate or written statement
furnished to Bank contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading.

 

6.                                       AFFIRMATIVE COVENANTS.

 

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

 

6.1                                 Good Standing.  Borrower shall maintain its
and each of its Subsidiaries’ corporate existence and good standing in its
jurisdiction of incorporation and maintain qualification in each jurisdiction in
which it is required under applicable law except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.  Borrower
shall maintain, and shall cause each of its Subsidiaries to maintain, in force
all licenses, approvals and agreements, the loss of which could reasonably be
expected to have a Material Adverse Effect.

 

6.2                                 Government Compliance.  Borrower shall meet,
and shall cause each Subsidiary to meet, the minimum funding requirements of
ERISA with respect to any employee benefit plans subject to ERISA to the extent
that not meeting them could reasonably be expected to have a Material Adverse
Effect.  Borrower shall comply, and shall cause each Subsidiary to comply, with
all statutes, laws, ordinances and government rules and regulations to which it
is subject, noncompliance with which could reasonably be expected to have a
Material Adverse Effect.

 

6.3                                 Financial Statements, Reports,
Certificates.  Borrower shall deliver the following to Bank:  (a) as soon as
available, but in any event within thirty (30) days after the end of each
calendar month, a company prepared consolidated balance sheet, income, and cash
flow statement covering Borrower’s consolidated operations during such period,
prepared in accordance with GAAP, consistently applied, in a form acceptable to
Bank and certified by a Responsible Officer; (b) as soon as available, but in
any event within one hundred twenty (120) days after the end of Borrower’s
fiscal year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) if applicable, copies of all statements,
reports and notices sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all reports on Forms 10-K and
10-Q filed with the Securities and Exchange Commission; (d) promptly upon
receipt of notice thereof, a report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of Two Hundred Fifty Thousand Dollars ($250,000) or
more; and (e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time generally
prepared by Borrower in the ordinary course of business.

 

Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit C hereto.

 

6.4                                 Inventory; Returns.  Borrower shall keep all
Inventory in good and marketable condition, free from all material defects
except for ordinary wear and tear and Inventory for which adequate reserves have
been made.  If applicable, returns and allowances, if any, as between Borrower
and its account debtors shall be on the same basis and in accordance with the
usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement.  Borrower shall promptly notify Bank
of all returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than Two Hundred Fifty Thousand Dollars
($250,000).

 

6.5                                 Taxes.  Borrower shall make, and shall cause
each Subsidiary to make, due and timely payment or deposit of all material
federal, state, and local taxes, assessments, or contributions required of it by
law, and will execute and deliver to Bank, within a reasonable period of time
after demand by Bank, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable

 

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laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and will, upon
request within a reasonable period of time, furnish Bank with proof satisfactory
to Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.

 

6.6                                 Insurance.

 

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

 

(b)                                 All such policies of insurance shall be in
such form, with such companies, and in such amounts as reasonably satisfactory
to Bank.  All such policies of property insurance shall contain a lender’s loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof, and all liability insurance policies shall show
the Bank as an additional insured and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason.  Upon Bank’s request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor.  All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.

 

6.7                                 Accounts.  Borrower shall maintain and shall
cause each of its Subsidiaries to maintain its primary operating accounts with
Bank, provided that Borrower shall have up to 30 days after the Closing Date to
move such accounts to Bank.

 

6.8                                 Quick Ratio.  Borrower shall maintain,
measured as of the last day of each calendar month, a ratio of (i) Quick Assets
to (ii) total current liabilities, less non-cancelable deferred revenue, plus
all long term bank and lease debt minus any cash held at Bank which is
specifically pledged to support any Obligation of at least 1.50 to 1.00.

 

6.9                                 Liquidity; Cash Burn.  Borrower shall
maintain, measured as of the last day of each calendar month, a balance of
unrestricted cash and cash equivalents plus net billed accounts receivable
(collectively, “Liquidity”) in an amount of at least eight (8) times Borrower’s
Average Cash Burn.  As used herein, “Average Cash Burn” means the change in
Borrower’s cash during the three months immediately preceding the date of
measurement, net of any changes in debt, equity, minority interests, and capital
expenditures financed by Bank under the Equipment Line, divided by three (3).

 

If at any time Borrower’s Liquidity is less than eight (8) times its Cash Burn,
Borrower shall at its sole option either (i) immediately repay all Obligations
in full and Bank shall have no further obligation to make Credit Extensions to
Borrower or (ii) immediately open and thereafter maintain a money market account
or a certificate of deposit account with Bank in an amount equal to or greater
than 100% of the aggregate balance of all outstanding Obligations (the
“Liquidity Cash Collateral”) pursuant to Section 4.4 so long and only for such
period as Borrower’s Liquidity is less than eight (8) times its Cash Burn
(provided that during such time period, Bank shall have no further obligation to
make Credit Extensions to Borrower).

 

6.10                           Intellectual Property.  Borrower shall use
commercially reasonable efforts to (i) protect, defend and maintain the validity
and enforceability of its trademarks, patents and copyrights, (ii) detect
infringements of its trademarks, patents and copyrights and promptly advise Bank
in writing of material infringements detected and (iii) not allow any of its
material trademarks, Patents or copyrights to be abandoned, forfeited or
dedicated to the public except where Borrower may determine such abandonment,
forfeiture or dedication to the public to be commercially reasonable.

 

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6.11                           FURTHER ASSURANCES.  AT ANY TIME AND FROM TIME TO
TIME BORROWER SHALL EXECUTE AND DELIVER SUCH FURTHER INSTRUMENTS AND TAKE SUCH
FURTHER ACTION AS MAY REASONABLY BE REQUESTED BY BANK TO EFFECT THE PURPOSES OF
THIS AGREEMENT.

 

7.                                       NEGATIVE COVENANTS.

 

Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following:

 

7.1                                 Dispositions.  Convey, sell, lease, transfer
or otherwise dispose of (collectively, a “Transfer”), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property other
than:  (i) Transfers of Inventory in the ordinary course of business;
(ii) Transfers of licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business;
(iii) Transfers of worn-out or obsolete Equipment which was not financed by
Bank; (iv) Transfers of intellectual property in the ordinary course of
Borrower’s business; or (v) Transfers permitted in clause (b) of the definition
of Permitted Investments.

 

7.2                                 Change in Business; Change in Control or
Executive Office.  Engage in any business, or permit any of its Subsidiaries to
engage in any business, other than the businesses currently engaged in by
Borrower and any business substantially similar or related thereto (or
incidental thereto); or conduct business in a manner materially different than
the manner conducted by Borrower as of the Closing Date which manner could
reasonably be expected to have an adverse effect on Borrower; or suffer or
permit a Change in Control; or without thirty (30) days prior written
notification to Bank within thirty (30) days, relocate its chief executive
office or state of incorporation; or without prior written notice to Bank,
change the date on which its fiscal year ends.

 

7.3                                 Mergers or Acquisitions.  Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with or
into any other business organization, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person.  Notwithstanding the foregoing, this Section 7.3
shall not apply to transactions in which the sole consideration is Borrower’s
stock, Borrower is the surviving entity, and, after giving effect to such
transaction, there is no Change in Control, provided that at the time of any
such transaction an Event of Default has not occurred which is continuing and no
Event of Default would exist after giving effect to any such transaction.

 

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

 

7.5                                 Encumbrances.  Create, incur, assume or
suffer to exist any Lien with respect to any of its property, including its
intellectual property, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries so
to do, except for Permitted Liens.

