Document:

exv10w16

 

Exhibit 10.16

MONEYGRAM EMPLOYEE EQUITY TRUST

Effective as of June 30, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page

	ARTICLE 1.
	 	Trust, Trustee and Trust Fund	 	 	5	 
	1.1
	 	Trust	 	 	5	 
	1.2.
	 	Trustee	 	 	5	 
	1.3.
	 	Trust Fund	 	 	5	 
	1.4.
	 	Trust Fund Subject to Claims	 	 	5	 
	1.5.
	 	Definitions	 	 	6	 
	ARTICLE 2.
	 	Contributions and Dividends	 	 	9	 
	2.1.
	 	Contributions	 	 	9	 
	2.2.
	 	Dividends	 	 	10	 
	ARTICLE 3.
	 	Release and Allocation of Company Stock	 	 	10	 
	3.1.
	 	Release of Shares	 	 	10	 
	3.2.
	 	Allocations	 	 	10	 
	3.3.
	 	Excess Shares	 	 	10	 
	ARTICLE 4.
	 	Compensation, Expenses and Tax Withholding	 	 	11	 
	4.1.
	 	Compensation and Expenses	 	 	11	 
	4.2.
	 	Withholding of Taxes	 	 	12	 
	ARTICLE 5.
	 	Administration of Trust Fund	 	 	12	 
	5.1.
	 	Management and Control of Trust Fund	 	 	12	 
	5.2.
	 	Investment of Funds	 	 	12	 
	5.3.
	 	Trustee’s Administrative Powers	 	 	12	 
	5.4.
	 	Voting and Tendering of Company Stock	 	 	14	 
	5.5.
	 	Indemnification	 	 	15	 
	5.6.
	 	General Duty to Communicate to Committee	 	 	16	 
	ARTICLE 6.
	 	Accounts and Reports of Trustee	 	 	16	 
	6.1.
	 	Records and Accounts of Trustee	 	 	16	 
	6.2.
	 	Fiscal Year	 	 	16	 
	6.3.
	 	Reports of Trustee	 	 	16	 
	6.4.
	 	Final Report	 	 	16	 
	ARTICLE 7.
	 	Succession of Trustee	 	 	16	 
	7.1.
	 	Resignation of Trustee	 	 	16	 
	7.2.
	 	Removal of Trustee	 	 	16	 
	7.3.
	 	Appointment of Successor Trustee	 	 	17	 
	7.4.
	 	Succession to Trust Fund Assets	 	 	17	 
	7.5.
	 	Continuation of Trust	 	 	17	 
	7.6.
	 	Changes in Organization of Trustee	 	 	17	 
	7.7.
	 	Continuance of Trustee's Powers in Event of Termination of the Trust	 	 	17	 

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	 	 	 	 	Page

	ARTICLE 8.
	 	Amendment or Termination	 	 	17	 
	8.1.
	 	Amendments	 	 	17	 
	8.2.
	 	Termination	 	 	18	 
	8.3.
	 	Form of Amendment or Termination	 	 	18	 
	ARTICLE 9.
	 	Miscellaneous	 	 	18	 
	9.1.
	 	Controlling Law	 	 	18	 
	9.2.
	 	Committee Action	 	 	18	 
	9.3.
	 	Notices	 	 	19	 
	9.4.
	 	Severability	 	 	19	 
	9.5.
	 	Protection of Persons Dealing with the Trust	 	 	19	 
	9.6.
	 	Tax Status of Trust	 	 	19	 
	9.7.
	 	Participants to Have No Interest in the Company by Reason of the Trust	 	 	19	 
	9.8.
	 	Nonassignability	 	 	19	 
	9.9.
	 	Gender and Plurals	 	 	20	 
	9.10.
	 	Counterparts	 	 	20	 

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MONEYGRAM EMPLOYEE EQUITY TRUST

          THIS TRUST AGREEMENT (the “Agreement”) made effective as of June 30, 2004,
between MoneyGram International, Inc., a Delaware corporation (the “Company”),
and Wells Fargo Bank, N.A., a national banking association (the “Trustee”), as
trustee.

W I T N E S S E T H :

          WHEREAS, pursuant to the Separation and Distribution Agreement dated as of
June 30, 2004 (the “Separation and Distribution Agreement”) by and among Viad
Corp, a Delaware corporation (“Viad”), Travelers Express Company, Inc., and MGI
Merger Sub, Inc., the Company will become an independent, publicly traded
corporation through a distribution (the “Distribution”) of all of the Company
Stock (as defined below) owned by Viad to holders of shares of Viad Common
Stock (as defined in the Separation and Distribution Agreement); and

          WHEREAS, in connection with the Distribution, it has been agreed in the
Employee Benefits Agreement dated as of June 30, 2004 by and among Viad, the
Corporation and TECI (the “Employee Benefits Agreement”) that (1) the trustee
of the Viad Corp Employee Equity Trust created pursuant to the Trust Agreement
dated as of August 15, 1996, between Viad and Wells Fargo Bank of Arizona,
N.A., as trustee (the “Viad Trust”), will transfer to the trustee of a new
trust established by MoneyGram, effective as of June 30, 2004, all of the
shares of Company Stock distributed in the Distribution with respect to the
shares of common stock of Viad held in the Viad Trust as of the record date for
the Distribution, (2) Viad will assign to the Company a portion of the
principal amount of the Promissory Note dated August 15, 1996 issued by the
Trustee to the Company (the “Original Note”) and (3) the trustee of such new
trust will assume in favor of the Company, and Viad will release the Viad Trust
from, such portion of the Original Note; and

          WHEREAS, the Company desires to establish a trust (the “Trust”) to
implement the foregoing; and

          WHEREAS, the Trustee desires to act as trustee of the Trust, and to hold
legal title to the assets of the Trust, in trust, for the purposes hereinafter
stated and in accordance with the terms hereof;

          WHEREAS, the Company or its subsidiaries have previously adopted the Plans
(as defined below);

          WHEREAS, the Company desires to provide assurance of the availability of
the shares of Company Stock necessary to satisfy certain of its obligations or
those of its subsidiaries under the Plans (as defined below);

          WHEREAS, the Company desires that the assets to be held in the Trust Fund
(as defined below) should be principally or exclusively securities of the
Company and, therefore, expressly waives any diversification of investments
that might otherwise be necessary, appropriate, or required pursuant to
applicable provisions of law; and

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          NOW, THEREFORE, the parties hereto hereby enter into the Trust Agreement
and the Trust and agree that the Trust will be comprised, held and disposed of
as follows:

ARTICLE 1.

Trust, Trustee and Trust Fund

          1.1. Trust. This Agreement and the Trust shall be known as the MoneyGram
Employee Equity Trust. The parties intend that the Trust will be an
independent legal entity with title to and power to convey all of its assets.
The parties hereto further intend that the Trust not be subject to the Employee
Retirement Income Security Act of 1974, as amended. The Trust is not a part of
any of the Plans (as herein defined) and does not provide retirement or other
benefits to any Plan Participant (as herein defined). The assets of the Trust
will be held, invested and disposed of by the Trustee, in accordance with the
terms of the Trust.

          1.2. Trustee. The trustee named above, and its successor or successors,
is hereby designated as the trustee hereunder, to receive, hold, invest,
administer and distribute the Trust Fund in accordance with this Agreement, the
provisions of which shall govern the power, duties and responsibilities of the
Trustee.

          1.3. Trust Fund. The assets held at any time and from time to time under
the Trust collectively are herein referred to as the “Trust Fund” and shall
consist of contributions received by the Trustee, proceeds of any loans,
investments and reinvestment thereof, the earnings and income thereon, less
disbursements therefrom. Except as herein otherwise provided, title to the
assets of the Trust Fund shall at all times be vested in the Trustee and
securities that are part of the Trust Fund shall be held in such manner that
the Trustee’s name and the fiduciary capacity in which the securities are held
are fully disclosed, subject to the right of the Trustee to hold title in
bearer form or in the name of a nominee, and the interests of others in the
Trust Fund shall be only the right to have such assets received, held,
invested, administered and distributed in accordance with the provisions of the
Trust.

          1.4. Trust Fund Subject to Claims. Notwithstanding any provision of this
Agreement to the contrary, the Trust Fund shall at all times remain subject to
the claims of the Company’s general creditors under federal and state law.

          In addition, the Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of the Company’s
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue allocations pursuant to Article 3.

          Unless the Trustee has actual knowledge of the Company’s Insolvency, or
has received notice from the Company or a person claiming to be a creditor
alleging that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company’s
solvency as may be furnished to the Trustee and that provides the Trustee
with a reasonable basis for making a determination concerning the Company’s
Insolvency.

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          If at any time the Trustee has determined that the Company is Insolvent,
the Trustee shall discontinue allocations pursuant to Article 3 and shall hold
the Trust Fund for the benefit of the Company’s general creditors. Nothing in
this Trust Agreement shall in any way diminish any rights of employees as
general creditors of the Company with respect to benefits due under the Plan(s)
or otherwise.

          The Trustee shall resume allocations pursuant to Article 3 only after the
Trustee has determined that the Company is not Insolvent (or is no longer
Insolvent).

          1.5. Definitions. In addition to the terms defined in the preceding
portions of the Trust, certain capitalized terms have the meanings set forth
below:

          Basket Value. “Basket Value” means with respect to each Trust Year, the
product of (a) the Available Shares for such Trust Year, (b) the product of
four and the Company’s most recent reported quarterly earnings per share, and
(c) the equal weighted average price earnings ratio of the following companies
(or any successor of such companies) as reported in the Wall Street Journal on
the last business day of such Trust Year: First Data Corp; Global Payment
Inc.; and Total Systems Services.

          Board of Directors. “Board of Directors” means the board of directors of
the Company.

          Calculation Period. “Calculation Period” means a period consisting of
July 1, 2004 – December 31, 2007, or calendar years 2008 — 2012.

          Change of Control. “Change of Control” means any of the following events:

          (a) An acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of 20% or more of
either: (1) the then outstanding shares of Common Stock of the Company (the
“Outstanding Company Common Stock”) or (2) the combined voting power of the
then Outstanding Voting Securities of the Company entitled to vote generally in
the election of Directors (the “Outstanding Company Voting Securities”);
excluding, however the following: (A) any acquisition directly from the
Company or any entity controlled by the Company other than an acquisition by
virtue of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Company or any entity
controlled by the Company, (B) any acquisition by the Company, or any entity
controlled by the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any entity controlled
by the Company or (D) any acquisition pursuant to a transaction which complies
with clauses (1), (2) and (3) of paragraph (c) of this definition; or

          (b) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided, however, for purposes
of this paragraph (b) that any individual, who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination

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for
election by the Company’s shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board, (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; but provided further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered as
a member of the Incumbent Board, or

          (c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
“Corporate Transaction”) excluding, however, such a Corporate Transaction
pursuant to which (1) all or substantially all of the individuals and entities
who are the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Corporate Transaction (the “Prior Shareholders”) beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of Common
Stock and the combined voting power of the then Outstanding Voting Securities
entitled to vote generally in the election of Directors, as the case may be, of
the Company or other entity resulting from such Corporate Transaction
(including, without limitation, a corporation or other entity which as a result
of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no Person (other
than the Company or any entity controlled by the Company, any employee benefit
plan (or related trust) of the Company or any entity controlled by the Company
or such corporation or other entity resulting from such Corporate Transaction)
will beneficially owns, directly or indirectly, 20% or more of, respectively,
the outstanding shares of Common Stock of the Company or other entity
resulting from such Corporate Transaction or the combined voting power of the
Outstanding Voting Securities of such Company or other entity entitled to vote
generally in the election of Directors except to the extent that such ownership
existed prior to the Corporate Transaction and (3) individuals who were members
of the Incumbent Board will constitute at least a majority of the members of
the Board of Directors of the Company resulting from such Corporate
Transaction; and further excluding any disposition of all or substantially all
of the assets of the Company pursuant to a spin-off, split-up or similar
transaction (a “Spin-off”) if, immediately following the Spin-off, the Prior
Shareholders beneficially own, directly or indirectly, more than 80% of the
outstanding shares of Common Stock and the combined voting power of the then
Outstanding Voting Securities entitled to vote generally in the election of
directors of both entities resulting from such transaction, in substantially
the same proportions as their ownership, immediately prior to such transaction,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities; provided, that if another Corporate Transaction involving the
Company occurs in connection with or following a Spin-off, such Corporate
Transaction shall be analyzed separately for purposes of determining
whether a Change of Control has occurred; or

          (d) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.

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          Code. “Code” means the Internal Revenue Code of 1986, as amended.

          Committee. “Committee” means a committee of officers, directors and/or
employees of the Company which is charged by the Board of Directors with
administration of the Trust.

          Company. “Company” means MoneyGram International, Inc., a Delaware
corporation, or any successor thereto. References to the Company shall include
its subsidiaries where appropriate.

          Company Stock. “Company Stock” means shares of common stock, par value
$0.01 per share, issued by the Company or any successor securities.

          DC Participant. “DC Participant” means as of any date any individual who
is employed by the Company or any subsidiary of the Company as of such date and
is a participant in a DC Plan.

          DC Plan. “DC Plan” shall mean the MoneyGram 401(k) Plan and any successor
thereto.

          DC Plan Trustee Certification. “DC Plan Trustee Certification” means a
certification to be delivered by the trustee of the DC Plan to the Trustee
pursuant to Section 5.4, which sets forth the directions made by each DC
Participant as to voting or tendering of Company Stock allocated to his account
in the DC Plan with respect to the voting or tendering decision at issue.

          Extraordinary Dividend. “Extraordinary Dividend” means any dividend or
other distribution of cash or other property (other than Company Stock) made
with respect to Company Stock, which the Board of Directors declares generally
to be other than an ordinary dividend.

          Fair Market Value. “Fair Market Value” means as of any date the average
of the highest and lowest reported sales price regular way during normal
business hours on such date (or if such date is not a trading day, then on the
most recent prior date which is a trading day) of a share of Company Stock as
reported on the composite tape, or similar reporting system, for issues listed
on the New York Stock Exchange (or, if the Company Stock is no longer traded on
the New York Stock Exchange, on such other national securities exchange on
which the Company Stock is listed or national securities or central market
system upon which transactions in Company Stock are reported, as either shall
be designated by the Committee for the purposes hereof) or if sales of Common
Stock are not reported in any manner specified above, the average of the high
bid and low asked quotations on such date (or if such date is not a trading
day, then on the most recent prior date which is a trading day) in the
over-the-counter market as reported
by the National Association of Securities Dealers’ Automated Quotation
System or, if not so reported, by National Quotation Bureau, Incorporated or
similar organization selected by the Committee.

          Final Target Value. “Final Target Value” means with respect to each Trust
Year the greater of (a) the Target Value and (b) the Basket Value.

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          Insolvency. “Insolvency” means (a) the inability of the Company to pay
its debts as they become due, or (b) the Company being subject to a pending
proceeding as a debtor under the provisions of Title 11 of the United States
Code (Bankruptcy Code).

          Loan. “Loan” means the portion of the Viad Loan assumed by the Trustee
pursuant to an Assignment, Assumption and Release Agreement dated as of June
30, 2004.

          Plans. “Plans” mean the DC Plan, the employee benefit plans listed on
Schedule A hereto and any other employee benefit plan of the Company or its
subsidiaries designated as such by the Board of Directors.

          Plan Participant. “Plan Participant” means a participant in any of the
Plans.

          Suspense Account. “Suspense Account” means a separate account to be
maintained by the Trustee to hold Excess Shares pursuant to the terms of
Article 3 hereof.

          Target Value. “Target Value” for a given Trust Year means the amount set
forth on Schedule B hereto.

          Trustee. “Trustee” means Wells Fargo Bank, N.A., a national banking
association (not in its corporate capacity but as trustee of the Trust), or any
successor trustee.

          Trust Year. “Trust Year” means the period beginning on July 1, 2004 and
ending on December 31, 2004 and each 12-month period beginning on January 1 and
ending on December 31 thereafter.

