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  Exhibit 10.5    
    


 
    LOAN AND SECURITY AGREEMENT    
    


        THIS LOAN AND SECURITY AGREEMENT (this
"Agreement") dated as of September 30, 2010 (the "Effective Date") among
(i) TRANZYME, INC., a Delaware corporation ("Tranzyme"),
(ii) TRANZYME PHARMA INC., a Canadian corporation ("Tranzyme-Canada") (Tranzyme and
Tranzyme-Canada are referred to herein individually and collectively, jointly and severally, solidarily, as "Borrower"),
(iii) COMPASS HORIZON FUNDING COMPANY LLC, a Delaware limited liability company, as a Lender
("Horizon"), (iv) OXFORD FINANCE CORPORATION, a Delaware corporation , as a Lender
("Oxford") (Horizon, Oxford and each of the other "Lenders" from time to time a party hereto are referred to herein collectively as the
"Lenders" and each individually as a "Lender"); and (v) OXFORD FINANCE
CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "Collateral Agent"), provides the terms on
which the Lenders shall lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows: 


        1    ACCOUNTING AND OTHER TERMS    


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


        1.2    Designation of Agent.    Each Borrower hereby designates
Tranzyme as the agent of that Borrower to discharge the duties and responsibilities as provided herein. 


        1.3    Operation of Borrowing.    Except as otherwise provided in this
Section, loans and advances hereunder shall be requested solely by Tranzyme as agent for each Borrower. Each Borrower shall be directly indebted to the Lenders for each advance distributed to
Tranzyme, together with all accrued interest thereon, as if that amount had been advanced directly by the Lenders to such Borrower. Collateral Agent and the Lenders shall have no responsibility to
inquire as to the distribution of loans and advances made by the Lenders through Tranzyme as described herein. 


        1.4    Continuation of Authority of Agent.    The authority of
Tranzyme to request loans on behalf of, and to bind, Borrower, shall continue unless and until Collateral Agent and the Lenders actually receive written notice of the termination of such authority. 


        2    LOANS AND TERMS OF PAYMENT    


        2.1    Promise to Pay.    Borrower hereby unconditionally promises to pay each Lender, the outstanding principal
amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement. 



        2.2    Term Loans.    



        (a)    Availability.    Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not
jointly, to make term loans to Borrower on the Effective Date in an aggregate amount up to Thirteen Million Dollars ($13,000,000.00) according to each Lender's Term Loan Commitment as set forth on  Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a "Term Loan", and
collectively as the "Term Loans"). After repayment, no Term Loan may be re-borrowed. 


        (b)    Repayment.    Borrower shall make monthly payments of interest only commencing on the first (1st)
Payment Date following the Funding Date of the Term Loans, and continuing on the Payment Date of each successive month thereafter through and including July 1, 2011. 



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Commencing
on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal and interest, in arrears, to each
Lender, as calculated by the Collateral Agent based upon: (i) the amount of such Lender's Term Loan, (ii) the effective rate of interest, as determined in Section 2.3(a), and
(iii) a repayment schedule equal to thirty (30) months. All unpaid principal and accrued interest with respect to the Term Loans is due and payable in full on the Maturity Date. The Term
Loans may only be prepaid in accordance with Sections 2.2(c) and 2.2(d). 



        (c)    Mandatory Prepayments.    If the Term Loans are accelerated following the occurrence of an Event of Default,
Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term
Loans plus accrued interest thereon, (ii) the Prepayment Fee, (iii) the Final Payment, plus (iv) all other sums, that shall have become due and payable, including interest at the
Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date Borrower shall pay to each Lender its respective Pro Rata Share of
the Final Payment in respect of the Term Loans. 


        (d)    Permitted Prepayment of Loans.    Borrower shall have the option to prepay all, but not less than all, of the
Term Loans advanced by Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least fifteen (15) days
prior to such prepayment, and (ii) pays to Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of
(A) all outstanding principal of the Term Loans plus accrued interest thereon, (B) the Prepayment Fee, (C) the Final Payment, plus (D) all other sums, that shall have
become due and payable, including Lenders' Expenses, if any, and interest at the Default Rate with respect to any past due amounts. 




        2.3    Payment of Interest on the Credit Extensions.    



        (a)    Interest Rate.    Subject to Section 2.2(b), the principal amount outstanding under the Term Loans shall
accrue interest at a fixed per annum rate equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the Term Loans, which interest shall be payable monthly in accordance with
Section 2.2(b). Interest shall accrue on each Term Loan commencing on, and including, the date on which the Term Loan is made. 


        (b)    Default Rate.    Immediately upon the occurrence and during the continuance of an Event of Default, Obligations
shall bear interest at a rate per annum which is five percentage points above the rate that
is otherwise applicable thereto (the "Default Rate"). Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not
a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent. 


        (c)    360-Day Year.    Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed. For purposes of disclosure pursuant to the Interest Act (Canada), the annual rates of interest or fees to which the rates
of interest or fees provided in this Agreement and the other Loan Documents (and stated herein or therein, as applicable, to be computed on the basis of a 360 day year or any other period of
time less than a calendar year) are equivalent are the rates so determined multiplied by the actual number of days in the applicable calendar year and divided by 360 or such other period of time,
respectively. 


        (d)    Debit of Accounts.    Collateral Agent may debit any of Borrower's deposit accounts, including the Designated
Deposit Account, for principal and interest payments or any other amounts Borrower owes Lenders under the Loan Documents when due. These debits shall not constitute a set-off. 



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




        2.4    Secured Promissory Notes.    Each Term Loan shall be evidenced by a Secured Promissory Note in the form
attached as Exhibit D hereto (each a "Secured Promissory Note"), and shall be repayable as set
forth herein. The Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such
Lender's Secured Promissory Note, an appropriate notation on such Lender's Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment.
The outstanding amount of each Term Loan set forth on such Lender's Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but
the failure to record, or any error in so recording, any such amount on such Lender's Secured Promissory Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or
under any Secured Promissory Note to make payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft,
destruction, or mutilation of its Secured Promissory Note, the Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor. 



        2.5    Fees.    Borrower shall pay to Collateral Agent: 



        (a)    Facility Fee.    A fully earned, non-refundable facility fee of Ninety Seven Thousand Five Hundred
Dollars ($97,500.00) to be shared between the Lenders pursuant to their respective Commitment Percentages; 


        (b)    Prepayment Fee.    The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with
their respective Pro Rata Shares; 


        (c)    Final Payment.    The Final Payment, when due hereunder, to be shared between the Lenders in accordance with
their respective Pro Rata Shares; 


        (d)    Late Payment Fee.    A late payment fee equal to five percent (5.00%) of any payment not paid when due, to be
shared between the Lenders in accordance with their respective Pro Rata Shares; and 


        (e)    Lenders' Expenses.    All Lenders' Expenses (including reasonable attorneys' fees and expenses, plus expenses,
for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due. 




        2.6    Withholding.    Payments received by Lenders from Borrower hereunder will be made free and clear of any
withholding taxes. Specifically, however, if at any time any governmental authority, applicable law, regulation or international agreement requires Borrower to make any such withholding or deduction
from any such payment or other sum payable hereunder to Lenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will
be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no
withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant governmental authority. Borrower will, upon request, furnish Lenders with proof
reasonably satisfactory to Lenders indicating that Borrower has made such withholding payment provided, however, that Borrower need not make any withholding payment if the amount or validity of such
withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of
Borrower contained in this Section shall survive the termination of this Agreement. 


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        3    CONDITIONS OF LOANS    



        3.1    Conditions Precedent to Initial Credit Extension.    Each Lender's obligation to make the Term Loan is subject
to the condition precedent that Collateral Agent shall consent to or shall have received, in form and substance satisfactory to Lenders, such documents, and completion of such other matters, as
Lenders may reasonably deem necessary or appropriate, including, without limitation: 



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



        (b)   duly
executed original signatures to a Control Agreement with SVB with respect to the Designated Deposit Account and any other account(s) maintained by Borrower at SVB; 


        (c)   duly
executed original signatures to a Control Agreement with Royal Bank of Canada with respect to any account(s) maintained by Borrower at Royal Bank of Canada; 


        (d)   duly
executed original Secured Promissory Notes in favor of each Lender according to its Commitment Percentage in an aggregate amount not to exceed the Term Loan
Commitments; 


        (e)   Operating
Documents of Tranzyme certified by the Secretary of State of the State of Delaware and (i) a good standing certificate certified by the Secretary of
State of the State of Delaware and (ii) a certificate of authorization issued by the Secretary of State of the State of North Carolina, each as of a date no earlier than thirty (30) days
prior to the Effective Date; 


        (f)    Operating
Documents of Tranzyme-Canada and (i) a certificate of compliance of in respect of Tranzyme-Canada certified by Industry Canada as of a date no earlier
than thirty (30) days prior to the Effective Date and (ii) a certificate of attestation issued by the Registraire des Entreprises for the Province of Quebec in respect of
Tranzyme-Canada; 


        (g)   duly
executed original signatures to the completed Borrowing Resolutions for Borrower; 


        (h)   Collateral
Agent shall have received certified copies, dated as of a recent date, of financing statement searches, as Collateral Agent shall request, accompanied by
written evidence (including any Code or PPSA termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the
initial Credit Extension, will be terminated or released; 


        (i)    landlord's
consent executed in favor of Collateral Agent, for the ratable benefit of the Lenders, in respect of Borrower's facilities located in Durham, North Carolina
and Sherbrooke, Quebec; 


        (j)    a
payoff letter from Oxford and SVB in respect of the Existing Oxford and SVB Indebtedness; 


        (k)   Evidence
of receipt by Borrower from 100% of the holders of Borrower's Subordinated Convertible Promissory Notes of legally binding elections to convert 100% of such
Subordinated Convertible Promissory Notes to equity securities of Borrower effective September 30, 2010; 



        (l)    evidence
satisfactory to Collateral Agent that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders; and 


        (m)  payment
of the fees and Lenders' Expenses then due as specified in Section 2.5 hereof. 