 

7.6                                 Distributions.  Pay any dividends or make
any other distribution or payment on account of or in redemption, retirement or
purchase of any capital stock, or permit any of its Subsidiaries to do so,
except that Borrower may repurchase the stock of former employees or directors
pursuant to stock repurchase plans or agreements as long as an Event of Default
does not exist prior to such repurchase or would not exist after giving effect
to such repurchase.

 

7.7                                 Investments.  Directly or indirectly acquire
or own, or make any Investment in or to any Person, or permit any of its
Subsidiaries so to do, other than Permitted Investments; or maintain or invest
any of its cash, cash equivalents, or investment property with a Person other
than Bank or permit any of its Subsidiaries to do so unless such Person has
entered into an account control agreement with Bank in form and substance
reasonably satisfactory to Bank (provided that such account control agreement
requirement shall not be applicable until 30 days after the Closing Date); or
suffer or permit any Subsidiary to be a party to, or be bound by, an agreement
that restricts such Subsidiary from paying dividends or otherwise distributing
property to Borrower.

 

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7.8                                 Transactions with Affiliates.  Directly or
indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower except for transactions that are in the ordinary course of
Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a
non-affiliated Person.

 

7.9                                 Subordinated Debt.  Make any payment in
respect of any Subordinated Debt, or permit any of its Subsidiaries to make any
such payment, except in compliance with the terms of such Subordinated Debt, or
amend any provision contained in any documentation relating to the Subordinated
Debt without Bank’s prior written consent.

 

7.10                           Inventory and Equipment.  Store the Inventory or
the Equipment with a bailee, warehouseman, or other third party unless the third
party has been notified of Bank’s security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank’s benefit or (b) is in pledge possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment. Store
or maintain any Equipment or Inventory at a location other than the location set
forth in Section 10 of this Agreement.

 

7.11                           Compliance.  Become an “investment company” or be
controlled by an “investment company,” within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Credit Extension
for such purpose.  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
law or regulation, which violation could reasonably be expected to have a
Material Adverse Effect, or permit any of its Subsidiaries to do any of the
foregoing.

 

8.                                       EVENTS OF DEFAULT.

 

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

 

8.1                                 Payment Default.  If Borrower fails to pay,
when due, any of the Obligations and such failure continues for 3 days or more
after the due date, provided that within such 3 day cure period, the failure to
pay shall not be deemed an Event of Default, but no Credit Extensions will be
made;

 

8.2                                 Covenant Default.  If Borrower fails to
perform any obligation under Article 0 or violates any of the covenants
contained in Article 0 of this Agreement, or fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Credit Extensions will
be required to be made during such cure period);

 

8.3                                 Material Adverse Effect.  If there occurs
any circumstance or circumstances that could reasonably be expected to have a
Material Adverse Effect;

 

8.4                                 Attachment.  If any material portion of
Borrower’s assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any trustee, receiver or
person acting in a similar capacity and such attachment, seizure, writ or
distress warrant or levy has not been removed, discharged or rescinded within
ten (10) Business Days, or if Borrower is enjoined, restrained, or in any way
prevented by court

 

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order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower’s assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower’s assets by the
United States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, and the same is not
paid within ten (10) Business Days after Borrower receives notice thereof,
provided that none of the foregoing shall constitute an Event of Default where
such action or event is stayed or an adequate bond has been posted pending a
good faith contest by Borrower (provided that no Credit Extensions will be
required to be made during such cure period);

 

8.5                                 Insolvency.  If an Insolvency Proceeding is
commenced by Borrower, or if an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within sixty (60) days (provided that no
Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);

 

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

 

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

 

8.8                                 Judgments.  If a judgment or judgments for
the payment of money in an amount, individually or in the aggregate, of at least
Two Hundred Fifty Thousand Dollars ($250,000) shall be rendered against Borrower
and shall remain unsatisfied and unstayed for a period of thirty (30) days
(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment); or

 

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

 

9.                                       BANK’S RIGHTS AND REMEDIES.

 

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

 

(a)                                  Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 0, all Obligations shall become immediately due and payable
without any action by Bank);

 

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

 

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

 

(d)                                 Make such payments and do such acts as Bank
considers necessary or reasonable to protect its security interest in the
Collateral.  Borrower agrees to assemble the Collateral if Bank so requires, and
to make the Collateral available to Bank as Bank may reasonably designate. 
Borrower authorizes Bank to enter the premises where the Collateral is located,
to take and maintain possession of the Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or lien which in
Bank’s determination appears to be prior or superior to its security interest
and to pay all reasonable expenses incurred in connection therewith.  With
respect to any of Borrower’s owned premises, Borrower hereby grants Bank a
license

 

16

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upon the occurrence and during the continuance of an Event of Default to enter
into possession of such premises and to occupy the same, without charge, in
order to exercise any of Bank’s rights or remedies provided herein, at law, in
equity, or otherwise;

 

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

 

(f)                                    Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral.  Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section 0, to use, without
charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section 0, Borrower’s
rights under all licenses and all franchise agreements shall inure to Bank’s
benefit;

 

(g)                                 Dispose of the Collateral by way of one or
more contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower’s premises) as Bank determines is commercially
reasonable, and apply any proceeds to the Obligations in whatever manner or
order Bank deems appropriate;

 

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

 

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

 

9.2                                 Power of Attorney.  Effective only upon the
occurrence and during the continuance of an Event of Default, Borrower hereby
irrevocably appoints Bank (and any of Bank’s designated officers, or employees)
as Borrower’s true and lawful attorney to:  (a) send requests for verification
of Accounts or notify account debtors of Bank’s security interest in the
Accounts; (b) endorse Borrower’s name on any checks or other forms of payment or
security that may come into Bank’s possession; (c) sign Borrower’s name on any
invoice or bill of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and
adjust all claims under and decisions with respect to Borrower’s policies of
insurance; (f) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; and (g) to file, in its sole discretion, one or more financing
or continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Borrower where permitted by law; provided
Bank may exercise such power of attorney to sign the name of Borrower on any of
the documents described in Section 4.2 to perfect and continue the perfection of
Bank’s security interests in the Collateral regardless of whether an Event of
Default has occurred.  The appointment of Bank as Borrower’s attorney in fact,
and each and every one of Bank’s rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions hereunder is
terminated.

 

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

 

9.4                                 Bank Expenses.  If Borrower fails to pay any
amounts or furnish any required proof of payment due to third persons or
entities, as required under the terms of this Agreement, then Bank may do any or
all of the following after reasonable notice to Borrower:  (a) make payment of
the same or any part thereof; (b) set up such reserves under a facility in
Section 2.1 as Bank reasonably deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 0 of this Agreement, and take any action with respect
to such policies as Bank reasonably deems prudent.  Any amounts so

 

17

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paid or deposited by Bank shall constitute Bank Expenses, shall be immediately
due and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral.  Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.

 

9.5                                 Bank’s Liability for Collateral.  So long as
Bank complies with reasonable banking practices, Bank shall not in any way or
manner be liable or responsible for:  (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever.  All risk of loss, damage or destruction of the Collateral shall be
borne by Borrower.  Notwithstanding the foregoing, Bank shall be responsible for
its own gross negligence or willful conduct.

 

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

 

9.7                                 Demand; Protest.  Borrower waives demand,
protest, notice of protest, 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 at any time held by Bank on which Borrower may in any way
be liable.