          Viad Loan. “Viad Loan” means the loan and extension of credit to the Viad
Trust evidenced by the promissory note made by the Trustee of the Viad Trust
dated September 9, 1992, with which the Trustee of the Viad Trust purchased
Company Stock, as amended as of August 15, 1996 to reduce the remaining
principal amount as a result of the assignment to Dial, and the assumption by
the trustee of a new trust established by Dial, of a portion of the remaining
principal amount of the Original Note specified in Section 3.5 of the Viad
Trust.

ARTICLE 2.

Contributions and Dividends

          2.1. Contributions. For each Trust Year the Company shall contribute to
the Trust in cash such amount, which together with dividends, as provided in
Section 2.2, and any other earnings of the Trust, shall enable the Trustee to
make all payments of principal and interest due under the Loan on a timely
basis.
Unless otherwise expressly provided herein, the Trustee shall apply all
such contributions, dividends and earnings to the payment of principal and
interest due under the Loan. If, at the end of any Trust Year, no such
contribution has been made in cash, such contribution shall be deemed to have
been made in the form of forgiveness of principal and interest on the Loan to
the extent of the Company’s failure to make contributions as required by this
Section 2.1. All contributions made under the Trust shall be delivered to the
Trustee. The Trustee shall be accountable for all contributions received by
it, but shall have no duty to require any contributions to be made to it.

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          2.2. Dividends. Except as otherwise provided herein, dividends paid in
cash on Company Stock held by the Trust, including Company Stock held in the
Suspense Account, shall be applied to pay interest and repay scheduled
principal due under the Loan. In the event that dividends paid on Company
Stock held in the Trust, other than Extraordinary Dividends, exceed the amount
of scheduled principal and interest due in any Trust Year, such excess shall be
distributed to the Plans and/or to any other broad cross-section of individuals
employed by the Company, as determined in good faith by the Committee;
provided, however, that in the event that in any Trust Year cash dividends on
Company Stock held by the Trust exceed the amount indicated on Schedule C
hereto, other than by reason of an Extraordinary Dividend, such excess shall be
applied to prepay principal of the Loan. Extraordinary Dividends, as well as
dividends which are not in cash or in Company Stock, shall not be used to pay
interest on or principal of the Loan, but shall be reduced to cash by the
Trustee and reinvested in Company Stock as soon as practicable. Company Stock
purchased with the proceeds of an Extraordinary Dividend or with the proceeds
of a non-cash dividend shall, for purposes of this Agreement (including without
limitation Section 3.1 hereof), be deemed to have been acquired with the
proceeds of the Loan. In the Trustee’s discretion, investments in Company
Stock may be made through open-market purchases, private transactions or (with
the Company’s consent) purchases from the Company.

ARTICLE 3.

Release and Allocation of Company Stock

          3.1. Release of Shares. Subject to the other provisions of this Article
3, upon the payment or forgiveness in any Trust Year of any principal on the
Loan (a “Principal Payment”), the following number of shares of Company Stock
acquired with the proceeds of the Loan shall be available for allocation
(“Available Shares”) as provided in this Article 3: the number of shares so
acquired and held in the Trust immediately before such payment or forgiveness,
multiplied by a fraction the numerator of which is the amount of the Principal
Payment and the denominator of which is the sum of such Principal Payment and
the remaining principal of the Loan outstanding after such Principal Payment.

          3.2. Allocations. Subject to the provisions of Section 3.3, Available
Shares shall be allocated as directed by the Committee to the Plans on a
quarterly basis or at such other times during the Trust Year as may be required
to provide shares in accordance with the respective regular payment schedules
for benefits under such Plans. The
Committee’s discretion shall be limited to the number of shares of Company
Stock allocated among Plans, with the allocation itself being mandatory.
Subject to Section 3.3, in the event that as of December 31 of any given Trust
Year, any unallocated Available Shares remain after satisfaction of all benefit
obligations under each of the Plans for a given Trust Year, and/or after
determination of the amount, if any, of Excess Shares, under Section 3.3, all
remaining Available Shares shall be contributed by the Trustee to the Plans or
such other plans of the Company or its subsidiaries covering a broad
cross-section of individuals employed by the Company as the Committee shall
direct.

          3.3. Excess Shares. (a) Notwithstanding the provisions of Section 3.2,
Available Shares shall not be released from the Trust and allocated during a
given Trust Year

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pursuant to Section 3.2 to the extent that the Fair Market
Value of the Available Shares theretofore allocated during such Trust Year, as
of the date(s) of allocation, together with the Fair Market Value of the
Available Shares proposed to be allocated, as of the date(s) of proposed
allocation, exceeds the Target Value. If, as of December 31 of such Trust
Year, the Fair Market Value of the Available Shares theretofore allocated
during such Trust Year, as of the date(s) of allocation, together with the
Available Shares for such Trust Year not yet allocated, exceeds the Final
Target Value, the Available Shares with a Fair Market Value as of December 31
in an amount equal to such excess shall not be released and allocated pursuant
to this Section 3.2 but rather, such Available Shares (“Excess Shares”) shall
be held by the Trustee in the Suspense Account and allocated in accordance with
the provisions of this Section 3.3.

          (b) In the event that there are any Excess Shares created in any Trust
Year within a Calculation Period, such Excess Shares shall be released from the
Suspense Account pursuant to Section 3.2 to the extent that but for such
release the Fair Market Value of the Available Shares in a subsequent Trust
Year within the same Calculation Period would be less than the Final Target
Value. In the event that in any Trust Year the value of the Available Shares
was less than the Final Target Value for such Trust Year (such amount being
referred to as the “Shortfall”) and Excess Shares are created in subsequent
Trust Year within the same Calculation Period, Excess Shares with a value
equal to the Shortfall shall be transferred by the Trustee to such Plans as
directed by the Committee; it being understood, that such shares may not, in
any event, be transferred to the Company.

          (c) In the event that at the end of any Calculation Period there are
Excess Shares that have not been allocated pursuant to Section 3.3(b), such
Excess Shares shall, subject to the provisions of this subsection (c), be
distributed in equal amounts of shares in each Trust Year in the next
Calculation Period to individuals employed by the Company or plans in which
they participate, as directed by the Committee taking into account the best
interest of the individuals employed by the Company and its subsidiaries.
However, Excess Shares which would have been allocated in a Trust Year pursuant
to the preceding sentence shall instead be allocated pursuant to Section 3.2 to
the extent that there is a Shortfall with respect to such Trust Year. Any
Excess Shares remaining in the Trust at the beginning of the final Calculation
Period of the Trust shall be contributed in equal amounts of shares in each
Trust Year during such Calculation Period to individuals employed by the
Company or plans in which they participate, as directed by the Committee taking
into account the best interest of the individuals employed by
the Company and its subsidiaries, and the Trust shall not terminate until
such Excess Shares have been so contributed.

ARTICLE 4.

Compensation, Expenses and Tax Withholding

          4.1. Compensation and Expenses. The Trustee shall be entitled to such
reasonable compensation for its services as may be agreed upon from time to
time by the Company and the Trustee and to be reimbursed for its reasonable
legal, accounting and appraisal fees, expenses and other charges reasonably
incurred in connection with the administration, management, investment and
distribution of the Trust Fund. Such compensation shall be paid, and such
reimbursement shall be made out of the Trust Fund. The Company agrees to make

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sufficient contributions to the Trust to pay such amounts owing the Trustee in
addition to those contributions required by Section 2.1 and, in the event the
Company fails to make the contributions necessary to pay amounts owing to the
Trustee, the Trustee shall be entitled to seek payment directly from the
Company.

     4.2. Withholding of Taxes. The Trustee may withhold, require withholding,
or otherwise satisfy its withholding obligation, on any distribution which it
is directed to make, such amount as it may reasonably estimate to be necessary
to comply with applicable federal, state and local withholding requirements.
Upon settlement of such tax liability, the Trustee shall distribute the balance
of such amount. Prior to making any distribution hereunder, the Trustee may
require such release or documents from any taxing authority, or may require
such indemnity, as the Trustee shall reasonably deem necessary for its
protection.

ARTICLE 5.

Administration of Trust Fund

          5.1. Management and Control of Trust Fund. Subject to the terms of this
Agreement, the Trustee shall have exclusive authority, discretion and
responsibility to manage and control the assets of the Trust Fund.

          5.2. Investment of Funds.

          Except as otherwise provided in Section 2.2 and in this Section 5.2, the
Trustee shall invest and reinvest the Trust Fund exclusively in Company Stock,
including any accretions thereto resulting from the proceeds of a tender offer,
recapitalization or similar transaction which, if not in Company Stock, shall
be reduced to cash as soon as practicable. The Trustee may invest any portion
of the Trust Fund temporarily pending investment in Company Stock, distribution
or payment of expenses in (a) investments in United States Government
obligations with maturities of less than one year, (b) interest-bearing
accounts including but not limited to certificates of deposit, time deposits,
saving accounts and money market accounts with maturities
of less than one year in any bank, including the Trustee’s, with aggregate
capital in excess of $1,000,000,000 and a Moody’s Investor Services rating of
at least P1, or an equivalent rating from a nationally recognized ratings
agency, which accounts are insured by the Federal Deposit Insurance Corporation
or other similar federal agency, (c) obligations issued or guaranteed by any
agency or instrumentality of the United States of America with maturities of
less than one year or (d) short-term discount obligations of the Federal
National Mortgage Association.

          5.3. Trustee’s Administrative Powers.

          Except as otherwise provided herein, and subject to the Trustee’s duties
hereunder, the Trustee shall have the following powers and rights, in addition
to those provided elsewhere in this Agreement or by law:

          (a) to retain any asset of the Trust Fund;

-12-

 

     (b) subject to Section 5.4 and Article 3, to sell, transfer,
mortgage, pledge, lease or otherwise dispose of, or grant options with
respect to any Trust Fund assets at public or private sale;

     (c) upon direction from the Company, to borrow from any lender
(including the Company pursuant to the Loan), to acquire Company Stock as
authorized by this Agreement, to enter into lending agreements upon such
terms (including reasonable interest and security for the loan and rights
to renegotiate and prepay such loan) as may be determined by the
Committee; provided, however, that any collateral given by the Trustee
for the Loan shall be limited to cash and property contributed by the
Company to the Trust and dividends paid on Company Stock held in the
Trust Fund and shall not include Company Stock acquired with the proceeds
of Loan;

     (d) with the consent of the Committee, to settle, submit to
arbitration, compromise, contest, prosecute or abandon claims and demands
in favor of or against the Trust Fund;

     (e) to vote or to give any consent with respect to any securities,
including any Company Stock, held by the Trust either in person or by
proxy for any purpose, provided that the Trustee shall vote, tender or
exchange all shares of Company Stock as provided in Section 5.4;

     (f) to exercise any of the powers and rights of an individual owner
with respect to any asset of the Trust Fund and to perform any and all
other acts that in its judgment are necessary or appropriate for the
proper administration of the Trust Fund, even though such powers, rights
and acts are not specifically enumerated in this Agreement;

     (g) to employ such accountants, actuaries, investment bankers,
appraisers, other advisors and agents as may be reasonably necessary in
collecting, managing, administering, investing, valuing, distributing and
protecting the Trust Fund or the assets thereof or any borrowings of the
Trustee made in accordance with Section 5.3(c); and to
pay their reasonable fees and expenses, which shall be deemed to be
expenses of the Trust and for which the Trustee shall be reimbursed in
accordance with Section 4.1;

     (h) to cause any asset of the Trust Fund to be issued, held or
registered in the Trustee’s name or in the name of its nominee, or in
such form that title will pass by delivery, provided that the records of
the Trustee shall indicate the true ownership of such asset;

     (i) to utilize another entity as custodian to hold, but not invest
or otherwise manage or control, some or all of the assets of the Trust
Fund; and

     (j) to consult with legal counsel (who may also be counsel for the
Trustee generally) with respect to any of its duties or obligations
hereunder; and to pay the reasonable fees and expenses of such counsel,
which shall be deemed to be expenses of the Trust and for which the
Trustee shall be reimbursed in accordance with Section 4.1.

-13-

 

     Notwithstanding the foregoing, neither the Trust nor the Trustee shall
have any power to, and shall not, engage in any trade or business.

          5.4. Voting and Tendering of Company Stock.

          (a) Voting of Company Stock. The Trustee shall follow the directions of
the trustee of the DC Plan as to the manner in which shares of Company Stock
held by the Trust are to be voted on each matter brought before an annual or
special stockholders’ meeting of the Company or the manner in which any consent
is to be executed, in each case as provided below. Before each such meeting of
stockholders, the Trustee shall cause to be furnished to the trustee of the DC
Plan a copy of the proxy solicitation material received by the Trustee,
together with a form requesting confidential instructions as to how to vote the
shares of Company Stock held by the Trustee. Upon timely receipt of the DC
Plan Trustee Certification, the Trustee shall on each such matter vote the
number of shares (including fractional shares) of Company Stock held by the
Trust as follows:

          The Trustee shall, with respect to each DC Plan, assign to each DC
Participant, a number of shares (the “DC Participant Directed Amount”) equal to
the product of (i) the total number of shares of Common Stock held in the Trust
Fund, and (ii) a fraction, the numerator of which is the number of shares of
Company Stock allocated from the Trust Fund to such DC Participant’s account in
the DC Plan for the most recent preceding Trust Year and the denominator of
which is the total number of shares of Company Stock contributed by the Trustee
to the trustees of the trusts established under the DC Plan with respect to
such Trust Year, in each case, as reflected in the DC Plan Trustee
Certification. Each share assigned to each DC Participant in accordance with
the previous sentence shall be voted in accordance with such participant’s
direction to the trustee of the DC Plan in which he participates with respect
to shares of Company Stock allocated to his account in such DC Plan, as
reflected in the DC Plan Trustee Certification. Any shares of Company Stock
which remain undirected pursuant to the foregoing provisions shall be voted
for, against or to abstain in the same proportions as the
            shares of Company Stock for which the Trustee is directed as provided
above. Similar provisions shall apply in the case of any action by shareholder
consent without a meeting.

          (b) Tender or Exchange of Company Stock. The Trustee shall use its best
efforts timely to distribute or cause to be distributed to the trustee of any
trust established under any DC Plan any written materials distributed to
stockholders of the Company generally in connection with any tender offer or
exchange offer, together with a form requesting confidential instructions on
whether or not to tender or exchange shares of Company Stock held in the Trust.
Upon timely receipt of the DC Plan Trustee Certification, the Trustee shall
tender or not tender the DC Participant Directed Amount for each DC Participant
in accordance with such participant’s direction to the trustee of the DC Plan
in which he participates with respect to shares of Company Stock allocated to
his account in such DC Plan, as set forth in the DC Plan Trustee Certification.
The trustee of any DC Plan shall not be limited in the number of instructions
to tender or withdraw from tender which it may give but shall not have the
right to give instructions to tender or withdraw from tender after a reasonable
time established by the Trustee. If the Trustee shall not receive timely
instruction by means of the DC Plan Trustee Certification as to the manner in
which to respond to such a tender or exchange offer, the Trustee

-14-

 

shall not
tender or exchange any shares of Company Stock with respect to which the
trustee of any DC Plan has the right of direction, and the Trustee shall have
no discretion in such matter.

          (c) The Company shall maintain appropriate procedures to ensure that all
instructions by DC Participants are collected, tabulated, and transmitted to
the trustee under the DC Plan and to the Trustee without being divulged or
released to any person affiliated with the Company or its affiliates. All
actions taken by DC Participants and the contents of the DC Plan Trustee
Certification shall be held confidential by the Trustee and shall not be
divulged or released to any person, other than (i) agents of the Trustee who
are not affiliated with the Company or its affiliates or (ii) by virtue of the
execution by the Trustee of any proxy, consent or letter of transmittal for the
shares of Company Stock held in the Trust.

