Document:

Exhibit 10.3

 

TRUST
AGREEMENT

 

Between

 

Safety Insurance Company

 

And

 

FIDELITY MANAGEMENT TRUST COMPANY

 

Safety
Insurance Company Executive Incentive Compensation Plan 

Trust

 

Dated as
of November 7, 2008

 

	
  Plan
  Number:44279

  	
   

  	
  ECM NQ 2007 BPD

  
	
  (07/2007)

  	
   

  	
  10/20/2008

  
	
   

  	
   

  	
   

  
	
   

  	
  © 2007 Fidelity Management &
  Research Company

  	
   

  

 

 

TABLE
OF CONTENTS

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Trust

  	
   

  	
  3

  
	
   

  	
   

  	
  (a) Establishment

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Grantor Trust

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Trust Assets

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Non-Assignment

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Payments to Sponsor 

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  Disbursement

  	
   

  	
  4

  
	
   

  	
   

  	
  (a) Directions from
  Sponsor

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Limitations

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  Investment of Trust 

  	
   

  	
  4

  
	
   

  	
   

  	
  (a) Selection
  of Investment Options

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Available
  Investment Options (c)

  	
   

  	
   

  
	
   

  	
   

  	
  Investment Directions

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Funding Mechanism

  	
   

  	
   

  
	
   

  	
   

  	
  (e) Mutual Funds

  	
   

  	
   

  
	
   

  	
   

  	
  (f) Trustee Powers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  Recordkeeping and
  Administrative Services to Be Performed

  	
   

  	
  7

  
	
   

  	
   

  	
  (a) Accounts

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Inspection and
  Audit

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Notice of Plan
  Amendment

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Returns, Reports
  and Information

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Compensation and Expenses 

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  Directions and Indemnification 

  	
   

  	
  8

  
	
   

  	
   

  	
  (a) Directions from
  Sponsor

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Directions from
  Participants

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Indemnification

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Survival

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  Resignation or Removal of
  Trustee 

  	
   

  	
  9

  
	
   

  	
   

  	
  (a) Resignation and
  Removal

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Termination

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Notice Period

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Transition
  Assistance

  	
   

  	
   

  
	
   

  	
   

  	
  (e) Failure to
  Appoint Successor

  	
   

  	
   

  

 

i

 

TABLE OF CONTENTS
 (Continued)

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  Successor Trustee 

  	
   

  	
  10

  
	
   

  	
   

  	
  (a) Appointment

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Acceptance

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Corporate Action

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  Resignation, Removal, and
  Termination Notices 

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  Duration 

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  Insolvency of Sponsor 

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  Amendment or Modification 

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  Electronic Services 

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  General 

  	
   

  	
  13

  
	
   

  	
   

  	
  (a) Performance by
  Trustee, its Agent or Affiliates

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Entire Agreement

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Waiver

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Successors and
  Assigns

  	
   

  	
   

  
	
   

  	
   

  	
  (e) Partial
  Invalidity

  	
   

  	
   

  
	
   

  	
   

  	
  (f) Section Headings

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  Assignment

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18 

  	
   

  	
  Force Majeure

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19 

  	
   

  	
  Confidentiality

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20 

  	
   

  	
  Situs of Trust Assets

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21 

  	
   

  	
  Governing Law 

  	
   

  	
  15

  
	
   

  	
   

  	
  (a) Massachusetts Law
  Controls

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Trust Agreement
  Controls

  	
   

  	
   

  

 

ii

 

TRUST AGREEMENT,
dated as of the 7th
day of November 2008, between Safety Insurance Company, a Massachusetts
entity, having an office at 20 Custom House Street, Boston, MA 02110 (the “Sponsor”),
and FIDELITY MANAGEMENT TRUST COMPANY, a
Massachusetts trust company, having an office at 82 Devonshire Street, Boston,
Massachusetts 02109 (the “Trustee”).

 

WITNESSETH:

 

WHEREAS, the Sponsor is the sponsor of the Plan; and

 

WHEREAS, the Sponsor wishes to restate, in its entirety,
by entering into this Agreement, the irrevocable trust originally
established on January 1, 2004, with regard to the Plan and to contribute
to the Trust assets that shall be held therein, subject to the claims of
Sponsor’s creditors in the event of Sponsor’s Insolvency, as herein defined,
until paid to Participants and their beneficiaries in such manner and at such
times as specified in the Plan;

 

WHEREAS, it is the
intention of the parties that the Trust shall not affect the status of the Plan
as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of management or
highly compensated employees for purposes of Title I of the Employee Retirement
Income Security Act of 1974 (“ERISA”);

 

WHEREAS, it is the intention of
the Sponsor to make contributions to the Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under the Plan; and

 

WHEREAS, the Trustee is willing
to hold and invest the aforesaid assets in trust among several investment options selected by the Sponsor.

 

NOW, THEREFORE, in consideration of the
foregoing premises and the mutual covenants and agreements set forth below, the Sponsor and the Trustee agree as
follows:

 

Section 1.   Definitions.  The
following terms as used in this Trust Agreement have the meanings indicated
unless the context clearly requires otherwise:

 

(a)           “Agreement”
shall mean this Trust Agreement, as the same may be amended and in effect from time
to time.

 

(b)           “Business Day” shall mean any
day on which the New York Stock Exchange (NYSE) is open.

 

(c)           “Code” shall mean the Internal
Revenue Code of 1986, as it has been or may be amended from time

 

1

 

to
time.

 

(d)                                 “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as it has been or may be amended from
time to time.

 

(e)                                  “Fidelity Mutual Fund”
shall mean any investment company advised by Fidelity Management & Research Company or any of its affiliates.

 

(f)                                    “Insolvency” shall mean that the
Sponsor is or has become insolvent as defined in Section 13(a).

 

(g)                                 “Mutual Fund” shall refer both to
Fidelity Mutual Funds and Non-Fidelity Mutual Funds.

 

(h)                                 “Non-Fidelity Mutual
Fund” shall mean certain investment companies not advised by Fidelity Management & Research Company or any
of its affiliates.

 

(i)                                     “Participant”
shall mean, with respect to the Plan, any individual who has accrued a benefit
under    the Plan, which has not yet been
fully distributed and/or forfeited, and shall include the designated beneficiary(ies) with respect to the benefit of
such an individual until such benefit has been fully distributed and/or
forfeited.

 

(j)                                     “Permissible Investment” shall mean
any of the investments specified by the Sponsor as available for investment of
assets of the Trust and agreed to by the Trustee. The Permissible Investments
shall be listed in the Service Agreement.

 

(k)                                  “Plan” shall mean the plan or plans
described in the Service Agreement.

 

(l)                                     “Reconciliation Period” shall mean the
period beginning on the date of the initial transfer of assets to the Trust and
ending on the date of the completion of the reconciliation of Participant
records.

 

(m)                               “Reporting Date” shall mean the last
day of each calendar quarter, the date as of which the Trustee resigns or is removed pursuant to this Agreement
and the date as of which this Agreement terminates pursuant to Section 9
hereof.

 

(n)                                 “Service Agreement” shall mean the agreement
between the Trustee and the Sponsor for the Trustee, through certain affiliates and related companies, to provide
administrative and recordkeeping services for the Plan.

 

(o)                                 “Sponsor” shall mean Safety Insurance
Company, as identified in the first paragraph of this Agreement, or any successor to all or substantially
all of its businesses which, by agreement, operation of law or
otherwise, assumes the responsibility of the Sponsor under this Agreement.

 

(p)                                 “Trust”
shall mean the Safety Insurance Company Executive Incentive Compensation Plan
Trust, being the trust restated by the Sponsor and the Trustee pursuant to the
provisions of the Agreement.

 

(q)                                 “Trustee” shall mean Fidelity
Management Trust Company, a Massachusetts trust company and any successor to all or substantially all of its trust
business.  The term Trustee shall also
include any successor trustee appointed pursuant to this Agreement to
the extent such successor agrees to serve as Trustee under the Agreement.

 

Section 2.  Trust.

 

(a)   Establishment.  The Sponsor hereby establishes the Trust with
the Trustee.  The Trust shall consist of an initial contribution of money
or other property acceptable to the Trustee in its sole discretion, made
by the Sponsor or transferred from a previous trustee, such additional sums of
money as

 

2

 

shall from time to time be
delivered to the Trustee, all investments made therewith and proceeds thereof, and all earnings and profits thereon, less the
payments that are made by the Trustee as provided herein, without
distinction between principal and income. 
The Trustee hereby accepts the Trust on the terms and conditions set forth in this Agreement.  In accepting this Trust, the Trustee shall be
accountable for the assets received by it, subject to the terms and
conditions of the Agreement.

 

(b)   Grantor
Trust.  The Trust is intended to be a
grantor trust, of which the Sponsor is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Code, and shall be construed
accordingly.

 

(c)   Trust Assets.  The principal of the Trust, and any earnings
thereon shall be held separate and apart from
other funds of the Sponsor and shall be used exclusively for the uses and
purposes of Participants and general
creditors as herein set forth. 
Participants and their beneficiaries shall have no preferred claim on,
or any beneficial ownership interest in, any assets of the Trust.  Any rights created under the Plan and the Agreement shall be mere
unsecured contractual rights of Participants and their beneficiaries against the Sponsor.  Any assets held by the Trust will be subject
to the claims of the Sponsor’s general
creditors under federal and state law in the event of Insolvency, as defined in
this Agreement.

 

(d)   Non-Assignment.  Benefit payments to Participants and their
beneficiaries from the Trust may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process. Nothwithstanding anything
in this Agreement to the contrary, the Sponsor can direct the Trustee to disperse monies pursuant
to a domestic relations order as defined in Code section 414 (p)(1)(B) in accordance with Section 4(a).

 

Section 3.  Payments to Sponsor. 
Except as provided under the Agreement, the Sponsor shall have no right
to retain or divert to others any of the Trust assets before all benefit
payments have been made to the Participants and their beneficiaries pursuant to
the terms of the Plan.  The Sponsor may
direct the Trustee in writing to pay the Sponsor any amount in excess of the
amount needed to pay all of the benefits accrued under the Plan as of the date
of such payment.

 

3

 

Section 4.  Disbursements.

 

(a)   Directions from Sponsor.

 

(i)   If the Service Agreement provides that the
Trustee will make distributions of Plan benefits
directly to Participants and beneficiaries, the Trustee shall disburse monies
to Participants and their
beneficiaries for benefit payments in the amounts that the Sponsor directs from
time to time in writing.  The Trustee shall have no responsibility to
ascertain whether the Sponsor’s direction complies with the terms of the
Plan or of any applicable law.  The
Trustee shall be responsible for federal or state income tax reporting or withholding with respect to such Plan
benefits.  The Trustee shall not be responsible
for tax reporting or withholding of FICA (Social Security and Medicare), any
federal or state unemployment, or local tax with respect to Plan distributions.