 

10.                                 NOTICES.

 

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

 

If to Borrower:

RIGEL PHARMACEUTICALS, INC.

 

240 East Grand Avenue

 

South San Francisco, CA 94080

 

Attn:  Chief Financial Officer

 

FAX:  (650) 624-1101

 

 

If to Bank:

COMERICA BANK - CALIFORNIA

 

333 W. Santa Clara St.

 

San Jose, CA 95113

 

Attn:  Corporate Banking Center

 

 

with a copy to:

COMERICA BANK - CALIFORNIA

 

Five Palo Alto Square - 8th Floor

 

3000 El Camino Real

 

Palo Alto, CA  94306

 

Attn: Jonathan H. Norris

 

FAX:  (650) 213-1710

 

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

 

18

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

 

This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law.  Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California.  BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT.  EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

12.                                 GENERAL PROVISIONS.

 

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

 

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

 

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

 

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

 

12.5                           Amendments in Writing, Integration.  Neither this
Agreement nor the Loan Documents can be amended or terminated orally.  All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement
and the Loan Documents, if any, are merged 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, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement.

 

12.7                           Survival.  All covenants, representations and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding.  The obligations of Borrower to
indemnify Bank with respect to the expenses, damages, losses, costs and
liabilities described in Section 0 shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Bank
have run.

 

12.8                           Confidentiality.  In handling any confidential
information Bank and all employees and agents of Bank, including but not limited
to accountants, shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public

 

19

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information thereby received or received pursuant to this Agreement except that
disclosure of such information may be made (i) to the subsidiaries or affiliates
of Bank in connection with their present or prospective business relations with
Borrower, provided that they are subject to the same confidentiality
restrictions as Bank, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
reasonably determine in connection with the enforcement of any remedies
hereunder.  Confidential information hereunder shall not include information
that either:  (a) is in the public domain or in the knowledge or possession of
Bank when disclosed to Bank because it was disclosed to Bank by a third party
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information, or becomes part of the public domain after
disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a
third party, provided Bank does not have actual knowledge that such third party
is prohibited from disclosing such information.

 

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

 

 

 

RIGEL PHARMACEUTICALS, INC.

 

 

 

By:

     /s/ James H. Welch

 

 

 

Title:

Chief Financial Officer

 

 

 

 

 

COMERICA BANK - CALIFORNIA

 

 

 

By:

    /s/ John Norris

 

 

 

Title:

VP, Technology & Life Sciences Group

 

20

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DEBTOR

RIGEL PHARMACEUTICALS, INC.

 

 

SECURED PARTY:

COMERICA BANK - CALIFORNIA

 

EXHIBIT A

 

COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

 

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

 

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

 

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

 

Notwithstanding the foregoing, the Collateral shall not include any copyrights,
patents, trademarks, servicemarks, trade styles, trade names, logos, business
names, applications for any of the foregoing, data, know-how, confidential or
proprietary information, derivative works, inventions, blueprints, mask works,
designs, design rights, trade secrets, software, rights in software, goodwill,
proprietary information on computer discs, computer tapes, literature, and
catalogs, now owned or hereafter acquired, or any claims for damages by way of
any past, present and future infringement of any of the foregoing (collectively,
the “Intellectual Property”); provided, however, that the Collateral shall
include (i) all equipment financed by Bank and (ii) all accounts and general
intangibles that consist of rights to payment and proceeds from the sale,
licensing or disposition of all or any part, or rights in, the foregoing (the
“Rights to Payment”).  Notwithstanding the foregoing, if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the
underlying Intellectual Property is necessary to have a security interest in the
Rights to Payment, then the Collateral shall automatically, and effective as of
the Closing Date, include the Intellectual Property to the extent necessary to
permit perfection of Bank’s security interest in the Rights to Payment.

 

Notwithstanding the foregoing, the term “Collateral” shall not include any
Equipment not financed by Bank, proceeds of such Equipment, or rights of
Borrower as a licensee to the extent the granting of a security interest therein
(i) would be contrary to applicable law or (ii) is prohibited by or would
constitute a default under any agreement or document governing such property
(but only to the extent such prohibition is enforceable under applicable law);
provided that upon the termination or lapsing of any such prohibition, such
property shall automatically be part of the Collateral; and provided further
that the provisions of this paragraph shall in no case exclude from the
definition of “Collateral” any Accounts, proceeds of the disposition of any
property, or general intangibles consisting of rights to payment (other than
proceeds of such excluded Equipment), all of which shall at all times constitute
“Collateral”; and provided further that any Equipment financed by Bank will at
all times constitute “Collateral”.

 

21

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EXHIBIT B

 

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

 

DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME

 

TO:  TECHNOLOGY AND LIFE SCIENCES DIVISION

DATE:

 

 

 

FAX #:  650-846-6840

TIME:

 

 

FROM:

RIGEL PHARMACEUTICALS, INC.

CLIENT NAME (BORROWER)

REQUESTED BY:

 

AUTHORIZED SIGNER’S NAME

 

AUTHORIZED SIGNATURE:

 

 

PHONE NUMBER:

 

 

FROM ACCOUNT #

 

TO ACCOUNT #

 

 

 

 

 

REQUESTED TRANSACTION TYPE

 

REQUEST DOLLAR AMOUNT

 

 

$

 

PRINCIPAL INCREASE (ADVANCE)

 

$

 

PRINCIPAL PAYMENT (ONLY)

 

$

 

INTEREST PAYMENT (ONLY)

 

$

 

PRINCIPAL AND INTEREST (PAYMENT)

 

$

 

 

OTHER INSTRUCTIONS:

 

 

 

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

 

BANK USE ONLY

TELEPHONE REQUEST:

 

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

 

 

 

 

 

 

 

 

Authorized Requester

 

Phone #

 

 

 

 

 

 

 

 

 

Received By (Bank)

 

Phone #

 

 

 

 

 

 

Authorized Signature (Bank)

 

22

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EXHIBIT C

 

COMPLIANCE CERTIFICATE

 

TO:

COMERICA BANK - CALIFORNIA

 

 

FROM:

RIGEL PHARMACEUTICALS, INC.

 

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

 

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

 

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

 

 

 

 

Monthly financial statements

 

Monthly within 30 days

 

Yes

 

No

 

Annual (CPA Audited)

 

FYE within 120 days

 

Yes

 

No

 

10K and 10Q

 

(as applicable)

 

Yes

 

No

 

Total amount of Borrower’s cash and investments

 

Amount:  $             

 

Yes

 

No

 

Total amount of Borrower’s cash and investments maintained with Bank

 

Amount:  $             

 

Yes

 

No

 

 

Financial Covenant

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

 

 

 

 

On a monthly basis:

 

 

 

 

 

 

 

 

 

Adjusted Quick Ratio

 

1.50:1.00

 

      :1.00

 

Yes

 

No

 

Minimum RML

 

8.00:1.00

 

      :1.00

 

Yes

 

No

 

If RML falls below 8.00 to 1.00

 

100% Cash Security

 

$            

 

Yes

 

No

 

 

Comments Regarding Exceptions:  See Attached.

 

 

No

 

Received by:

 

 

Sincerely,

AUTHORIZED SIGNER

 

 

RIGEL PHARMACEUTICALS, INC.