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



        (a)   timely
receipt of an executed Payment/Advance Form in the form of Exhibit B attached hereto; 


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


        (c)   in
such Lender's reasonable discretion, there has not been any material impairment in the general affairs, management, results of operation, financial condition or the
prospect of repayment of the Obligations, nor has there been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Lenders. 




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


        3.4    Procedures for Borrowing.    Subject to the prior satisfaction of all other applicable conditions to the making
of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern
time five (5) Business Days prior to the date the Term Loan is to be made. Together with any such electronic or facsimile notification, Borrower shall deliver to Lenders by electronic mail or
facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee. Lenders may rely on any telephone notice given by a person whom Lenders believe is a Responsible
Officer or designee. On the Funding Date, each Lender shall credit and/or transfer (as applicable) to Borrower's Designated Deposit Account, an amount equal to its Term Loan Commitment. 


        4    CREATION OF SECURITY INTEREST    



        4.1    Grant of Security Interest.    Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders,
and to each Lender, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders,
and to each Lender, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the
security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral. If Borrower shall acquire a commercial tort claim (as defined
in the Code), Borrower shall promptly notify Collateral Agent in a writing signed by Borrower of the general details thereof (and further details as may be required by Collateral Agent) and grant to
Collateral Agent, for the ratable benefit of the Lenders, and to each Lender in such writing a security 


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interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent. 



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




        4.2    Authorization to File Financing Statements.    Borrower hereby authorizes Collateral Agent and Lenders to file
financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent's and each Lender's interest or rights hereunder, including a notice that
any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Collateral Agent and Lenders under the Code. Such financing statements may indicate
the Collateral as "all assets of Debtor other than Debtor's intellectual property" or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Collateral
Agent's and Lenders' discretion. 


        5    REPRESENTATIONS AND WARRANTIES    


        Borrower
represents and warrants to Collateral Agent and the Lenders as follows: 


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



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



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and
are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower is bound.
Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower's
business. 




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



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


        All
Inventory is in all material respects of good and marketable quality, free from material defects. 


        Borrower
is the sole owner of its intellectual property, except for licenses granted by Borrower in connection with joint ventures and corporate collaborations in the ordinary course of
business. Each issued patent is valid and enforceable, and no part of the intellectual property has been judged invalid or unenforceable, in whole or in part, and to Borrower's knowledge, no claim has
been made that any part of the intellectual property violates the rights of any third party except to the extent such claim could not reasonably be expected to have a material adverse effect on
Borrower's business. Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any material license or other agreement with respect to which Borrower is a licensee
that (a) prohibits or otherwise restricts Borrower from granting a security interest in Borrower's interest in such license or agreement or any other property, or (b) for which a default
under or termination of could interfere with Collateral Agent's and Lenders' right to sell any Collateral. Borrower shall provide written notice to Collateral Agent and Lenders within ten
(10) days of entering into or becoming bound by any such license or agreement (other than over-the-counter software that is commercially available to the public).
Borrower shall take such steps as Collateral Agent requests to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for (x) all such licenses or agreements to be
deemed "Collateral" and for Collateral Agent and each Lender to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or, whether
now existing or entered into in the future, and (y) Collateral Agent shall have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with
Collateral Agent's rights and remedies under this Agreement and the other Loan Documents. 




        5.3    Litigation.    There are no actions or proceedings pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000.00). 


        5.4    No Material Deterioration in Financial Condition; Financial Statements.    All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Lenders fairly present, in all material respects Borrower's consolidated financial condition and Borrower's consolidated results of 


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operations.
There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements submitted to Lenders. 


        5.5    Solvency.    Borrower is not left with unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they mature. 



        5.6    Regulatory Compliance.    Borrower is not an "investment company" or a company "controlled" by an "investment
company" under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the
Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a "holding company" or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding company" as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any
laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrower's or any of its Subsidiaries' properties or assets
has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than
legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as currently conducted. 



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


        5.8    Tax Returns and Payments; Pension Contributions.    Borrower has timely filed all required tax returns and
reports, and Borrower and its Subsidiaries have timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower. To Borrower's knowledge there are not
any claims or adjustments proposed for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental agency. 


        5.9    Use of Proceeds.    Borrower shall use the proceeds of the Credit Extensions solely as working capital and to
fund its general business requirements and not for personal, family, household or agricultural purposes; provided, however, that a portion of the proceeds of the Term Loans shall be used to repay the
Existing Oxford and SVB Indebtedness in full. 


        5.10    Full Disclosure.    No written representation, warranty or other statement of Borrower in any certificate or
written statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written
statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual
results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results). 


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        5.11    Subordinated Convertible Promissory Notes.    Borrower has received from 100% of the holders of Borrower's
Subordinated Convertible Promissory Notes legally binding elections to convert 100% of such Subordinated Convertible Promissory Notes to equity securities of Borrower effective September 30,
2010; effective as of September 30, 2010, 100% of Borrower's Subordinated Convertible Promissory Notes have been converted to equity securities of Borrower and upon such conversion 100% of the
Subordinated Convertible Promissory Notes have been retired and are no longer outstanding. 


        Lenders
hereby represent and warrant to Borrower as follows: 


        5.12    Inter-creditor Agreement.    That certain Inter-creditor Agreement by and between the Lenders dated as of
September 30, 2010 is in full force and effect as of the date hereof and the execution, delivery, and performance by Lenders of the Loan Documents do not conflict with such Inter-creditor
Agreement. 


        6    AFFIRMATIVE COVENANTS    


        Borrower
shall, and shall cause each of its Subsidiaries to, do all of the following: 


        6.1    Government Compliance.    



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


        (b)   Obtain
and keep in full force and effect, all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to
which it is a party and the grant of a security interest to Collateral Agent for the ratable benefit of the Lenders, in all of the Collateral. Borrower shall promptly provide copies of any such
obtained Governmental Approvals to Collateral Agent. 




        6.2    Financial Statements, Reports, Certificates.    



        (a)   Deliver
to Lenders: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and
consolidating balance sheet and income statement covering Borrower's consolidated operations for such month certified by a Responsible Officer and in a form acceptable to Collateral Agent;
(ii) as soon as available, but no later than one hundred eighty (180) days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion (other than with a "going concern" qualification relating to the need for future additional equity or debt financing) on the financial
statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion (it being understood that Ernst & Young LLP, Borrower's
certified public accounting firm on and as of the Effective Date is acceptable to Collateral Agent); (iii) as soon as available, but no later than ten (10) days after the last day of
Borrower's fiscal year, Borrower's financial projections for current fiscal year as approved by Borrower's Boards of Directors; (iv) within five (5) days of delivery, copies of all
statements, reports and notices made available to all of Borrower's security holders or to any holders of Subordinated Debt; (v) in the event that Borrower becomes subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with
the Securities and Exchange Commission or a link thereto on Borrower's or another website on the Internet; (vi) a prompt report of any legal actions pending or threatened against Borrower or
any of its Subsidiaries that 



9







 

could
result in damages or costs to Borrower or any of its Subsidiaries of Two Hundred Thousand Dollars ($200,000) or more; and (vii) such other  budgets, sales projections, operating plans and other
financial information reasonably requested by Lenders. Without limiting the foregoing, Borrower
shall deliver to Lenders, concurrently with the delivery of any financial statements pursuant to clause (a) above, a copy of the bank and/or investment account statements issued by or otherwise
available from each institution at which Borrower or any Subsidiary maintains any Collateral Account. 


        (b)   Within
thirty (30) days after the last day of each month, deliver to Collateral Agent with the monthly financial statements, a duly completed Compliance
Certificate signed by a Responsible Officer. 




        6.3    Inventory; Returns.    Keep all Inventory in good and marketable condition, free from material defects. Returns
and allowances between Borrower and its Account Debtors shall follow Borrower's customary practices as they exist at the Effective Date. Borrower must promptly notify Collateral Agent of all returns,
recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000). 


        6.4    Taxes; Pensions.    Timely file and require each of its Subsidiaries to timely file, all required tax returns
and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owned by Borrower and each of its
Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such
payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms. Borrower may defer payment of any contested taxes,
provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Lenders in
writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a "Permitted Lien". 


        6.5    Insurance.    Keep its business and the Collateral insured for risks and in amounts standard for companies in
Borrower's industry and location and as Collateral Agent and Lenders may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Collateral
Agent and Lenders. All property policies shall have a lender's loss payable endorsement showing Collateral Agent and Horizon Technology Finance Management LLC, as agent for Horizon ("HTFM") as
lender loss payees and waive subrogation against Collateral Agent and HTFM, and all liability policies shall show, or have endorsements showing, Collateral Agent and HTFM, as an additional insured.
All policies (or the loss payable and additional insured endorsements) shall provide that the insurer must give Collateral Agent and HTFM at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Collateral Agent's or HTFM's request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under
any policy shall, at Collateral Agent's or HTFM's option, be payable to Collateral Agent and HTFM on behalf of the Lenders on account of the Obligations. Notwithstanding the foregoing, (a) so
long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to $100,000 with respect to any loss, but not exceeding
$250,000, in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired
property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent and Lenders have been granted a first
priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral
Agent and HTFM, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. If Borrower 


10







 



fails
to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Collateral Agent and HTFM, Collateral Agent or
HTFM may
make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent or HTFM deems prudent. 