 

(ii)   If the Service Agreement provides that the
Sponsor shall be responsible for making distributions
of benefits to Participants and beneficiaries, then the Trustee shall disburse
monies to the Sponsor for benefit
payments in the amounts that the Sponsor directs from time to time in
writing.  The Trustee shall have
no responsibility to ascertain whether the Sponsor’s direction complies with
the terms of the Plan or any applicable law. 
The Trustee shall not be responsible for: (1) making benefit
payments to Participants under the Plan; or, (2) any federal, state or
local tax reporting or withholding of any kind with respect to such Plan
benefits.

 

(b)   Limitations.  The Trustee shall not be required to make any
disbursement in excess of the net realizable value of the assets of the Trust
at the time of the disbursement.

 

Section 5.  Investment of Trust.

 

(a)   Selection
of Investment Options.  The Trustee
shall have no responsibility for the selection of investment options under the Trust and
shall not render investment advice to any person in connection with the selection of such
options.

 

(b)   Available
Investment Options.  The Sponsor
shall direct the Trustee as to what investment options the Trust shall be invested in (i) during the
Reconciliation Period, and (ii) following the Reconciliation Period, subject to the following limitations.  The Sponsor may include only Permissible Investments as described in the Service Agreement;
provided, however, that the Trustee shall not be considered a fiduciary
with investment discretion.  The Sponsor
may add or remove investment options with the
consent of the Trustee and upon mutual amendment of the Service Agreement to
reflect such additions.

 

(c)   Investment Directions.  In order to provide for an accumulation of
assets comparable to the contractual liabilities accruing under the Plan, the
Sponsor may direct the Trustee in writing to invest

 

4

 

the
assets held in the Trust to correspond to the hypothetical investments made for
Participants in accordance
with their direction under the Plan.

 

(d)   Funding Mechanism.  The Sponsor’s designation of available
investment options under paragraphs (a) and
(b) above, the maintenance of accounts for each Participant under the Plan
and the crediting of investments to
such accounts, and the exercise by Participants of any powers relating to investments under this Section 5 are solely
for the purpose of providing a mechanism for measuring the obligation of the Sponsor to any particular Participant
under the Plan.  As further provided in
the Agreement, no Participant or beneficiary will have any preferential claim
to or beneficial ownership interest in
any asset or investment held in the Trust, and the rights of any Participant
and his or her beneficiaries under the
Plan and the Agreement are solely those of an unsecured general creditor of the
Sponsor with respect to the benefits of the Participant under the Plan.

 

(e)   Mutual Funds.  The Sponsor hereby acknowledges that it has
received from the Trustee a copy of the prospectus for each Mutual Fund
selected by the Sponsor as a Permissible Investment.  Trust investments in Mutual Funds shall be
subject to the following limitations:

 

(i)   Execution of Purchases and Sales.  Purchases
and sales of Permissible Investments (other than for Exchanges) shall be
made on the date on which the Trustee receives from the Sponsor in good order
all information and documentation necessary to accurately effect such purchases
and sales (or in the case of a purchase, the subsequent date on which the
Trustee has received a wire transfer of funds necessary to make such
purchase).  Exchanges of Permissible
Investments shall be made on the same Business Day that the Trustee receives a
proper direction if received before market close (generally 4:00 p.m. eastern time); if the direction is received
after market close (generally 4:00 p.m. eastern time), the exchange
shall be made the following Business Day.

 

(ii)   Voting.  At the time of mailing of notice of each annual
or special stockholder’s meeting of any Mutual Fund, the Trustee shall send a
copy of the notice and all proxy solicitation materials to the Sponsor,
together with a voting direction form for return to the Trustee or its
designee.  The Trustee shall vote the
shares held in the Trust in the manner as directed by the Sponsor.  The Trustee shall not vote shares for which it has received no corresponding
directions from the Sponsor.  The Sponsor
shall also have the right to direct the Trustee as to the manner in
which all shareholder rights, other than the right to vote, shall be
exercised.  The Trustee shall have no
duty to solicit directions from the Sponsor.

 

(f)   Trustee Powers.  The Trustee shall have the following powers
and authority:

 

5

 

(i)                       Subject to paragraphs (b), (c) and (d) of
this Section 5, to sell, exchange, convey, transfer, or otherwise dispose
of any property held in the Trust, by private contract or at public
auction.  No person dealing with the Trustee shall be bound to see to the application
of the purchase money or other property delivered to the Trustee or to
inquire into the validity, expediency, or propriety of any such sale or other disposition.

 

(ii)                    To cause any securities or other property
held as part of the Trust to be registered in the Trustee’s own name, in the
name of one or more of its nominees, or in the Trustee’s account with the Depository Trust Company of New York and to hold
any investments in bearer form, but the books and records of the Trustee
shall at all times show that all such investments are part of the Trust.

 

(iii)                 To keep that portion of the Trust in cash or cash balances
as the Sponsor may, from time to
time, deem to be in the best interest of the Trust.

 

(iv)                To make, execute, acknowledge, and deliver
any and all documents of transfer or conveyance and to carry out the powers
herein granted.

 

(v)                   To settle, compromise, or submit to
arbitration any claims, debts, or damages due to
or arising from the Trust; to commence or defend suits or legal or
administrative proceedings; to represent
the Trust in all suits and legal and administrative hearings; and to pay all
reasonable expenses arising from any such action, from the Trust if not
paid by the Sponsor.

 

(vi)                To employ legal, accounting, clerical, and
other assistance as may be required in carrying out the provisions of this
Agreement and to pay their reasonable expenses and compensation from the Trust
if not paid by the Sponsor.

 

(vii)             To do all other acts although not specifically mentioned
herein, as the Trustee may deem
necessary to carry out any of the foregoing powers and the purposes of the
Trust.

 

Notwithstanding any powers
granted to the Trustee pursuant to the Agreement or to applicable law, the
Trustee shall not have any power that could give the Trust the objective of
carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2
of the Procedure and Administrative Regulations promulgated pursuant to the
Code.

 

6

 

Section 6.  Recordkeeping and Administrative Services
to Be Performed.

 

(a)   Accounts.  The Trustee shall keep accurate accounts of
all investments, receipts, disbursements, and other transactions hereunder, and
shall report the value of the assets held in the Trust periodically and on the
date on which the Trustee resigns or is removed as provided in the Agreement or
is terminated as provided in the Agreement. 
Within thirty (30) days following each Reporting Date or within sixty
(60) days in the case of a Reporting Date caused by the resignation or removal
of the Trustee, or the termination of the
Agreement, the Trustee shall file with the Sponsor a written account setting
forth all investments, receipts, disbursements, and other transactions
effected by the Trustee between the Reporting Date
and the prior Reporting Date, and setting forth the value of the Trust as of
the Reporting Date. Except as otherwise required under applicable law,
upon the expiration of six (6) months from the date of filing such account
with the Sponsor, the Trustee shall have no liability or further accountability
to anyone with respect to the propriety of its acts or transactions shown in
such account, except with respect to such acts
or transactions as to which the Sponsor shall within such six (6) month
period file with the Trustee written objections.

 

(b)   Inspection and Audit.  All records generated by the Trustee in
accordance with paragraphs
(a) shall be open to inspection and audit, during the Trustee’s regular
business hours prior to the termination of the Agreement, by the Sponsor or any
person designated by the Sponsor.

 

(c)   Effect of Plan Amendment.  The Sponsor must deliver to the Trustee a
copy of any amendment to the Plan as soon as administratively feasible following the
amendment’s adoption and the Sponsor must provide the Trustee on a timely basis with
all additional information the Sponsor deems necessary for the Trustee to perform the its duties
hereunder as well as such other information as the Trustee may reasonably request.

 

(d)   Returns, Reports and Information.  Except as set forth in the Service Agreement,
the Sponsor shall be
responsible for the preparation and filing of all returns, reports, and
information required of the Trust by
law.  The Trustee shall provide the
Sponsor with such information as the Sponsor may reasonably request to
make these filings.  The Sponsor shall
also be responsible for making any disclosures to Participants required by law.

 

Section 7.  Compensation and Expenses. 
Sponsor shall pay to Trustee, within thirty (30) days of receipt of the
Trustee’s bill, the fees for services in accordance with the Service
Agreement.  All fees for services are
specifically outlined in the Service Agreement and are based on any assumptions
identified therein.

 

All
expenses of the Trustee relating directly to the acquisition and disposition of
investments

 

7

 

constituting
part of the Trust, and all taxes of any kind whatsoever that may be levied or
assessed under existing
or future laws upon or in respect of the Trust or the income thereof, shall be
a charge against and paid from the appropriate Participants’ accounts.

 

Section 8.  Directions and Indemnification.

 

(a)   Directions
from Sponsor.   Whenever the Sponsor
provides a direction to the Trustee, the Trustee shall not be liable for any
loss, or by reason of any breach, arising from the direction if the direction is contained in
a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been
submitted (and not withdrawn) in writing to the Trustee by the Sponsor in the
manner described in the Service Agreement, provided the Trustee reasonably
believes the signature of the individual to
be genuine.  Such direction may be made
via electronic data transfer (“EDT”) in accordance with procedures
agreed to by the Sponsor and the Trustee; provided, however, that the Trustee
shall be fully protected in relying on such direction as if it were a direction
made in writing by the Sponsor.  The Trustee shall have no responsibility to
ascertain any direction’s (i) accuracy, (ii) compliance with
the terms of the Plan or any applicable law, or (iii) effect for tax
purposes or otherwise.

 

(b)   Directions from Participants.  The Trustee shall not be liable for any loss
resulting from any Participant’s exercise or
non-exercise of rights under this Agreement to direct the investment of the hypothetical
assets in the Participant’s accounts.

 

(c)   Indemnification.  The Sponsor shall indemnify the Trustee
against, and hold the Trustee harmless from, any and all loss, damage, penalty,
liability, cost, and expense, including without limitation, reasonable
attorneys’ fees and disbursements, that may be incurred by, imposed upon, or
asserted against the Trustee by reason of any
claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with
respect to the Plan or the Trust, excepting only any and all loss, etc.,
arising solely from the Trustee’s negligence or bad faith.

 

(d)   Survival.  The provisions of this Section 8 shall
survive the termination of this Agreement.

 

Section 9.  Resignation or Removal of Trustee.

 

(a)   Resignation and Removal.

 

(i) The
Trustee may resign at any time in accordance with the notice provisions set
forth below.

 

(ii)  The Sponsor may remove the Trustee at any time
in accordance with the

 

8

 

notice provisions set forth
below.

 

(b)   Termination.  The Agreement may be terminated at any time
by the Sponsor upon prior written notice to the Trustee in accordance with the
notice provisions set forth below.