Date:

 

 

 

 

By:

 

 

Verified:

 

 

SIGNATURE

AUTHORIZED SIGNER

 

 

 

 

 

 

Date:

 

 

TITLE

 

 

Compliance Status

Yes

 

 

 

DATE

 

 

23

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CORPORATE RESOLUTIONS TO BORROW

 

Borrower:

RIGEL PHARMACEUTICALS, INC.

 

I, the undersigned Secretary or Assistant Secretary of RIGEL PHARMACEUTICALS,
INC. (the “Corporation”), HEREBY CERTIFY, on behalf of the Corporation, that the
Corporation is organized and existing under and by virtue of the laws of the
State of Delaware.

 

I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Certificate of Incorporation, as amended, and the
Restated Bylaws of the Corporation, each of which is in full force and effect on
the date hereof.

 

I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.

 

BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:

 

NAMES

 

POSITION

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:

 

Borrow Money.  To borrow from time to time from COMERICA BANK - CALIFORNIA
(“Bank”), on such terms as may be agreed upon between the officers, employees,
or agents of the Corporation and Bank, such sum or sums of money as in their
judgment should be borrowed, without limitation.

 

Execute Loan Documents.  To execute and deliver to Bank that certain Loan and
Security Agreement dated as of July 12, 2002 (the “Loan Agreement”) and any
other agreement entered into between Corporation and Bank in connection with the
Loan Agreement, including any amendments, all as amended or extended from time
to time (collectively, with the Loan Agreement, the “Loan Documents”), and also
to execute and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for the Loan Documents, or any
portion thereof.

 

Grant Security.  To grant a security interest to Bank in the Collateral
described in the Loan Documents, which security interest shall secure all of the
Corporation’s Obligations, as described in the Loan Documents.

 

Negotiate Items.  To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.

 

Warrants.  To issue Bank warrants to purchase the Corporation’s capital stock.

 

Further Acts.  In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.

 

BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank

 

1

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

 

may rely on these Resolutions until written notice of their revocation shall
have been delivered to and received by Bank.  Any such notice shall not affect
any of the Corporation’s agreements or commitments in effect at the time notice
is given.

 

I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.

 

IN WITNESS WHEREOF, I have hereunto set my hand on July 12, 2002 and attest that
the signatures set opposite the names listed above are their genuine signatures.

 

 

CERTIFIED AND ATTESTED BY:

 

 

 

 

 

X

/s/ James H. Welch

 

 

Secretary

 

2

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

 

COMERICA BANK - CALIFORNIA
Member FDIC

 

ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Equipment Line)

 

Name(s):  RIGEL PHARMACEUTICALS,
INC.                                                                                                                                                                  
Date:  July 12, 2002

 

 

$

credited to deposit account No.                       when Advances are
requested by Borrower

 

Amounts paid to others on your behalf:

$56,250

to COMERICA BANK - CALIFORNIA for Loan Fee

$

to Bank counsel fees and expenses

$

to                       

$

to                       

$15,000,000

TOTAL (AMOUNT FINANCED)

 

Upon consummation of this transaction, this document will also serve as the
authorization for COMERICA BANK - CALIFORNIA to disburse the loan proceeds as
stated above.

 

 

 

 

Signature

 

Signature

 

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

 

AGREEMENT TO PROVIDE INSURANCE

 

TO:

COMERICA BANK - CALIFORNIA

Date:  July 12, 2002

 

attn:  Collateral Operations, M/C 4604

 

 

9920 South La Cienega Blvd, 14th Floor

 

 

Inglewood, CA  90301

Borrower:  RIGEL PHARMACEUTICALS, INC.

 

In consideration of a loan in the amount of $15,000,000, secured by all tangible
personal property including inventory and equipment.

 

I/We agree to obtain adequate insurance coverage to remain in force during the
term of the loan.

 

I/We also agree to advise the below named agent to add COMERICA BANK -
CALIFORNIA as lender’s loss payable on the new or existing insurance policy, and
to furnish Bank at above address with a copy of said policy/endorsements and any
subsequent renewal policies.

 

I/We understand that the policy must contain:

 

1.                                       Fire and extended coverage in an amount
in accordance with the terms of the Loan and Security Agreement by and between
Borrower and Comerica Bank-California.

 

2.                                       Lender’s “Loss Payable” Endorsement
Form 438 BFU in favor of COMERICA BANK - CALIFORNIA, or any other form
acceptable to Bank.

 

INSURANCE INFORMATION

 

Insurance
Co./Agent                                                                                                                                                                                                                    
Telephone No.:

 

Agent’s Address:

 

Signature of Obligor:

 

 

 

 

 

Signature of Obligor:

 

 

 

FOR BANK USE ONLY

 

 

 

INSURANCE VERIFICATION: Date:

 

 

 

 

 

Person Spoken to:

 

 

 

 

 

Policy Number:

 

 

 

 

 

Effective From:

 

To:

 

 

 

Verified by:

 

 

 

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

 

DEBTOR:

RIGEL PHARMACEUTICALS, INC.

 

 

SECURED PARTY:

COMERICA BANK - CALIFORNIA

 

EXHIBIT A

 

COLLATERAL DESCRIPTION ATTACHMENT
TO UCC-1 FINANCING STATEMENT

 

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

 

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

 

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

 

Notwithstanding the foregoing, the Collateral shall not include any copyrights,
patents, trademarks, servicemarks, trade styles, trade names, logos, business
names, applications for any of the foregoing, data, know-how, confidential or
proprietary information, derivative works, inventions, blueprints, mask works,
designs, design rights, trade secrets, software, rights in software, goodwill,
proprietary information on computer discs, computer tapes, literature, and
catalogs, now owned or hereafter acquired, or any claims for damages by way of
any past, present and future infringement of any of the foregoing (collectively,
the “Intellectual Property”); provided, however, that the Collateral shall
include (i) all equipment financed by Bank and (ii) all accounts and general
intangibles that consist of rights to payment and proceeds from the sale,
licensing or disposition of all or any part, or rights in, the foregoing (the
“Rights to Payment”).  Notwithstanding the foregoing, if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the
underlying Intellectual Property is necessary to have a security interest in the
Rights to Payment, then the Collateral shall automatically, and effective as of
the Closing Date, include the Intellectual Property to the extent necessary to
permit perfection of Bank’s security interest in the Rights to Payment.

 

Notwithstanding the foregoing, the term “Collateral” shall not include any
Equipment not financed by Bank, proceeds of such Equipment, or rights of
Borrower as a licensee to the extent the granting of a security interest therein
(i) would be contrary to applicable law or (ii) is prohibited by or would
constitute a default under any agreement or document governing such property
(but only to the extent such prohibition is enforceable under applicable law);
provided that upon the termination or lapsing of any such prohibition, such
property shall automatically be part of the Collateral; and provided further
that the provisions of this paragraph shall in no case exclude from the
definition of “Collateral” any Accounts, proceeds of the disposition of any
property, or general intangibles consisting of rights to payment (other than
proceeds of such excluded Equipment), all of which shall at all times constitute
“Collateral”; and provided further that any Equipment financed by Bank will at
all times constitute “Collateral”.

 

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

 

 

SECURITIES ACCOUNT
CONTROL AGREEMENT

 

 

July 12, 2002

 

Attn:  Jack Singer

 

Re:                               Comerica Bank   –   California /Security
Interest in Securities Account of RIGEL PHARMACEUTICALS, INC.