        6.6    Operating Accounts.    



        (a)   Maintain
all of Borrower's and each Subsidiary's operating and investment accounts with SVB, other than (i) Borrower's operating accounts in Canada at Royal Bank
of Canada which are subject to a Control Agreement or other appropriate instrument with respect to such accounts to perfect Collateral Agent's Lien in such accounts in accordance with the terms
hereunder and (ii) Tranzyme NSULC's operating accounts in Canada at Royal Bank of Canada (which accounts shall be subject to a Control Agreement or other appropriate instrument with respect to
such accounts to perfect Collateral Agent's Lien in such accounts to the extent required by Section 7.7 hereof). 


        (b)   Provide
Collateral Agent and Lenders five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution
other than Royal Bank of Canada or SVB. In addition, for each Collateral Account that Borrower or any Subsidiary at any time maintains, Borrower or such Subsidiary shall cause the applicable bank or
financial institution (other than Collateral Agent) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to
such Collateral Account to perfect Collateral Agent's and Lenders' Lien in such Collateral Account in accordance with the terms hereunder, which Control Agreement may not be terminated without prior
written consent of Collateral Agent and Lenders. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of Borrower's or such Subsidiary's employees and identified to Collateral Agent and Lenders by Borrower or such Subsidiary as such. 




        6.7    Protection of Intellectual Property Rights.    Borrower shall: (a) protect, defend and maintain the
validity and enforceability of the intellectual property material to the conduct of its business; (b) promptly advise Collateral Agent in writing of material infringements of its intellectual
property of which Borrower is or becomes, or upon the exercise of reasonable diligence should have become, aware; and (c) not allow any intellectual property material to Borrower's business to
be abandoned, forfeited or dedicated to the public without Lenders' written consent. 


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


        6.9    Notices of Litigation and Default.    Borrower will give prompt written notice to Lenders of any litigation or
governmental proceedings pending or threatened (in writing) against Borrower which would reasonably be expected to have a material adverse effect with respect to Borrower. Without
limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any
Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Lenders of such occurrence, which
such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default. 


        6.10    Creation/Acquisition of Subsidiaries.    In the event Borrower or any Subsidiary creates or acquires any
Subsidiary, Borrower and such Subsidiary shall promptly notify Lenders of the creation or 


11







 



acquisition
of such new Subsidiary and take all such action as may be reasonably required by Lenders to cause each such domestic Subsidiary to guarantee the Obligations of Borrower under the Loan
Documents and grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower shall grant and pledge to
Collateral Agent, for the ratable benefit of Lenders, and Lenders a perfected security interest in the stock, units or other evidence of ownership of each. 



        6.11    Further Assurances.    Execute any further instruments and take further action as Lenders or Collateral Agent
reasonably request to perfect or continue Collateral Agent's and Lenders' Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Collateral Agent, within five (5) days
after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental
Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its
Subsidiaries; provided, however, that Borrower shall not be required to deliver any correspondence,
reports, documents or other filings made by Borrower with the United States Food and Drug Administration or corresponding foreign governmental regulatory organizations in the ordinary course of
business. 


        7    NEGATIVE COVENANTS    


        Borrower
shall not, and shall not permit any of its Subsidiaries to, do any of the following without Lenders' prior written consent: 



        7.1    Dispositions.    Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively,
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in
the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens and Permitted Investments; (d) of
non-exclusive licenses for the use of the property, including, without limitation, intellectual property, of Borrower or its Subsidiaries in the ordinary course of business; and
(e) the
entering into of exclusive licenses for the use of the intellectual property of Borrower or its Subsidiaries in the ordinary course of business in connection with joint ventures and corporate
collaborations, provided that any exclusive license of any of Borrower's material intellectual property shall be approved by Borrower's Boards of Directors and subject to a license agreement entered
into in an arm's-length transaction. Notwithstanding the foregoing, Borrower shall be entitled to transfer assets from its Sherbrooke, Quebec facility to its Durham, North Carolina facility. 


        7.2    Changes in Business, Management, Ownership, or Business Locations.    (a) Engage in or permit any of its
Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve;
or (c) (i) have a change in management such that if a Key Person resigns, is terminated, or is no longer actively involved in the management of Borrower in his current position unless either
(A) a replacement officer approved by Borrower's Boards of Directors has been engaged within ninety (90) days after such Key Person's departure from Borrower (with notice of such
engagement provided to Lenders) or (B) within ninety (90) days after such Key Person's departure from Borrower, Borrower has delivered to Lenders a copy of a plan approved by Borrower's
Boards of Directors outlining a course of action with respect to the replacement of such Key Person; (ii) enter into any transaction or series of related transactions in which the stockholders
of Borrower who were not stockholders immediately prior to the first such transaction own more than 50% of the voting stock of Borrower immediately after giving effect to such transaction or related
series of such transactions (other than by the sale of Borrower's equity securities in a public offering or to institutional investors so long as Borrower identifies to Lenders the institutional
investors prior to the closing of the transaction), unless all Obligations (including any applicable Prepayment Fee and the Final Payment) are repaid in full by 


12







 



Borrower
in accordance with Section 2.2(d) hereof prior to or substantially contemporaneously with closing of such transaction and this Agreement is terminated (other than those provisions
which by their terms survive the termination of this Agreement). Borrower shall not, without at least thirty (30) days prior written notice to Lenders: (1) add any new offices or
business locations, including warehouses (unless such new offices or business locations contain less than Ten Thousand Dollars ($10,000) in Borrower's assets or property), (2) change its
jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its
jurisdiction of organization. 


        7.3    Mergers or Acquisitions.    Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, unless all Obligations are repaid in full
(including any applicable Prepayment Fee and the Final Payment) by Borrower in accordance with Section 2.2(d) hereof prior to or substantially contemporaneously with closing of such transaction
and this Agreement is terminated (other than those provisions which by their terms survive the termination of this Agreement). A Subsidiary may merge or consolidate into another Subsidiary (provided
such surviving Subsidiary is a "Borrower" or has provided a secured guaranty hereunder) or into Borrower provided Borrower is the surviving legal entity, and as long as no Event of Default is
occurring prior thereto or arises as a result therefrom. 


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


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


        7.6    Maintenance of Collateral Accounts.    Maintain any Collateral Account except pursuant to the terms of
Section 6.6(b) hereof. 


        7.7    Distributions; Investments.    



        (a)   Pay
any dividends (other than dividends payable solely in common stock) or make any distribution or payment or redeem, retire or purchase any capital stock (other than
repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements or similar plans or repurchases of capital stock for consideration paid in the form of capital
stock pursuant to that certain Amended and Restated Put and Support Agreement dated May 12, 2005, among Borrower and the individuals and entities party thereto), or 


        (b)   directly
or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so; provided, that 



          (i)  Tranzyme
may make direct Investments in Tranzyme-Canada to fund the operating expenses of Tranzyme-Canada; 


         (ii)  Tranzyme-Canada
may make distributions to Tranzyme to fund the operating expenses of Tranzyme; 


        (iii)  Borrower
may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or in exchange thereof; 




13







 


        (iv)  Tranzyme
may make Investments in the capital stock of Tranzyme NSULC for the purpose of indirectly funding the operating expenses of Tranzyme-Canada  provided, that
(1) such Investments shall not exceed $2,000,000 in the aggregate in any
three-month period, (2) Tranzyme NSULC shall use 100% of the proceeds of such Investments as a contribution of capital to Tranzyme-Canada, which contributions to Tranzyme-Canada shall occur as
soon as practicable (and in any event within two (2) Business Days) after receipt by Tranzyme NSULC of the Investment proceeds from Tranzyme and (3) no such Investments shall occur on or
after the date which is one hundred twenty (120) days after the Effective Date unless (A) Borrower notifies the Collateral Agent and the Lenders on or before the date which is one
hundred twenty (120) days after the Effective Date that Borrower has determined, in its sole discretion, that it remains necessary for Tranzyme to utilize Tranzyme NSULC to indirectly fund the
operating expenses of Tranzyme-Canada and (B) on or before the date which is one hundred fifty (150) days after the Effective Date, Borrower shall have caused Tranzyme NSULC to have
(x) delivered to the Collateral Agent and the Lenders a Guaranty of the Obligations substantially in the form of Exhibit E hereto (subject to the review of such Guaranty by Canadian
counsel to Tranzyme NSULC) and (y) taken all steps required by applicable law in order to create and perfect a first priority Lien in favor of the Collateral Agent and the Lenders in and to
each Collateral Account maintained by Tranzyme NSULC, including, without limitation, execution and delivery of a Deed of Hypothec in respect of such Collateral Accounts and Control Agreement(s)
executed by the applicable institution at which such Collateral Accounts are maintained with respect each such Collateral Account; and 


         (v)  Tranzyme
NSULC may make Investments in the capital stock of Tranzyme-Canada for purposes of (1) acquiring common shares of Tranzyme-Canada equal to the number of
shares that may be issued from time to time by Tranzyme and (2) funding the operating expenses of Tranzyme-Canada provided that (A) any such Investment made by means of cash (whether by
capital contribution, acquisition of capital stock, loan, or otherwise) is made in accordance with the terms set forth in the preceding clause (iv); or 




        (c)   make
any dividends or other distributions from Tranzyme-Canada to Tranzyme NSULC, or permit Tranzyme-Canada to redeem any of the capital stock of Tranzyme-Canada held by
Tranzyme NSULC, unless as soon as practicable (and in any event within two (2) Business Days) after receipt by Tranzyme NSULC of any such dividends, redemption proceeds, or other distributions
in respect of such capital stock of Tranzyme-Canada, Tranzyme NSULC shall declare and pay to Tranzyme a dividend or distribution in an amount equal to 100% of the dividend, redemption proceeds, or
other distribution received by Tranzyme NSULC from Tranzyme-Canada. 




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


        7.10    Compliance.    Become an "investment company" or a company controlled by an "investment company", under the
Investment Company Act of 1940, as amended or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable 


14







 



Event
or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be
expected to have a material adverse effect on Borrower's business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. 