 

(c)   Notice
Period. In the event either party desires to terminate the Agreement or any
Services hereunder, the
party shall provide at least sixty-(60) days prior written notice of the
termination date to the other party; provided, however, that the receiving
party may agree, in writing, to a shorter notice period.

 

(d)     Transition
Assistance. In the event of termination of the Agreement, if requested by Sponsor, the Trustee
shall assist Sponsor in developing a plan for the orderly transition of the
Plan data, cash and assets then
constituting the Trustee and recordkeeping services provided by the Trustee
hereunder to Sponsor or its designee. The
Trustee shall provide such assistance for a period not extending beyond sixty
(60) days from the termination date of this Agreement.  The Trustee shall provide to Sponsor, or to any person designated by Sponsor, at a mutually
agreeable time, one file of the Plan data prepared and maintained by the Trustee in the ordinary course of
business, in the Trustee’s format.  The
Trustee may provide other or additional transition assistance as
mutually determined for additional fees, which shall be due and payable by the
Sponsor prior to any termination of the Agreement.

 

(e)   Failure to Appoint Successor.  If, by the termination date, the Sponsor has
not notified the Trustee in writing as to the
individual or entity to which the assets and cash are to be transferred and delivered, the Trustee may bring an appropriate
action or proceeding for leave to deposit the assets and cash in a court
of competent jurisdiction.  The Trustee
shall be reimbursed by the Sponsor for all costs and expenses of the action or
proceeding including, without limitation, reasonable attorneys’  fees and disbursements.

 

Section 10.  Successor Trustee.

 

(a)   Appointment.  If the office of Trustee becomes vacant for
any reason, the Sponsor may in writing
appoint a successor trustee under this Agreement.  The successor trustee shall have all of the rights,
powers, privileges, obligations, duties, liabilities, and immunities granted to
the Trustee under the Agreement.  After a
successor trustee accepts appointment, a prior trustee shall not be liable for
the acts or omissions of the Trustee with respect to the Trust occurring after
the time of the appointment.

 

(b)   Acceptance.  When the successor trustee accepts its
appointment under the Agreement, title to the Trust assets shall immediately
vest in the Trustee without any further action on the part of the

 

9

 

prior
trustee.  The prior trustee shall execute
all instruments and do all acts that reasonably may be necessary or reasonably may be requested in
writing by the Sponsor or the Trustee to evidence the vesting of title to all
Trust assets in the Trustee or to deliver all Trust assets to the Trustee.

 

(c)   Corporate Action.  Any successor of the Trustee, through sale or
transfer of the business or trust department
of the Trustee, or through reorganization, consolidation, or merger, or any
similar transaction, shall, upon consummation of the transaction, become
the Trustee under this Agreement.

 

Section 11.  Resignation, Removal, and Termination
Notices.  All notices of resignation, removal, or
termination under this Agreement must be in writing and mailed to the party to
which the notice is being given by certified or registered mail, return receipt
requested, to the Sponsor at the address designated in the Service Agreement, and to the Trustee c/o Fidelity Investments - ECM
Client Services Relationship Manager, P.O. Box
770001, Cincinnati, OH 45277-0026, or to such other addresses as the parties
have notified each other of in the foregoing manner.

 

Section 12.  Duration.  The
Trust shall continue in effect without limit as to time, subject, however, to
the provisions of the Agreement relating to amendment, modification, and
termination thereof.

 

Section 13.  Insolvency of Sponsor.

 

(a)   Trustee
shall cease disbursement of funds for payment of benefits to Participants and their beneficiaries if the Sponsor is
Insolvent.  Sponsor shall be considered “Insolvent”
for purposes of the Agreement if (i) Sponsor
is unable to pay its debts as they become due, or (ii) Sponsor is subject
to a pending proceeding as a debtor under the United States Bankruptcy Code.

 

(b)   All times
during the continuance of the Trust, the principal and income of the Trust shall be subject to claims of general
creditors of the Sponsor under federal and state law as set forth below.

 

(i)   The Board
of Directors (or other body governing the entity under state law) and the Chief Executive
Officer of the Sponsor shall have the duty to inform the Trustee in writing of
the Sponsor’s Insolvency.  If a person claiming to be a creditor of the
Sponsor alleges in writing to the Trustee that the Sponsor has become
Insolvent, the Trustee shall determine whether the Sponsor is Insolvent and, pending such determination, the Trustee shall
discontinue disbursements for payment of benefits to Participants or
their beneficiaries.

 

(ii)   Unless
the Trustee has actual knowledge of the Sponsor’s Insolvency, or has received notice from the
Sponsor or a person claiming to be a creditor alleging that the Sponsor is

 

10

 

Insolvent, the Trustee shall
have no duty to inquire whether the Sponsor is Insolvent.  The Trustee may in all events rely on such
evidence concerning the Sponsor’s solvency as may be furnished to the Trustee
and that provides the Trustee with a
reasonable basis for making a determination concerning the Sponsor’s solvency.

 

(iii) 
If at any time the Trustee has determined that the Sponsor is Insolvent, the
Trustee shall discontinue disbursements for payments to Participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of the
Sponsor’s general creditors.  Nothing in
this Agreement shall in any way diminish any
rights of Participants or their beneficiaries to pursue their rights as general
creditors of the Sponsor with respect to benefits due under the Plan or
otherwise.

 

(iv) 
Trustee shall resume disbursements for the payment of benefits to Participants
or their beneficiaries in accordance with
this Agreement only after the Trustee has determined that the Sponsor is
not Insolvent (or is no longer Insolvent).

 

(c)   If the Sponsor permits the employees of
another member of the same controlled group (as defined in IRC Section 414(b) or
(c)) to participate in the Plan, all of the assets held by the Trust will be
subject to the claims of the general creditors of both the Sponsor and all of
such participating affiliates and, for purposes of Section 13(a), the
Sponsor is considered Insolvent if any such affiliate meets the definition of
Insolvent.

 

(d)   Provided
that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 13(a) hereof
and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount
of all payments due to Participants or their beneficiaries under the
terms of the Plan for the period of such discontinuance, less the aggregate
amount of any payments made to Participants or their beneficiaries by the
Sponsor in lieu of the payments provided for hereunder during any such period
of discontinuance.

 

Section 14.  Amendment or Modification.  This
Agreement may be amended or modified at any time and from time to time only by
an instrument executed by both the Sponsor and the Trustee.

 

Section 15.  Electronic Services.

 

(a)   The Trustee may provide communications and
services (“Electronic Services”) and/or software products (“Electronic Products”)
via electronic media, including, but not limited to Fidelity Plan Sponsor WebStation. 
The Sponsor and its agents agree to use such Electronic Services and Electronic
Products only in the course of
reasonable administration of or participation in the Plan and to keep confidential
and not publish, copy, broadcast, retransmit, reproduce, commercially exploit
or otherwise 

 

11

 

redisseminate the Electronic Products or Electronic Services or any portion
thereof without the Trustee’s written consent, except, in cases where
the Trustee has specifically notified the Sponsor that the Electronic Products or Services are suitable for delivery to
Participants, for non-commercial personal use by the Participants or
beneficiaries with respect to their participation in the Plan or for their
other retirement planning purposes.

 

(b)   The
Sponsor shall be responsible for installing and maintaining all Electronic Products, (including any programming required
to accomplish the installation) and for displaying any and all content
associated with Electronic Services on its computer network and/or intranet so
that such content will appear exactly as it appears when delivered to the
Sponsor.  All Electronic Products and
Services shall be clearly identified as originating from the Trustee or its
affiliate.  The Sponsor shall promptly
remove Electronic Products or Services from
its computer network and/or intranet, or replace the Electronic Products
or Services with updated products or services provided by the Trustee, upon
written notification (including written notification via facsimile) by the
Trustee.

 

(c)   All
Electronic Products shall be provided to the Sponsor without any express or implied legal warranties or acceptance of
legal liability by the Trustee, and all Electronic Services shall be provided to the Sponsor without acceptance of legal
liability related to or arising out of the electronic nature of the delivery or provision of such
Services.  Except as otherwise stated in
this Agreement, no rights are conveyed to any property, intellectual or
tangible, associated with the contents of the Electronic Products or Services
and related material. The Trustee hereby grants to the Sponsor a non-exclusive,
nontransferable revocable right and license to use the Electronic Products and
Services in accordance with the terms and conditions of the Agreement.

 

(d)   To the
extent that any Electronic Products or Services utilize Internet services to transport data or
communications, the Trustee will take, and the Sponsor agrees to follow,
reasonable security
precautions, however, the Trustee disclaims any liability for interception of
any such data or communications. The Trustee reserves the right not to accept data or
communications transmitted via electronic
media by the Sponsor or a third party if it determines that the media does not
provide adequate data security, or if it is not administratively feasible for
the Trustee to use the data security provided. The Trustee shall not be responsible for, and makes no warranties regarding
access, speed or availability of Internet or network services, or any
other service required for electronic communication.  The Trustee shall not be responsible for any
loss or damage related to or resulting from any changes or modifications to the
Electronic Products or Services after delivering it to the Sponsor.

 

12

 

Section 16.  General.

 

(a)   Performance
by Trustee, its Agents or Affiliates. 
The Sponsor acknowledges and authorizes that the services to be provided under the Agreement shall
be provided by the Trustee, its agents or affiliates, including but not limited
to Fidelity Investments Institutional Operations Company, Inc. or its successor, and that certain of such services may be
provided pursuant to one or more other contractual agreements or
relationships.

 

(b)   Entire Agreement.  This Agreement contains all of the terms
agreed upon between the parties with respect to the subject matter hereof.

 

(c)   Waiver.  No waiver by either party of any failure or
refusal to comply with an obligation
hereunder shall be deemed a waiver of any other or subsequent failure or
refusal to so comply.

 

(d)   Successors and Assigns.  The stipulations in this Agreement shall
inure to the benefit of, and shall bind, the successors and assigns of the
respective parties.

 

(e)   Partial
Invalidity.  If any term or provision
of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid
or unenforceable, the remainder of the Agreement, or the application of such
term or provision to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected thereby, and each term
and provision of the Agreement shall be valid and enforceable to the fullest
extent permitted by law.

 

(f)   Section Headings.  The headings of the various sections,
subsections and paragraphs of this Agreement
have been inserted only for the purposes of convenience and are not part of the
Agreement and shall not be deemed in
any manner to modify, explain, expand or restrict any of the provisions
of the Agreement.