          5.5. Indemnification.

          (a) The Company shall and hereby does indemnify and hold harmless the
Trustee from and against any claims, demands, actions, administrative or other
proceedings, causes of action, liability, loss, cost, damage or expense
(including reasonable attorneys’ fees), which may be asserted against it, in
any way arising out of or incurred as a result of its action or failure to act
in connection with the operation and administration of the Trust; provided that
such indemnification shall not apply to the extent that the Trustee has acted
in willful or negligent violation of applicable law or its duties under this
Trust or in bad faith. The Trustee shall be under no liability to any person
for any loss of any kind which may result (i) by reason of any action taken by
it in accordance with any direction of the Committee or any DC Participant
acting pursuant to Section 5.4 (hereinafter collectively referred to as the
“directing participants”), (ii) by reason of its failure to exercise any power
or authority or to take any action hereunder because of the failure of any such
directing participant to give directions to the Trustee, as provided for in
this Agreement, or (iii) by reason of any act or omission of any of the
directing participants with respect to its duties under this Trust. The
Trustee shall be fully protected in acting upon any instrument, certificate, or
paper delivered by the Committee or any DC Participant or beneficiary and
believed in good faith by the Trustee to be genuine and to be
signed or presented by the proper person or persons, and the Trustee shall
be under no duty to make any investigation or inquiry as to any statement
contained in any such writing, but may accept the same as conclusive evidence
of the truth and accuracy of the statements therein contained.

          (b) The Company may, but shall not be required to, maintain liability
insurance to insure its obligations hereunder. If any payments made by the
Company or the Trust pursuant to this indemnity are covered by insurance, the
Company or the Trust (as applicable) shall be subrogated to the rights of the
indemnified party against the insurance company.

          (c) Without limiting the generality of the foregoing, the Company may, at
the request of the Trustee, advance to the Trustee reasonable amounts of
expenses, including reasonable attorneys’ fees and expenses, which the Trustee
advises have been incurred in connection with its investigation or defense of
any claim, demand, action, cause of action, administrative or other proceeding
arising out of or in connection with the Trustee’s performance of its duties
under this Agreement.

-15-

 

          5.6. General Duty to Communicate to Committee. The Trustee shall promptly
notify the Committee of all communications with or from any government agency
or with respect to any legal proceeding with regard to the Trust and with or
from any Plan Participants concerning their entitlements under the Plans or the
Trust.

ARTICLE 6.

Accounts and Reports of Trustee

          6.1. Records and Accounts of Trustee. The Trustee shall maintain accurate
and detailed records and accounts of all transactions of the Trust, which shall
be available at all reasonable times for inspection or audit by any person
designated by the Company and which shall be retained as required by applicable
law.

          6.2. Fiscal Year. The fiscal year of the Trust shall be the twelve month
period beginning on January 1 and ending on December 31.

          6.3. Reports of Trustee. The Trustee shall prepare and present to the
Committee a report for the period ending on the last day of each fiscal year,
and for such shorter periods as the Committee may reasonably request, listing
all securities and other property acquired and disposed of and all receipts,
disbursements and other transactions effected by the Trust after the date of
the Trustee’s last account, and further listing all cash, securities, and other
property held by the Trust, together with the fair market value thereof, as of
the end of such period. In addition to the foregoing, the report shall contain
such information regarding the Trust Fund’s assets and transactions as the
Committee in its discretion may reasonably request.

          6.4. Final Report. In the event of the resignation or removal of a
Trustee hereunder, the Committee may request and the Trustee shall then with
reasonable promptness submit, for the period ending on the effective date of
such resignation or removal, a report similar in form and purpose to that
described in Section 6.3.

ARTICLE 7.

Succession of Trustee

          7.1. Resignation of Trustee. The Trustee or any successor thereto may
resign as Trustee hereunder at any time upon delivering a written notice of
such resignation, to take effect sixty (60) days after the delivery thereof to
the Committee, unless the Committee accepts shorter notice; provided, however,
that no such resignation shall be effective until a successor Trustee has
assumed the office of Trustee hereunder.

          7.2. Removal of Trustee. The Trustee or any successor thereto may be
removed by the Company by delivering to the Trustee so removed an instrument
executed by the Committee. Such removal shall take effect at the date
specified in such instrument, which shall not be less than sixty (60) days
after delivery of the instrument, unless the Trustee accepts shorter notice;
provided, however, that no such removal shall be effective until a successor
Trustee has assumed the office of Trustee hereunder.

-16-

 

          7.3. Appointment of Successor Trustee. Whenever the Trustee or any
successor thereto shall resign or be removed or a vacancy in the position shall
otherwise occur, the Board of Directors shall use its best efforts to appoint a
successor Trustee as soon as practicable after receipt by the Committee of a
notice described in Section 7.1, or the delivery to the Trustee of a notice
described in Section 7.2, as the case may be, but in no event more than
seventy-five (75) days after receipt or delivery, as the case may be, of such
notice. A successor Trustee’s appointment shall not become effective until
such successor shall accept such appointment by delivering its acceptance in
writing to the Company. If a successor is not appointed within such 75 day
period, the Trustee, at the Company’s expense, may petition a court of
competent jurisdiction for appointment of a successor.

          7.4. Succession to Trust Fund Assets. The title to all property held
hereunder shall vest in any successor Trustee acting pursuant to the provisions
hereof without the execution or filing of any further instrument, but a
resigning or removed Trustee shall execute all instruments and do all acts
necessary to vest title in the successor Trustee. Each successor Trustee shall
have, exercise and enjoy all of the powers, both discretionary and ministerial,
herein conferred upon its predecessors. A successor Trustee shall not be
obliged to examine or review the accounts, records, or acts of, or property
delivered by, any previous Trustee and shall not be responsible for any action
or any failure to act on the part of any previous Trustee.

          7.5. Continuation of Trust. In no event shall the legal disability,
resignation or removal of a Trustee terminate the Trust, but
the Board of Directors shall forthwith appoint a successor Trustee in
accordance with Section 7.3 to carry out the terms of the Trust.

          7.6. Changes in Organization of Trustee. In the event that any corporate
Trustee hereunder shall be converted into, shall merge or consolidate with, or
shall sell or transfer substantially all of its assets and business to,
another corporation, state or federal, the corporation resulting from such
conversion, merger or consolidation, or the corporation to which such sale or
transfer shall be made, shall thereunder become and be the Trustee under the
Trust with the same effect as though originally so named.

          7.7. Continuance of Trustee’s Powers in Event of Termination of the Trust.
In the event of the termination of the Trust, as provided herein, the Trustee
shall dispose of the Trust Fund in accordance with the provisions hereof.
Until the final distribution of the Trust Fund, the Trustee shall continue to
have all powers provided hereunder as necessary or expedient for the orderly
liquidation and distribution of the Trust Fund.

ARTICLE 8.

Amendment or Termination

          8.1. Amendments. Except as otherwise provided herein, the Company may
amend the Trust at any time and from time to time in any manner which it deems
desirable, provided that no amendment which would adversely affect the
contingent rights of Plan Participants may change (a) the allocation formula
contained in Section 3.1 or Section 3.2 so as to change the Fair Market Value
in any Trust Year of the Available Shares or the Excess Shares, (b) the terms
of Section 3.3, (c) the Target Value reflected on Schedule B with respect to
any

-17-

 

Trust Year, (d) the provisions of Section 2.2 as to the use of dividends in
excess of the amounts reflected on Schedule C, (e) the provisions of Section
5.4, (f) the provisions of Section 8.2, (g) the provisions of this Section 8.1,
or (h) change the duties of the Trustee without the Trustee’s consent, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, the
Company shall retain the power under all circumstances to amend the Trust to
correct any errors or clarify any ambiguities or similar issues of
interpretation in this Agreement.

          8.2. Termination. Subject to the terms of Section 3.3(c) and this Section
8.2, the Trust shall terminate on September 8, 2012 or any earlier date on
which the Loan is paid in full (the “Termination Date”). The Board of
Directors may terminate the Trust at any time prior to the Termination Date.
The Trust shall also terminate automatically upon the Company giving the
Trustee notice of a Change of Control. Immediately upon a termination of the
Trust, the Company shall be deemed to have forgiven all amounts then
outstanding under the Loan. As soon as practicable after receiving notice
from the Company of a Change of Control or upon any other termination of the
Trust, the Trustee shall sell all of the Company Stock and other non-cash
assets (if any) then held in the Trust Fund as directed by the Committee in
good faith taking into account the interests of a broad cross-section of
individuals employed by the Company. The proceeds of such sale shall first be
returned to the
Company up to an amount equal to the principal amount, plus any accrued
interest, of the Loan that was forgiven upon such termination. Subject to the
provisions of Section 3.3(c), any funds remaining in the Trust after such
payment to the Company shall be distributed with reasonable promptness to a
broad cross-section of Plan Participants or to individuals employed by the
Company generally or to any benefit plan or trust in which a broad
cross-section of individuals employed by the Company participate, as the
Committee may in good faith determine taking into account the best interests of
the individuals employed by the Company.

          8.3. Form of Amendment or Termination. Any amendment or termination of
the Trust shall be evidenced by an instrument in writing signed by an
authorized officer of the Company, certifying that said amendment or
termination has been authorized and directed by the Company or the Board of
Directors, as applicable, and, in the case of any amendment, shall be consented
to by signature of an authorized officer of the Trustee, if required by Section
8.1.

ARTICLE 9.

Miscellaneous

          9.1. Controlling Law. The laws of the State of Delaware shall be the
controlling law in all matters relating to the Trust, without regard to
conflicts of law.

          9.2. Committee Action. Any action required or permitted to be taken by
the Committee may be taken on behalf of the Committee by any individual so
authorized. The Company shall furnish to the Trustee the name and specimen
signature of each member of the Committee upon whose statement of a decision or
direction the Trustee is authorized to rely. Until notified of a change in the
identity of such person or persons, the Trustee shall act upon the assumption
that there has been no change.

-18-

 

          9.3. Notices. All notices, requests, or other communications required or
permitted to be delivered hereunder shall be in writing, delivered by
registered or certified mail, return receipt requested as follows:

To the Company:

MoneyGram
International, Inc. 

1550 Utica Avenue South 

St. Louis Park, Minnesota 55416 

Attention: General Counsel

To the Trustee:

Wells Fargo Bank, N.A.

6th and Marquette 

Mail: N9303-110 

Minneapolis, MN 55479 

Attention: Nancy Sampair

Any party hereto may from time to time, by written notice given as aforesaid,
designate any other address to which notices, requests or other communications
addressed to it shall be sent.

          9.4. Severability. If any provision of the Trust shall be held illegal,
invalid or unenforceable for any reason, such provision shall not affect the
remaining parts hereof, but the Trust shall be construed and enforced as if
said provision had never been inserted herein.

          9.5. Protection of Persons Dealing with the Trust. No person dealing with
the Trustee shall be required or entitled to monitor the application of any
money paid or property delivered to the Trustee, or determine whether or not
the Trustee is acting pursuant to authorities granted to it hereunder or to
authorizations or directions herein required.

          9.6. Tax Status of Trust. It is intended that the Company, as grantor
hereunder, be treated as the owner of the entire Trust and the trust assets
under Section 671, et seq. of the Code. Until advised otherwise, the Trustee
may presume that the Trust is so characterized for federal income tax purposes
and shall make all filings of tax returns on that presumption.

          9.7. Participants to Have No Interest in the Company by Reason of the
Trust. Neither the creation of the Trust nor anything contained in the Trust
shall be construed as giving any person, including any individual employed by
the Company or any subsidiary of the Company, any equity or interest in the
assets, business, or affairs of the Company except to the extent that any such
individuals are entitled to exercise stockholder rights with respect to Company
Stock pursuant to Section 5.4.

          9.8. Nonassignability. No right or interest of any person to receive
distributions from the Trust shall be assignable or transferable, in whole or
in part, either directly or by operation of law or otherwise, including, but
not by way of limitation, execution, levy, garnishment, attachment, pledge, or
bankruptcy, but excluding death or mental incompetency,

-19-

 

and no right or
interest of any person to receive distributions from the Trust shall be subject
to any obligation or liability of any such person, including claims for alimony
or the support of any spouse or child.

          9.9. Gender and Plurals. Whenever the context requires or permits, the
masculine gender shall include the feminine gender and the singular form shall
include the plural form and shall be interchangeable.

          9.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original.

-20-

 

          IN WITNESS WHEREOF, the Company and the Trustee have caused this Agreement
to be signed, and their seals affixed hereto, by their authorized officers all
as of the day, month and year first above written.

	 	 	 	 	 
	 	MONEYGRAM INTERNATIONAL, INC.

 	 
	 	By:  	                                    /s/ Teresa H. Johnson
 	 
	 	 	Name:  	Teresa Johnson 	 
	 	 	Title:  	Vice President, General Counsel
& Secretary 	 
	 

	 	 	 	 	 
	 	WELLS FARGO BANK, N.A.

 	 
	 	By:  	/s/ Todd A. Crandall
 	 
	 	 	Name:  	Todd A. Crandall 	 
	 	 	Title:  	Assistant Vice
President/Relationship Manager 	 

-21-

 

	 	 	 	 	 

SCHEDULE A

	1.	 	MoneyGram International, Inc. Supplemental 401(k) Plan
	 
	2.	 	MoneyGram International, Inc. Deferred Compensation Plan
	 
	3.	 	Travelers Express Company, Inc. Supplemental Pension Plan
4. MoneyGram Pension Plan
	 
	5.	 	Active Employee and Retiree Health and Welfare Plans
	 
	6.	 	MoneyGram International, Inc. Omnibus Incentive Plan
	 
	7.	 	MoneyGram International, Inc. Management Incentive Plan
	 
	8.	 	MoneyGram International, Inc. Executive Severance Plans (Tier I and Tier II)

-22-

 

SCHEDULE B

	 	 	 
	Trust Year
	 	Target Value ($)
	
 
	 	
 
	2004 (7/1-12/31)

2005

2006

2007
	 	25,129,749

28,747,201

32,903,423

37,752,348

-23-

 

SCHEDULE C

	 	 	 
	Trust Year
	 	Dividends ($)
	
 
	 	
 
	2004 (7/1-12/31)

2005

2006

2007
	 	$1,637,030

1,332,467

951,762

380,705

-24-<PAGE>
                                                                    EXHIBIT 10.1

                           LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of June 28,
2002, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite
200, 2221 Washington Street, Newton, Massachusetts 02462, doing business under
the name "Silicon Valley East" ("Bank") and CRITICAL THERAPEUTICS, INC., a
Delaware corporation ("Borrower"), provides the terms on which Bank shall lend
to Borrower and Borrower shall repay Bank. The parties agree as follows:

      1 ACCOUNTING AND OTHER TERMS

      Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.

      2 LOAN AND TERMS OF PAYMENT

      2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.

      2.1.1 VENTURE EQUIPMENT FACILITY.

            (a) Subject to the terms and conditions of this Agreement, Bank
agrees to lend to Borrower, from time to time prior to the Commitment
Termination Date, equipment advances (each an "Equipment Advance" and
collectively the "Equipment Advances") in an aggregate amount not to exceed the
Committed Equipment Line. When repaid, the Equipment Advances may not be
re-borrowed. The proceeds of the Equipment Advances shall be used solely (i) to
reimburse Borrower for the purchase of Eligible Equipment purchased within
ninety (90) days (determined based upon the applicable invoice date of such
Eligible Equipment) of the Equipment Advance and to purchase new Eligible
Equipment, and (ii) to reimburse Borrower for Leasehold Improvements. Bank's
obligation to lend hereunder shall terminate on the earlier of (i) the
occurrence and continuance of an Event of Default, or (ii) the Commitment
Termination Date. For purposes of this Section, except as provided below, the
minimum amount of each Equipment Advance is Fifty Thousand Dollars ($50,000.00).
Notwithstanding the foregoing, the initial Equipment Advance hereunder (which
may be at an amount less than $50,000.00) may be used to reimburse Borrower for
Eligible Equipment purchased on or after January 1, 2002 (the "Initial Equipment
Advance") provided that the Initial Equipment Advance is requested on or before
thirty (30) days from the Closing Date. The Borrower may only request six (6)
Equipment Advances for the finance of Eligible Equipment (and Other Equipment
under the terms of this Agreement), and may only request six (6) Equipment
Advances for the finance Leasehold Loans. Borrower shall designate at the time
of each Equipment Advance request
<PAGE>
whether such Equipment Advance shall finance Eligible Equipment (and Other
Equipment under the terms of this Agreement) or Leasehold Loans.