        8    EVENTS OF DEFAULT    


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



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


        8.2    Covenant Default.    



        (a)   Borrower
fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.10, or 6.11 or violates any covenant in Section 7; or 


        (b)   Borrower
fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents,
and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period). Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in
subsection (a) above; 




        8.3    Material Adverse Change.    A Material Adverse Change occurs; 



        8.4    Attachment; Levy; Restraint on Business.    



        (a)   (i)
The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under control of Borrower (including a Subsidiary) on
deposit with Lenders or any Lender Affiliate, or (ii) a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency, and the same under
subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided,
however, no Credit Extensions shall be made during any ten (10) day cure period; and 


        (b)   (i)
any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins,
restrains, or prevents Borrower from conducting any part of its business; 



15









 



































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


        8.6    Other Agreements.    There is a default in any agreement to which Borrower is a party with a third party or
parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could have a material adverse effect on Borrower's business. 


        8.7    Judgments.    One or more judgments, orders, or decrees for the payment of money in an amount, individually or
in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall
be rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to
the satisfaction, vacation, or stay of such judgment, order or decree); 


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



        8.9    Subordinated Debt.    A default or breach occurs (and applicable notice and grace periods have expired, if any)
under any agreement between Borrower and any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or Lenders, or any
creditor that has signed such an agreement with Collateral Agent or Lenders breaches any terms of such agreement in any material respect; or 


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



        9    RIGHTS AND REMEDIES    


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



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


        (b)   stop
advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or Lenders; 


        (c)   settle
or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent and/or Lenders consider advisable, notify
any Person owing 



16







 




Borrower
money of Collateral Agent's and Lenders' security interest in such funds, and verify the amount of such account; 


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


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


        (f)    ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Collateral Agent and Lenders are hereby granted a
non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and,
in connection with Collateral Agent's or Lenders' exercise of their rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Collateral Agent for the
benefit of the Lenders; 


        (g)   place
a "hold" on any account maintained with Collateral Agent or Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral; 


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


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




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


        9.3    Protective Payments.    If Borrower fails to obtain the insurance called for by Section 6.5 or fails to
pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or 


17







 



make
such payment, and all amounts so paid by Collateral Agent are Lenders' Expenses and immediately due and payable, bearing interest at the then highest applicable rate, and secured by the
Collateral. Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent's waiver of any Event of Default. 


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



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



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


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


        10    NOTICES    


        All
notices, consents, requests, approvals, demands, or other communication (collectively, "Communication") by any party to this Agreement
or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days
after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail (if an email
address is specified herein) or facsimile transmission; (c) one (1) Business 


18







 



Day
after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to
be notified and sent to the address, facsimile number, or email address indicated below. Either Collateral Agent, Lender or Borrower may change its address or facsimile number by giving the other
party written notice thereof in accordance with the terms of this Section 10. 

 






 



				
	 	If to Borrower:	 	Tranzyme, Inc.

4819 Emperor Blvd., Suite 400

Durham, North Carolina 27703

Attention: Richard I. Eisenstadt

Fax: (919) 313-4700

Email: reisenstadt@tranzyme.com
	
 	
with a copy to:	
 	
Hutchison Law Group PLLC

5410 Trinity Road, Suite 400

Raleigh, NC 27607

Attention: Justyn J. Kasierski

Fax: (919) 829-9696

Email: jkasierski@hutchlaw.com
	
 	
and to:	
 	
Ogilvy Renault LLP

1 Place Ville Marie, Suite 2500

Montreal, Quebec

Canada H3B 1R1

Attention: Elliot Shapiro

Fax: (514) 286-5474

Email: eshapiro@oglivyrenault.com
	
 	
If to Collateral Agent:	
 	
Oxford Finance Corporation

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: General Counsel

Fax: (703) 519-5225
	
 	
if to Horizon:	
 	
Compass Horizon Funding Company LLC

76 Batterson Park Road

Farmington, Connecticut 06032

Attention: Legal Department

Fax: (860) 676-8655

Email: jay@horizontechfinance.com
	
 	
with a copy to:	
 	
Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attn: David A. Ephraim, Esquire

Fax: (617) 880-3456

Email: DEphraim@riemerlaw.com




 

         11    CHOICE OF LAW, VENUE AND JURY TRIAL
WAIVER    


        New
York law governs the Loan Documents without regard to principles of conflicts of law. Borrower, Lenders and Collateral Agent each submit to the exclusive jurisdiction of the State
and Federal courts in New York. Notwithstanding the foregoing, nothing in this Agreement shall be deemed to operate to preclude Collateral Agent or any Lender from bringing suit or taking other legal
action 


19







 

in
any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Collateral Agent and Lenders. Borrower
expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal
jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal
service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail
addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower's actual receipt thereof
or three (3) days after deposit in the U.S. mails, proper postage prepaid. 


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


        12    GENERAL PROVISIONS    


        12.1    Successors and Assigns.    This Agreement binds and is for the benefit of the successors and permitted assigns
of each party. Borrower may not assign this Agreement or any rights or obligations under it without Collateral Agent's and Lenders' prior written consent (which may be granted or withheld in
Collateral Agent's and Lenders' discretion). Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of,
or any interest in, Lenders' obligations, rights, and benefits under this Agreement and the other Loan Documents. Borrower hereby authorizes and directs Lender, for and on behalf of the Borrower, to
maintain a record of ownership of the Notes and any interest therein, which record, or "book-entry system", shall identify the owner or owners of the Notes and any interests therein.
Notwithstanding any other provision of this Agreement or the Loan Documents, the right to the principal of, and stated interest on, the Notes may be transferred only through such
book-entry system. 


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


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


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


        12.5    [Reserved].    


        12.6    Amendments in Writing; Integration.    All amendments to this Agreement must be in writing signed by
Collateral Agent, Lenders and Borrower. This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or 


20







 



agreements.
All prior agreements, term sheets, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents. 


        12.7    Counterparts.    This Agreement may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 



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


        12.9    Confidentiality.    In handling any confidential information of Borrower, Lenders and Collateral Agent shall
exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Lenders' and Collateral Agent's Subsidiaries or
Affiliates; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Lenders and Collateral Agent shall use commercially reasonable efforts to
obtain such prospective transferee's or purchaser's agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to regulators or as
otherwise required in connection with an examination or audit; (e) as Collateral Agent considers appropriate in exercising remedies under the Loan Documents; and (f) to third party
service providers of Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with Lenders and Collateral Agent with terms no less restrictive than
those contained herein. Confidential information does not include information that either: (i) is in the public domain or in Lenders' and/or Collateral Agent's possession when disclosed to
Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to Lenders and/or Collateral Agent; or (ii) is disclosed to Lenders and/or Collateral Agent by a third
party, if Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information. 



        Collateral
Agent may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis, so
long as Collateral Agent does not disclose Borrower's identity or the identity of any person associated with Borrower unless otherwise expressly permitted by this Agreement. The provisions of the
immediately preceding sentence shall survive the termination of this Agreement. 




        12.10    Right of Set Off.    Borrower hereby grants to Collateral Agent and to each Lender, a Lien, security interest
and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or Lenders or any entity under the control of Collateral Agent or Lenders (including an Collateral
Agent affiliate) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or Lenders may set off the
same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND
ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 


21







 

        12.11    Borrower Liability.    Each Borrower hereunder shall be obligated to repay all Credit Extensions made
hereunder, regardless of which Borrower actually receives the proceeds of such Credit Extension, as if each Borrower hereunder directly received all
Credit Extensions. Each Borrower waives any
suretyship defenses available to it under the Code or any other applicable law. Each Borrower waives any right to require Collateral Agent or the Lenders to: (i) proceed against any Borrower or
any other Person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Collateral Agent or the Lenders may exercise or not exercise any right or remedy it has
against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower's liability. Notwithstanding any other
provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to
the rights of Collateral Agent and the Lenders under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights
that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement
or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in
contravention of this Section, such Borrower shall hold such payment in trust for Collateral Agent and such payment shall be promptly delivered to Collateral Agent for application to the Obligations,
whether matured or unmatured. 


        13    DEFINITIONS    


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



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


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


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


        "Agreement" is defined in the preamble hereof. 


        "Amortization Date" is August 1, 2011. 


        "Basic Rate" is the per annum rate of interest (based on a year of 360 days) equal to the greater of (i) 10.75% and
(ii) the sum of (a) the three-month U.S. LIBOR rate reported in the Financial Times three (3) Business Days prior to the applicable
Funding Date, plus (b) 9.50%. 


        "Borrower" is defined in the preamble hereof. 


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


        "Borrowing Resolutions" are, with respect to any Person, those resolutions adopted by such Person's Board of Directors and delivered by
such Person to Collateral Agent approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together 



22







 




with
a certificate executed by its secretary on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan
Documents to which it is a party, (b) that attached as Exhibit A to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing
and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents on
behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Collateral Agent and Lenders may conclusively rely on such certificate unless and until
such Person shall have delivered to Collateral Agent a further certificate canceling or amending such prior certificate. 


        "Business Day" is any day that is not a Saturday, Sunday or any days that are recognized bank holidays in the United States, North
Carolina and Virginia, and any other days on which Collateral Agent is closed. 



        "Cash Equivalents" are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or
any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and
having the highest rating from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., and (c) certificates of deposit issued maturing no more than one
(1) year after issue. For the avoidance of doubt, the direct purchase by Borrower, co-borrower, or any subsidiary of Borrower of any Auction Rate Securities, or purchasing
participations in, or entering into any type of swap or other derivative transaction (other than currency option agreements relating to British Pounds Sterling, Euros or Canadian Dollars entered into
by Borrower in the ordinary course of business and not for speculation, provided that the aggregate outstanding notional amount of such currency options shall not exceed $2,000,000 at any time), or
otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower, co-borrower, or any subsidiary of
Borrower shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this agreement governing Permitted
Investments. Notwithstanding the foregoing, Cash Equivalents does not include and each Borrower and Subsidiary is prohibited from purchasing, purchasing participations in, entering into any type of
swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal
bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an Auction Rate Security. 