 

Section 17.  Assignment.  This
Agreement, and any of its rights and obligations hereunder, may not be assigned by any party without the prior written
consent of the other party(ies), and such consent may be withheld in any
party’s sole discretion.  Notwithstanding
the foregoing, Trustee may assign this Agreement in whole or in part, and any of its rights and obligations hereunder, to
a subsidiary or affiliate of Trustee without consent of the
Sponsor.  All provisions in the Agreement
shall extend to and be binding upon the parties hereto and their respective
successors and permitted assigns.

 

Section 18.  Force Majeure.  No
party shall be deemed in default of the Agreement to the extent that any delay
or failure in performance of its obligation(s) results, without its fault
or negligence, from any cause beyond its
reasonable control, such as acts of God, acts of civil or military authority,
embargoes,

 

13

 

epidemics, war, riots,
insurrections, fires, explosions, earthquakes, floods, unusually severe weather
conditions, power outages or strikes. 
This clause shall not excuse any of the parties to the Agreement from
any liability which results from failure to have in place reasonable disaster
recovery and safeguarding plans adequate for protection of all data each of the
parties to the Agreement are responsible for maintaining for the Plan.

 

Section 19.  Confidentiality.  Both
parties to this Agreement recognize that in the course of implementing and
providing the services described herein, each party may disclose to the other
confidential information. All such confidential information, individually and collectively,
and other proprietary information disclosed by either party shall remain the
sole property of the party disclosing the same, and the receiving party shall have no interest or rights with respect
thereto if so designated by the disclosing party to the receiving
party.  Each party agrees to maintain all
such confidential information in trust and confidence to the same extent that it protects its own
proprietary information, and not to disclose such confidential information
to any third party without the written consent of the other party.  Each party further agrees to take all reasonable precautions to prevent any
unauthorized disclosure of confidential information.  In addition,
each party agrees not to disclose or make public to anyone, in any manner, the
terms of the Agreement, except as required by law, without the prior
written consent of the other party.

 

Section 20.  Situs of Trust Assets.  The
Sponsor and the Trustee agree that no assets of the Trust shall be located or
transferred outside of the United States.

 

Section 21.  Governing Law.

 

(a)   Massachusetts Law Controls.  This Agreement is being made in the Commonwealth
of Massachusetts, and the Trust shall be administered as a Massachusetts
trust.  The validity, construction, effect, and administration of the Agreement shall
be governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, except to the extent those laws are superseded
under Section 514 of ERISA.

 

(b)   Trust Agreement Controls.  The Trustee is not a party to the Plan, and
in the event of any conflict between the provisions of the Plan and the
provisions of the Agreement, the provisions of the Agreement shall control.

 

14

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.

 

 

	
  Plan Sponsor Name:

  	
   

  	
  Safety Insurance Company
  

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ William J.
  Begley, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  William J.
  Begley, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  VP, Treasurer, CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
  10/29/2008

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FIDELITY MANAGEMENT
  TRUST COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Gregory M. Perkins

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Gregory M. Perkins

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
  10/31/2008

  
							

 

15

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.

 

 

	
  Plan Sponsor Name:

  	
   

  	
  Safety Insurance Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ William.
  Begley, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  William J.
  Begley, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  VP, Treasurer, CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
  10/29/2008

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FIDELITY MANAGEMENT
  TRUST COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Gregory M. Perkins

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Gregory M. Perkins

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
  10/31/2008

  
							

 

16Exhibit
10.1

 

Agreement No.             

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT the (“Agreement”),
dated as of September 25, 2008, is made by and between Redpoint Bio
Corporation, a Delaware corporation with a principal place of business located
at 7 Graphics Drive, Ewing, New Jersey 08628 (“Debtor”); and CIT Healthcare LLC, a Delaware limited liability
company with offices located at 305 Fellowship Road, Suite 305, Mount
Laurel, NJ (“CIT”)

 

RECITALS:

 

A.                                   Debtor has
requested that CIT make certain Loans to Debtor, which shall be evidenced by
and payable in accordance with certain Notes executed by Debtor, each of which
executed Notes shall incorporate the terms of this Agreement but shall each be
deemed a separate agreement and obligation; and

 

B.                                     To secure all
of its payment and performance obligations under the Loan Documents, Debtor has
agreed to grant to CIT a security interest in certain Collateral, upon the
terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of their mutual
covenants and agreements set forth in this Agreement, and intending to be
legally bound, CIT and Debtor hereby agree as follows:

 

SECTION I.                                           DEFINITIONS AND
ACCOUNTING TERMS

 

1.01                           Definitions.  Unless the context requires otherwise, the
following terms shall have the meaning set forth below for all purposes of this
Agreement and the other Loan Documents, and such meanings shall be equally
applicable to both the singular and plural forms of the terms defined:

 

“Agreement”
means this Loan and Security Agreement, as the same may be amended, restated or
supplemented from time to time.

 

“Business Day”
means any day on which CIT and JPMorgan Chase Bank are open for business.

 

“Change of Control”
means the sale, assignment or other transfer, individually or in the aggregate,
of more than fifty percent (50%) of the capital stock or membership interest or
partnership interest in Debtor presently held (directly or indirectly) by the
current shareholders, members and/or partners (collectively, the “Current Shareholders”), or any
voting rights associated therewith, to a person or entity other than a Current
Shareholder.

 

“Collaboration Partner” means any third party
(including such third party’s employees and agents) permitted to use equipment
owned by Debtor pursuant to the terms of a licensing or collaboration agreement
with Debtor; provided that such third party shall not have a right to purchase,
take possession of or move such equipment at any time.

 

“Collateral”
means the equipment, leasehold improvements, fixtures, software imbedded
therein, replacements, replacement parts, substitutions, additions, and
accessories thereto, as well as codes, books and records in connection
therewith, described in the attached Exhibit A, as the same may be 

 

	
  Loan & Security Agreement

  	
  CIT Healthcare LLC

  

 

1

 

supplemented from time to time in connection with the making of any
Loan, together with all cash and non-cash proceeds thereof, whether in the form
of accounts, general intangibles, instruments, investment property, chattel
paper or otherwise.

 

“Default” means
any event specified in Section 8.01 hereof, which with the giving
of notice or the lapse of time, or both, would result in an Event of Default.

 

“Default Rate of Interest”
has the meaning provided in the applicable Note.

 

“Documentation Fee”
has the meaning provided in Section 7.01.

 

“Event of Default”
has the meaning provided in Section 8.01.

 

“Event of Loss”
has the meaning provided in Section 6.02.

 

“GAAP” means generally
accepted accounting principles in the United States of America as in effect
from time to time and for the period as to which such accounting principles are
to apply.

 

“Indebtedness”
means, without duplication, all liabilities, contingent or otherwise, which are
either (a) obligations in respect of borrowed money or for the deferred
purchase price of property or assets, or (b) obligations with respect to
capital leases.

 

“Indemnified Party”
has the meaning provided in Section 7.02.

 

“Late Fee” has the
meaning provided in Section 7.01.

 

“Loan Documents”
means this Agreement, the Notes, the other closing documents executed by
Debtor, and any other ancillary agreements executed by Debtor from time to time
in connection with this Agreement, all as may be amended, restated or
supplemented from time to time.

 

“Loan” means
each advance of credit to Debtor made under this Agreement, and “Loans” means, collectively, all
such advances of credit.

 

“Material Adverse Change”,
“Material Adverse Effect” means a material adverse change in or
material adverse effect on any of (a) the business, condition (financial
or otherwise), operations, performance, properties or prospects of Debtor, (b) the
ability of Debtor to perform its obligations under this Agreement or any other
Loan Document, (c) the value of the Collateral or (d) the ability of
CIT to enforce the Obligations or its rights and remedies under this Agreement
or any of the other Loan Documents.

 

“Maximum Loan Amount”
means an amount equal to the “Principal
Amount” as defined in each Note, and allowance for certain amounts such
as accrued interest, sales taxes and overages, which amount shall not exceed,
in the aggregate, $2,000,000.00.

 

“Notes” means
each promissory note executed in connection with a Loan and, collectively, “Notes” means all such promissory
notes.

 

“Obligations”
means all now existing or hereafter arising debts, obligations, covenants, and
duties of payment or performance of every kind, matured or un-matured, direct
or contingent, owing, arising, due or payable to CIT or any affiliate or direct
or indirect subsidiary of CIT, by or from Debtor whether arising out of this
Agreement or any other Loan Document or otherwise, including, without 

 

2

 

limitation, the obligation of Debtor: (a) to pay the principal of,
and interest on, each Loan in accordance with the terms of this Agreement, and
to pay and satisfy all other indebtedness, liabilities and monetary obligations
owed by Debtor to CIT under the Loan Documents; (b) to perform all of
Debtor’s other obligations under this Agreement and the other Loan Documents;
and (c) to pay all costs, fees and expenses incurred by CIT in connection
with this Agreement and the other Loan Documents, including, without limitation,
(i) recording fees and taxes imposed in connection with the execution of
any Note or the filing of any financing statements or other personal property
security documents, (ii) all costs that CIT may incur to obtain or
maintain the insurance coverage required under Section 6.01, and (iii) all
reasonable costs, fees, expenses and disbursements of inside or outside counsel
hired by CIT in connection with the preparation, negotiation, amendment,
modification, administration and enforcement of the Loan Documents or CIT’s
security interests in the Collateral, including any proceeding brought by CIT
to enforce payment of any of the foregoing obligations, or the representation
of CIT in any bankruptcy proceeding filed by or against Debtor.

 

“Origination Fee”
has the meaning provided in Section 7.01.

 

“Payment Date”
means the due date of any payment of principal or interest on any Loan, as set
forth in the Note evidencing such Loan.

 

“Permitted Liens” means (i) liens created
pursuant to the Loan Documents, (ii) liens imposed by law for taxes that
are not yet due or are being contested in good faith if adequate reserves with
respect thereto are maintained on the books of the Borrower in accordance with
GAAP, (iii) carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s and other like liens imposed by law, arising in the ordinary course
of business provided that such liens secure only amounts not yet due and
payable, or if due and payable, (a) are unfiled and no other action has
been taken to enforce the same, or (b) are being contested in good faith
by appropriate proceedings for which adequate reserves determined in accordance
with GAAP have been established, and (iii) judgment liens in respect of
judgments that do not constitute an Event of Default hereunder.

 

“Prepayment Fee”
has the meaning provided in the applicable Note.

 

“Uniform Commercial Code”
means the Uniform Commercial Code as adopted and in effect from time to time in
the State of New York, or any other applicable state.

 

“Use of Proceeds”
means the proceeds and use of the Loans, and shall be used by Debtor solely for
the acquisition of equipment, provided that up to $500,000 of the proceeds of
the Loans may be used for soft costs, such as freight, taxes and installation
associated with the acquisition of such equipment or for general corporate
working purposes (collectively, “Softcosts”).