 

Dear Sir or Madam:

 

This agreement (“Control Agreement”) is entered by and among COMERICA BANK -
CALIFORNIA (“Bank”), RIGEL PHARMACEUTICALS, INC. (“Pledgor”) and Comerica
Securities, Inc. (“Securities Intermediary”).

 

1.                                       THIS CONTROL AGREEMENT CONCERNS ANY
ACCOUNT (COLLECTIVELY, THE “SECURITIES ACCOUNT”) ESTABLISHED BY PLEDGOR WITH
SECURITIES INTERMEDIARY, WHETHER NOW EXISTING OR HEREAFTER ARISING.  PURSUANT TO
THAT CERTAIN LOAN AND SECURITY AGREEMENT DATED AS OF THE DATE HEREOF (AS AMENDED
FROM TIME TO TIME, THE “SECURITY AGREEMENT”), BANK HAS A SECURITY INTEREST IN
ALL OF PLEDGOR’S PRESENT AND FUTURE RIGHT, TITLE AND INTEREST IN, TO AND UNDER
THE SECURITIES ACCOUNT MAINTAINED WITH SECURITIES INTERMEDIARY IN CONNECTION
WITH THE SECURITIES, SECURITIES ENTITLEMENTS OR OTHER INVESTMENT PROPERTY,
INSTRUMENTS AND FINANCIAL ASSETS CONTAINED IN THE SECURITIES ACCOUNT, AND ALL
INVESTMENT PROPERTY, INSTRUMENTS AND FINANCIAL ASSETS AT ANY TIME HELD OR
MAINTAINED IN THE SECURITIES ACCOUNT, TOGETHER WITH ALL INVESTMENT PROPERTY,
INSTRUMENTS AND FINANCIAL ASSETS SUBSTITUTED THEREFORE OR FOR ANY PART THEREOF,
ALL INTEREST, DIVIDENDS, INCREASES, PROFITS, NEW FINANCIAL ASSETS OR OTHER
INCREMENTS, DISTRIBUTIONS OR RIGHTS OF ANY KIND RECEIVED ON ACCOUNT OF ANY OF
THE FOREGOING, AND ALL OTHER INCOME RECEIVED IN CONNECTION THEREWITH AND ALL
PRODUCTS OR PROCEEDS THEREOF (WHETHER CASH OR NON-CASH PROCEEDS)(COLLECTIVELY,
THE “SECURITIES ENTITLEMENT”).  BANK, PLEDGOR AND SECURITIES INTERMEDIARY ARE
ENTERING INTO THIS CONTROL AGREEMENT TO PERFECT BANK’S SECURITY INTEREST IN THE
SECURITIES ACCOUNT.

 

2.                                       THE SECURITIES ENTITLEMENT IS TO BE
HELD IN THE SECURITIES ACCOUNT AND IS AND WILL REMAIN SUBJECT TO A FIRST
PRIORITY SECURITY INTEREST IN FAVOR OF BANK.  THE SECURITIES ACCOUNT IS NOT A
MARGIN ACCOUNT OR SUBJECT TO CHECK WRITING PRIVILEGES. ALL RIGHTS OF SECURITIES
INTERMEDIARY IN THE SECURITIES ACCOUNT EXCEPT FOR PERMITTED LIENS AS DEFINED
BELOW SHALL BE SUBORDINATED AND POSTPONED IN FAVOR OF BANK’S RIGHTS AND
INTERESTS THEREIN UNDER AND PURSUANT TO THE SECURITY AGREEMENT.

 

3.                                       UNTIL SECURITIES INTERMEDIARY IS
NOTIFIED TO THE CONTRARY BY BANK IN ANY ENTITLEMENT ORDER OR OTHER NOTICE
(“NOTICE”), SECURITIES INTERMEDIARY IS AUTHORIZED TO ACT UPON THE INSTRUCTION OF
PLEDGOR, OR ITS AUTHORIZED REPRESENTATIVES, AND COMPLY WITH PLEDGOR’S (OR ITS
AUTHORIZED REPRESENTATIVES) INSTRUCTIONS FOR THE FOLLOWING PURPOSES:

 

ý                     make trades of any and all of the financial assets held in
the Securities Account &/or

 

ý                     receiving any distributions relating to the Securities
Entitlement &/or

 

ý                     making any withdrawals of any and all of the financial
assets held in the Securities Account or the

 

1

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

 

proceeds thereof.

 

Upon and following receipt of Notice until revocation or withdrawl of such
Notice in writing by Bank, (i) Securities Intermediary shall immediately cease
complying with instructions concerning the Securities Account and the Securities
Entitlement originated by the Pledgor, or its representatives, and thereafter
shall comply with the instructions of Bank without further consent by Pledgor;
(ii) Securities Intermediary shall not be authorized to release any of the
Securities Entitlement or any proceeds thereof or make any distribution from the
Securities Account to any party other than Bank, until otherwise instructed by
Bank in writing; (iii) Securities Intermediary is instructed to hold the
Securities Account and Securities Entitlement for the benefit of Bank; and (iv)
Bank shall be the only person authorized to make any withdrawals of and/or to
authorize or receive any distribution of or relating to the Securities
Entitlement.

 

4.                                       BY ITS EXECUTION HEREOF, SECURITIES
INTERMEDIARY ACKNOWLEDGES AND AGREES TO THE TERMS SET FORTH HEREIN, AND THAT
THIS CONTROL AGREEMENT CONSTITUTES WRITTEN NOTICE TO SECURITIES INTERMEDIARY AND
ACKNOWLEDGMENT BY SECURITIES INTERMEDIARY OF BANK’S SECURITY INTEREST IN THE
SECURITIES ACCOUNT.  SAID SECURITY INTEREST SHALL BE NOTED BY THE SECURITIES
INTERMEDIARY ON ITS BOOKS AND RECORDS.

 

5.                                       SECURITIES INTERMEDIARY HAS ESTABLISHED
THE SECURITIES ACCOUNT IN PLEDGOR’S NAME.  A TRUE AND COMPLETE COPY OF THE
ACCOUNT AGREEMENT ENTERED INTO BETWEEN PLEDGOR AND SECURITIES INTERMEDIARY WITH
RESPECT TO THE SECURITIES ACCOUNT (THE “ACCOUNT AGREEMENT”)IS ATTACHED AS
EXHIBIT A.  EXHIBIT A CONTAINS A COMPLETE AND ACCURATE STATEMENT OF THE
INVESTMENT PROPERTY, FINANCIAL ASSETS AND CREDIT BALANCES CREDITED TO THE
SECURITIES ACCOUNT AS OF THE DATE(S) SET FORTH IN THE STATEMENT.  EXCEPT FOR THE
CLAIMS AND INTEREST OF BANK AND PLEDGOR IN THE SECURITIES ACCOUNT AND LIENS TO
SECURE FEES OWED TO SECURITIES INTERMEDIARY BY PLEDGOR WITH RESPECT TO THE
OPERATION OF THE SECURITIES ACCOUNT (“PERMITTED LIENS”), SECURITIES INTERMEDIARY
DOES NOT KNOW OF ANY CLAIM TO OR INTEREST IN THE SECURITIES ACCOUNT.

 

6.                                       SECURITIES INTERMEDIARY SHALL SEND
COPIES OF ALL STATEMENTS AND CONFIRMATIONS REGARDING THE SECURITIES ACCOUNT
SIMULTANEOUSLY TO PLEDGOR AND TO BANK.  SECURITIES INTERMEDIARY SHALL PROMPTLY
NOTIFY BANK AND PLEDGOR IF A PERSON ASSERTS A LIEN, ENCUMBRANCE OR ADVERSE CLAIM
AGAINST THE SECURITIES ACCOUNT WITHOUT BANK’S PRIOR WRITTEN CONSENT, WHICH WILL
NOT BE UNREASONABLY WITHHELD.