            (b) To obtain an Equipment Advance, Borrower shall deliver to Bank a
completed supplement in substantially the form attached as EXHIBIT B ("Loan
Supplement"), together with Annex A to the applicable Loan Supplement describing
the Financing Equipment and such additional information as Bank may reasonably
request at least five (5) Business Days before the proposed funding date (the
"Funding Date"). On each Funding Date. Bank shall specify in the Loan Supplement
for each Equipment Advance, the Basic Rate, and the Payment Dates. If Borrower
satisfies the conditions of each Equipment Advance, Bank shall disburse such
Equipment Advance by internal transfer to Borrower's deposit account with Bank.
Each Equipment Advance may not exceed 100% of the Original Stated Cost of the
Financed Equipment or 100% of the documented costs of Leasehold Improvements.

      2.1.2 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if there has been a
Material Adverse Change, or a material adverse change in the prospects of
Borrower, whether or not arising from transactions in the ordinary course of
business, or there has been any material adverse deviation by Borrower from the
most recent business plan of Borrower presented to and accepted by Bank prior to
the execution of this Agreement.

      2.2 INTEREST RATE; PAYMENTS.

            (a) Principal and Interest Payments On Payment Dates. Borrower shall
repay each Equipment Advance pursuant to the terms set forth in the
corresponding Loan Supplement. For each Equipment Advance, Borrower shall make
equal monthly payments of principal and interest, in advance, calculated by the
Bank based upon: (1) the amount of the Equipment Advance, (2) the Basic Rate,
and (3) an amortization schedule equal to the Repayment Period (individually,
the "Scheduled Payment", and collectively, "Scheduled Payments"), on the first
Business Day of the month following the month in which the Funding Date occurs
(or commencing on the Funding Date if the Funding Date is the first Business Day
of the month) with respect to such Equipment Advance and continuing thereafter
during the Repayment Period on the first Business Day of each successive
calendar month (each a "Payment Date"). All unpaid principal and accrued
interest is due and payable in full on the last Payment Date with respect to
such Equipment Advance. Payments received after 12:00 noon Eastern time are
considered received at the opening of business on the next Business Day. An
Equipment Advance may only be prepaid in accordance with Sections 2.2(e) and
2.2(g).

            (b) Interest Rate. Equipment Advances under the Committed Equipment
Line shall accrue interest on the unpaid principal amount of each Equipment
Advance until the Equipment Advance has been paid in full, at the per annum rate
of interest equal to the Basic Rate fixed as of the Funding Date for each
Equipment Advance in accordance with the definition of the Basic Rate. Any
amounts outstanding during the continuance of an Event of Default shall bear
interest at a per annum rate equal to the Prime Rate plus five percent (5%)(the
"Default Rate").

                                       2
<PAGE>
            (c) Interim Payment. In addition to the Scheduled Payments, on the
Funding Date for each Equipment Advance (unless the Funding Date is the first
Business Day of the month) Borrower shall pay to the Bank, an amount (the
"Interim Payment") equal to (i) the subject Equipment Advance multiplied by (ii)
the sum of the Basic Rate (as of the date of such Equipment Advance) plus Two
Percent (2%), divided by (iii) 360 days and then multiplied by (iv) the number
of days from the actual Funding Date of the Equipment Advance until the first
day of the month following such Equipment Advance.

            (d) Final Payment. On the Maturity Date with respect to each
Equipment Advance, Borrower shall pay, in addition to the unpaid principal and
accrued interest and all other amounts due on such date with respect to such
Equipment Advance, an amount equal to the Final Payment.

            (e) Prepayment Upon an Event of Loss. If any Financed Equipment is
subject to an Event of Loss and Borrower is required to or elects to prepay the
Equipment Advance with respect to such Financed Equipment pursuant to Section
6.8, then such Equipment Advance shall be prepaid to the extent and in the
manner provided in such section.

            (f) Mandatory Prepayment Upon an Acceleration. If the Equipment
Advances are accelerated following the occurrence of an Event of Default or
otherwise, Borrower shall immediately pay to Bank an amount equal to the sum of:
(i) all outstanding principal plus accrued interest, (ii) the Final Payment plus
(iii) all other sums, if any, that shall have become due and payable, including
interest at the Default Rate with respect to any past due amounts.

            (g) Permitted Prepayment of Loans. Borrower shall have the option to
prepay any of the Equipment Advances advanced by Bank under this Agreement,
provided Borrower (i) provides written notice to Bank of its election to prepay
the Equipment Advances at least five (5) days prior to such prepayment, and (ii)
pays, on the date of such prepayment (A) all outstanding principal plus accrued
interest, (B) the Final Payment plus (C) all other sums, if any, that shall have
become due and payable pursuant to the terns hereof, including interest at the
Default Rate with respect to any past due amounts.

      2.3 FEES. Borrower shall pay to Bank:

            (a) Final Payment. The Final Payment; and

            (b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.

      2.4 ADDITIONAL COSTS. If any new law or regulation increases Bank's costs
or reduces its income for any loan, Borrower shall pay the increase in cost or
reduction in income or additional expense; provided, however, that Borrower
shall not be liable for any amount attributable to any period before 180 days
prior to the date Bank notifies Borrower of such increased costs. Bank agrees
that it shall allocate any increased costs among its customers similarly
affected in good faith and in a manner consistent with Bank's customary
practice.

      3 CONDITIONS OF LOANS

                                       3
<PAGE>
      3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:

            (a) this Agreement;

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

            (c) Negative Pledge Agreement covering Intellectual Property;

            (d) landlord's waiver;

            (e) a legal opinion of Borrower's counsel, in form and substance
      acceptable to Bank;

            (f) Warrant to Purchase Stock;

            (g) financing statements (Forms UCC-1);

            (h) Account Control Agreement/ Investment Account Control Agreement

            (i) insurance certificate;

            (j) payment of Bank Expenses then due pursuant to the terms hereof,

            (k) Certificate of Foreign Qualification (if applicable);

            (1) Certificate of Good Standing/Legal Existence; and

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

      3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:

      (a) timely receipt of a completed Loan Supplement: and

      (b) the representations and warranties in Section 5 must be materially
true on the date of the Loan Supplement and on the effective date of each Credit
Extension (except to the extent such representation or warranty relates to a
specific prior date) and no Event of Default shall have occurred and be
continuing as of such effective date, or result from the Credit Extension. Each
Credit Extension is Borrower's representation and warranty on that date that the
representations and warranties in Section 5 remain true.

      4 CREATION OF SECURITY INTEREST

      4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations and the performance of
each of Borrower's

                                       4
<PAGE>
duties under the Loan Documents, a continuing security interest in, and pledges
and assigns to the Bank, the Collateral, wherever located, whether now owned or
hereafter acquired or arising, and all proceeds and products thereof. Borrower
warrants and represents that the security interest granted herein shall be a
first priority security interest in the Collateral. During the existence of the
Event of Default, Bank may place a "hold" on any deposit account pledged as
Collateral.

Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any material license or other material agreement with respect to
which the Borrower is the licensee that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower's interest in such
material license or material agreement or any other property. Borrower shall not
enter into, or become bound by, any such license or agreement which is
reasonably likely to have a material impact on Borrower's business or financial
condition, unless Borrower provides Bank with written notice within five (5)
Business Days after entering into such agreement. Borrower shall take such steps
as Bank reasonably requests to obtain the consent of, or waiver by, any person
whose consent or waiver is necessary for all such licenses or contract rights to
be deemed "Collateral" and for Bank to have a security interest in it that might
otherwise be restricted or prohibited by law or by the terms of any such license
or agreement, whether now existing or entered into in the future.

Notwithstanding the foregoing provisions of this Section 4, the within grant of
a security interest shall not extend to, and the term "Collateral" shall not
include Restricted Collateral, to the extent that (i) such Restricted Collateral
is not assignable or capable of being encumbered as a matter of law or under the
terms of the Restricted Collateral (but solely to the extent that any such
restriction shall be enforceable under applicable law), without the consent of
the non-Borrower parties to the Restricted Collateral and (ii) such consent has
not been obtained; provided, however, that the foregoing grant of security
interest shall extend to, and the term "Collateral" shall include, (A) any and
all proceeds of such agreement to the extent that the assignment or encumbering
of such proceeds is not so restricted as a matter o f law or under the terms of
such agreement (but solely to the extent that any such restriction shall be
enforceable under applicable law) and (B) any agreement constituting Restricted
Collateral upon consent thereto being obtained from the non-Borrower parties to
such agreement (but Borrower shall have no obligation to obtain any such
consent).

"Restricted Collateral" shall mean: licenses in which the Borrower is the
licensee which govern the use of any other party's intellectual property.

Borrower agrees that any disposition of the Collateral in violation of this
Agreement, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code. If the Agreement is terminated,
Bank's lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire
a commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower of the brief details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Bank.

      5 REPRESENTATIONS AND WARRANTIES

                                       5
<PAGE>
      Borrower represents and warrants as follows:

      5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary is
validly existing and in good standing in its state of formation and qualified to
do business in, and in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be qualified except where
the failure to do so could not reasonably be expected to cause a Material
Adverse Change. In connection with this Agreement, the Borrower delivered to the
Bank a certificate signed by the Borrower and entitled "Perfection Certificate".
The Borrower represents and warrants to the Bank that: (a) the Borrower's exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; and (b) the Borrower is an organization of the type. and is
organized in the jurisdiction, set forth in the Perfection Certificate; and (c)
the Perfection Certificate accurately sets forth the Borrower's organizational
identification number or accurately states that the Borrower has none; and (d)
the Perfection Certificate accurately sets forth the Borrower's place of
business, or, if more than one, its chief executive office as well as the
Borrower's mailing address if different, and (e) all other information set forth
on the Perfection Certificate pertaining to the Borrower is accurate and
complete. If the Borrower does not now have an organizational identification
number, but later obtains one, Borrower shall forthwith notify the Bank of such
organizational identification number.

      The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's certificate of
incorporation, as may be amended, and by-laws, nor constitute an event of
default under any material agreement by which Borrower is bound. Borrower is not
in default under any agreement to which or by which it is bound in which the
default could reasonably be expected to cause a Material Adverse Change.

      5.2 COLLATERAL. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. Borrower has no deposit account, other than the deposit
accounts with Bank and deposit accounts described in the Perfection Certificate
delivered to the Bank in connection herewith. The Accounts are bona fide,
existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. The Collateral is not in the
possession of any third party bailee (such as a warehouse). In the event that
Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank. Borrower has no
knowledge of any actual or imminent Insolvency Proceeding of any account debtor
whose accounts are an Eligible Account in any Borrowing Base Certificate. All
Inventory is in all material respects of good and marketable quality, free from
material defects.

      5.3 LITIGATION. Except as shown in the Perfection Certificate, there are
no actions or proceedings pending or, to the knowledge of Borrower's Responsible
Officers, threatened by or against Borrower or any Subsidiary in which an
adverse decision could reasonably be expected to cause a Material Adverse
Change.

      5.4 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material

                                       6
<PAGE>
respects Borrower's consolidated financial condition and Borrower's consolidated
results of operations at the dates and for the periods indicated. There has not
been any material deterioration in Borrower's consolidated financial condition
since the date of the most recent financial statements submitted to Bank.

      5.5 SOLVENCY. Borrower is able to pay its debts (including trade debts) as
they mature.

      5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules. the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes except those being contested in good faith with adequate
reserves under GAAP. Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
its business as currently conducted except where the failure to make such
declarations; notices or filings would not reasonably be expected to cause a
Material Adverse Change.

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

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

      6 AFFIRMATIVE COVENANTS

      Borrower shall do all of the following:

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

                                       7
<PAGE>
noncompliance with which could have a material adverse effect on Borrower's
business or operations or be expected to cause a Material Adverse Change.

      6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

            (a) Borrower shall deliver to Bank: (i) as soon as available, but no
later than thirty (30) days after the last day of each month, a Compliance
Certificate signed by a Responsible Office in the Form of EXHIBIT C, together
with a company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than one hundred and twenty (120) days after the last day of Borrower's
fiscal year, a Compliance Certificate signed by a Responsible Office in the form
of EXHIBIT C, together with audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Bank; (iii) in the event that the Borrower's stock
becomes publicly held, within five (5) days of filing, copies of all statements,
reports and notices made available to Borrower's security holders or to any
holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (iv) a prompt report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000.00) or more; (v) annually, but not later than fifteen (15)
days after Board Approval, budgets, sales projections and operating plans, and
(vi) other financial information reasonably requested by Bank.

      6.3 INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from material defects. Returns and allowances between
Borrower and its account debtors shall follow Borrower's customary practices as
they exist at the Closing Date. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims that involve more than Fifty Thousand
Dollars ($50,000.00).

      6.4 TAXES. Borrower shall make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments (other
than taxes and assessments which Borrower is contesting in good faith, with
adequate reserves maintained in accordance with GAAP) and will deliver to Bank,
on demand, appropriate certificates attesting to such payments.

      6.5 INSURANCE. Borrower shall keep its business and the Collateral insured
for risks and in amounts, standard for Borrower's industry, and as Bank may
reasonably request in Bank's reasonable discretion. Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies with respect to the Collateral shall have a lender's loss
payable endorsement showing Bank as an additional loss payee and all liability
policies shall show the Bank as an additional insured and all policies shall
provide that the insurer must Olive Bank at least twenty (20) days notice before
canceling its policy. At Bank's request, Borrower shall deliver certified copies
of policies and evidence of all premium payments. Proceeds payable under any
policy shall, at Banks option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing and subject to Section 6.8, so long as no Event of
Default has occurred and is continuing, Borrower shall have the option of
applying the proceeds

                                       8
<PAGE>
of any casualty policy up to $125,000.00, in the aggregate, toward the
replacement or repair of destroyed or damaged property; provided that (i) any
such replaced or repaired property (a) shall be of equal or like value as the
replaced or repaired Collateral and (b) shall be deemed Collateral in which Bank
has been granted a first priority security interest and (ii) after the
occurrence and during the continuation of an Event of Default all proceeds
payable under such casualty policy shall, at the option of the Bank, be payable
to Bank on account of the Obligations. If Borrower fails to obtain insurance as
required under Section 6.5 or to pay any amount or furnish any required proof of
payment to third persons and the Bank, Bank may make all or part of such payment
or obtain such insurance policies required in Section 6.5, and take any action
under the policies Bank deems prudent.

      6.6 ACCOUNTS. In order to permit the Bank to monitor the Borrower's
financial performance and condition, Borrower, and all Borrower's Subsidiaries,
shall maintain Borrower's, and such Subsidiaries, primary depository, operating
and securities accounts with Bank and a majority of the Borrower's or such
Subsidiaries cash or securities in excess of that amount used for Borrower's or
such Subsidiaries operations shall be maintained or administered through the
Bank. Any Guarantor shall maintain all depository, operating and securities
accounts with Bank. Borrower shall identify to Bank, in writing, any bank or
securities account opened by Borrower with any institution other than Bank. In
addition, for each such account that the Borrower at any time opens or
maintains, Borrower shall, at the Bank's request and option, pursuant to an
agreement in form and substance acceptable to the Bank, cause the depositary
bank or securities intermediary to agree that such account is the collateral of
the Bank pursuant to the terms hereunder. The provisions of this paragraph shall
not apply to deposit accounts exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of the Borrower's
employees.

      6.7 FURTHER ASSURANCES. Borrower shall execute any further instruments and
take further action as Bank reasonably requests to perfect or continue Bank's
security interest in the Collateral or to effect the purposes of this Agreement.

      6.8 LOSS; DESTRUCTION; OR DAMAGE. Borrower shall bear the risk of the
Financed Equipment being lost, stolen, destroyed, or damaged. If during the term
of this Agreement any item of Financed Equipment becomes obsolete or is lost,
stolen, destroyed, damaged beyond repair, rendered permanently unfit for use, or
seized by a governmental authority for any reason for a period equal to at least
the remainder of the term of this Agreement (an "Event of Loss"), then in each
case, Borrower:

            (a) prior to the occurrence of an Event of Default, at Borrower's
option, shall (i) pay to Bank on account of the Obligations all accrued interest
to the date of the prepayment, plus all outstanding principal, plus the Final
Payment, each with respect to such item of Financed Equipment subject to an
Event of Loss; or (ii) repair or replace any Financed Equipment subject to an
Event of Loss provided the repaired or replaced Financed Equipment is of equal
or like value to the Financed Equipment subject to an Event of Loss and provided
further that Bank has a first priority perfected security interest in such
repaired or replaced Financed Equipment.