 

1.02                           Accounting Terms.  Accounting terms used and not otherwise
defined in this Agreement, have the meanings determined by, and all
calculations with respect to accounting or financial matters shall be computed
in accordance with, GAAP.

 

SECTION II.                                       THE LOANS

 

2.01                           Commitment to Make Loans.  Subject to the satisfaction of the applicable
conditions precedent, CIT agrees to make Loans to Debtor, on or before September 25,
2009 up to the Maximum Loan Amount for the purchase of equipment, which
equipment must be approved and deemed acceptable by CIT;  provided that up to $500,000 of the proceeds
of the Loans may be used for Softcosts. 
All Loans requested by Debtor shall be in increments of $100,000 and
shall be due and payable on or before September 25, 2013.

 

3

 

2.02                           Loans Evidenced by the Notes.  Whenever Debtor desires that CIT make a Loan,
Debtor shall notify CIT of the date on which Debtor desires CIT to make such
Loan and provide CIT with a completed and signed Note to evidence the Loan, in
form and substance satisfactory to CIT, a completed and signed Funding
Certificate in the form set forth on Exhibit B hereto, a supplement
to Exhibit A hereto setting forth the Collateral being purchased
(or reimbursed, as the case may be) with the proceeds of such Loan.  With respect to equipment purchased by Debtor
prior to the date hereof, or acquired after the date hereof by the Debtor using
funds other than the proceeds of a Loan, and subject to Section 2.06
hereof, in order to request a loan to reimburse the cost of such equipment,
Debtor shall provide CIT with a copy of the original invoice and proof of
payment for such equipment.

 

2.03                           Payments of Principal and
Interest.  The
principal amount of each Loan and all interest thereon shall be due and payable
to CIT, in immediately available funds, without defense, setoff, claim,
counterclaim or right of recoupment, in accordance with the terms of the Note
evidencing such Loan.

 

2.04                           Interest on Loans; Default
Rate.  The rate of interest on each
Loan shall be calculated at a rate equal to the per annum rate of interest
published in the Federal Reserve Statistical Release H.15 as the five-year
treasury note rate (as determined two (2) business days prior to the
issuance of the applicable Loan), plus 9.10%, provided that the five-year
treasury note rate shall not be lower than 2.90%.  Notwithstanding the foregoing, the rate of
interest on each Loan shall be capped at 12.95%.  Upon the occurrence of an Event of Default,
all Loans may, at the election of CIT, bear interest at the applicable Default
Rate of Interest set forth in the Note evidencing such Loans until such Event
of Default is waived.  Debtor may elect
an interest-only period of up to six (6) months with respect to each of
the Loans.

 

2.05                           Other Terms and Conditions
of Loans.  Each Loan
shall be subject to such other terms and conditions as are set forth in the
applicable Note.

 

2.06                           Equipment Acquired Prior to
the Date Hereof.  With
respect to equipment acquired by Debtor prior to the date of this Agreement,
the Debtor may request Loans for the following percentage of the actual cost of
such equipment: (a) with respect to equipment purchased within six (6) months
prior to the date hereof, 100% of the actual cost, and (b) with respect to
equipment purchased more than six (6) months, but less than twelve (12)
months prior to the date hereof, 70% of the actual cost, and (c) with
respect to equipment purchased more than twelve (12) months but less than
twenty-four (24) months prior to the date hereof, 60% of the actual cost, and (d) with
respect to equipment purchased more than twenty-four (24) months prior to the
date hereof, 0% of the actual cost. 
Notwithstanding the foregoing, the $500,000 of Loans which relate to
Softcosts shall not be subject to the percentage restrictions set forth above.

 

2.07         Conditions
Precedent to Initial Funding.  The obligation of CIT to make the Loans to
the Debtor is subject to the satisfaction or waiver in writing by CIT of the
following conditions precedent:

 

2.07.1          Lien Searches.  CIT shall have received tax lien, judgment
lien and Uniform Commercial Code searches from all jurisdictions reasonably
required by CIT, and such searches shall verify that CIT, will have, a first
priority security interest in the Collateral.

 

2.07.2          Insurance.  Debtor shall have delivered to CIT evidence
satisfactory to CIT that all required insurance is in full force and effect in
accordance with Section 6.

 

2.07.3          UCC Filings.  All Uniform Commercial Code financing
statements and similar documents required to be filed in order to create in
favor of CIT, a first priority 

 

4

 

perfected security interest in the
Collateral, shall have been properly filed in each office in each jurisdiction
required.

 

2.07.4          Secretary’s Certificate.  CIT shall have received an executed
certificate of the corporate secretary of the Debtor, satisfactory in form and
substance to CIT, certifying that the representations and warranties contained
herein are true and correct in all material respects and that Debtor is in
compliance with all of the terms and provisions set forth herein; attesting to
the signature of the person executing the Loan Documents and no Default or
Event of Default has occurred.

 

2.07.5          Organizational Documents.  CIT shall have received a copy of the
Certificate of Incorporation of Debtor, certified by the applicable authority
in Delaware, and copies of the by-laws (as amended through the date hereof) of
Debtor.

 

2.07.6          No Material Adverse Effect.  CIT shall have completed and be satisfied
with an updated examination and verification of the books and records of the
Debtor, and such examination shall indicate that (i) no material adverse
change has occurred in the financial condition, business, prospects, profits,
operations or assets of the Debtor or 
the Debtors’ subsidiaries over the last ninety (90) days.

 

2.07.7          Background Checks.  CIT shall have received and be satisfied with
background checks on key managers and stockholders of Debtor, if requested.

 

2.07.8          Landlord Waivers.  CIT shall have received a fully executed
landlord waiver with respect to each leased location where the Collateral will
be located.  Each such location is listed
on Exhibit A.

 

2.07.9          Other Documents.  Such other documents and completion of such
other matters, as CIT may reasonably deem necessary or appropriate.

 

2.08             Conditions Precedent to Making Loans.

 

2.08.1          No Default.  No Default or Event of Default shall have
occurred and be continuing or would result from the making of the Loan.

 

2.08.2          Material Adverse Effect.  CIT has determined in CIT’s sole discretion
that nothing has occurred that has had a Material Adverse Effect.

 

SECTION III.            COLLATERAL
SECURITY

 

3.01         Grant of Security Interest.  To secure Debtor’s payment and performance of
all of the Obligations, Debtor hereby grants to CIT a general, continuing and
valid, first priority security interest in and perfected lien upon the
Collateral.

 

3.02         Accessions.  All additions and upgrades acquired by Debtor
which are or become attached to or part of the Collateral, which are not
removable without in any way affecting or impairing the originally intended
function or use of such Collateral, shall become Collateral subject to the
terms of this Agreement.

 

5

 

3.03         Financing Statements and Evidence of Security
Interests.  Debtor
hereby authorizes CIT to file such Uniform Commercial Code financing statements
in form satisfactory to CIT as CIT reasonably deems necessary in order to
perfect CIT’s security interest in the Collateral.  In addition, Debtor agrees to take such other
steps as CIT from time to time reasonably may request in order to perfect CIT’s
security interests in the Collateral, including noting of CIT’s lien on the
Collateral and delivering to CIT any of the Collateral evidenced by an
Instrument or a certificate.

 

SECTION IV.           REPRESENTATIONS
AND WARRANTIES

 

4.01         Representations and Warranties.  Debtor hereby represents and warrants to CIT
as follows:

 

(a)           Existence and Power.  Debtor is duly organized, validly existing,
and in good standing under the laws of the State of Delaware. Debtor has the power
to own its properties and to engage in its business as currently conducted.

 

(b)           Financial Condition.  All financial information and financial
statements of Debtor previously furnished to CIT present fairly, in all
material respects, the financial condition of Debtor as of the date of such
financial information or financial statements, as applicable.

 

(c)           Debtor Information.  The signature block on the signature page hereof
sets forth Debtor’s exact and complete legal name.  In addition, set forth under Debtor’s
signature block is Debtor’s (i) type of organization, (ii) the State
in which Debtor is organized or formed, (iii) Debtor’s organizational
identification number (or, if no such identification number has been assigned
by Debtor’s State of organization, an indication that no such number has been
assigned), (iv) the exact address of its chief executive office, and (v) Debtor’s
federal employer identification number.

 

(d)           Past Changes.  Except as set forth on Schedule 4.01(d) or
on the signature block on the signature page hereof, Debtor has not within
the past five (5) years (i) changed its name, (ii) been the
surviving entity in any merger, or (iii) been known by, or included in a
Uniform Commercial Code financing statement relating to Debtor under, any name
other than Debtor’s name set forth on the signature page hereof.

 

(e)           No Violations.  The making and performance of this Agreement,
the Notes and the other Loan Documents will not (i) violate Debtor’s
organizational documents, (ii) violate any applicable laws or (iii) result
in a breach of or default under any material contract, agreement, or instrument
to which Debtor is a party or by which Debtor or its property is bound,
including, without limitation, any shareholder agreements and convertible note
documentation.

 

(f)            Consents.  All necessary consents, approvals or
authorizations of, or filing, registration or qualification with, any person,
entity or governmental authority, required to be obtained by Debtor in
connection with the execution and delivery of this Agreement or the undertaking
or performance of any obligation hereunder has been obtained.

 

(g)           Pending Disputes.  Except as previously disclosed by Debtor to
CIT in writing, there exist no actions, suits or proceedings of any kind by or against
Debtor pending in any court or before any arbitrator or governmental body,
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

(h)           Authority and Enforceability.  Debtor (i) has the power and authority
to enter into this Agreement, the Notes and the other Loan Documents, and to
incur and perform the Obligations, and (ii) 

 

6

 

has taken all actions necessary to authorize the execution, delivery,
and performance of this Agreement, the Notes and the other Loan Documents to
which Debtor is a party.  This Agreement,
the Notes the other Loan Documents to which Debtor is a party are valid,
binding, and enforceable against Debtor in accordance with their respective
terms subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or law.

 

(i)            Collateral Matters.  Debtor is the absolute owner of all
Collateral, free and clear of all liens, claims and encumbrances other than the
Permitted Liens.

 

(j)            Environmental and Health Care Issues.  Debtor represents and warrants that it: (i) possesses
and will maintain at all times during the term of this Agreement environmental,
health and safety licenses, healthcare and other permits, authorizations,
registrations, FDA and other approvals and similar rights (“Approvals”) necessary under all
environmental and health laws, rules and regulations for Debtor to conduct
its operations as now being conducted and (ii) each Approval and similar
rights is and will remain during the term of this Agreement valid and
subsisting, in full force and effect and enforceable by Debtor in all material
respects.  Except as disclosed in this
Agreement, Debtor has received no written notices of any violation or
noncompliance with, or remedial obligation under, any environmental or health
care laws and there are no writs, injunctions, decrees, orders, lawsuits,
claims, proceedings or judgments outstanding under or, to the knowledge of
Debtor, investigations or inquiries pending or threatened relating to the
ownership, use, condition, maintenance or operation of, or conduct of business
related to, any Collateral, any real estate where the Collateral is located or
other Collateral covered by this Agreement.