 

7.                                       SECURITIES INTERMEDIARY SHALL NOT AGREE
WITH ANY THIRD PARTY THAT SECURITIES INTERMEDIARY WILL COMPLY WITH ENTITLEMENT
ORDERS FROM THE THIRD PARTY.  SECURITIES INTERMEDIARY SHALL NOT AMEND THE
ACCOUNT AGREEMENT, INCLUDING ITS CHOICE OF LAW CLAUSE AND THE PROVISION
PROVIDING FOR TREATMENT OF PROPERTY HELD IN THE SECURITIES ACCOUNT AS A
FINANCIAL ASSET, WITHOUT BANK’S WRITTEN CONSENT.  SECURITIES INTERMEDIARY SHALL
NOT PERMIT PLEDGOR TO TERMINATE THE SECURITIES ACCOUNT.

 

8.                                       THE RIGHTS AND POWERS GRANTED HEREIN TO
BANK HAVE BEEN GRANTED IN ORDER TO PERFECT ITS SECURITY INTEREST IN THE
SECURITIES ACCOUNT, ARE POWERS COUPLED WITH AN INTEREST AND WILL NEITHER BE
AFFECTED BY THE DEATH OR BANKRUPTCY OF THE PLEDGOR NOR BY THE LAPSE OF TIME. 
SECURITIES INTERMEDIARY’S OBLIGATIONS UNDER THIS CONTROL AGREEMENT SHALL
CONTINUE IN EFFECT UNTIL THE SECURITY INTEREST OF BANK IN THE SECURITIES ACCOUNT
HAS BEEN TERMINATED PURSUANT TO THE TERMS OF THE SECURITY AGREEMENT AND BANK HAS
NOTIFIED YOU OF SUCH TERMINATION IN WRITING.  UPON RECEIPT OF SUCH NOTICE
SECURITIES INTERMEDIARY’S OBLIGATIONS UNDER THIS CONTROL AGREEMENT WITH RESPECT
TO THE OPERATION AND MAINTENANCE OF THE SECURITIES ACCOUNT AFTER THE RECEIPT OF
SUCH NOTICE SHALL TERMINATE, BANK SHALL HAVE NO FURTHER RIGHT TO ORIGINATE
ENTITLEMENT ORDERS CONCERNING THE SECURITIES ACCOUNT AND SECURITIES INTERMEDIARY
MAY TAKE SUCH STEPS AS THE PLEDGOR MAY REQUEST TO VEST FULL OWNERSHIP AND
CONTROL OF THE SECURITIES ACCOUNT IN THE PLEDGOR, INCLUDING, BUT NOT LIMITED TO,
REMOVING THE NAME OF BANK FROM THE SECURITIES ACCOUNT OR TRANSFERRING ALL OF THE
FINANCIAL ASSETS AND CREDIT BALANCES IN THE SECURITIES ACCOUNT TO ANOTHER
SECURITIES ACCOUNT IN THE NAME OF THE PLEDGOR OR ITS DESIGNEE.

 

9.                                       THIS CONTROL AGREEMENT SHALL BE BINDING
UPON AND INURE TO THE BENEFIT OF THE SUCCESSORS AND ASSIGNS OF THE PARTIES
HERETO, AND SHALL BE GOVERNED BY, AND IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

10.                                 THIS CONTROL AGREEMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH
TAKEN TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

2

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

 

11.                                 PLEDGOR ACKNOWLEDGES THAT THIS CONTROL
AGREEMENT SUPPLEMENTS PLEDGOR’S EXISTING AGREEMENTS WITH SECURITIES
INTERMEDIARY.  THIS CONTROL AGREEMENT DOES NOT CREATE ANY OBLIGATION OR DUTY OF
SECURITIES INTERMEDIARY OTHER THAN THOSE EXPRESSLY SET FORTH HEREIN.  IF THIS
CONTROL AGREEMENT CONFLICTS WITH ANY OTHER AGREEMENT BETWEEN SECURITIES
INTERMEDIARY AND PLEDGOR, THE TERMS OF THIS CONTROL AGREEMENT SHALL PREVAIL.

 

12.                                 THIS CONTROL AGREEMENT IS AN INTEGRATED
AGREEMENT AND SUPPLEMENTS ALL NEGOTIATIONS AND AGREEMENT WITH RESPECT TO THE
SUBJECT MATTER HEREOF. ANY AMENDMENTS HERETO SHALL BE IN WRITING AND SIGNED BY
ALL PARTIES.

 

13.                                 UNLESS OTHERWISE PROVIDED IN THIS CONTROL
AGREEMENT, ALL NOTICES OR DEMANDS RELATING TO THIS CONTROL AGREEMENT SHALL BE IN
WRITING AND (EXCEPT FOR ACCOUNT STATEMENTS AND OTHER INFORMATIONAL DOCUMENTS
WHICH MAY BE SENT BY FIRST–CLASS MAIL, POSTAGE PREPAID) SHALL BE PERSONALLY
DELIVERED, SENT BY CERTIFIED MAIL OR BY FACSIMILE TO BANK, PLEDGOR OR SECURITIES
INTERMEDIARY, AS THE CASE MAY BE, AT THE ADDRESS SET FORTH BELOW:

 

If to Bank:

Comerica Bank-California

 

9920 S. La Cienega Blvd., Suite #628

 

Inglewood, CA  90301-4423

 

Telephone:  (310) 417-5600

 

Facsimile:  (310) 417-5414

 

Attention:  Manager

 

 

With a copy to :

Comerica Bank-California

 

Five Palo Alto Square - 8th Floor

 

3000 El Camino Real

 

Palo Alto, CA  94306

 

Attn: Jonathan H. Norris

 

FAX:  (650) 213-1710

 

 

If to Pledgor:

RIGEL PHARMACEUTICALS, INC.

 

240 East Grand Avenue

 

South San Francisco, CA 94080

 

Attn:  Chief Financial Officer

 

FAX:  (650) 624-1101

 

 

If to Securities Intermediary:

Comerica Securities, Inc.

 

201 N. Figueroa St., 1st. Floor

 

Los Angeles, CA 90012

 

Telephone: (213)484-3758

 

Facsimile: (213)484-3795

 

Attn: Jack Singer

 

14.                                 WAIVER OF JURY TRIAL.  THE PARTIES
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED.  EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY,
AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT.

 

3

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

 

Please sign where indicated below to reflect your acknowledgment of and
agreement to the foregoing terms and conditions.

 

 

Very truly yours,

 

 

 

COMERICA BANK - CALIFORNIA

 

 

 

 

 

By:

   /s/ John Norris

 

 

 

 

Title:

VP, Technology & Life Sciences Group

 

 

 

 

 

 

RIGEL PHARMACEUTICALS, INC.

 

Pledgor

 

 

 

 

 

By:

   /s/ James H. Welch

 

 

 

 

Title:

Chief Financial Officer

 

 

 

 

 

 

COMERICA SECURITIES, INC.