            (b) during the continuance of an Event of Default, on or before the
next Payment Date following such Event of Loss. for each such item of Financed
Equipment subject

                                       9
<PAGE>
to such Event of Loss, Borrower shall, at Bank's option, pay to Bank an amount
equal to the sum of: (i) all outstanding principal plus accrued interest with
respect to such item of Financed Equipment subject to an Event of Loss, (ii) the
Final Payment with respect to such item of Financed Equipment subject to an
Event of Loss, plus (iii) all other sums, if any, that shall have become due and
payable, including interest at the Default Rate with respect to any past due
amounts.

      7 NEGATIVE COVENANTS

      Borrower shall not do any of the following without the Bank's prior
written consent which shall not be unreasonably withheld.

      7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or an part of its business or property, except for Transfers (1) of Inventory in
the ordinary course of business: (ii) of exclusive and non-exclusive licenses,
partnerships, joint ventures and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business; or
(iii) of worn-out or obsolete Equipment.

      7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or have a material change in its
ownership (other than by the sale of Borrower's equity securities in a public
offering or to venture capital investors), or management such that either of the
individuals holding the following positions as of the Closing Date is no longer
actively involved in the senior management of the Borrower on a full tune basis,
and a replacement, satisfactory to the Bank is not made within ten (10) Business
Days of such change:(i) Chief Executive Officer, or (ii) Chief Technical
Officer. Borrower shall not, without at least thirty (30) days prior written
notice to Bank: (i) relocate its chief executive office, or (ii) change its
jurisdiction of organization, or (iii) change its organizational structure or
type, or (iv) change its legal name, or (v) change any organizational number (if
any) assigned by its jurisdiction of organization. The Borrower shall provide
written notice to Bank within five (5) days of adding any new offices or
business locations (unless such new offices or business locations contain less
than Ten Thousand Dollars ($10,000.0) in Borrower's assets or property).

      7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.

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

      7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its property,
or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.

                                      10
<PAGE>
      7.6 DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or own
any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock. Borrower may enter into employee stock or option plan approved by
the Board of Directors from time to time.

      7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter or permit
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.

      7.8 SUBORDINATED DEBT. Make or permit any payment on any Subordinated
Debt, except under the terms of the Subordinated Debt, or amend any provision in
any document relating to the Subordinated Debt, without Bank's prior written
consent.

      7.9 COMPLIANCE. Become an "investment company" or a company controlled by
an "investment company'", under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction. as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.

      8 EVENTS OF DEFAULT

      Any one of the following is an Event of Default:

      8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) Business Days after their due date. During the additional period the
failure to cure the default is not an Event of Default (but no Credit Extension
shall be made during the cure period);

      8.2 COVENANT DEFAULT. Borrower does not perform any obligation in Section
6 or violates any covenant in Section 7 or does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within ten
(10) days after it occurs, or if the default cannot be cured within ten (10)
days or cannot be cured after Borrower's attempts in the ten (10) day period,
and the default may be cured within a reasonable time, then Borrower shall have
additional time, (of not more than thirty (30) days) to attempt to cure the
default. Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain. During the additional period
the failure to cure the default is not an Event of Default (but no Credit
Extensions shall be made during the cure period);

      8.3   MATERIAL ADVERSE CHANGE.  A Material Adverse Change occurs;

                                       11
<PAGE>
      8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in twenty (20) days; (ii) the service
of process upon the Borrower seeking to attach, by trustee or similar process
any funds of the Borrower on deposit with the Bank; (iii) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (iv) a judgment or other claim becomes a Lien on a material portion of
Borrower's assets; or (v) a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within twenty
(20) days after Borrower receives notice. These are not Events of Default if
stayed or if a bond is posted pending contest by Borrower (but no Credit
Extensions shall be made during the cure period);

      8.5 INSOLVENCY. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);

      8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could result in a Material Adverse Change;

      8.7 JUDGMENTS. If a judgment or judgments for the payment of money in an
amount individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment);

      8.8 MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.

      8.9 GUARANTY. (i) Any guaranty of any Obligations terminates or ceases for
any reason to be in full force; or (ii) any Guarantor does not perform any
obligation under any guaranty of the Obligations; or (iii) any material
misrepresentation or material misstatement exists now or later in any warranty
or representation in any guaranty of the Obligations or in any certificate
delivered to Bank in connection with the guaranty; or (iv) any circumstance
described in Section 7, or Sections 8.4, 8.5 or 8.7 occurs to any Guarantor, or
(v) the death, liquidation, winding up, termination of existence, or insolvency
of any Guarantor.

      9 BANK'S RIGHTS AND REMEDIES

      9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:

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

                                       12
<PAGE>
            (b) Stop advancing money or extending credit for Borrower's benefit
      under this Agreement or under any other agreement between Borrower and
      Bank;

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

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

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

            (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
      for sale, advertise for sale, and sell the Collateral. Subject to the
      rights of third parties, Bank is granted a non-exclusive, royalty-free
      license or other right, effective during the existence of an Event of
      Default, to use, without charge, Borrower's labels, patents, copyrights,
      mask works, rights of use of any name, trade secrets, trade names,
      trademarks, service marks, and advertising matter, or any similar property
      as it pertains to the Collateral, in completing production of, advertising
      for sale, and selling any Collateral and, in connection with Bank's
      exercise of its rights under this Section, subject to the rights of third
      parties, Borrower's rights under all licenses and all franchise agreements
      inure to Bank's benefit; and

            (g) Dispose of the Collateral according to the Code.

      9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle. and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.

                                       13
<PAGE>
      9.3 ACCOUNTS COLLECTION. In the event that an Event of Default occurs and
is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
Account. After the occurrence of an Event of Default. any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.

      9.4 BANK EXPENSES. Any amounts paid by Bank as provided herein are Bank
Expenses and are immediately due and payable, and shall bear interest at the
then applicable rate and be secured by the Collateral. No payments by Bank shall
be deemed an agreement to make similar payments in the future or Bank's waiver
of any Event of Default.

      9.5 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bears all risk of loss, damage or destruction of the
Collateral (except to the extent such loss, damage or destruction is caused by
Bank's gross negligence or willful misconduct).

      9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements are cumulative. Bank has all rights
and remedies provided under the Code, by law, or in equity. Bank's exercise of
one right or remedy is not an election, and Bank's waiver of any Event of
Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.

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

      10 NOTICES

      All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.

<TABLE>
<S>                                <C>
            If to Borrower:        Critical Therapeutics, Inc.
                                   675 Massachusetts Avenue, 14th
                                   Floor
                                   Cambridge, Massachusetts 02139
                                   Attn:  President
                                   FAX:

            with a copy to:        Hale and Dorr LLP
</TABLE>

                                       14
<PAGE>
<TABLE>
<S>                                <C>
                                   60 State Street
                                   Boston, Massachusetts 02109
                                   Attn.:  Steven Singer, Esquire
                                   FAX: (617)526-5000

            If to Bank:            Silicon Valley Bank
                                   One Newton Executive Park, Suite 200
                                   2221 Washington Street
                                   Newton, Massachusetts 02462
                                   Attn:  R. Bryan Jadot
                                   Fax: (617) 969-4395

            with a copy to:        Riemer & Braunstein LLP
                                   Three Center Plaza
                                   Boston, Massachusetts 02108
                                   Attn:  David A. Ephraim, Esquire
                                   FAX:  (617) 880-3456
</TABLE>

      11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

      Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

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

      12 GENERAL PROVISIONS

      12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
the right, without the consent of or notice to Borrower,

                                       15
<PAGE>
to sell, transfer, negotiate, or grant participation in all or any part of, or
any interest in, Bank's obligations, rights and benefits under this Agreement,
the Loan Documents or any related agreement.

      12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.

      12.3 RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice. Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

      12.4 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.

      12.5 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

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

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

      12.8 SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

                                       16
<PAGE>
      12.9 CONFIDENTIALITY. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower
(provided, however, that such subsidiary or affiliate shall comply with the
terms of this provision); (ii) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, that such prospective
transferee or purchaser shall comply with the terms of this provision); (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank's examination. or audit; and (v) as Bank considers
appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.

      13 DEFINITIONS

      13.1 DEFINITIONS.

      "ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.

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

      "BANK EXPENSES" are all audit fees (not to exceed once per year prior to
an Event of Default) and expenses and reasonable costs or expenses (including
reasonable attorneys' fees and expenses) for preparing, negotiating, defending
and enforcing the Loan Documents (including appeals or Insolvency Proceedings).

      "BASIC RATE" is as of the Funding Date the per annum rate of interest
(based on a year of 360 days) equal to (i) for the Leasehold Loans, a per annum
rate equal to the Prime Rate, and (ii) for all other Equipment Advances a per
annum rate of interest equal to the Prime Rate, plus one percent (1.0%).

      "BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

      "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.

      "CLOSING DATE" is the date of this Agreement.

                                       17
<PAGE>
      "CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.

      "COLLATERAL" is any and all properties, rights and assets of the Borrower
(excluding Intellectual Property, as defined herein) granted by the Borrower to
Bank or arising under the Code, now, or in the future, in which the Borrower
obtains an interest, or the power to transfer rights, including, without
limitation, the property described on EXHIBIT A.

      "COMMITTED EQUIPMENT LINE" is an Equipment Advance or Equipment Advances
of up to Two Million Two Hundred and Fifty Thousand Dollars ($ 2,250,000.00) to
finance Eligible Equipment and Other Equipment, and Seven Hundred and Fifty
Thousand Dollars ($750,000.00) for Leasehold Loans.

      "COMMITMENT TERMINATION DATE" shall mean December 31, 2002.

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

      "CREDIT EXTENSION" is each Equipment Advance or any other extension of
credit by Bank for Borrower's benefit.

      "ELIGIBLE EQUIPMENT" is (a) general purpose computer equipment, office
equipment, fixtures, test and laboratory equipment, furnishings, subject to the
limitations set forth herein, and (b) Other Equipment that complies with all of
Borrower's representations and warranties to Bank and which is reasonably
acceptable to Bank in all respects.

      "EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

      "EQUIPMENT ADVANCE" is defined in Section 2.1.1(a).

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

      "EVENT OF LOSS" is defined in Section 6.8.

                                       18
<PAGE>
      "FINAL PAYMENT" is a payment (in addition to and not a substitution for
the regular monthly payments of principal plus accrued interest) due on the
Maturity Date for Such Equipment Advance equal to the Loan Amount for such
Equipment Advance multiplied by the Final Payment Percentage.

      "FINAL PAYMENT PERCENTAGE" is (i) for Leasehold Loans seven percent
(7.0%), and (ii) for all other Equipment Advances, eight and one-half of one
percent (8.5%).

      "FINANCED EQUIPMENT" is all present and future Eligible Equipment in which
Borrower has any interest, the purchase of which is financed by an Equipment
Advance.

      "FUNDING DATE" is any date on which an Equipment Advance is made to or on
account of Borrower.

      "GAAP" is generally accepted accounting principles.

      "GUARANTOR" is any present or future guarantor of the Obligations.

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

      "INITIAL EQUIPMENT ADVANCE" is defined in Section 2.1.1(a).

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

      "INTELLECTUAL PROPERTY" is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.

      "INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

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

                                       19
<PAGE>
      "LEASEHOLD IMPROVEMENTS" means leasehold improvements made to the real
estate premises leased by borrower, which improvements are either fixtures or
tenant build-out of the real estate premises.

      "LEASEHOLD LOANS" means the Equipment Advances made hereunder relating to
Leasehold Improvements acceptable to the Bank (excluding Leasehold Improvements
financed under Other Equipment), the cost of which improvements were paid by
Borrower not more than sixty (60) days prior to the Funding Date of the
Equipment Advance.

      "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

      "LOAN AMOUNT" in respect of each Equipment Advance is the original
principal amount of such Equipment Advance.

      "LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

      "MATERIAL ADVERSE CHANGE " is: (i) A material impairment in the
perfection or priority of Bank's security interest in the Collateral or in
the value of such Collateral: (ii) a material adverse change in the
business.  operations, or condition (financial or otherwise) of the
Borrower; or (iii) a material impairment of the prospect of repayment of
any portion of the Obligations.

      "MATURITY DATE" is with respect to each Equipment Advance, the last day of
the Repayment Period for such Equipment Advance, or if earlier, the date of
prepayment or the date of acceleration of such Equipment Advance by Bank
following an Event of Default.

      "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.

      "ORIGINAL STATED COST" is (i), the original cost to the Borrower of the
item of new Equipment net of any and all freight, installation, tax, or (ii) the
fair market value assigned to such item of used Equipment by mutual agreement of
Borrower and Bank at the time of making of the Equipment Advance.

      "OTHER EQUIPMENT" is leasehold improvements, transferable software
licenses, and soft costs approved by the Bank, including sales tax, freight and
installation expenses. Unless otherwise agreed to by Bank, not more than 25% of
the proceeds of the Committed Equipment Line shall be used to finance Other
Equipment (which limitation is exclusive of Equipment Advances for Leasehold
Loans).

      "PAYMENT DATE" is defined in Section 2.2(a).

                                       20
<PAGE>
            "PERMITTED INDEBTEDNESS" is:

            (a)   Borrower's indebtedness to Bank under this Agreement or
      the Loan Documents;

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

            (c)   Subordinated Debt;

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

            (e)   Indebtedness secured by Permitted Liens; and

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

            "PERMITTED INVESTMENTS" are:

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

            (b) (i) marketable direct obligations issued or unconditionally
      guaranteed by the United States or its agency or any state maturing within
      1 year from its acquisition, (ii) commercial paper maturing no more than 1
      year after its creation and having the highest rating from either Standard
      & Poor's Corporation or Moody's Investors Service. Inc., (iii) Bank's
      certificates of deposit issued maturing no more than I year after issue,
      (iv) any other investments administered through the Bank.

            "PERMITTED LIENS" are:

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

            (b) Liens for taxes, fees, assessments or other government charges
      or levies, either not delinquent or being contested in good faith and for
      which Borrower maintains adequate reserves on its Books, if they have no
      priority over any of Bank's security interests;

            (c) Purchase money Liens in an amount not greater than One Million
      Dollars ($1,000,000.00) in the aggregate during any fiscal year: (i) on
      Equipment acquired or held by Borrower incurred for financing the
      acquisition of the Equipment, or (ii) existing on equipment when acquired,
      if the Lien is confined to the property and improvements and the proceeds
      of the equipment;

                                       21
<PAGE>
            (d) Leases or subleases and exclusive and non-exclusive licenses or
      sub licenses, partnerships, joint ventures and similar arrangements
      granted by Borrower in the ordinary course of Borrower's business,
      consistent with the terms of Section 4.1;

            (e) Carriers', warehousemen's, mechanics', materialmen's repairmen's
      or other like liens arising in the ordinary course of business which are
      not overdue for a period of more than ninety (90) days or which are being
      contested in good faith by appropriate proceedings if they have no
      priority over any of Bank's security interest; and

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

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

            "PRIME RATE" is Bank's most recently announced "prime rate," even if
it is not Bank's lowest rate.

            "REPAYMENT PERIOD" as to each Equipment Advance, is a period of time
equal to forty eight (48) consecutive months commencing on the first Business
Day of the month following the month in which the Funding Date occurs, except
for Leasehold Loans, which shall be a period equal to twenty four (24)
consecutive months commencing on the first Business Day of the month following
the month in which the Funding Date occurs.

            "RESPONSIBLE OFFICER" is each of the Chief Executive Officer,
President, Chief Financial Officer and Controller of Borrower.

            "SCHEDULED PAYMENT" is defined in Section 2.2(a).

            "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terns
acceptable to Bank.

            "SUBSIDIARY" is any Person, corporation, partnership, limited
liability company, joint venture, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled.
directly or indirectly, by the Person or one or more Affiliates of the Person.

                  [Remainder of Page Intentionally Left Blank]

                                       22
<PAGE>
            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.

BORROWER:

CRITICAL THERAPEUTICS, INC.