        "Claims" are defined in Section 12.2. 


        "Code" is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York provided,
that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such
term contained in Article 1 or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority
of, or remedies with respect to, Collateral Agent's and Lenders' Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the New York, the term
"Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions. 


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



        "Collateral Account" is any Deposit Account, Securities Account, or Commodity Account. 



23







 

        "Collateral Agent" means, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of
the Lenders. 


        "Commitment Percentage" is set forth in Schedule 1.1, as amended from time to time. 


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


        "Communication" is defined in Section 10. 


        "Compliance Certificate" is that certain certificate in the form attached hereto as  Exhibit C. 



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


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


        "Credit Extension" is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower's benefit. 


        "Deed of Hypothec" means the Deed of Hypothec on a Universality of Movable Property made by Tranzyme-Canada in favor of Lenders. 


        "Default Rate" is defined in Section 2.3(b). 



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


        "Designated Deposit Account" is Borrower's deposit account, account number 3300633969, maintained with SVB. 


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


        "Effective Date" is defined in the preamble of this Agreement. 


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


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


        "Event of Default" is defined in Section 8. 



24









 



































 



        "Existing Oxford and SVB Indebtedness" means the indebtedness of Borrower to Oxford and SVB in the aggregate principal and interest
outstanding amount as of the Effective Date of $3,591,674.57 outstanding pursuant to the terms of a Loan and Security Agreement dated December 3, 2008 among Borrower, Oxford and SVB . 


        "Final Payment" is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest)
due on the earlier to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d),
equal to four percent (4.00%) of the original principal amount of the Term Loans, payable to Lenders in accordance with their respective Pro Rata Shares. 


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


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


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


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


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


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


        "Indemnified Person" is defined in Section 12.2. 


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


        "Inventory" is all "inventory" as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation all merchandise, 



25







 




raw
materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returned goods and any documents of title representing any of the above. 


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


        "Key Person" is Borrower's Chief Executive Officer and Borrower's Chief Financial Officer. 


        "Lender" is any one of the Lenders. 


        "Lenders" shall mean the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement
pursuant to Section 12.1. 


        "Lenders' Expenses" are all Collateral Agent's and Lenders' audit fees and expenses, costs, and expenses (including reasonable attorneys'
fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees and filing fees) for preparing, amending, negotiating, recording, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower. 


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


        "Loan Documents" are, collectively, this Agreement, the Warrants, the Perfection Certificate, any note, or notes or guaranties executed by
Borrower, any note, or notes or guaranties or hypothecs or securities executed by Borrower or any Guarantor, and any other present or future agreement between Borrower and/or for the benefit of
Lenders and Collateral Agent in connection with this Agreement, all as amended, restated, or otherwise modified. 


        "Material Adverse Change" is (a) a material impairment in the perfection or priority of Collateral Agent's and/or Lenders' Lien in
the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) or prospects of Borrower; or (c) a
material impairment of the prospect of repayment of any portion of the Obligations. 


        "Maturity Date" is, for each Term Loan, the date which is twenty-nine (29) months after the Amortization Date with
respect to such Term Loan. 


        "Obligations" are Borrower's obligation to pay when due any debts, principal, interest, Lenders' Expenses, Final Payment, Prepayment Fee,
and other amounts Borrower owes Lenders now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to Lenders and/or Collateral Agent, and the performance of
Borrower's duties under the Loan Documents. 


        "Operating Documents" are, for any Person, such Person's formation documents, as certified with the Secretary of State of such Person's
state of formation on a date that is no earlier than 30 days prior to the Effective Date, and (a) if such Person is a corporation, its bylaws in current form, (b) if such Person
is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto. 



26







 

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



        "Payment Date" is the first day of each calendar month. 


        "Perfection Certificate" is defined in Section 5.1. 


        "Permitted Indebtedness" is: 



        (a)   Borrower's
Indebtedness to Lenders and Collateral Agent under this Agreement and the other Loan Documents; 



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


        (c)   Subordinated
Debt; 


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


        (e)   Indebtedness
secured by Permitted Liens described in clause (c) of the definition thereof, provided that such Indebtedness does not exceed $250,000 in the
aggregate in any fiscal year of Borrower and provided such Indebtedness does not exceed the lesser of cost or fair market value of the Equipment financed with such Indebtedness; 



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


        (g)   other
unsecured Indebtedness in an aggregate outstanding principal amount at any time not to exceed One Hundred Thousand Dollars ($100,000); and 


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




        "Permitted Investments" are: 



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


        (b)   Cash
Equivalents. 




        "Permitted Liens" are: 



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


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


        (c)   purchase
money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment or (ii) existing on Equipment
when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment; 


        (d)   Liens
of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only
to Inventory, securing liabilities in the aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) and which are not delinquent or remain payable without penalty 




27







 





or
which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; 


        (e)   bankers'
liens, rights of setoff and Liens in favor of financial institutions incurred made in the ordinary course of business arising in connection with Borrower's
deposit accounts or securities accounts held at such institutions to secure payment of fees and similar costs and expenses subject to Borrower's compliance with Section 6.6(b) hereof; 



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


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


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


        (i)    non-exclusive
licenses of intellectual property granted to third parties in the ordinary course of business; and 



        (j)    exclusive
licenses of intellectual property granted to third parties in the ordinary course of business in connection with joint ventures and corporate collaborations
provided that any exclusive license of
any of Borrower's material intellectual property shall be approved by Borrower's Board of Directors and subject to a license agreement entered into in an arm's-length transaction. 




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



        "Prepayment Fee" shall be an additional fee payable to Collateral Agent, to be shared between the Lenders pursuant to their respective Pro
Rata Shares, in amount equal to: 



	(i)
	for
a prepayment made on or prior to September 30, 2011, six percent (6.0%) of the principal amount of the outstanding Term Loans as of the date of
such prepayment; or



	(ii)
	for
a prepayment made after September 30, 2011, and on or prior to September 30, 2012, three percent (3.0%) of the principal amount of the
outstanding Term Loans as of the date of such prepayment; and



	(iii)
	for
a prepayment made after September 30, 2012, and on or prior to September 30, 2013, two percent (2.0%) of the principal amount of the
outstanding Term Loans as of the date of such prepayment; and



	(iii)
	for
a prepayment made after September 30, 2013, and prior to the Maturity Date, one percent (1.0%) of the principal amount of the outstanding Term
Loans as of the date of such prepayment. 




28







 

        "Pro Rata Share" means, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined
by dividing the amount of Term Loans made by such Lender by the aggregate amount of all outstanding Term Loans. 


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


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


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


        "Secured Promissory Note" is defined in Section 2.4. 



        "Secured Promissory Note Record" is a record maintained by each Lender with respect to the outstanding Obligations and credits made
thereto. 


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


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


        "Subsidiary" means, with respect to any Person, any Person of which more than 50.0% of the voting stock or other equity interests (in the
case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or one or more of Affiliates of such Person. 


        "SVB" means Silicon Valley Bank, a California corporation. 


        "Term Loan" is defined in Section 2.2(a) hereof. 


        "Term Loan Commitment" means, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on  Schedule 1.1. "Term Loan Commitments" means the aggregate amount of such commitments of all
Lenders. 


        "Transfer" is defined in Section 7.1. 



        "Tranzyme NSULC" means Tranzyme Holdings ULC, an unlimited liability company organized under the laws of Nova Scotia, Canada. 


        "Warrants" are those certain Warrants to Purchase Stock dated as of the Effective Date executed and issued by Tranzyme in favor of each
Lender. 



29







 

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

 






 



					
	BORROWER:	 	 
	
 TRANZYME, INC.	
 	

 
	
 By	
 	
/s/ Richard I. Eisenstadt







 	
 	

 
	Name:	 	Richard I. Eisenstadt







 	 	 
	Title	 	VP, Finance & CFO







 	 	 
	
 TRANZYME PHARMA INC.	
 	

 
	
 By	
 	
/s/ Richard I. Eisenstadt







 	
 	

 
	Name:	 	Richard I. Eisenstadt







 	 	 
	Title	 	VP, Finance & CFO







 	 	 
	

LENDERS AND COLLATERAL AGENT:	
 	

 
	
 OXFORD FINANCE CORPORATION, as Collateral Agent and as a Lender	
 	

 
	
 By	
 	
/s/ TA Lex







 	
 	

 
	Name:	 	TA Lex







 	 	 
	Title:	 	COO







 	 	 
	
 COMPASS HORIZON FUNDING COMPANY LLC, as a Lender	
 	

 
	
 By	
 	
/s/ Robert D. Pomeroy, Jr.







 	
 	

 
	Name:	 	Robert D. Pomeroy, Jr.







 	 	 
	Title:	 	Chief Executive Officer







 	 	 



 

 30








 



































 



 
 

  SCHEDULE 1.1
  LENDERS AND COMMITMENTS    
    

 










								
	Lender



 
	 	Commitment 	 	Commitment

Percentage 	 
	 Oxford Finance Corporation
	 	$	8,000,000	 	 	61.54	%
	 Compass Horizon Funding Company LLC
	 	$	5,000,000	 	 	38.46	%
	 	 	 	 	 	 
	 TOTAL
	 	$	13,000,000	 	 	100.00	%
	 	 	 	 	 	 




 

 1







 
 
 

  EXHIBIT A    
    


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



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


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


        Notwithstanding
the foregoing, the Collateral does not include any of the following, whether now owned or hereafter acquired: any copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative work, whether published or unpublished; any patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same; trademarks, trade names, service marks, mask works, rights of use of any name
or domain names and, to the extent permitted under applicable law, any applications therefor, whether registered or not; and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions; provided, however, the Collateral shall include all
Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing and any claims for damage by way of any past, present, or future
infringement of any of the foregoing. 