 

4.02         Remaking of Representations and Warranties.  All representations and warranties made by
Debtor in Section 4.01 shall be deemed to be remade by Debtor each
time that CIT makes a Loan to Debtor and each time that CIT makes a
disbursement under any Loan to Debtor.

 

SECTION V.             COVENANTS OF
DEBTOR

 

5.01         Affirmative Covenants.  Until the full and final payment and
satisfaction of the Obligations and the termination of CIT’s commitments to
make Loans hereunder, Debtor agrees to comply, at all times, with the following
agreements and covenants:

 

(a)           Liens.  Debtor agrees to keep the Collateral free and
clear of all liens, claims and encumbrances (other than Permitted Liens), and
to forever warrant and defend the Collateral from any and all claims and
demands of any other person or entity.

 

(b)           Maintenance of Collateral.  Debtor agrees to (i) maintain the
Collateral in good and substantial repair and condition, reasonable wear and
tear excepted, (ii) make any and all repairs and replacements to the
Collateral when and where reasonably necessary, and (iii) safeguard,
protect and hold all Collateral in accordance with the terms hereof and subject
to CIT’s security interest.  The
Collateral shall be held at all times at the locations listed on Exhibit A
hereto or other locations approved by CIT in writing and for which CIT has
received, at its request, an executed landlord waiver.

 

(c)           Compliance with Laws.  Debtor agrees to comply with all federal,
state and local acts, rules and regulations, and all orders of any
federal, state or local legislative, administrative or judicial body or
official applicable to Debtor, the Debtor’s business, if the failure to so
comply would have a Material Adverse Effect.

 

7

 

(d)           Maintenance and Compliance with Permits.  Debtor agrees to obtain and maintain all
permits, approvals, authorizations and licenses necessary to operate its
business, to conduct Debtor’s business and to bill and collect accounts
receivable payable by governmental entities, except to the extent the failure
to maintain any such permit, approval, authorization or license would not have
a Material Adverse Effect.

 

(e)           Financial Records.  Debtor agrees to maintain books and records
pertaining to Debtor’s financial matters in such detail, form and scope as is
commercially reasonable.  Debtor agrees
to allow CIT, at reasonable times upon reasonable notice, but in any event,
absent the occurrence of a Default, only two (2) times in any twelve (12)
month period, (i) to examine Debtor’s books and records, and make copies
thereof and take extracts therefrom, and (ii) to verify and inspect the
Collateral.

 

(f)            Financial Statements.  Debtor agrees to furnish to CIT the following
financial statements of Debtor:

 

(i)            Within ninety (90) days following the end of each
fiscal year of Debtor, audited financial statements of Debtor for such fiscal
year, including a balance sheet, income statement and statement of cash flows
for such fiscal year, prepared in accordance with GAAP and certified (without
qualification or exception deemed material by CIT) by independent certified
public accountants who are reasonably acceptable to CIT , setting forth in
comparative form the figures for the previous fiscal year (if applicable); and

 

(ii)           Within forty-five (45) days after the end of each
fiscal quarter of Debtor, unaudited quarterly financial statements, conforming
to the requirements set forth in clause (i) above but subject to
reasonable year-end adjustments and without footnotes, prepared in conformity
with GAAP and certified by Debtor’s chief financial officer to be, in such
officer’s opinion, complete, true and correct in all material respects and to
present fairly Debtor’s financial position as of the end of such fiscal
quarter.

 

(g)           Terrorism and Money Laundering Laws.  Debtor agrees to comply with all applicable
anti-money laundering and terrorism laws, regulations and executive orders in
effect from time to time (including, without limitation, the USA Patriot Act
(Pub. L. No. 107-56)).  Debtor shall
also ensure that no person who owns a controlling interest in or otherwise
controls Debtor is a person designated under Section 1(b), (c) or (d) of
Executive Order No. 13224 (issued September 23, 2001) or any other
similar executive order.  Debtor
acknowledges that CIT’s performance hereunder is subject to compliance with all
such laws, regulations and executive orders, and in furtherance of the
foregoing, Debtor agrees to provide to CIT all information about Debtor’s
ownership, officers, directors, customers and business structure as CIT
reasonably may require to comply with such laws, regulations and executive
orders.

 

(h)           Use of Loan Proceeds.  Debtor agrees to use the proceeds of all
Loans only for the purchase of equipment in the normal course of business and
not for distributions to any shareholders, members or partners of Debtor;
provided that up to $500,000 of the proceeds of the Loans may be used for
Softcosts.

 

(i)            Taxes and Tax Returns.  Debtor agrees to file timely all federal,
state, and local tax returns required by applicable laws and to pay or caused
to be paid all taxes, assessments, and other governmental charges imposed upon
Debtor or the Collateral prior to the due date therefor.  If a lien securing any taxes is filed in any
public office, then Debtor shall pay all such taxes immediately and remove such
lien promptly; provided, that, pending such payment and removal of such lien,
CIT may, at its election and without curing or waiving any Event of Default
which may have occurred as a result 

 

8

 

thereof, pay such taxes on behalf of Debtor, and the amount paid by CIT
shall become an Obligation which is due and payable on demand by CIT.

 

(j)            Right of First Negotiation for New Equipment
Financing.  During the
one year period following the effective date of this Agreement, Debtor agrees
that should Debtor desire to borrow an aggregate amount less than or equal to
two million dollars ($2,000,000) for the purpose of acquiring or otherwise
financing equipment, then Debtor shall notify CIT of such desire and shall
negotiate with CIT the proposed terms of such financing.  In the event that CIT and Debtor fail to
agree on terms for such financing within twenty (20) days after Debtor first
notifies CIT of such intention, then Debtor shall be free to negotiate terms
for such financing with third parties. 
If CIT notifies Debtor that CIT is not interested in negotiating terms
for such a proposed financing, then subject to the restrictions set forth
herein, Debtor may immediately enter into negotiations with a third party for
the financing of such equipment and is not required to wait twenty (20) days
before initiating such negotiations.  For
purposes of clarity, CIT shall have this right of first negotiation only for
the one year period following the effective date of this Agreement and only for
a financing in an aggregate amount less than or equal to two million dollars
($2,000,000).

 

5.02         Negative Covenants.  Until the full and final payment and
satisfaction of the Obligations and the termination of CIT’s commitments to
make Loans hereunder, Debtor agrees to comply, at all times, with the following
agreements and covenants:

 

(a)           Sale of Collateral.  Debtor agrees (i) not to sell, assign or
otherwise dispose of any interest in the Collateral, and (ii) not to
remove or attempt to remove any item of Collateral from the location set forth
on Exhibit A hereto once installed.

 

(b)           No Fixtures.  No part of the Collateral other than
leasehold improvements shall be or become fixtures under applicable law.

 

(c)           Organizational and Business Changes. Debtor agrees
not to (i) merge or consolidate with any other entity, (ii) change
its name, (iii) change its structure or organizational form, or
reincorporate or reorganize in a new jurisdiction, (iv) permit any Change
in Control, or (iv) enter into or engage in any operation or business
activity other than its business as currently conducted; provided that
Debtor may change its name or so long as Debtor provides CIT with thirty (30)
days prior written notice thereof and the appropriate parties execute and
deliver to CIT, prior to making such change, all documents and agreements
required by CIT in order to ensure that CIT’s security interests in the
Collateral continue in effect without any break or lapse in perfection.

 

(d)           Subsidiaries.  Debtor agrees not to create or acquire any
new subsidiary unless (a) Debtor notifies CIT as promptly as reasonably
practicable prior to the formation or acquisition of such subsidiary and (b) at
CIT’s election, such subsidiary guarantees the Obligations.

 

SECTION VI.           INSURANCE;
EVENT OF LOSS

 

6.1           Insurance Coverage.

 

(a)           Debtor shall obtain and maintain, at Debtor’s
expense, “All Risks” property insurance covering the Collateral against all
risks of loss or physical damage to the Collateral for the full insurable 

 

9

 

value thereof at the greater of on a “replacement cost” basis or for
the outstanding balance of the Obligations, and naming CIT as lender loss
payee.  In addition, Debtor shall obtain
and maintain commercial general liability coverage in an amount reasonably acceptable
to CIT and naming CIT as additional insured, and Debtor shall also obtain such
other insurance in amounts and against such risks as CIT may reasonably
specify, and shall promptly deliver each policy to CIT with a standard
long-form lender endorsement duly executed by the applicable insurance carrier
(or its authorized agent) or other evidence of insurance acceptable to CIT; and
providing CIT with not less than thirty (30) days prior written notice of
cancellation (ten (10) days for non-payment of premiums).  Each such policy shall be in form, terms and
amounts with deductibles satisfactory to CIT, issued by insurance carriers
reasonably satisfactory to CIT.  Such
carriers shall in no event have an A.M. Best’s Rating of less than “A-VII.”  As to CIT’s interest in such policy, no act
or omission of CIT or any of CIT’s officers, agents, employees or
representatives shall affect the obligations of the insurer to pay the full
amount of any loss.

 

(b)           Debtor hereby assigns to CIT any monies which may
become payable under any such policy of insurance as a result of any Collateral
that has been destroyed or otherwise impaired and irrevocably constitutes and
appoints CIT as Debtor’s attorney in fact (i) to make, settle and adjust
claims under each policy of insurance, (ii) to make claims for any monies
which may become payable under such insurance and other insurance on the
Collateral including returned or unearned premiums, and (iii) to endorse
Debtor’s name on any check, draft or other instrument received in payment of
claims or returned or unearned premiums under each policy and to apply the
funds to the payment of the Obligations owing to CIT; provided, however, CIT is
under no obligation to do any of the foregoing.

 

(c)           Should Debtor fail to maintain the insurance
coverage required by this Section 6.01 in full force, or to pay any
premium in whole or in part relating thereto, then CIT, without waiving or
releasing any default or obligation by Debtor, may (but shall be under no
obligation to) either (i) purchase and maintain insurance coverage on the
Collateral or (ii) pay the premiums therefor, in either case, on behalf of
Debtor.  The full amount of any such
insurance purchased and/or premium paid by CIT shall be payable by Debtor upon
demand, and failure to pay same shall constitute an Event of Default under this
Agreement and the other Loan Documents.