By /s/Christopher Mirabelli
   ---------------------------------------

Name: Christopher Mirabelli
      ------------------------------------

Title:  President
        ----------------------------------

BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST

By /s/R. Bryan Jadot
   --------------------------------------

Name: R. Bryan Jadot
      -----------------------------------

Title: Vice President
       ----------------------------------

SILICON VALLEY BANK

By /s/Maggie Garcia
   --------------------------------------

Name: Maggie Garcia
      -----------------------------------

Title: AVP
       ----------------------------------
       (Signed in Santa Clara County, California)

                                       23
<PAGE>

                                    EXHIBIT A

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

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

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

Notwithstanding the foregoing provisions, the within grant of a security
interest shall not extend to, and the tern "Collateral" shall not include
Restricted Collateral, to the extent that (i) such Restricted Collateral is not
assignable or capable of being encumbered as a matter of law or under the terms
of the Restricted Collateral (but solely to the extent that any such restriction
shall be enforceable under applicable law), without the consent of the
non-Borrower parties to the Restricted Collateral and (ii) such consent has not
been obtained; provided, however, that the foregoing grant of security interest
shall extend to, and the term "Collateral" shall include, (A) any and all
proceeds of such agreement to the extent that the assignment or encumbering of
such proceeds is not so restricted as a matter of law or under the terms of such
agreement (but solely to the extent that any such restriction shall be
enforceable under applicable law) and (B) any agreement constituting Restricted
Collateral upon consent thereto being obtained from the non-Borrower parties to
such agreement (but Borrower shall have no obligation to obtain any such
consent).

"Restricted Collateral" shall mean: licenses in which the Borrower is the
licensee which govern the use of any other party's intellectual property.

         The Collateral does not include:

         Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
Notwithstanding the foregoing, the Collateral shall include all accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing intellectual property.

                                       24
<PAGE>
                                    EXHIBIT B

                        FORM OF LOAN AGREEMENT SUPPLEMENT

                        LOAN AGREEMENT SUPPLEMENT No. [ ]

         LOAN AGREEMENT SUPPLEMENT No. [ ], dated __________, 200_
("Supplement"), to the Loan and Security Agreement dated as of _________, 2002
(the "Loan Agreement) by and between the undersigned Critical Therapeutics, Inc.
("Borrower"), and Silicon Valley Bank ("Bank").

         Capitalized terms used herein but not otherwise defined herein are used
with the respective meanings given to such terns in the Loan Agreement.

To secure the prompt payment by Borrower of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrower of all the
terms contained in the Loan Agreement, Borrower grants Bank, a first priority
security interest in each item of equipment and other property described in
Annex A hereto, which equipment and other property shall be deemed to be
additional Financed Equipment and Collateral. The Loan Agreement is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto. The proceeds of the Loan should be transferred to Borrower's account
with Bank set forth below:

          Bank Name:        Silicon Valley Bank
          Account No.:
                            -------------------

Borrower hereby certifies that (a) the foregoing information is true and correct
and authorizes Bank to endorse in its respective books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth in the Loan Terms
Schedule; (b) the representations and warranties made by Borrower in the Loan
Agreement are true and correct on the date hereof and shall be true and correct
on such Funding Date. No Event of Default has occurred and is continuing under
the Loan Agreement. This Supplement may be executed by Borrower and Bank in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

         This Supplement is delivered as of this day and year first above
written.

SILICON VALLEY BANK                          CRITICAL THERAPEUTICS, INC.

By:                                          By:
      -------------------------------------            -------------------------
Name:                                        Name:
      -------------------------------------            -------------------------
Title:                                       Title:
      -------------------------------------            -------------------------

                                       25
<PAGE>
Annex A - Description of Financed Equipment
Annex B - Loan Terms Schedule

                                       26
<PAGE>
                              ANNEX A TO EXHIBIT B

         The Financed Equipment being financed with the Equipment Advance which
this Loan Agreement Supplement is being executed is listed below. Upon the
funding of such Equipment Advance, this schedule automatically shall be deemed
to be a part of the Collateral.

Description of Equipment   Make   Model     Serial #        Invoice #

                                       27
<PAGE>
                              ANNEX B TO EXHIBIT B

                           LOAN TERMS SCHEDULE #_____

Select One:

___ "Eligible Equipment" or "Other Equipment"

___ "Leasehold Loans"

Loan Funding Date:  ____________, 200_

Original Loan Amount: $_______

Interest Rate:  _______%

Scheduled Payment Dates and Amounts*:

    One (1) payment of $______ due __________________
    ______ payment of $______ due monthly in advance from _______ through _____.
    One (1) payment of $______ due __________________

Maturity Date:  _______

Final Payment: An additional amount equal to the Final Payment
               Percentage multiplied by the Loan Amount, shall be
               paid on the Maturity Date with respect to such Loan.

Payment No.       Payment Date

1**
2
3
4
---
35
[36]

....

*/ The amount of each Scheduled Payment shall change as the Loan Amount changes.

**/ Forty-Eight (48) months for Eligible Equipment and Other Equipment and
Twenty-Four (24) months for Leasehold Loans

                                       28
<PAGE>
                                    EXHIBIT C

                             COMPLIANCE CERTIFICATE

TO:      SILICON VALLEY BANK

FROM:    CRITICAL THERAPEUTICS, INC.

         The undersigned authorized officer of Critical Therapeutics, Inc.
certifies that under the teens and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending ________________ with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached
are the required documents supporting the certification. The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.

         PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.

<TABLE>
<CAPTION>
REPORTING COVENANT                                 REQUIRED                                  COMPLIES
------------------                                 --------                                  --------
<S>                                                <C>                                       <C>
Monthly financial statements with CC               Monthly within 30 days                    Yes      No
Annual (CPA Audited)                               FYE within 120 days                       Yes      No
Annual Budgets                                     FYE with 15 days of Board Approval        Yes      No
</TABLE>

COMMENTS REGARDING EXCEPTIONS:  See Attached.

Sincerely,                                                       BANK USE ONLY

                                                 Received by:
------------------------------------                          ------------------
Signature                                                     AUTHORIZED SIGNER

                                                 Date:
------------------------------------                       ---------------------
Title
                                                 Verified:
                                                           ---------------------
                                                              AUTHORIZED SIGNER
------------------------------------
Date
                                                 Date:
                                                       -------------------------

                                       29
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT AND LAWS OR, SUBJECT TO SECTION 5.3 HEREOF, AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL. THAT SUCH
REGISTRATION IS NOT REQUIRED.

                            WARRANT TO PURCHASE STOCK

Issuer:  Critical Therapeutics, Inc., a Delaware corporation
Number of Shares:  90,000, subject to adjustment
Class of Stock:  Series A Convertible Preferred Stock, $.001 par value per share
Exercise Price:  $1.00, subject to adjustment
Issue Date:  June 28, 2002
Expiration Date:  June 28, 2012

         FOR THE AGREED UPON VALUE of $1.00, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
this Warrant is issued to SILICON VALLEY BANK (together with its successors and
permitted assigns, "Holder") by Critical Therapeutics, Inc., a Delaware
corporation (the "Company").

         Subject to the terms and conditions hereinafter set forth, the Holder
is entitled upon surrender of this Warrant and the duly executed subscription
form annexed hereto as Appendix 1, at the office of the Company, 675
Massachusetts Avenue, 14th Floor, Cambridge, Massachusetts 02139 or such other
office as the Company shall notify the Holder of in writing, to purchase from
the Company up to Ninety Thousand (90,000) fully paid and non-assessable shares
(the "Shares") of the Company's Series A Convertible Preferred Stock, $.001 par
value per share (the "Class"), at a purchase price per Share of One Dollar
($1.00) (the "Exercise Price"). This Warrant may be exercised in whole or in
part at any time and from time to time until 5:00 PM, Eastern time, on the
Expiration Date set forth above, and shall be void thereafter. Until such time
as this Warrant is exercised in full or expires, the Exercise Price and the
number Shares are subject to adjustment from time to time as hereinafter
provided.

         Notwithstanding the foregoing definition of Class, upon and after the
automatic or voluntary conversion, redemption or retirement of all (but not less
than all) of the outstanding shares of such Class, including without limitation
upon the Company's initial registered underwritten public offering and sale of
its securities ("IPO"), then from and after the date upon which all such
outstanding shares have been so converted, redeemed or retired, "Class" shall
mean the Company's common stock, $.001 par value per share ("Common Stock"), and
this Warrant shall be exercisable for such number of shares of Common Stock as
shall equal the number of shares of Common Stock into which the Shares would
have been converted pursuant to the Company's Certificate of Incorporation, as
amended, including without limitation the Certificate of Designation. if any.
applicable to the same class or series of preferred stock as the Shares (the
"Certificate") had the Shares been issued and outstanding immediately prior to
such conversion, redemption or retirement. and the Exercise Price shall be the
Common Stock
<PAGE>
conversion price as determined pursuant to the Certificate immediately prior to
such conversion, redemption or retirement (all subject to further adjustment as
provided herein).

ARTICLE 1.  EXERCISE.

                  1.1 Method of Exercise. Holder may exercise this Warrant by
delivering this Warrant together with a duly executed Notice of Exercise in
substantially the form attached as Appendix 1 hereto to the principal office of
the Company. Unless Holder is exercising the conversion right set forth in
Section 1.2, Holder shall also deliver to the Company a check for the aggregate
Exercise Price for the Shares being purchased.

                  1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined as follows:

                           X = Y (A-B)/A

         where:
                           X = the number of Shares to be issued to the Holder.

                           Y = the number of Shares with respect to
                           which this Warrant is being exercised
                           (which shall include both the number of
                           Shares issued to the Holder and the
                           number of Shares subject to the portion
                           of the Warrant being cancelled in payment
                           of the aggregate Exercise Price).

                           A = the Fair Market Value (as determined
                           pursuant to Section 1.3 below) of one
                           Share.

                           B = the Exercise Price then in effect.

                  1.3 Fair Market Value.

                     1.3.1 If shares of the Class (or shares of the Company's
stock into which shares of the Class are convertible or exchangeable) are traded
on a nationally recognized securities exchange or over the counter market, the
fair market value of a Share shall be the closing price of a share of the Class
(or the closing price of a share of the Company's stock for which shares of the
Class are convertible or exchangeable) reported for the business day immediately
preceding the date of Holder's Notice of Exercise to the Company.

                     1.3.2 If shares of the Class (or shares of the Company's
stock into which shares of the Class are convertible or exchangeable) are not
traded on a nationally recognized securities exchange or over the counter
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment.

                  1.4 Delivery of Certificate and New Warrant. Promptly after
Holder exercises or converts this Warrant, the Company at its sole expense shall
promptly deliver to Holder (i)

                                     - 2 -
<PAGE>
certificates for the Shares acquired upon such
exercise, and (ii) if this Warrant has not been fully exercised or converted and
has not expired, a new warrant of like tenor representing the Shares for which
this Warrant is still exercisable.

                  1.5 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.

                  1.6 Assumption on Sale, Merger or Consolidation of the
Company.

                     1.6.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, assignment, transfer, exclusive license, or other
disposition of all or substantially all of the assets of the Company, or any
acquisition, reorganization, consolidation, or merger of the Company where the
holders of the Company's outstanding voting equity securities immediately prior
to the transaction beneficially own less than a majority of the outstanding
voting equity securities of the surviving or successor entity immediately
following the transaction.

                     1.6.2. Assumption of Warrant. Upon the closing of any
Acquisition (other than an Acquisition in which the consideration received by
the Company's stockholders consists solely of cash), and as a condition
precedent thereto, the successor or surviving entity shall assume the
obligations of this Warrant, and this Warrant shall be exercisable for the same
securities and property as would be payable for the Shares issuable upon
exercise of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent closing. The
Exercise Price shall be adjusted accordingly, and the Exercise Price and number
and class of Shares shall continue to be subject to adjustment from time to time
in accordance with the provisions hereof.

ARTICLE 2.  ADJUSTMENTS TO THE SHARES.

                  2.1 Stock Dividends, Splits, Etc. If the Company declares or
pays a dividend on the outstanding shares of the Class, payable in shares of the
Class, Common. Stock or other securities, or subdivides the outstanding Common
Stock into a greater amount of Common Stock or the outstanding shares of the
Class into a greater number of shares of the Class, or subdivides the shares of
the Class in a transaction that increases the amount of Common Stock into which
such shares are convertible, then upon exercise of this Warrant, for each Share
acquired, Holder shall receive, without additional cost to Holder, the total
number and kind of securities to which Holder would have been entitled had
Holder owned the Shares of record as of the date the dividend or subdivision
occurred.

                  2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, reorganization or other event that
results in a change of the number and/or class of the securities issuable upon
exercise or conversion of this Warrant, Holder shall be entitled to receive,
upon exercise or conversion of this Warrant, the number and kind of

                                     - 3 -
<PAGE>
securities and property that Holder would have received for the Shares if this
Warrant had been exercised immediately before such reclassification, exchange,
substitution, reorganization or other event. The Company or its successor shall
promptly issue to Holder a new warrant of like tenor for such new securities or
other property. The new warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article 2 including, without limitation, adjustments to the Exercise Price and
to the number of securities or property issuable upon exercise of the new
warrant. The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, reorganizations or other events.

                  2.3 Adjustments for Combinations, Etc. If the outstanding
shares of the Class are combined or consolidated, by reclassification or
otherwise, into a lesser number of shares, the Exercise Price shall be
proportionately increased and the number of Shares issuable upon exercise or
conversion of this Warrant shall be proportionately decreased.

                  2.4 No Impairment. The Company shall not, by amendment of the
Certificate or its by-laws or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment.

                  2.5 Adjustments for Dilutive Issuances. The number of shares
of Common Stock for which the Shares are convertible shall be adjusted from time
to time in accordance with Section C.4(d) of Article FOURTH of the Certificate
as if the Shares were issued and outstanding on and as of the date of any such
required adjustment

                  2.6 Fractional Shares. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional Share interest
arises upon any exercise or conversion of this Warrant, the Company shall
eliminate such fractional Share interest by paying Holder an amount computed by
multiplying such fractional interest by the Fair Market Value (determined in
accordance with Section 1.3 above) of one Share.

                  2.7 Certificate as to Adjustments. Upon each adjustment of the
Exercise Price, number of class of Shares or number of shares of Common Stock or
other securities for which the Shares are convertible or exchangeable, the
Company at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate of its chief financial officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall
at any time and from time to time, upon written request, furnish Holder with a
certificate setting forth the Exercise Price, number and class of Shares and
conversion ratio in effect upon the date thereof and the series of adjustments
leading to such Exercise Price, number and class of Shares and conversion ratio.

ARTICLE 3.  REPRESENTATIONS AND COVENANTS OF THE COMPANY.

                                     - 4 -
<PAGE>
                  3.1 Representations and Warranties. The Company hereby
represents and warrants to the Holder as follows:

                     (a) All Shares which may be issued upon the due exercise of
this Warrant. and all Common Stock or other securities, if any, issuable upon
due conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.

                     (b) The Company covenants that it shall at all times cause
to be reserved and kept available out of its authorized and unissued shares such
number of shares of its Series A Convertible Preferred Stock and shares of its
Common Stock and other securities as will be sufficient to permit the exercise
in full of this Warrant and the conversion of the Shares into shares of Common
Stock or such other securities.

                     (c) On and as of the date hereof, (i) $1.00 is the lowest
price per share for which shares of the Class have been sold or issued by the
Company, and the lowest exercise or conversion price per share for which shares
of the Class may be purchased or acquired upon the exercise or conversion of
outstanding securities exercisable or convertible by their terms for shares of
the Class, and (ii) the Common Stock conversion price in effect for shares of
the Class as determined pursuant to the Certificate is $1.00.

                     (d) The execution and delivery by the Company of this
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire the Shares, have been
duly authorized by all necessary corporate action on the part of the Company,
and this Warrant is not inconsistent with the Certificate and/or the Company's
by-laws, does not contravene any law or governmental rule, regulation or order
applicable to it, does not and will not contravene any provision of, or
constitute a default under, any material indenture. mortgage, contract or other
instrument to which it is a party or by which it is bound, and constitutes a
legal, valid and binding agreement of the Company, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors rights and to general equity principles.