2








 








































 
 

  EXHIBIT B
  Loan Payment/Advance Request Form
  
    DISBURSEMENT LETTER    
    


        The undersigned, being the duly elected and
acting                                    of  TRANZYME, INC., a Delaware corporation ("Tranzyme"), and TRANZYME
PHARMA INC., a Canadian corporation ("Tranzyme-Canada") (Tranzyme and Tranzyme-Canada are referred to herein individually
and collectively, jointly and severally, solidarily, as "Borrower"), does hereby certify to OXFORD FINANCE
CORPORATION, ("Oxford" and "Lender"), as collateral agent (the
"Collateral Agent") and COMPASS HORIZON FUNDING COMPANY LLC
("Horizon") in connection with that certain Loan and Security Agreement dated on or about the date hereof by and between Borrower and Collateral Agent
(the "Loan Agreement"; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that: 



        1.     The
representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material
respects as of the date hereof. 


        2.     No
event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document. 



        3.     Borrower
and Guarantor are in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement. 


        4.     All
conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have been satisfied or waived by
Collateral Agent. 


        5.     No
Material Adverse Change has occurred. 


        6.     The
proceeds for the Term Loan shall be disbursed as follows: 



 






 



						
	 Disbursement from Oxford:
	 	 	 	 
	 	 Loan Amount
	 	$	8,000,000	 
	 	 —Deposit Received
	 	 	 	 
	 	 Less:
	 	 	 	 
	 	 —Existing Debt Payoff
	 	 	 	 
	 	 —Oxford's Legal Fees
	 	 	 	 
	 	 —Oxford's Facility Fee
	 	 	 	 




 

  


 






 



					
	 





 Net Proceeds due from Oxford:
	 	 	 	 
	                     
	 	$	                	 
	 





                    
	 	$	                	 
	                     
	 	$	                	 




 

  


 






 



						
	 Disbursement from Horizon:
	 	 	 	 
	 	 Loan Amount
	 	$	5,000,000	 
	 	 —Deposit Received
	 	 	 	 
	 	 Less:
	 	 	 	 
	 	 —Existing Debt Payoff
	 	 	 	 
	 	 —Horizon's Legal Fees
	 	 	 	 
	 	 —Horizon's Facility Fee
	 	 	 	 




 

 1







 
 
 


 










					
	 





 Net Proceeds due from Horizon:
	 	 	 	 
	                     
	 	$	                	 
	 





                    
	 	$	                	 
	                     
	 	$	                	 




 

         The
aggregate net proceeds of the Term Loan in the amount of $                    shall be transferred to Borrower's account as follows: 




Account
Name:

Bank Name:

Bank Address:

Account Number:

ABA Number: 





Dated:
September     , 2010 

 






 



					
	 BORROWER:	 	 
	

TRANZYME, INC.	
 	

 
	
 By	
 	
  








 	
 	

 
	Name:	 	 







 	 	 
	Title:	 	  







 	 	 
	
 TRANZYME PHARMA INC.	
 	

 
	
 By	
 	
  







 	
 	

 
	Name:	 	 







 	 	 
	Title:	 	  







 	 	 
	
 LENDERS AND COLLATERAL AGENT:
	

OXFORD FINANCE CORPORATION, as Collateral Agent and as a Lender
	
 By	
 	
 







 	
 	

 
	Name:	 	  







 	 	 
	Title:	 	  








 	 	 
	
 COMPASS HORIZON FUNDING COMPANY LLC, as a Lender
	
 By	
 	
  







 	
 	

 
	Name:	 	 







 	 	 
	Title:	 	  







 	 	 



 

 2








 








































 
 

  EXHIBIT C—COMPLIANCE CERTIFICATE    
    

 






 



				
	 	TO:	 	Oxford Finance Corporation, as Collateral Agent
	
 	
 FROM:	
 	
Tranzyme, Inc. and Tranzyme Pharma Inc.



 

         The
undersigned authorized officer of TRANZYME, INC., a Delaware corporation
("Tranzyme"), and TRANZYME PHARMA INC., a Canadian corporation
("Tranzyme-Canada") (Tranzyme and Tranzyme-Canada are referred to herein individually and collectively, jointly and severally, solidarily, as
"Borrower") hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement among Borrower, Collateral Agent, and
the Lenders (the "Agreement"), 



          (i)  Borrower
is in complete compliance for the period
ending                                    with all required covenants
except as noted below; 


         (ii)  There
are no Events of Default, except as noted below; 


        (iii)  Except
as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date except as
noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof;
and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date. 


        (iv)  Borrower,
and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state, and local
taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement; 


         (v)  No
Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously
provided written notification to Collateral Agent 




        Attached
are the required documents, if any, supporting our certification(s). The Officer on behalf of Borrower further certifies that the attached financial statements 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 and except, in the
case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements. Capitalized terms used but not
otherwise defined herein shall have the meanings given them in the Agreement. 


3







 

        Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under "Complies" column.

 






 



													
	 
	 	Reporting Covenant 	 	Requirement 	 	 
	 	Complies 
	1)	 	Financial statements	 	Monthly within 30 days	 	 	 	Yes	 	No	 	N/A
	
2)	
 	
Annual (CPA Audited) statements	
 	
Within 180 days after Fiscal Year End	
 	
 	
 	
Yes	
 	
No	
 	
N/A
	
3)	
 	
Annual Financial Projections/Budget (prepared on a monthly basis)	
 	
Annually (w/n 10 days of FYE). and when revised	
 	
 	
 	
Yes	
 	
No	
 	
N/A
	
4)	
 	
A/R & A/P agings	
 	
If applicable	
 	
 	
 	
Yes	
 	
No	
 	
N/A
	
5)	
 	
8-K, 10-K and 10-Q Filings	
 	
If applicable	
 	
 	
 	
Yes	
 	
No	
 	
N/A
	
6)	
 	
IP Report	
 	
If applicable	
 	
 	
 	
Yes	
 	
No	
 	
N/A
	
7)	
 	
Total amount of Borrower's cash and cash equivalents at the last day of the measurement period	
 	
 	
 	
$    	
 	
 	
 	
 	
 	
 
	
8)	
 	
 	
 	
Month	
 	
QTD	
 	
YTD	
 	
 	
 	
 
	

 	
 	
 Deposit and Securities Accounts	
 	
 (Please list all accounts; attach separate sheet if additional space needed)




 

 4







 




 










															
	 
	 	Bank 	 	Account Number 	 	 
	 	New Account? 	 	Acct Control

Agmt in place?

(only required for

accounts in US) 
	1)	 	Silicon Valley Bank	 	 	 	 	 	Yes	 	No	 	Yes	 	No
	
2)	
 	
Royal Bank of Canada	
 	
 	
 	
 	
 	
Yes	
 	
No	
 	
Yes	
 	
No
	
3)	
 	
 	
 	
 	
 	
 	
 	
Yes	
 	
No	
 	
Yes	
 	
No
	
4)	
 	
 	
 	
 	
 	
 	
 	
Yes	
 	
No	
 	
Yes	
 	
No
	
5)	
 	
 	
 	
 	
 	
 	
 	
Yes	
 	
No	
 	
Yes	
 	
No
	
6)	
 	
 	
 	
 	
 	
 	
 	
Yes	
 	
No	
 	
Yes	
 	
No




 

  


 






 



															
	 	 	 Financial Covenants	 	Requirement	 	Actual	 	 	 	 	 	Compliance	 	 
	

 	
 	
N/A	
 	
$                	
 	
$        	
 	
 	
 	

 	
 	

 	
 	

 
	

 	
 	
 Other Matters	
 	
 	
 	
 	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	
Have there been any changes in management?	
 	
Yes	
 	
No	
 	

 
	

 	
 	
Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Agreement?	
 	
Yes	
 	
No	
 	

 
	

 	
 	
Have there been any new or pending claims or causes of action against Borrower that involve more than $200,000?	
 	
Yes	
 	
No	
 	

 
	

 	
 	
 Exceptions	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	
Please explain any	
 	









 
	 	 	exceptions with respect to	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	the certification above: (If	 	







 
	 	 	no exceptions exist, state	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	"No exceptions." Attach	 	







 
	 	 	separate sheet if additional	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	space needed.)	 	







 




 

  


 






 



													
	 	 	 	 	 	 	 LENDERS USE ONLY	 	 	 	 
	
 TRANZYME, INC.

	
 	







  DATE	
 	

 	
 	

 	
 	

 	
 	

 
	TRANZYME PHARMA INC.	 	 	 	 	 	 	 	 	 	 
	
 By:	
 	








 	
 	
 	
 	
Received by:	
 	








 	
 	
Verified by:	
 	








 
	
 Name:	
 	








 	
 	
 	
 	
Date:	
 	








 	
 	
Date:	
 	








 
	
 Title:	
 	








 	
 	
 	
 	
Compliance Status	
 	
Yes	
 	
No




 

 5








 








































 
 

  EXHIBIT D
  
    SECURED PROMISSORY NOTE    
    

 






 



			
	$                	 	Dated: September     ,2010




 

         FOR
VALUE RECEIVED, the undersigned, TRANZYME, INC., a Delaware corporation
("Tranzyme"), and TRANZYME PHARMA INC., a Canadian corporation
("Tranzyme-Canada") (Tranzyme and Tranzyme-Canada are referred to herein individually and collectively, jointly and severally, solidarily, as
"Borrower"), HEREBY PROMISES TO PAY to the order of [Compass/ OXFORD] ("Lender")
the principal amount of                        Dollars ($            )
or such lesser amount as shall equal the outstanding principal balance of the Term Loan made to Borrower by Lender, plus interest on
the aggregate unpaid principal amount of Term Loan, at the rates and in accordance with the terms of the Loan and Security Agreement by and between Borrower and Oxford Finance Corporation, as
Collateral Agent, and the Lenders, including without limitation, Oxford Finance Corporation, and Compass Horizon Funding Company LLC (as amended, restated, supplemented or otherwise modified
from time to time, the "Loan Agreement"); capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Loan Agreement. If not sooner paid, the entire principal
amount and all accrued interest hereunder and under the Loan Agreement shall be due and payable on Term Loan Maturity Date as set forth in the Loan Agreement. 