 

Securities Intermediary

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

4

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

 

Exhibit A

Account Agreement

 

5

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SECURITIES ACCOUNT

 

 

CONTROL AGREEMENT

 

 

July 12, 2002

 

Attn: Secretary

 

Re:                               Comerica Bank-California /Security Interest in
Securities Account of RIGEL PHARMACEUTICALS, INC.

 

Dear Sir or Madam:

 

This agreement (“Control Agreement”) is entered by and among Comerica
Bank-California (“Bank”), a California banking corporation, RIGEL
PHARMACEUTICALS, INC., a Delaware corporation (“Pledgor”) and Monarch Funds, a
Delaware business trust (the “Trust”), by Forum Shareholder Services, LLC, a
Delaware limited liability company, as agent therefor.

 

1.                                       This Control Agreement concerns any
account (collectively, the “Securities Account”) established by Pledgor with
Trust, whether now existing or hereafter arising.  Pursuant to that certain Loan
and Security Agreement dated as of the date hereof (as amended from time to
time, the “Security Agreement”), Bank has a security interest in all of
Pledgor’s present and future right, title and interest in, to and under the
Securities Account maintained with Trust in connection with the securities,
securities entitlements or other investment property, instruments and financial
assets contained in the Securities Account, and all investment property,
instruments and financial assets at any time held or maintained in the
Securities Account, together with all investment property, instruments and
financial assets substituted therefore or for any part thereof, all interest,
dividends, increases, profits, new financial assets or other increments,
distributions or rights of any kind received on account of any of the foregoing,
and all other income received in connection therewith and all products or
proceeds thereof (whether cash or non-cash proceeds)(collectively, the
“Securities Entitlement”).  Bank, Pledgor and Trust are entering into this
Control Agreement to perfect Bank’s security interest in the Securities Account.

 

2.                                       The Securities Entitlement is to be
held in the Securities Account and is and will remain subject to a first
priority security interest in favor of Bank.  The Securities Account is not a
margin account or subject to check writing privileges. All rights of Trust in
the Securities Account except for Permitted Liens as defined below shall be
subordinated and postponed in favor of Bank’s rights and interests therein under
and pursuant to the Security Agreement.

 

3.                                       Until Trust is notified to the contrary
by Bank in any entitlement order or other notice (“Notice”), Trust is authorized
to act upon the instruction of Pledgor, or its authorized representatives, and
comply with Pledgor’s (or its authorized representatives) instructions for the
following purposes:

 

ý                     make trades of any and all of the financial assets held in
the Securities Account &/or

 

ý                     receiving any distributions relating to the Securities
Entitlement &/or

 

ý                     making any withdrawals of any and all of the financial
assets held in the Securities Account or the proceeds thereof.

 

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

 

UPON AND FOLLOWING RECEIPT OF NOTICE, UNTIL REVOCATION OR WITHDRAWL OF SUCH
NOTICE IN WRITING BY BANK, (I) TRUST SHALL IMMEDIATELY CEASE COMPLYING WITH
INSTRUCTIONS CONCERNING THE SECURITIES ACCOUNT AND THE SECURITIES ENTITLEMENT
ORIGINATED BY THE PLEDGOR, OR ITS REPRESENTATIVES, AND THEREAFTER SHALL COMPLY
WITH THE INSTRUCTIONS OF BANK WITHOUT FURTHER CONSENT BY PLEDGOR; (II) TRUST
SHALL NOT BE AUTHORIZED TO RELEASE ANY OF THE SECURITIES ENTITLEMENT OR ANY
PROCEEDS THEREOF OR MAKE ANY DISTRIBUTION FROM THE SECURITIES ACCOUNT TO ANY
PARTY OTHER THAN BANK, UNTIL OTHERWISE INSTRUCTED BY BANK IN WRITING;
(III) TRUST IS INSTRUCTED TO HOLD THE SECURITIES ACCOUNT AND SECURITIES
ENTITLEMENT FOR THE BENEFIT OF BANK; AND (IV) BANK SHALL BE THE ONLY PERSON
AUTHORIZED TO MAKE ANY WITHDRAWALS OF AND/OR TO AUTHORIZE OR RECEIVE ANY
DISTRIBUTION OF OR RELATING TO THE SECURITIES ENTITLEMENT.

 

4.                                       BY ITS EXECUTION HEREOF, TRUST
ACKNOWLEDGES AND AGREES TO THE TERMS SET FORTH HEREIN, AND THAT THIS CONTROL
AGREEMENT CONSTITUTES WRITTEN NOTICE TO TRUST AND ACKNOWLEDGMENT BY TRUST OF
BANK’S SECURITY INTEREST IN THE SECURITIES ACCOUNT.  SAID SECURITY INTEREST
SHALL BE NOTED BY THE TRUST ON ITS BOOKS AND RECORDS.

 

5.                                       TRUST HAS ESTABLISHED THE SECURITIES
ACCOUNT IN PLEDGOR’S NAME.  A TRUE AND COMPLETE COPY OF THE ACCOUNT AGREEMENT
ENTERED INTO BETWEEN PLEDGOR AND TRUST WITH RESPECT TO THE SECURITIES ACCOUNT
(THE “ACCOUNT AGREEMENT”) IS ATTACHED AS EXHIBIT A.  EXHIBIT A IS A COMPLETE AND
ACCURATE STATEMENT OF THE INVESTMENT PROPERTY, FINANCIAL ASSETS AND CREDIT
BALANCES CREDITED TO THE SECURITIES ACCOUNT AS OF THE DATE(S) SET FORTH IN THE
STATEMENT.  EXCEPT FOR THE CLAIMS AND INTEREST OF BANK AND PLEDGOR IN THE
SECURITIES ACCOUNT AND LIENS TO SECURE FEES OWED TO TRUST BY PLEDGOR WITH
RESPECT TO THE OPERATION OF THE SECURITIES ACCOUNT (“PERMITTED LIENS”), TRUST
DOES NOT KNOW OF ANY CLAIM TO OR INTEREST IN THE SECURITIES ACCOUNT.

 

6.                                       TRUST SHALL SEND COPIES OF ALL
STATEMENTS AND CONFIRMATIONS REGARDING THE SECURITIES ACCOUNT SIMULTANEOUSLY TO
PLEDGOR AND TO BANK.  TRUST SHALL PROMPTLY NOTIFY BANK AND PLEDGOR IF A PERSON
ASSERTS A LIEN, ENCUMBRANCE OR ADVERSE CLAIM AGAINST THE SECURITIES ACCOUNT.

 

7.                                       TRUST SHALL NOT AGREE WITH ANY THIRD
PARTY THAT TRUST WILL COMPLY WITH ENTITLEMENT ORDERS FROM THE THIRD PARTY. 
TRUST SHALL NOT AMEND THE ACCOUNT AGREEMENT, INCLUDING ITS CHOICE OF LAW CLAUSE
AND THE PROVISION PROVIDING FOR TREATMENT OF PROPERTY HELD IN THE SECURITIES
ACCOUNT AS A FINANCIAL ASSET, WITHOUT BANK’S WRITTEN CONSENT.  TRUST SHALL NOT
PERMIT PLEDGOR TO TERMINATE THE SECURITIES ACCOUNT WITHOUT BANK’S WRITTEN
CONSENT, WHICH SHALL NOT BE UNREASONABLY WITHHELD.