                  3.2 Notice of Certain Events. If the Company proposes at any
time (a) to declare any dividend or distribution upon any of its capital stock,
whether in cash, property. stock. or other securities and whether or not a
regular cash dividend; (b) to offer for subscription pro rata to the holders of
shares of the Class any additional shares of stock of any class or series or
other rights: (c) to effect any reclassification or recapitalization of any of
its securities:, or (d) to merge or consolidate with or into any other
corporation, or sell, lease, license, or convey all or substantially all of its
assets, or to liquidate, dissolve or wind up; then, in connection with each such
event. the Company shall give Holder (1) at least 10 days prior written notice
of the date on which a record will be taken for such dividend, distribution, or
subscription rights (and specifying the date on which the holders of securities
of the Company shall be entitled to receive such dividend, distribution or
rights) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; and (2) in the case of the matters referred to
in (c) and (d) above at least 10 days prior written notice of the date when the
same will take place (and

                                     - 5 -
<PAGE>
specifying the date on which the holders of securities of the Company will be
entitled to exchange their securities of the Company for securities or other
property deliverable upon the occurrence of such event).

                  3.3 Registration Under Securities Act of 1933, as amended. The
shares of Common Stock issuable upon conversion of the Shares (and the Shares,
at all times when the Class is Common Stock) shall have certain incidental or
"piggyback" registration rights pursuant to, and as set forth in, that certain
Investor Rights Agreement dated as of July 6, 2001 among the Company and the
other parties named therein. The Company shall execute and deliver an amendment
or joinder agreement with Holder for the purpose of effecting the foregoing
grant of registration rights. The Company represents and warrants to Holder that
the Company's foregoing grant of registration rights and its execution, delivery
and performance of the aforementioned amendment or joinder agreement (a) have
been duly authorized by all necessary corporate action of the Company's Board of
Directors and shareholders, (b) will not violate the Certificate or the
Company's by-laws, each as amended, (c) will not violate or cause a breach or
default (or an event which with the passage of time or the giving of notice or
both, would constitute a breach or default) under any agreement, instrument,
mortgage, deed of trust or other arrangement to which the Company is a party or
by which it or any of its assets is subject or bound, and (d) do not require the
approval, consent or waiver of or by any shareholder, registration rights holder
or other third party which approval, consent or waiver has not been obtained as
of the date of issuance of this Warrant.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. Holder represents and
warrants to the Company as follows:

                  4.1 Purchase for Own Account. Subject to Silicon Valley Bank's
right to transfer this Warrant and the Shares (and/or the securities, if any,
issued and issuable upon conversion of the Shares) to its parent corporation
Silicon Valley Bancshares and/or any other affiliate, this Warrant and the
Shares to be acquired upon exercise hereof will be acquired for investment for
Holder's account, not as nominee or agent, and not with a view to sale or
distribution in violation of applicable federal and state securities laws.

                  4.2 Investment Experience. Holder understands that the
purchase of this Warrant and the Shares covered hereby involves substantial
risk. Holder (a) has experience as an investor in unregistered securities, (b)
has sufficient knowledge and experience in financial and business affairs that
it evaluate the risks and merits of its investment in this Warrant and the
Shares. (c) can bear the economic risk of such Holder's investment in this
Warrant and the Shares, and (d) has made such inquiry concerning the Company and
its business and personnel as it has deemed appropriate.

                  4.3 Accredited Investor. Holder is an "accredited investor" as
such term is defined in Regulation D under the Securities Act of 1933, as
amended.

ARTICLE 5.  MISCELLANEOUS.

                  5.1 Automatic Conversion upon Expiration. In the event that,
upon the Expiration Date, the Fair Market Value of one Share (or other security
issuable upon the exercise

                                     - 6 -
<PAGE>
hereof) as determined in accordance with Section 1.3 above is greater than the
Exercise Price in effect on such date, then this Warrant shall automatically be
deemed on and as of such date to be converted pursuant to Section 1.2 above as
to all Shares (or such other securities) for which it shall not previously have
been exercised or converted, and the Company shall promptly deliver a
certificate representing the Shares (or such other securities) issued upon such
conversion to the Holder.

                  5.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT
                  BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
                  REGISTRATION THEREOF UNDER SUCH ACT AND LAWS OR, SUBJECT TO
                  SECTION 5.3 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED
                  BY THE CORPORATION TO SILICON VALLEY BANK DATED AS OF June 28,
                  2002, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
                  CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
                  REQUIRED.

                  5.3 Compliance with Securities Laws on Transfer. This Warrant
and the Shares (and the securities, if any, issued and issuable upon conversion
of the Shares) may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor
and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company), provided that the transferee
agrees in writing to be subject to the terms of this Section 5.2. The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
Silicon Valley Bancshares or other affiliate of Holder, provided that the
transferee agrees in writing, upon the Company's request. to be subject to the
terms of this Section 5.2.

                  5.4 Transfer Procedure. Following its receipt of this executed
Warrant, Silicon Valley Bank will transfer same in whole or in part to its
parent corporation Silicon Valley Bancshares, and thereafter Holder and/or
Silicon Valley Bancshares may, subject to Section 5.3 above, transfer all or
part of this Warrant and/or the Shares (or the securities, if any, issued and
issuable upon conversion of the Shares) at any time and from time to time by
giving the Company notice of the portion of the Warrant and/or Shares (or the
securities, if any, issued and issuable upon conversion of the Shares) being
transferred setting forth the name, address and taxpayer identification number
of the transferee and surrendering this Warrant to the Company for reissuance to
the transferee(s) (and Holder if applicable); provided, that at all times prior
to the Company's IPO, Holder shall not, without the prior written consent of the
Company, transfer this Warrant (or any part hereof), any Shares, or any
securities issued or issuable upon

                                     - 7 -
<PAGE>
conversion of the Shares, to any person who directly competes with the Company,
unless such transfer is in connection with an Acquisition of the Company by any
such person.

                  5.5 Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally, or mailed by first-class registered or certified mail,
postage prepaid, or sent via reputable overnight courier service, fee prepaid,
at such address as may have been furnished to the Company or the Holder, as the
case may be, in writing by the Company or such holder from time to time, but in
all cases, unless instructed in writing otherwise, the Company shall deliver a
copy of all notices to Holder to Silicon Valley Bank, Treasury Department, 3003
Tasman Drive, HA 200, Santa Clara, California 95054.

                  5.6 Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.

                  5.7 Attorneys Fees. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorneys' fees.

                  5.8 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
without giving effect to its principles regarding conflicts of law.

                  5.9 No Rights as a Shareholder. Except as specifically
provided in this Warrant, Holder shall have no rights as a shareholder of the
Company in respect of the Shares issuable hereunder unless and until Holder
exercises this Warrant as to all or any of such Shares.

                  [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

                                     - 8 -
<PAGE>
         IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Stock to be executed as an instrument under seal by its duly authorized
representative as of the date first above written.

WITNESS:                                   "COMPANY"

                                           CRITICAL THERAPEUTICS, INC.
By:      /s/Edith Estabrook                By:      /s/Christopher Mirabelli
   ---------------------------                    ------------------------------
Name:                                      Name:
Title:                                     Title:  President

                                     - 9 -
<PAGE>
                                   APPENDIX 1

                               NOTICE OF EXERCISE

         1. The undersigned hereby elects to purchase       shares of the
           stock of          pursuant to Section 1.1 of the attached Warrant,
and tenders herewith payment of the Exercise Price of such shares in full.

         1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in Section 1.2 of the attached Warrant. This
conversion is exercised with respect to           of shares of the
Stock of           .

         [Strike paragraph that does not apply.]

         2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:

                               -------------------------
                                     (Name)

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

                               -------------------------
                                    (Address)

         3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.

                                   -------------------------------------
                                   (Signature)

--------------------
         (Date)

<PAGE>

                           LOAN MODIFICATION AGREEMENT

       This Loan Modification Agreement (this "Loan Modification Agreement") is
entered into as of December 11, 2002, by and between SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and CRITICAL THERAPEUTICS, INC., a Delaware corporation with its chief
executive office located at 675 Massachusetts Avenue, 14th Floor, Cambridge,
Massachusetts 02139 ("Borrower").

1.     DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a certain loan arrangement dated as of June 28,
2002, evidenced by, among other documents, a certain Loan and Security Agreement
dated as of June 28, 2002 between Borrower and Bank (as may be amended from time
to time, the "Loan Agreement"). The Loan Agreement established an equipment line
of credit (the "Committed Equipment Line") in favor of Borrower: (i) to finance
Eligible Equipment and Other Equipment in the maximum principal amount of
$2,250,000.00, and (ii) for Leasehold Loans in the maximum principal amount of
$750,000.00. Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.

Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".

2.     DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.     DESCRIPTION OF CHANGE IN TERMS.

       A.     Modifications to Loan Agreement.

              1.     The Loan Agreement is hereby amended by deleting the
                     following text appearing in paragraph (a) of Section 2.1.1
                     thereof:

                            "The Borrower may only request six (6) Equipment
                            Advances for the finance of Eligible Equipment (and
                            Other Equipment under the terms of this Agreement),
                            and may only request six (6) Equipment Advances for
                            the finance Leasehold Loans."

                     and inserting in lieu thereof the following:

                            "The Borrower may only request nine (9) Equipment
                            Advances for the finance of Eligible Equipment (and
                            Other Equipment under the terms of this Agreement),
                            and may only request six (6) Equipment Advances for
                            the finance Leasehold Loans."

              2.     The Loan Agreement is hereby amended by deleting the
                     following text appearing in Section 13.1 thereof entitled
                     "Definitions":

<PAGE>

                     ""Commitment Termination Date" shall be December 31, 2002."

                   and inserting in lieu thereof the following:

                        ""Commitment Termination Date" shall be March 31, 2003."

4.     FEES. In addition to the fees described in the Loan Agreement, the
Borrower shall also reimburse Bank for all legal fees and expenses incurred in
connection with this amendment to the Existing Loan Documents.

5.     RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of June 28, 2002 between Borrower and Bank,
and acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.

6.     ADDITIONAL COVENANTS: RATIFICATION OF PERFECTION CERTIFICATE. Borrower
hereby certifies that no Collateral is in the possession of any third party
bailee (such as at a warehouse). In the event that Borrower, after the date
hereof, intends to store or otherwise deliver the Collateral to such a bailee,
then Borrower shall first receive, the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Bank. Borrower hereby ratifies, confirms and reaffirms, all
and singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of June 28, 2002 between Borrower and Bank, and
acknowledges, confirms and agrees the disclosures and information above Borrower
provided to Bank in the Perfection Certificate has not changed, as of the date
hereof.

7.     AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral.

8.     CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

9.     RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

10.    NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Obligations.

11.    CONTINUING VALIDITY. Borrower understands and agrees that in modifying
the existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

<PAGE>

12.    RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
Loan Modification Agreement, Borrower and any guarantor hereby reaffirm and
hereby grant to Bank, a lien, security interest and right of setoff as security
for all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.

13.    JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of The Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.

14.    COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).

            [The remainder of this page is intentionally left blank]

<PAGE>

       This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                                 BANK:

CRITICAL THERAPEUTICS, INC.               SILICON VALLEY BANK, doing business as
                                          SILICON VALLEY EAST

By: /s/ Edith Estabrook                   By: /s/ R. Bryan Jadot
    ----------------------------              ----------------------------------
    Name: Edith Estabrook                     Name: R. Bryan Jadot
    Title: Director, Operations               Title: Vice President

                                          SILICON VALLEY BANK

                                          By: /s/ Maggie Garcia
                                              ----------------------------------
                                              Name: Maggie Garcia
                                              Title: Loan Admin. Team Leader
                                                 (signed in Santa Clara County,
                                                 California)

<PAGE>

                       SECOND LOAN MODIFICATION AGREEMENT

       This Second Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of April 10, 2003, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and CRITICAL THERAPEUTICS, INC., a Delaware corporation with its chief
executive office located at 675 Massachusetts Avenue, 14th Floor, Cambridge,
Massachusetts 02139 ("Borrower").

1.     DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a certain loan arrangement dated as of June 28,
2002, evidenced by, among other documents, a certain Loan and Security Agreement
dated as of June 28, 2002 between Borrower and Bank, as amended by a certain
Loan Modification Agreement dated as of December 11, 2002 (as may be further
amended from time to time, the "Loan Agreement"). The Loan Agreement established
an equipment line of credit (the "Committed Equipment Line") in favor of
Borrower: (i) to finance Eligible Equipment and Other Equipment in the maximum
principal amount of $2,250,000.00, and (ii) for Leasehold Loans in the maximum
principal amount of $750,000.00. Capitalized terms used but not otherwise
defined herein shall have the same meaning as in the Loan Agreement.

Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".

2.     DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.       DESCRIPTION OF CHANGE IN TERMS.

       A.     Modifications to Loan Agreement.

              1.     The Loan Agreement is hereby amended by deleting the
                     following text appearing in Section 13.1 thereof entitled
                     "Definitions":

                        ""Commitment Termination Date" shall be March 31, 2003."

                     and inserting in lieu thereof the following:

                        ""Commitment Termination Date" shall be June 30, 2003."

4.     FEES. In addition to the fees described in the Loan Agreement, Borrower
shall pay to Bank a modification fee for this Amendment in an amount equal to
One Thousand Five Hundred Dollars ($1,500.00), which fee shall be due on the
date hereof and shall be deemed fully earned as of the date hereof. The Borrower
shall also reimburse Bank for all legal fees and expenses incurred in connection
with this amendment to the Existing Loan Documents.

5.     RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of June 28,

<PAGE>

2002 between Borrower and Bank, and acknowledges, confirms and agrees that said
Negative Pledge Agreement shall remain in full force and effect.

6.     ADDITIONAL COVENANTS: RATIFICATION OF PERFECTION CERTIFICATE. Borrower
hereby certifies that no Collateral is in the possession of any third party
bailee (such as at a warehouse). In the event that Borrower, after the date
hereof, intends to store or otherwise deliver the Collateral to such a bailee,
then Borrower shall first receive, the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Bank. Borrower hereby ratifies, confirms and reaffirms, all
and singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of June 28, 2002 between Borrower and Bank, and
acknowledges, confirms and agrees the disclosures and information above Borrower
provided to Bank in the Perfection Certificate has not changed, as of the date
hereof.

7.     AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral.

8.     CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

9.     RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

10.    NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Obligations.

11.    CONTINUING VALIDITY. Borrower understands and agrees that in modifying
the existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

12.    RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
Loan Modification Agreement, Borrower and any guarantor hereby reaffirm and
hereby grant to Bank, a lien, security interest and right of setoff as security
for all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.

<PAGE>

13.    JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of The Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.

14.    COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).

<PAGE>

       This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                                 BANK:

CRITICAL THERAPEUTICS, INC.               SILICON VALLEY BANK, doing business as
                                          SILICON VALLEY EAST

By: /s/ Edith Estabrook                   By: /s/ R. Bryan Jadot
    -------------------------------           ----------------------------------
    Name: Edith Estabrook                     Name: R. Bryan Jadot
    Title: Director, Operations               Title: Vice President

                                          SILICON VALLEY BANK

                                          By: /s/ Maggie Garcia
                                              ----------------------------------
                                              Name: Maggie Garcia
                                              Title: AVP
                                              (signed in Santa Clara County,
                                              California)

<PAGE>

                        THIRD LOAN MODIFICATION AGREEMENT

       This Third Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of June 30, 2004, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and CRITICAL THERAPEUTICS, INC., a Delaware corporation with its chief
executive office located at 675 Massachusetts Avenue, 14th Floor, Cambridge,
Massachusetts 02139 ("Borrower").

1.     DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
       indebtedness and obligations which may be owing by Borrower to Bank,
       Borrower is indebted to Bank pursuant to a certain loan arrangement dated
       as of June 28, 2002, evidenced by, among other documents, a certain Loan
       and Security Agreement dated as of June 28, 2002 between Borrower and
       Bank, as amended by a certain Loan Modification Agreement dated as of
       December 11, 2002, as further amended by a certain Second Loan
       Modification Agreement dated as of April 10, 2003 (as may be further
       amended from time to time, the "Loan Agreement"). Capitalized terms used
       but not otherwise defined herein shall have the same meaning as in the
       Loan Agreement.