        Borrower
agrees to pay any initial partial monthly interest payment from the date of this Note to the first Payment Date on the first Payment Date. 


        Principal,
interest and all other amounts due with respect to the Term Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and
this Secured Promissory Note. The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this Note. 



        The
Loan Agreement, among other things, (a) provides for the making of a secured Term Loan to Borrower, and (b) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events. 


        This
Note may not be prepaid except as set forth in Section 2.2(c) and Section 2.2(d) of the Loan Agreement. 


        This
Note and the obligation of Borrower to repay the unpaid principal amount of the Term Loan, interest on the Term Loan and all other amounts due Lender under the Loan Agreement is
secured under the Loan Agreement. 


        Presentment
for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are
hereby waived. 


        Borrower
shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys' fees and costs, incurred by Lender in the enforcement or attempt to enforce any
of Borrower's obligations hereunder not performed when due. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 



        Note Register; Ownership of Note.    The ownership of an interest in this Note shall be registered on a record of ownership maintained by
Lender or its
agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record
of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of
ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity. 


6







 

        IN
WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof. 

 






 



					
	BORROWER:	 	 
	
 TRANZYME, INC.	
 	

 
	
 By	
 	
 







 	
 	

 
	Name:	 	  







 	 	 
	Title:	 	 







 	 	 
	
 TRANZYME PHARMA INC.	
 	

 
	
 By	
 	
 







 	
 	

 
	Name:	 	  







 	 	 
	Title:	 	 







 	 	 



 

 7








 








































 
 

  EXHIBIT E
  
    FORM OF UNCONDITIONAL GUARANTY    
    


 UNCONDITIONAL GUARANTY  



        This continuing Unconditional Guaranty ("Guaranty") is entered into as
of                        , 2010, by Tranzyme Holdings ULC
("Guarantor"), in favor of Compass Horizon Funding Company LLC ("Horizon") and Oxford Finance Corporation ("Oxford"). 


 
 

RECITALS    
    


        A.    Concurrently
herewith, Horizon and Oxford as lenders (collectively, "Lenders"), Tranzyme, Inc., a Delaware corporation, and Tranzyme Pharma Inc., a Canadian
corporation, as borrowers (collectively, "Borrowers") and Oxford , as agent for the Lenders, are entering into that certain Loan and Security Agreement dated as of September       ,
2010, (as amended, restated, or otherwise modified from time to time, the "Loan Agreement") pursuant to which Lenders agreed to make certain advances of money and to extend certain financial
accommodations to Borrowers (collectively, the "Loans"), subject to the terms and conditions set forth therein. Capitalized terms used but not otherwise defined herein shall have the meanings given
them in the Loan Agreement. 


        B.    In
consideration of the agreement of Lenders to make the Loans to Borrowers under the Loan Agreement, Guarantor is willing to guaranty the full payment and performance by
Borrowers of all of their respective obligations thereunder and under the other Loan Documents, all as further set forth herein. 


        NOW, THEREFORE, to induce Lenders to enter into the Loan Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound, Guarantor hereby represents, warrants, covenants and agrees as follows: 



        Section 1.    Guaranty.    


        1.1   Unconditional
Guaranty of Payment.    In consideration of the foregoing, Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Lenders,
the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all Obligations. The liability of Guarantor under this Guaranty is unlimited and
extends to the full amount of the Obligations. Guarantor agrees that it shall execute such other documents or agreements and take such action as Lenders shall reasonably request to effect the purposes
of this Guaranty. 


        1.2   Solidarity.    Guarantor
shall be bound to Lenders as solidary surety. As a result of the foregoing, Guarantor, Borrowers and any other person(s) presently or
in the future guaranteeing any of the Obligations towards Lenders are and shall be obliged to Lenders for the same thing such that each of Guarantor, Borrowers and any other person(s) presently or in
the future guaranteeing any or all of the Obligations may be compelled separately to pay or fulfill all of the Obligations. 


        1.3   Separate
Obligations.    These obligations are independent of Borrowers' obligations and separate actions may be brought against Guarantor (whether action is
brought against Borrowers or whether Borrowers are joined in the action). 


        Section 2.    Representations and Warranties.    


        Guarantor
hereby represents and warrants that: 



        (a)   Guarantor
has all requisite power and authority to execute and deliver this Guaranty and each Loan Document executed and delivered by Guarantor pursuant to the Loan
Agreement or this Guaranty and to perform its obligations thereunder and hereunder. 



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        (b)   The
execution, delivery and performance by Guarantor of this Guaranty (i) do not contravene any law or any contractual restriction binding on or affecting
Guarantor or by which Guarantor's property may be affected; (ii) do not require any authorization or approval or other action by, or any notice to or filing with, any governmental authority or
any other Person under any indenture, hypothec, mortgage, deed of trust, lease, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of its property is bound,
except such as have been obtained or made; and (iii) do not result in the imposition or creation of any Lien upon any property of Guarantor. 


        (c)   This
Guaranty is a valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be
subject to or limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally. 


        (d)   To
the Guarantor's knowledge, there is no action, suit or proceeding affecting Guarantor pending or threatened before any court, arbitrator, or governmental authority,
domestic or foreign, which may have a material adverse effect on the ability of Guarantor to perform its obligations under this Guaranty. 


        (e)   Guarantor's
obligations hereunder are not subject to any offset or defense against Lenders or Borrowers of any kind. 



        (f)    To
ensure the legality, validity, enforceability or admissibility into evidence of this Guaranty in the jurisdiction in which Guarantor is domiciled, it is not necessary
that (i) this Guaranty be filed or recorded with any court or other authority in such jurisdiction, (ii) any other filings, notices, authorizations, approvals be obtained or other
actions taken, or (iii) any stamp or similar tax be paid on or with respect to this Guaranty, or, if any of the foregoing actions are necessary, they have been duly taken. 


        (g)   Neither
Guarantor nor its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) under applicable law. 


        (h)   [Reserved].



        (i)    Guarantor
covenants, warrants, and represents to Lenders that all representations and warranties contained in this Guaranty shall be true at the time of Guarantor's
execution of this Guaranty, and shall continue to be true so long as this Guaranty remains in effect. Guarantor expressly agrees that any misrepresentation or breach of any warranty whatsoever
contained in this Guaranty shall be deemed material. 




        Section 3.    General Waivers.    Guarantor expressly waives: 



        (a)   Any
right to require Lenders to (i) proceed against Borrowers or any other person; (ii) proceed against or exhaust any security or (iii) pursue any
other remedy. Lenders may exercise or not exercise any right or remedy they have against Borrowers or any security they hold (including the right to foreclose by judicial or nonjudicial sale) without
affecting Guarantor's liability hereunder. 


        (b)   Any
defenses from disability or other defense of Borrowers or from the cessation of Borrowers' liabilities. 


        (c)   The
benefit of discussion, such that Lenders shall not be bound to exercise, continue or exhaust any recourses against Borrowers, any other persons or any security or
guarantees from which Lenders may at any time benefit, before being entitled to seek payment or fulfillment of the Obligations from Guarantor. 



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        (d)   The
benefit of division, such that Guarantor shall not be entitled to require that Lenders divide their claims for the Obligations and to reduce their claims to the
amount of any share or portion of Guarantor, Borrowers or other guarantors. 


        (e)   Any
setoff, defense or counterclaim against Lenders. 


        (f)    Any
defense from the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrowers. Until Borrowers' obligations to
Lenders have been paid in full and all of Borrowers' financing arrangements with Bank have been terminated, Guarantor has no right of subrogation or reimbursement or other rights against Borrowers. 


        (g)   Any
right to enforce any remedy that Lenders have against Borrowers. 


        (h)   Any
rights to participate in any security held by Lenders. 


        (i)    Any
demands for performance, notices of nonperformance or of new or additional indebtedness incurred by Borrowers to Lenders. Guarantor is responsible for being and
keeping itself informed of Borrowers' financial condition. 



        (j)    The
benefit of any act or omission by Lenders which directly or indirectly results in or aids the discharge of Borrowers from any of the Obligations by operation of law
or otherwise. 




        Section 4.    Waiver re: Subrogation.    The obligations of Guarantor hereunder shall
be neither extinguished, lessened nor affected by any loss of or any unenforceability of any other guarantees or security from which Lenders may, presently or in the future, benefit in connection with
the Obligations, whether such loss or unenforceability be caused or occasioned by any act or omission (negligent or otherwise) of Lenders or any person(s) for whom same may be responsible.
Notwithstanding any provision of law to the contrary, the obligations of Guarantor hereunder shall be neither extinguished, lessened nor affected by any act or omission resulting in the inability of
Guarantor to be subrogated in any rights, hypothecs or other security benefiting Lenders for the Obligations. Lenders shall not be under any obligation whatsoever in favour of Guarantor to marshal,
exercise or pursue any other guarantees or security or any monies or properties which Lenders may be entitled to receive or to which they may have a claim and Guarantor hereby waives the benefits, if
any, of any right to assert any defenses in connection therewith. 


        Section 5.    Continuing Nature.    This Guaranty shall be a continuing guaranty, shall
cover all of the Obligations and shall apply to and guarantee any ultimate balance of the Obligations due or remaining unpaid or unfulfilled to Lenders. This Guaranty is and shall continue to be in
addition to and not in substitution of, any other guarantees or other security which Lenders may, presently or in the future, hold and/or enjoy in connection with the Obligations. 