 

6.02         Event of Loss.  In the event that there has been a loss of
Collateral or damage thereto to all or any portion of any Collateral (an “Event
of Loss”), Debtor shall forthwith (and in any event within three (3) days
after such occurrence) give CIT written notice of such Event of Loss, and CIT
and Debtor shall proceed diligently and cooperate fully with each other in the
recovery of any and all proceeds of insurance applicable thereto.  All such proceeds of insurance shall be paid
to CIT and applied against the Debtor’s Obligations, such application to be
made first to accrued interest and all other amounts then due and owing under
the terms and conditions of the Loan Documents, and second ratably against the
installments due under the Notes in the inverse order of their maturities.

 

SECTION VII.          FEES AND
EXPENSES; INDEMNITY

 

7.01         Fees and Expenses.

 

(a)           Facility/Structuring Fee.  To induce CIT to enter into this Agreement
and to extend to Debtor the Loans, Debtor agrees to pay to CIT a
facility/structuring fee in the amount of $20,000.00 (the “Facility/Structuring Fee”), which shall be
fully earned upon execution of this Agreement by CIT and Debtor.

 

(b)           Late Fee.  In addition to other amounts which may be due
hereunder, Debtor agrees to pay to CIT a late fee in the amount of 5% of the
payment amount (the “Late Fee”)
for each payment of 

 

10

 

principal and/or interest which shall not have been received by CIT
within ten (10) days following the due date therefor.

 

(c)           Attorney Fees.  In addition to other amounts which may be due
hereunder, Debtor agrees to pay to CIT on request for all reasonable costs,
fees and expenses of CIT, or any persons acting on its behalf (including,
without limitation, the fees, costs and expenses of inside or outside counsel
in connection with the drafting, negotiating and execution of all Loan
Documents.

 

(d)           Other Obligations.  Debtor agrees to pay to CIT, within (ten) 10
days of Debtor’s receipt of an invoice from CIT, all other monetary Obligations
due and payable by Debtor to CIT under this Agreement, the Notes and the other
Loan Documents.

 

7.02         Indemnity.  Debtor hereby agrees to indemnify CIT and its
officers, directors, employees, attorneys and agents (each, an “Indemnified Party”) from, and to defend and
hold each Indemnified Party harmless against, any and all losses, liabilities,
obligations, claims, actions, judgments, suits, damages, penalties, costs,
fees, expenses (including reasonable attorney’s fees) of any kind or nature
which at any time may be imposed on, incurred by, or asserted against, any
Indemnified Party: (a) as a result of CIT’s exercise of any of CIT’s
rights and remedies under this Agreement, or CIT’s defense of its interests in
the Collateral (including the defense of claims brought by Debtor as a
debtor-in-possession, any creditors’ committee of Debtor or any trustee in
bankruptcy); (b) as a result of any environmental pollution, hazardous
material or environmental clean up relating to the real estate on which the
Collateral may be located; (c) in connection with any regulatory
investigation or proceeding by any regulatory authority or agency having
jurisdiction over Debtor; and (d) otherwise relating to or arising out of
the transactions contemplated by this Agreement, the Notes and the other Loan
Documents, or any action taken (or failure to act) by any Indemnified Party
with respect thereto; provided that an Indemnified Party’s conduct in
connection with any of the foregoing matters does not constitute gross
negligence or willful misconduct.  This
indemnification shall survive the repayment and satisfaction of the
Obligations.

 

SECTION VIII.         EVENTS OF DEFAULT; REMEDIES

 

8.01         Events of Default.  The occurrence of any one or more of the
following events shall constitute an “Event of Default” hereunder:

 

(a)           Debtor shall fail to pay when due the principal and
interest payable under any Note, or any other monetary Obligation due and
payable by Debtor to CIT under this Agreement, the Notes or the other Loan
Documents, and such failure shall continue for a period of ten (10) days;

 

(b)           Debtor shall fail to perform or observe any other
covenant, condition or agreement to be performed or observed by Debtor under
this Agreement, the Notes or the other Loan Documents (other than those
referred to in Section 8.01(c) below), and such failure shall
continue unremedied for a period of 30 days;

 

(c)           Debtor shall fail to perform or observe any
covenant, condition or agreement to be performed or observed by Debtor pursuant
to Sections 5.01(a), 5.01(h), 5.02 and 6.01 hereof;

 

(d)           Any representation or warranty made by Debtor
herein, in any other Loan Document or in any document or certificate furnished
to CIT in connection herewith shall have been incorrect or misleading in any
material respect when made or deemed made;

 

(e)           Debtor shall liquidate or dissolve, or shall cease
to do business as a going concern;

 

11

 

 (f)                                 (i) The commencement by Debtor of any
bankruptcy, insolvency, arrangement, reorganization, receivership, assignment
for the benefit of creditors or similar proceedings under any federal or state
law; or (ii) the commencement against Debtor of any bankruptcy,
insolvency, arrangement, reorganization, receivership, assignment for the
benefit of creditors or similar proceeding under any federal or state law by
creditors of Debtor, but only if such proceeding is not contested by Debtor
within ten (10) days after commencement and not dismissed or vacated
within sixty (60) days after commencement;

 

(g)                                 A judgment creditor of Debtor shall obtain
possession or control of any of the Collateral by any means;

 

(h)                                 There shall be a judgment rendered against
Debtor in an amount in excess of $100,000;

 

(i)                                     A Change of Control shall occur;

 

(j)                                     A Material Adverse Effect shall occur in the
business or condition of Debtor; or

 

(k)                                  If Debtor breaches or violates the terms of,
or if a default or an event of default occurs under any other existing or
future agreement (related or unrelated) between or among Debtor and CIT or any
affiliate or direct of indirect subsidiary of CIT, including without
limitation, any lease agreements or finance agreements.

 

8.02                           Rights and Remedies of CIT.

 

(a)                                  Remedies With Respect to Outstanding Loans.  Upon
the occurrence of an Event of Default, at the option of CIT, all commitments of
CIT to make Loans to Debtor pursuant to any of the Loan Documents shall cease,
unless such Event of Default is waived in accordance herewith.  In addition, upon the occurrence and
continuance of an Event of Default, CIT may, at its option (i) declare all
Obligations immediately due and payable, (ii) charge Debtor the Default
Rate of Interest on all then outstanding or thereafter incurred Obligations in
lieu of the interest provided for in Section 2.04 of this
Agreement, provided that CIT has given Debtor written notice of such Event of
Default if required by Section 2.04, and (iii) immediately
terminate this Agreement and the other Loan Documents upon notice to the
Companies.  Notwithstanding the
foregoing, (x) CIT’s commitment to make Loans to Debtor pursuant to any of
the Loan Documents automatically shall terminate without any declaration,
notice or demand by CIT upon the commencement of any proceeding described in Section 8.01(f),
and (y) this Agreement automatically shall terminate and all Obligations
shall become due and payable immediately without any declaration, notice or
demand by CIT, upon (A) the commencement of any proceeding described in
clause (i) of Section 8.01(f) or (B) upon the
commencement of any proceeding described in clause (ii) of Section 8.01(f),
only if such proceeding shall not be contested by Debtor within the time
required, or the proceeding shall not be dismissed or vacated within the time
required.

 

(b)                                 Remedies With Respect to Collateral. 
Immediately after the occurrence and continuance of an Event of Default,
CIT may, at its option, to the extent permitted by applicable law:

 

(i)                                     Exercise all rights of and remedies available
to a secured party in law or in equity with respect to Debtor and the
Collateral, whether under the Uniform Commercial Code or otherwise, including
the right to (A) by its own means or with judicial assistance, enter
Debtor’s premises and take possession of the Collateral, or render it unusable,
or dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and Debtor shall not resist or interfere with
such action , (b) require Debtor at Debtor’s expense to assemble all or 

 

12

 

any part of the Collateral and make it
available to CIT at any place designated by CIT, and (C), (B) sell, lease,
license or otherwise dispose of the Collateral; and

 

(ii)                                  Foreclose CIT’s security interests in the
Collateral by any available judicial procedure.

 

CIT shall have the right, at its option, to rebuild,
repair, or perform maintenance on any Collateral for the purpose of putting the
Collateral in such saleable form as CIT shall deem appropriate.  Debtor hereby agrees that a notice received
by it at least ten (10) days before the time of any intended public sale
or of the time after which any private sale or other disposition of the Collateral
is to be made, shall be deemed to be reasonable notice of such sale or other
disposition.  Debtor covenants and agrees
not to interfere with or impose any obstacle to CIT’s exercise of its rights
and remedies with respect to the Collateral, after the occurrence and
continuance of an Event of Default hereunder.

 

(c)                                  Application of Proceeds.  The
net cash proceeds resulting from CIT’s exercise of any of the foregoing rights
(after deducting all costs and expenses of CIT including, without limitation,
legal fees and expenses) shall be applied by CIT to the payment of the
Obligations, whether due or to become due, in such order as CIT may elect, and
Debtor shall remain liable to CIT for any deficiencies, and CIT in turn agrees
to remit to Debtor or its successors and assigns, and surplus therefrom.

 

(d)                                 Rights Cumulative.  The
enumeration of the foregoing rights and remedies is not intended to be
exhaustive, and the exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy available to CIT under applicable law or
the Loan Documents, all of which shall be cumulative.

 

8.03                           Power of Attorney.  Debtor hereby irrevocably appoints any
officer, employee or agent of CIT as Debtor’s true and lawful attorney-in-fact
with power to, upon the occurrence and during the continuance of an Event of
Default under this Agreement or any Note or any other Loan Document:  (i) endorse Debtor’s name upon any
notes, checks, drafts, money orders, or other instruments or payments or other
Collateral that may come into CIT’s possession; (ii) sign and endorse
Debtor’s name upon any documents of title, invoices, freight or express bills,
assignments, verifications and notices in connection with any of the
Collateral, and any instruments or documents relating thereto or to Debtor’s
rights therein; (iii) at any time whether or not an Event of Default has
occurred, to execute in Debtor’s name and file one or more financing, amendment
and continuation statements covering the Collateral; and (iv) at any time
whether or not an Event of Default has occurred, to file, settle or adjust, and
receive payment of claims made under any such insurance policy on or after the
occurrence of any loss of Collateral or any damage or destruction thereto, and
to endorse Debtor’s name on any checks, drafts or other instruments on payment
of such insurance  claims.  Any such attorney of Debtor shall have full
power to do any and all things necessary to be done with respect to the above
transactions as fully and effectually as Debtor might do.

 

SECTION IX.                                  MISCELLANEOUS PROVISIONS

 

9.01                           Assignments.  Without the prior written consent of CIT,
Debtor shall not assign, transfer, pledge, hypothecate, or otherwise dispose of
any interest or obligation of Debtor under this Agreement, any Note or any
other Loan Document.  Nor shall Debtor
sublease or lend the Collateral or permit the Collateral to be used by any
person or entity other than Debtor, Debtor’s employees or, solely with respect
to permission to use the Collateral, Debtor’s Collaboration Partners.  Subject to Section 8.02(b) hereof,
CIT may, without the consent of or notice to Debtor, assign or transfer all or
any portion of CIT’s rights under this Agreement or one or more Notes to any
person or entity.  Debtor agrees that, following
its receipt of notice of any such assignment by CIT, Debtor will pay the
payments relating to such 

 

13

 

assigned rights directly to the assignee (or to whomever the assignee
shall designate).  Upon CIT’s request,
Debtor will acknowledge to any assignee receipt of CIT’s notice of such
assignment.