 

8.                                       THE RIGHTS AND POWERS GRANTED HEREIN TO
BANK HAVE BEEN GRANTED IN ORDER TO PERFECT ITS SECURITY INTEREST IN THE
SECURITIES ACCOUNT, ARE POWERS COUPLED WITH AN INTEREST AND WILL NEITHER BE
AFFECTED BY THE DEATH OR BANKRUPTCY OF THE PLEDGOR NOR BY THE LAPSE OF TIME. 
TRUST’S OBLIGATIONS UNDER THIS CONTROL AGREEMENT SHALL CONTINUE IN EFFECT UNTIL
THE SECURITY INTEREST OF BANK IN THE SECURITIES ACCOUNT HAS BEEN TERMINATED
PURSUANT TO THE TERMS OF THE SECURITY AGREEMENT AND BANK HAS NOTIFIED YOU OF
SUCH TERMINATION IN WRITING.  UPON RECEIPT OF SUCH NOTICE TRUST’S OBLIGATIONS
UNDER THIS CONTROL AGREEMENT WITH RESPECT TO THE OPERATION AND MAINTENANCE OF
THE SECURITIES ACCOUNT AFTER THE RECEIPT OF SUCH NOTICE SHALL TERMINATE, BANK
SHALL HAVE NO FURTHER RIGHT TO ORIGINATE ENTITLEMENT ORDERS CONCERNING THE
SECURITIES ACCOUNT AND TRUST MAY TAKE SUCH STEPS AS THE PLEDGOR MAY REQUEST TO
VEST FULL OWNERSHIP AND CONTROL OF THE SECURITIES ACCOUNT IN THE PLEDGOR,
INCLUDING, BUT NOT LIMITED TO, REMOVING THE NAME OF BANK FROM THE SECURITIES
ACCOUNT OR TRANSFERRING ALL OF THE FINANCIAL ASSETS AND CREDIT BALANCES IN THE
SECURITIES ACCOUNT TO ANOTHER SECURITIES ACCOUNT IN THE NAME OF THE PLEDGOR OR
ITS DESIGNEE.

 

9.                                       THIS CONTROL AGREEMENT SHALL BE BINDING
UPON AND INURE TO THE BENEFIT OF THE SUCCESSORS AND ASSIGNS OF THE PARTIES
HERETO, AND SHALL BE GOVERNED BY, AND IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

10.                                 EACH OF THE PLEDGOR AND THE BANK HEREBY
AGREES TO INDEMNIFY THE TRUST FOR, DEFEND THE TRUST AGAINST AND HOLD THE TRUST
HARMLESS FROM ALL CLAIMS, DEMANDS, SUITS, EXPENSES (INCLUDING REASONABLE
ATTORNEYS’ FEES), LOSSES AND DAMAGES RESULTING FROM OR ARISING OUT OF THIS
CONTROL AGREEMENT AND NOT DUE TO THE TRUST’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, INCLUDING AS A RESULT OF THE TRUST’S ACTIONS IN HONORING
INSTRUCTIONS FROM ANY PROPERLY AUTHORIZED PERSON BELIEVED TO BE AUTHORIZED PRIOR
TO RECEIPT OF NOTIFICATION TO THE CONTRARY OR REFUSING TO HONOR INSTRUCTIONS
FROM PERSONS NOT DEMONSTRATED TO THE TRUST’S REASONABLE SATISFACTION TO BE SO
AUTHORIZED.  THE PLEDGOR AND THE BANK AGREE THAT, IN THE EVENT OF ANY DISPUTE
BETWEEN THEM OR EITHER OF THEM AND A THIRD PERSON IN CONNECTION WITH WHICH THE
TRUST BECOMES SUBJECT TO CONFLICTING CLAIMS WITH RESPECT THE SECURITIES ACCOUNT,
THE TRUST

 

2

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

 

may in its sole and absolute discretion initiate an interpleader action, in
which the Pledgor and the Bank consent to being joined, to determine the
relative rights of the claimants with respect to the Securities Account.

 

11.                                 THIS CONTROL AGREEMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH
TAKEN TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

12.                                 PLEDGOR ACKNOWLEDGES THAT THIS CONTROL
AGREEMENT SUPPLEMENTS PLEDGOR’S EXISTING AGREEMENTS WITH TRUST.  THIS CONTROL
AGREEMENT DOES NOT CREATE ANY OBLIGATION OR DUTY OF TRUST OTHER THAN THOSE
EXPRESSLY SET FORTH HEREIN.  IF THIS CONTROL AGREEMENT CONFLICTS WITH ANY OTHER
AGREEMENT BETWEEN TRUST AND PLEDGOR, THE TERMS OF THIS CONTROL AGREEMENT SHALL
PREVAIL.

 

13.                                 THIS CONTROL AGREEMENT IS AN INTEGRATED
AGREEMENT AND SUPPLEMENTS ALL NEGOTIATIONS AND AGREEMENT WITH RESPECT TO THE
SUBJECT MATTER HEREOF. ANY AMENDMENTS HERETO SHALL BE IN WRITING AND SIGNED BY
ALL PARTIES.

 

14.                                 UNLESS OTHERWISE PROVIDED IN THIS CONTROL
AGREEMENT, ALL NOTICES OR DEMANDS RELATING TO THIS CONTROL AGREEMENT SHALL BE IN
WRITING AND (EXCEPT FOR ACCOUNT STATEMENTS AND OTHER INFORMATIONAL DOCUMENTS
WHICH MAY BE SENT BY FIRST–CLASS MAIL, POSTAGE PREPAID) SHALL BE PERSONALLY
DELIVERED, SENT BY CERTIFIED MAIL OR BY FACSIMILE TO BANK, PLEDGOR OR TRUST, AS
THE CASE MAY BE, AT THE ADDRESS SET FORTH BELOW:

 

If to Bank:

Comerica Bank-California

 

9920 S. La Cienega Blvd., Suite #628

 

Inglewood, CA  90301-4423

 

Telephone:  (310) 417-5600

 

Facsimile:  (310) 417-5414

 

Attention:  Manager

 

 

With a copy to :

Comerica Bank-California

 

Five Palo Alto Square - 8th Floor

 

3000 El Camino Real

 

Palo Alto, CA  94306

 

Attn: Jonathan H. Norris

 

FAX:  (650) 213-1710

 

 

If to Pledgor:

RIGEL PHARMACEUTICALS, INC.

 

240 East Grand Avenue

 

South San Francisco, CA 94080

 

Attn:  Chief Financial Officer

 

FAX:  (650) 624-1101

 

 

If to Trust:

Monarch Funds

 

P.O. Box 446

 

Portland, Maine 04101

 

Telephone:  (207) 822-6680

 

Attn.:  Secretary

 

15.                                 WAIVER OF JURY TRIAL.  THE PARTIES
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED.  EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY,
AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT.

 

3

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Please sign where indicated below to reflect your acknowledgment of and
agreement to the foregoing terms and conditions.

 

 

Very truly yours,

 

 

 

COMERICA BANK-CALIFORNIA,

 

a California banking corporation

 

 

 

By:

  /s/ Kathy Conte

 

 

 

 

Title:

Senior Vice President

 

 

 

 

 

 

RIGEL PHARMACEUTICALS, INC.

 

Pledgor

 

 

 

By:

  /s/ James H. Welch

 

 

 

 

Title:

Chief Financial Officer

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

MONARCH FUNDS,

 

a Delaware business trust

 

 

 

By:

Forum Shareholders Services, LLC,

 

 

a Delaware limited liability company, as agent

 

 

 

 

 

By:

 

 

 

 

 

Title:  Director

 

4

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Exhibit A

Account Agreement

 

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