        Section 6.    Certain rights of Lenders.    Lenders shall be entitled, as they see fit
to: 



        (a)   Grant
time, renewals, extensions, indulgences, releases and discharges to Borrowers or others and/or of all security or guarantees; 



        (b)   Take
security or other guarantees from Borrowers or others and give the same and any or all existing security or guarantees to Borrowers or others. 


        (c)   Abstain
from taking security or guarantees from Borrowers or others or from perfecting security or guarantees of Borrowers or others; 


        (d)   Cease
or refrain from giving credit or making loans or advances to Borrowers or others; 



        (e)   Accept
compensation from and otherwise deal with Borrowers or others and with all security or guarantees; and/or 



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        (f)    Apply
all monies at any time received from Borrowers or others or from security or guarantees upon such part of the Obligations as Lenders deems appropriate as well as
to change any such application in whole or in part from time to time as they deem appropriate, all without in any way extinguishing, lessening or affecting the obligations of Guarantor under this
Guaranty. 




        Section 7.    Reinstatement.    Notwithstanding any provision of the Loan Agreement to
the contrary, the liability of Guarantor hereunder shall be reinstated and revived and the rights of Lenders shall continue if and to the extent that for any reason any payment by or on behalf of
Guarantor or Borrowers is rescinded or must be otherwise restored by Lenders, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not
been paid. The determination as to whether any such payment must be rescinded or restored shall be made by Lenders in their sole discretion; provided,
however, that if Lenders choose to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold harmless Lenders from all costs and expenses
(including, without limitation, reasonable attorneys' fees) of such litigation. To the extent any payment is rescinded or restored, Guarantor's obligations hereunder shall be revived in full force and
effect without reduction or discharge for that payment. 


        Section 8.    Withholding.    In the event any payments are received by Lenders from
Guarantor hereunder, such payments will be made subject to applicable withholding for any taxes, levies, fees, deductions, withholding, restrictions or conditions of any nature whatsoever.
Specifically, if at any time any governmental authority, applicable law, regulation or international agreement requires Guarantor to make any such withholding or deduction from any such payment or
other sum payment hereunder to Lenders, Guarantor hereby covenants and agrees that the amount due from Guarantor with respect to such payment or other sum payable hereunder will be increased to the
extent necessary to ensure that, after the making of such required withholding or deduction, Lenders receive a net sum equal to the sum which they would have received had no withholding or deduction
been required and Guarantor shall pay the full amount withheld or deducted to the relevant governmental authority. Guarantor will, upon request, furnish Lenders with proof satisfactory to Lenders
indicating that Guarantor has made such withholding payment provided, however, that Guarantor need not make any withholding payment if the amount or validity of such withholding payment is contested
in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Guarantor. The agreements and obligations of Guarantor contained in this Section
shall survive the termination of this Guaranty. 


        Section 9.    Useful Information.    At the written request of Guarantor, Lenders shall
provide Guarantor with any useful information respecting the content and the terms and conditions of the Obligations and the progress made in the performance of the Obligations, the whole subject to
the provisions hereof. Any request by Guarantor for useful information hereunder shall be in writing and shall be as precise as possible in the circumstances. Lenders shall not be bound to furnish any
useful information which shall not have been requested in writing. Borrowers, by their signature hereto, as hereinafter provided, hereby unconditionally and irrevocably consent to Lenders providing
any present or future information concerning Borrowers to Guarantor. 


        Section 10.    No Waiver; Amendments.    No failure on the part of Lenders to exercise,
no delay in exercising and no course of dealing with respect to, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. This Guaranty may not be amended or
modified except by written agreement between Guarantor and Lenders, and no consent or waiver hereunder shall be valid unless in writing and signed by Lenders. 


        Section 11.    Compromise and Settlement.    No compromise, settlement, release,
renewal, extension, indulgence, change in, waiver or modification of any of the Obligations or the release or 


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discharge
of Borrowers from the performance of any of the Obligations shall release or discharge Guarantor from this Guaranty or the performance of the obligations hereunder. 


        Section 12.    Notice.    Any notice or other communication herein required or
permitted to be given shall be in writing and may be delivered in person or sent by facsimile transmission, email, overnight courier, or by mail, registered or certified, return receipt requested,
postage prepaid and addressed as follows: 

 






 



			
	If to Guarantor:	 	Tranzyme Holdings ULC

4819 Emperor Blvd., Suite 400

Durham, North Carolina 27703

Attention: Richard I. Eisenstadt

Fax: (919) 313-4700

Email: reisenstadt@tranzyme.com
	
with a copy to:	
 	
Stewart McKelvey

Suite 900

Purdy's Wharf Tower 1

1959 Upper Water Street

P.O. Box 997

Halifax NS B3J 2X2

Attention: Charles Reigh

Fax: (902) 420-1417
	
If to Lenders:	
 	
Oxford Finance Corporation

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: General Counsel

Fax: (703) 519-5225
	
with a copy to:	
 	
Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attn: John Malloy, Esquire

Fax No.: (617) 880-3456

Email: JMalloy@riemerlaw.com




 

 or
at such other address as may be substituted by notice given as herein provided. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to
have been duly given or served on the date on which personally delivered or sent by facsimile transmission or three (3) Business Days after the same shall have been deposited in the mail. If
sent by overnight courier service, the date of delivery shall be deemed to be the next Business Day after deposited with such service. 



        Section 13.    Entire Agreement.    This Guaranty constitutes and contains the entire
agreement of the parties and supersedes any and all prior and contemporaneous agreements, negotiations, correspondence, understandings and communications between Guarantor and Lenders, whether written
or oral, respecting the subject matter hereof. 


        Section 14.    Severability.    If any provision of this Guaranty is held to be
unenforceable under applicable law for any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent of Guarantor and Lenders to the extent possible. In any event,
all other provisions of this Guaranty shall be deemed valid and enforceable to the full extent possible under applicable law. 


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        Section 15.    Subordination of Indebtedness.    Any indebtedness or other obligation
of Borrowers now or hereafter held by or owing to Guarantor is hereby subordinated in time and right of payment to all obligations of Borrowers to Lenders, except as such indebtedness or other
obligation is expressly permitted to be paid under the Loan Agreement. Any notes now or hereafter evidencing such indebtedness of Borrowers to Guarantor shall be marked with a legend that the same are
subject to this Guaranty and shall be delivered to Lenders. 


        Section 16.    Payment of Expenses.    Guarantor shall pay, promptly on demand, all
Expenses incurred by Lenders in defending and/or enforcing this Guaranty. For purposes hereof, "Expenses" shall mean costs and expenses (including reasonable fees and disbursements of any law firm or
other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel) for defending and/or enforcing this Guaranty (including those incurred in connection
with appeals or proceedings by or against Guarantor under the Bankruptcy and Insolvency Act (Canada), or any other bankruptcy or insolvency law, including assignments for the benefit of creditors,
compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief). 


        Section 17.    Assignment; Governing Law.    This Guaranty shall be binding upon and
inure to the benefit of Guarantor, Lenders and their respective successors and assigns, except that Guarantor shall not have the right to assign its rights hereunder or any interest herein without the
prior written consent of Lenders, which may be granted or withheld in Lenders' sole discretion. Any such purported assignment by Guarantor without Lenders' written consent shall be void. This Guaranty
shall be governed by, and construed in accordance with, the laws of the province of Quebec and the laws of Canada applicable therein. 


        Section 18.    Jurisdiction.    Guarantor hereby irrevocably agrees that any legal
action or proceeding with respect to this Guaranty or any of the agreements, documents or instruments delivered in connection herewith may be brought in the courts of applicable jurisdiction of the
Province of Quebec, and, by
execution and delivery hereof, Guarantor accepts and consents to, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Nothing herein shall limit the
right of Lenders to bring proceedings against Guarantor in the courts of any other jurisdiction. Guarantor hereby waives, to the full extent permitted by law, any right to stay or to dismiss any
action or proceeding brought before said courts on the basis of forum non conveniens. 


        Section 19.    Waiver of Jury Trial.    EACH OF LENDERS AND GUARANTOR HEREBY WAIVES,
WHERE APPLICABLE AND TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS GUARANTY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY AND ANY RELATED
INSTRUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. 


        Section 20.    Language.    Each of the undersigned hereto acknowledges that the
undersigned has requested and is satisfied that the foregoing as well as all notices, actions and legal proceedings be drawn up in the English language./Chacun des soussignés
à ce document reconnaît que le soussigné a exigé que ce qui précède ainsi que tous avis, actions ou
procédures légales soient rédigés et exécutés en anglais et s'en déclare satisfait. 


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EXECUTED THIS        DAY OF                    , 2010.  

 






 



			
	 	 	GUARANTOR:
	

 	
 	
 TRANZYME HOLDINGS ULC
	 	 	Per:
	

 	
 	
  






  Name:

Title:






 

 Borrowers
hereby consent fully to all of the terms, conditions and contents hereof in general and irrevocably and unconditionally consent to the furnishing of information by Lenders to Guarantor
pursuant to Section 9 hereof in particular. 

 






 



			
	BORROWERS:	 	 
	
 TRANZYME INC.	
 	

 
	Per:	 	 
	
 






  Name:

Title:	
 	

 
	
 TRANZYME PHARMA INC.	
 	

 
	Per:	 	 
	
 






  Name:

Title:

	
 	

 




 

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Exhibit 10.5


LOAN AND SECURITY AGREEMENT


SCHEDULE 1.1 LENDERS AND COMMITMENTS

EXHIBIT A


EXHIBIT B Loan Payment/Advance Request Form DISBURSEMENT LETTER


EXHIBIT C—COMPLIANCE CERTIFICATE


EXHIBIT D SECURED PROMISSORY NOTE


EXHIBIT E FORM OF UNCONDITIONAL GUARANTY

RECITALS