2.     DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
       Collateral as described in the Loan Agreement (together with any other
       collateral security granted to Bank, the "Security Documents").

              Hereinafter, the Security Documents, together with all other
       documents evidencing or securing the Obligations shall be referred to as
       the "Existing Loan Documents".

3.     DESCRIPTION OF CHANGE IN TERMS.

       Modifications to Loan Agreement.

              i.     From and after the date of this Loan Modification
                     Agreement, all references in the Loan Agreement to
                     "Equipment Advances" shall mean and refer to "2002
                     Equipment Advances".

              ii.    The Loan Agreement shall be amended by inserting after
                     Section 2.1.2 thereof the following new Section 2.1.3
                     entitled "2004 Equipment Advances":

                     "2.1.3   2004 EQUIPMENT ADVANCES.

                            (a)    Availability. Subject to the terms of this
                     Agreement, Bank agrees to lend to Borrower, from June 30,
                     2004 through December 31, 2004, advances (each, a "2004
                     Equipment Advance"), not exceeding the 2004 Equipment Line.
                     When repaid, the 2004 Equipment Advances may not be
                     re-borrowed. 2004 Equipment Advances may only be used to
                     finance 2004/2005 Eligible Equipment purchased on or after
                     90 days before the date of each 2004 Equipment Advance and
                     no 2004 Equipment Advances may exceed 100% of the Equipment
                     invoice excluding taxes, shipping, warranty charges,
                     freight discounts and installation expense relating to such
                     Equipment, unless such costs constitute 2004/2005 Other
                     Equipment. The minimum amount of each 2004 Equipment
                     Advance shall be One Hundred Thousand Dollars
                     ($100,000.00). Notwithstanding the foregoing, the initial
                     2004 Equipment Advance hereunder may be used to reimburse
                     Borrower for 2004/2005 Eligible Equipment purchased on or
                     after January 1, 2004 (the "Initial 2004 Equipment
                     Advance"), provided such Initial 2004 Equipment Advance is
                     requested on or before July 31, 2004.

<PAGE>

                            (b)    Interest Rate. Interest accrues from the date
                     of each 2004 Equipment Advance at a per annum rate equal to
                     the Prime Rate plus 2.00%, and will be calculated ----
                     based upon a 360 day year.

                            (c)    Repayment. Each 2004 Equipment Advance shall
                     be payable in (i) forty-two (42) equal monthly installments
                     of principal calculated based upon the amount of such 2004
                     Equipment Advance divided by forty-two (42), plus (ii)
                     monthly payments of all accrued interest at the rate set
                     forth in Section 2.1.3 (b), beginning on the first Payment
                     Date following the date such 2004 Equipment Advance is made
                     and continuing on each Payment Date thereafter through the
                     2004 Equipment Maturity Date applicable to such 2004
                     Equipment Advance.

                            (d)    To obtain an 2004 Equipment Advance, Borrower
                     must notify Bank (the notice is irrevocable) by facsimile
                     no later than 3:00 p.m. Eastern time three (3) Business
                     Days before the day on which the 2004 Equipment Advance is
                     to be made. The notice in the form of EXHIBIT D
                     (Payment/Advance Form) must be signed by a Responsible
                     Officer or designee and include a copy of the invoice for
                     the Equipment being financed.

                            (e)    2004 Equipment Advances may be prepaid, in
                     whole or in part, without premium or penalty and without
                     the requirement of prior notice thereof."

              iii.   The Loan Agreement shall be amended by inserting after
                     Section 2.1.3 thereof the following new Section 2.1.4
                     entitled "2005 Equipment Advances":

                     "2.1.4   2005 EQUIPMENT ADVANCES.

                            (a)    Availability. Subject to the terms of this
                     Agreement, Bank agrees to lend to Borrower, from January 1,
                     2005 through December 31, 2005, advances (each, a "2005
                     Equipment Advance"), not exceeding the 2005 Equipment Line.
                     When repaid, the 2005 Equipment Advances may not be
                     re-borrowed. 2005 Equipment Advances may only be used to
                     finance 2004/2005 Eligible Equipment purchased on or after
                     90 days before the date of each 2005 Equipment Advance and
                     no 2005 Equipment Advances may exceed 100% of the Equipment
                     invoice excluding taxes, shipping, warranty charges,
                     freight discounts and installation expense relating to such
                     Equipment, unless such costs constitute 2004/2005 Other
                     Equipment. The minimum amount of each 2005 Equipment
                     Advance shall be One Hundred Thousand Dollars
                     ($100,000.00).

                            (b)    Interest Rate. Interest accrues from the date
                     of each 2005 Equipment Advance at a per annum rate equal to
                     the Prime Rate plus 2.00%, and will be calculated based
                     upon a 360 day year.

                            (c)    Repayment. Each 2005 Equipment Advance shall
                     be payable in (i) thirty-six (36) equal monthly
                     installments of principal calculated based upon the amount
                     of such 2005 Equipment Advance divided by thirty-six (36),
                     plus (ii) monthly payments of all accrued interest at the
                     rate set forth in Section 2.1.4 (b), beginning on the first
                     Payment Date following the date such 2005 Equipment Advance
                     is made and continuing on each Payment Date thereafter
                     through the 2005 Equipment Maturity Date applicable to such
                     2005 Equipment Advance.

                            (d)    To obtain an 2005 Equipment Advance, Borrower
                     must notify Bank (the notice is irrevocable) by facsimile
                     no later than 3:00 p.m. Eastern time three (3) Business
                     Days before the day on which the 2005 Equipment Advance is
                     to be made. The notice in the form of EXHIBIT D
                     (Payment/Advance Form) must be signed by a Responsible
                     Officer or designee and include a copy of the invoice for
                     the Equipment being financed.

                                      -2-
<PAGE>

                            (e)    2005 Equipment Advances may be prepaid, in
                     whole or in part, without premium or penalty and without
                     the requirement of prior notice thereof."

              iv.    The Loan Agreement is hereby amended by deleting the
                     following text appearing in Section 6.6 of the Loan
                     Agreement:

                            "In order to permit the Bank to monitor the
                     Borrower's financial performance and condition, Borrower,
                     and all Borrower's Subsidiaries, shall maintain Borrower's,
                     and such Subsidiaries, primary depository, operating and
                     securities accounts with Bank and a majority of the
                     Borrower's or such Subsidiaries cash or securities in
                     excess of that amount used for Borrower's or such
                     Subsidiaries operations shall be maintained or administered
                     through the Bank."

                     and inserting in lieu thereof the following:

                            "In order to permit the Bank to monitor the
                     Borrower's financial performance and condition, Borrower,
                     and all Borrower's Subsidiaries, shall maintain Borrower's,
                     and such Subsidiaries, primary operating accounts with
                     Bank."

              v.     The Loan Agreement is hereby amended by deleting the
                     definition of "Credit Extension" set forth in Section 13.1
                     and inserting in lieu thereof the following:

                            "CREDIT EXTENSION" is each 2002 Equipment Advance,
                     each 2004 Equipment Advance, each 2005 Equipment Advance,
                     or any other extension of credit by Bank for Borrower's
                     benefit.

              vi.    The Loan Agreement is hereby amended by deleting the
                     definition of "Payment Date" set forth in Section 13.1 and
                     inserting in lieu thereof the following:

                            "PAYMENT DATE" is (i) with respect to 2002 Equipment
                     Advances, defined in Section 2.2(a), (ii) with respect to
                     2004 Equipment Advances, the first Business Day of each
                     month after the date such 2004 Equipment Advance is made
                     and (iii) with respect to 2005 Equipment Advances, the
                     first Business Day of each month after the date such 2005
                     Equipment Advance is made.

              vii.   The Loan Agreement is hereby amended by adding the
                     following text at the end of the definition of "Permitted
                     Investments" set forth in Section 13.1 thereof:

                            "      (c)   the Investments described on Borrower's
                     board of director's approved investment policy delivered to
                     Bank"

              viii.  The Loan Agreement is hereby amended by incorporating into
                     Section 13.1 the following definitions to appear
                     alphabetically therein:

                            "2004 EQUIPMENT ADVANCE" is defined in Section
                            2.1.2.

                            "2004 EQUIPMENT LINE" is a 2004 Equipment Advance or
                            2004 Equipment Advances of up to Three Million
                            Dollars ($3,000,000.00).

                            "2004 EQUIPMENT MATURITY DATE" is, with respect to
                            each 2004 Equipment Advance, the forty-second (42nd)
                            Payment Date following the date each such 2004
                            Equipment Advance is made.

                                      -3-
<PAGE>

                            "2004/2005 ELIGIBLE EQUIPMENT" is (a) general
                            purpose computer equipment, office equipment,
                            fixtures, test and laboratory equipment,
                            furnishings, subject to the limitations set forth
                            herein, and (b) 2004/2005 Other Equipment that
                            complies with all of Borrower's representations and
                            warranties to Bank and which is reasonably
                            acceptable to Bank in all respects.

                            "2004/2005 OTHER EQUIPMENT" is leasehold
                            improvements, transferable software licenses, and
                            other soft costs approved by the Bank, including
                            sales tax, freight and installation expenses. Unless
                            otherwise agreed to by Bank, not more than 30% of
                            the proceeds of either the 2004 Equipment Line or
                            the 2005 Equipment Line shall be used to finance
                            2004/2005 Other Equipment.

                            "2005 EQUIPMENT ADVANCE" is defined in Section
                            2.1.3.

                            "2005 EQUIPMENT LINE" is a 2005 Equipment Advance or
                            2005 Equipment Advances of up to the lesser of (i)
                            Three Million Dollars ($3,000,000.00) minus the
                            aggregate original principal amount of all 2004
                            Equipment Advances made hereunder or (ii) One
                            Million Three Hundred Thousand Dollars
                            ($1,300,000.00).

                            "2005 EQUIPMENT MATURITY DATE" is, with respect to
                            each 2005 Equipment Advance, the thirty-sixth (36th)
                            Payment Date following the date each such 2005
                            Equipment Advance is made.

              ix.    The Loan Agreement is hereby amended by adding Exhibit D
                     hereto as Exhibit D thereto. Bank and Borrower acknowledge
                     that requests for 2004 Equipment Advances and 2005
                     Equipment Advances shall be made using the form set forth
                     in Exhibit D, rather than the form set forth in Exhibit B
                     (such form was to be used for 2002 Equipment Advances
                     only).

4.     FEES. In addition to the fees described in the Loan Agreement, Borrower
       shall pay to Bank a modification fee in an amount equal to Ten Thousand
       Dollars ($10,000.00), which fee shall be due on the date hereof and shall
       be deemed fully earned as of the date hereof. Borrower shall also
       reimburse Bank for all legal fees and expenses incurred in connection
       with this amendment to the Existing Loan Documents.

5.     RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
       confirms and reaffirms, all and singular, the terms and conditions of a
       certain Negative Pledge Agreement dated as of June 28, 2002 between
       Borrower and Bank, and acknowledges, confirms and agrees that said
       Negative Pledge Agreement shall remain in full force and effect.

6.     CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
       wherever necessary to reflect the changes described above.

7.     RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
       reaffirms all terms and conditions of all security or other collateral
       granted to the Bank, and confirms that the indebtedness secured thereby
       includes, without limitation, the Obligations.

8.     NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
       Borrower has no offsets, defenses, claims, or counterclaims against Bank
       with respect to the Obligations, or otherwise, and that if Borrower now
       has, or ever did have, any offsets, defenses, claims, or counterclaims
       against Bank, whether known or unknown, at law or in equity, all of them
       are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any
       liability thereunder.

9.     CONTINUING VALIDITY. Borrower understands and agrees that in modifying
       the existing Obligations, Bank is relying upon Borrower's
       representations, warranties, and agreements, as set forth in the Existing
       Loan Documents. Except as expressly modified pursuant to this Loan
       Modification Agreement, the terms of the Existing Loan Documents remain
       unchanged and in full force and effect. Bank's agreement to

                                      -4-
<PAGE>

       modifications to the existing Obligations pursuant to this Loan
       Modification Agreement in no way shall obligate Bank to make any future
       modifications to the Obligations. Nothing in this Loan Modification
       Agreement shall constitute a satisfaction of the Obligations. It is the
       intention of Bank and Borrower to retain as liable parties all makers of
       Existing Loan Documents, unless the party is expressly released by Bank
       in writing. No maker will be released by virtue of this Loan Modification
       Agreement.

10.    JURISDICTION/VENUE. Borrower accepts for itself and in connection with
       its properties, unconditionally, the exclusive jurisdiction of any state
       or federal court of competent jurisdiction in the Commonwealth of
       Massachusetts in any action, suit, or proceeding of any kind against it
       which arises out of or by reason of this Loan Modification Agreement;
       provided, however, that if for any reason Bank cannot avail itself of the
       courts of The Commonwealth of Massachusetts, then venue shall lie in
       Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK
       SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE
       BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH
       THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE
       COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
       OR ITS PROPERTY.

11.    COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
       only when it shall have been executed by Borrower and Bank (provided,
       however, in no event shall this Loan Modification Agreement become
       effective until signed by an officer of Bank in California).

                                      -5-
<PAGE>

       This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                                 BANK:

CRITICAL THERAPEUTICS, INC.               SILICON VALLEY BANK, doing business as
                                          SILICON VALLEY EAST

By: /s/ Frank E. Thomas                   By: /s/ R. Bryan Jadot
    ----------------------------              ----------------------------------
    Name: Frank E. Thomas                     Name: R. Bryan Jadot
    Title: Vice President, CFO                Title: Vice President

                                          SILICON VALLEY BANK

                                          By:   /s/ Jacquelyn Le
                                               -------------------------------
                                               Name: Jacquelyn Le
                                               Title: Operations Supervisor
                                               (signed in Santa Clara County,
                                               California)

       The undersigned, CTI SECURITIES CORP., a Massachusetts corporation,
ratifies, confirms and reaffirms, all and singular, the terms and conditions of
a certain Unconditional Guaranty dated December 3, 2003 (the "Guaranty") and a
certain Security Agreement dated December 3, 2003 (the "Security Agreement") and
acknowledges, confirms and agrees that the Guaranty and the Security Agreement
shall remain in full force and effect and shall in no way be limited by the
execution of this Loan Modification Agreement, or any other documents,
instruments and/or agreements executed and/or delivered in connection herewith.

                                          CTI SECURITIES CORP.

                                          By: /s/ Frank E. Thomas
                                              ----------------------------------
                                              Name: Frank E. Thomas
                                              Title: Vice President, CFO

56120/581

                                      -6-
<PAGE>

                                    EXHIBIT D
                        LOAN PAYMENT/ADVANCE REQUEST FORM
                 DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.

Fax To: (617) 969-5965                                       Date: _____________
--------------------------------------------------------------------------------
LOAN PAYMENT:
                   Sample documents Client Name (Borrower)

From Account #________________________   To Account #___________________________
                  (Deposit Account #)                      (Loan Account #)

Principal $___________________________   and/or Interest $______________________

All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:

AUTHORIZED SIGNATURE: _________________      Phone Number: _____________________
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
LOAN ADVANCE:

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

From Account #________________________   To Account #___________________________
                  (Loan Account #)                       (Deposit Account #)

Amount of Advance $___________________

All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:

AUTHORIZED SIGNATURE: _________________      Phone Number: _____________________
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
OUTGOING WIRE REQUEST

COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED. Deadline for same day processing is 3:00 pm, E.S.T.

Beneficiary Name: ____________________    Amount of Wire:$______________________

Beneficiary Bank: ____________________    Account Number: ______________________

City and State: ______________________

Beneficiary Bank Transit (ABA) #:__ __    Beneficiary Bank Code (Swift, Sort,
                                          Chip, etc.):
                                          (FOR INTERNATIONAL WIRE ONLY)

Intermediary Bank: ___________________    Transit (ABA) #: _____________________

For Further Credit to: _________________________________________________________

Special Instruction: ___________________________________________________________

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

Authorized Signature: _______________     2nd Signature (If Required):__________
Print Name/Title: ___________________     Print Name/Title:_____________________
Telephone # _________________________     Telephone # __________________________
--------------------------------------------------------------------------------

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