 

9.02                           Further Assurance.  From time to time, Debtor will execute and
deliver to Lender such additional documents and will provide such additional
information and do and perform such things as Lender may reasonably require to
carry out the terms and intent of this Agreement and the other Loan Documents
and be informed of the status and affairs of Debtor.

 

9.03                           Enforcement and Waiver by CIT.  CIT shall have the right at
all times to enforce the provisions of this Agreement, any Note and any other
Loan Document in strict accordance with the terms hereof and thereof,
notwithstanding any prior conduct or custom on the part of CIT in refraining
from so doing at any time or times.  No
waiver of an Event of Default by CIT shall be effective unless such waiver is
in writing and signed by CIT.  No delay
or failure of CIT to exercise any right or remedy hereunder, whether before or
after the happening of any Event of Default, shall impair any such right or
remedy, or shall operate as a waiver of such right or remedy, or as a waiver of
such Event of Default.  A waiver on any
occasion shall not be construed as a bar to or waiver of any right or remedy on
any future occasion. No single or partial exercise by CIT of any right or
remedy precludes any other or further exercise thereof, or precludes any other
right or remedy.

 

9.04                           Notices.  Except as otherwise herein provided, any
notice or other communication required hereunder shall be in writing (messages
sent by e-mail or other electronic transmission (other than by telecopier)
shall not constitute a writing, however any signature on a document or other
writing that is transmitted by e-mail or telecopier shall constitute a valid
signature for purposes hereof), and shall be deemed to have been validly
served, given or delivered when received by the recipient if hand delivered,
sent by commercial overnight courier or sent by facsimile, or three (3) Business
Days after deposit in the United States mail, with proper first class postage
prepaid and addressed to the party to be notified as follows:

 

(a)                                          If to CIT, at:

 

CIT Healthcare LLC

305 Fellowship Road

Mt. Laurel, NJ  08054

Attn: Alisa Micarelli

Telecopier No.: 856-727-5170;

 

14

 

(b)                                         If to Debtor at:

 

Redpoint Bio Corporation

7 Graphics Drive

Ewing, NJ 08628

Attn:

Telecopier No.: (609) 637-0126;

 

With a copy to:

 

Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 
08540

Attn: 
Andrew P. Gilbert

Telecopier No.  (609) 919-6701; or

 

(c)                                          To such other address as any party may
designate for itself by like notice.

 

9.05                           Waivers by Debtor.  To the maximum extent permitted by applicable
laws:

 

(a)                                  DEBTOR AND CIT EACH HEREBY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREUNDER.  DEBTOR HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.

 

(b)                                  DEBTOR AGREES NOT TO ASSERT
ANY CLAIM AGAINST CIT FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL
DAMAGES.

 

9.06                           Choice of Law.  The validity, interpretation and enforcement
of this agreement and the other loan documents shall be governed by the laws of
the State of New York, except to the extent that any other loan document
includes an express election to be governed by the laws of another
jurisdiction.

 

9.07                           Consent to Jurisdiction.  Debtor consents to the personal jurisdiction
and venue of the Federal and State courts located within the State of New York
with respect to any action arising out of the Notes, this Agreement, the other
Loan Documents or any other document or certificate delivered in connection
herewith and therewith; provided that CIT may, in CIT’s sole discretion,
enforce this Agreement, the Notes or any other Loan Document in any court
having lawful jurisdiction thereof.

 

9.08                           Entire Agreement; Amendments; Binding Effect.  This
Agreement and the other Loan Documents: (a) constitute the entire
agreement between Debtor and CIT; (b) supersede any prior agreements; (c) may
be amended only by a writing signed by Debtor and CIT; and (d) shall bind
and benefit Debtor and CIT and their respective successors and permitted
assigns.  Should the provisions of any
other Loan Document conflict with the provisions of this Agreement, the
provisions of this Agreement shall apply and govern.

 

9.09                           Severability.  If any provision hereof or of any other Loan
Document is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable 

 

15

 

agreement shall remain in full force and effect and shall not be
affected by such provision’s severance. 
Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.

 

9.10                           Usury Limit.  In no event shall Debtor, upon demand by CIT
for payment of any of the Obligations, by acceleration of the maturity thereof,
or otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law.  Regardless of any
provision herein, or in any Note or other Loan Document, CIT shall never be
entitled to receive, charge or apply, as interest on any indebtedness relating
hereto, any amount in excess of the maximum amount of interest permissible
under applicable law.  If CIT ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such. 
If as a result, the entire principal amount of the Obligations is paid
in full, any remaining excess shall be refunded to Debtor.  This Section 9.10 shall control
every other provision of this Agreement, the Notes and the other Loan
Documents.

 

9.11                           Headings.  Section and subsection headings in this
Agreement are included for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose.

 

9.12                           Counterparts.  This Agreement may be executed in any number
of manually executed and numbered counterparts, each of which shall be deemed
to be an original, but all of which together shall constitute one and the same
agreement.  To the extent, if any, that
this Agreement (with or without any of the Notes) constitutes chattel paper
under the provisions of the applicable Uniform Commercial Code, no security
interest in this Agreement and such Note may be created through the transfer
and possession of any counterpart other than counterpart number one.

 

9.13                           Survival.  The representations, warranties, covenants
and indemnities contained in this Agreement, the Notes and the other Loan
Documents shall survive the execution and delivery hereof and thereof and
payment, performance and satisfaction of the Obligations.

 

16

 

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set forth above.

 

REDPOINT BIO CORPORATION

 

	
  By:

  	
  /s/ Scott
  Horvitz

  	
   

  
	
  Name:
  Scott M. Horvitz

  
	
  Title:
  Chief Financial Officer, Treasurer and Secretary

  

 

If
an Organization, Type of Organization: 
Corporation

Jurisdiction
of Organization or Formation:  Delaware

Federal
Tax Identification Number:  22-3393959

Location
of Chief Executive Office:  7 Graphics
Drive, Ewing, New Jersey, 08628

Names
Used in Past Five (5) Years: 
Linguagen Corp.  

 

	
  CIT HEALTHCARE LLC

  
	
   

  
	
  By:

  	
  /s/ Alisa Micarelli

  	
   

  
	
  Name:

  	
  Alisa Micarelli

  	
   

  
	
  Title:

  	
  SVP

  	
   

  

 

COUNTERPART    OF   

 

17

 

Schedule 4.01(d)

 

Redpoint
was incorporated in August 1995 under the name “Linguagen Corp.”  On November 29, 2006, we changed our
name from “Linguagen Corp.” to “Redpoint Bio Corporation”.

 

On March 12, 2007, we
entered into the Agreement and Plan of Merger, dated as of March 12, 2007,
by and among Redpoint, on the one hand, and Robcor Properties, Inc. (“Robcor”),
Robcor Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Robcor (“Merger Sub”), Robcor, LLC, a Kentucky limited liability company and
wholly-owned subsidiary of Robcor (“Robcor LLC”), and Halter Financial
Investments, L.P., a Texas limited partnership, and Michael Heitz, as
stockholders of Robcor, on the other hand (the “Reverse Merger Agreement”).  The transactions contemplated by the Reverse
Merger Agreement were consummated on March 12, 2007 (the “Closing Date”).

 

Pursuant to the Reverse
Merger Agreement, on the Closing Date, Merger Sub merged with and into
Redpoint, (the “Reverse Merger”), with Redpoint being the surviving
corporation.  Redpoint became a
wholly-owned subsidiary of Robcor and the outstanding shares of capital stock,
convertible notes and certain warrants to purchase capital stock of Redpoint
were converted into an aggregate of 35,073,259 shares of Robcor common stock in
accordance with the Delaware General Corporation Law, on the terms and
conditions as set forth in the Reverse Merger Agreement.

 

On May 3, 2007, Robcor
and Redpoint entered into an Agreement and Plan of Merger in which Robcor, the
former parent company of Redpoint, merged with and into Redpoint. Such merger
was deemed effective on June 15, 2007.

 

18

 

EXHIBIT A

 

COLLATERAL

 

See
attached.

 

19

 

EXHIBIT B

 

FUNDING CERTIFICATE

 

The
undersigned, being the duly elected and acting                                             of
Redpoint Bio Corporation., a Delaware corporation (“Debtor”), does hereby
certify to CIT HEALTHCARE LLC, (“CIT”) in connection with that certain Loan and
Security Agreement dated as of September 25, 2008 by and among Debtor and
CIT (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 as of the date hereof.

 

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

 

3.                                       Borrower is in compliance with the covenants
and requirements contained in Sections 2.07, 2.08, 5 and 6 of the Loan
Agreement.

 

4.                                       All conditions referred to in Sections
2.07 and 2.08 of the Loan Agreement to the making of the Loan to be made on
or about the date hereof have been satisfied.

 

5.                                       No Material Adverse Change has occurred.

 

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

 

	
  Loan Amount

  	
   

  	
  $

  	
   

  
	
  Amount of Advance attributable to
  Softcosts:

  	
   

  	
  $

  	
   

  
	
  Less (Initial Advances Only):

  	
   

  	
   

  	
   

  
	
  Legal Fees

  	
   

  	
  $

  	
   

  
	
  Balance of Facility/Structuring Fee

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Proceeds due Debtor from CIT:

  	
   

  	
  $

  	
   

  

 

7.                                       The aggregate net proceeds of the Loan in the
amount of
$                                  
shall be transferred to Debtor’s account as follows:

 

	
  Account Name:

  	
   

  	
  Custody Services

  
	
  For
  Final Credit to account:

  	
   

  	
  Redpoint
  Bio Corporation DE3170

  
	
  Bank Name:

  	
   

  	
  State Street
  Bank & Trust Company

  
	
  Bank Address:

  	
   

  	
  Crown Colony Park, 1200
  Crown Colony Drive

  
	
   

  	
   

  	
  Quincy,
  MA 02169-0938

  
	
  Attention:

  	
   

  	
  Trisha
  Rodney

  
	
  Telephone:

  	
   

  	
   

  
	
  Account Number:

  	
   

  	
  17039843

  
	
  ABA Number:

  	
   

  	
  011000028

  

 

20

 

	
  Dated:
                    ,
  20

  	
  DEBTOR:

  
	
   

  	
   

  
	
   

  	
  REDPOINT BIO CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

21

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