Document:

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                                                                   EXHIBIT 10.31
                                                                   -------------

                                                              Customer No. 1158

                          LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT dated as of July 20, 1999, is made by
Paradigm Genetics, Inc. (the "Borrower"), a North Carolina corporation having
its principal place of business and chief executive office at P.O. Box 14528,
104 Alexander Drive, Building 2, Research Triangle Park, North Carolina, 27709-
4528, in favor of Transamerica Business Credit Corporation, a Delaware
corporation (the "Lender"), having its principal office at 9399 West Higgins
Road, Suite 600, Rosemont, Illinois 60018 and having an office at 76 Batterson
Park Road, Farmington, Connecticut  06032.

     WHEREAS, the Borrower has requested that the Lender make a Loan to the
Borrower; and

     WHEREAS, the Lender has agreed to make such Loan on the terms and
conditions of this Agreement.

     NOW, THEREFORE, in consideration of the premises and to induce the Lender
to extend credit, the Borrower hereby agrees with the Lender as follows:

     SECTION 1.  DEFINITIONS.

     As used herein, the following terms shall have the following meanings, and
shall be equally applicable to both the singular and plural forms of the terms
defined:

     Agreement shall mean this Loan and Security Agreement together with all
     ---------
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.

     Applicable Law shall mean the laws of the State of Illinois (or any other
     --------------
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.

     Business Day shall mean any day other than a Saturday, Sunday, or public
     ------------
holiday or the equivalent for banks in New York City.

     Cash Equivalents means (i) securities issued, guaranteed or insured by the
     ----------------
United States or any of its agencies with maturities of not more than three
years from the date acquired; (ii) corporate securities rated AA or higher with
maturities of less than three years; (iii) certificates of deposit with
maturities of not more than one year from the date acquired, issued by any U.S.
federal or state chartered commercial bank of recognized standing which has
capital and unimpaired surplus in excess of $100,000,000; (iv) investments in
money market funds registered under the Investment Company Act of 1940; (v)
mutual funds, at least 90% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) - (iv) of this definition; and (vi) other
instruments, commercial paper or investments acceptable to the Lender in its
sole discretion.
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     Closing Date means the date first set forth above.
     ------------

     Code shall have the meaning specified in Section 8(d).
     ----

     Collateral shall have the meaning specified in Section 2.
     ----------

     Collateral Access Agreement shall mean any landlord waiver, mortgagee
     ---------------------------
waiver, bailee letter, or similar acknowledgement of any warehouseman or
processor in possession of any Collateral.

     Contingent Obligation means any direct, indirect, contingent or non-
     ---------------------
contingent guaranty or obligation for the indebtedness of another Person, except
endorsements in the ordinary course of business.

     Effective Date shall mean the date on which all of the conditions specified
     --------------
in Section 3.3 shall have been satisfied.

     Event of Default shall mean any event specified in Section 7.
     ----------------

     Financial Statements shall have the meaning specified in Section 6.1.
     --------------------

     GAAP shall mean generally accepted accounting principles in the United
     ----
States of America, as in effect from time to time.

     Loans shall mean the loans and financial accommodations made by the Lender
     -----
to the Borrower in accordance with the terms of this Agreement and any Note
delivered hereunder.

     Loan Documents shall mean, collectively, this Agreement, the Notes, and all
     --------------
other present and future documents, agreements, certificates, instruments, and
opinions delivered by the Borrower under, in connection with or relating to this
Agreement, or any other present or future instrument or agreement between Lender
and Borrower, as each of the same may be amended, modified, extended, restated
or supplemented from time to time.

     Material Adverse Change shall mean, with respect to any Person, a material
     -----------------------
adverse change in the business, operations, results of operations, assets,
liabilities, or financial condition of such Person taken as a whole.

     Material Adverse Effect shall mean, with respect to any Person, a material
     -----------------------
adverse effect on the business, operations, results of operations, assets,
liabilities, or financial condition of such Person taken as a whole.

     Note shall mean each Promissory Note, in substantially the form attached
     ----
hereto, made by the Borrower in favor of the Lender, as amended, supplemented,
or otherwise modified from time to time.

     Obligations shall mean and include all loans (including the Loans),
     -----------
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by the Note or any note, guaranty or other

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instrument, whether or not arising under or in connection with, this Agreement,
any other Loan Document or any other present or future instrument or agreement,
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening, guaranteeing or confirming of a letter of credit,
loan, guaranty, indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment, purchase, discount or
otherwise), whether absolute or contingent, due or to become due, now due or
hereafter arising and however acquired (including without limitation all loans
previously made by Lender to Borrower). The term includes, without limitation,
all interest (including interest accruing on or after any bankruptcy, whether or
not an allowed claim), charges, expenses, commitment, facility, closing and
collateral management fees, letter of credit fees, reasonable attorneys' fees,
taxes and any other sum properly chargeable to Borrower under this Agreement,
the other Loan Documents or any other present or future agreement between Lender
and Borrower.

     Permitted Liens shall mean such of the following as to which no
     ---------------
enforcement, collection, execution, levy, or foreclosure proceeding shall have
been commenced:  (a) liens for taxes, assessments, and other governmental
charges or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen, and other like Persons arising by operation of
law in the ordinary course of business for sums which are not yet overdue for a
period of more than 30 days, or liens which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves are maintained to the extent required by GAAP; (b) deposits or pledges
to secure the payment of worker's compensation, unemployment insurance, or other
social security benefits or obligations, public or statutory obligations, surety
or appeal bonds, bid or performance bonds, or other obligations of a like nature
incurred in the ordinary course of business; (c) licenses, restrictions, or
covenants for or on the use of the Collateral which do not materially impair
either the use of the Collateral in the operation of the business of the
Borrower or the value of the Collateral; (d) attachment or judgment liens that
do not constitute an Event of Default; (e) a lien on any item of equipment or
other capital asset created substantially simultaneously with the acquisition of
such equipment for the purpose of financing such acquisition, provided that such
lien shall attach only to the equipment acquired and provided such lien does not
secure indebtedness in excess of $1,200,000; and (f) easements, rights of way
and other non monetary encumbrances on title to real property that do not render
title to the property encumbered thereby unmarketable or materially affected for
such properties intended purpose.

     Person shall mean any individual, sole proprietorship, partnership, limited
     ------
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.

     Receivable shall have the meaning set forth in Section 8(e).
     ----------

     Schedule shall mean Schedule A hereto containing certain information
     --------
pertaining to the Borrower.

     Solvent means, with respect to any Person, that as of the date as to which
     -------
such Person's solvency is measured:

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     (a) the fair saleable value of its assets is in excess of the total amount
of its liabilities.  (including contingent liabilities as valued in accordance
with GAAP) as they become absolute and matured;

     (b) it has sufficient capital to conduct its business; and

     (c) it is able generally to meet its debts as they mature.

     Taxes shall have the meaning specified in Section 5.5.
     -----

     SECTION 2.  CREATION OF SECURITY INTEREST; COLLATERAL.  The Borrower hereby
assigns and grants to the Lender a continuing general lien on, and security
interest in, all the Borrower's right, title, and interest in and to the
collateral described in the next sentence (the "Collateral") to secure the
payment and performance of all the Obligations, subject only to Permitted Liens.
Collateral means Receivables, Investment Property, Inventory, Equipment, and
Other Property and all additions and accessions thereto and substitutions and
replacements therefor and improvements thereon, and all proceeds (whether cash
or other property) and products thereof, including, without limitation, all
proceeds of insurance covering the same and all tort claims in connection
therewith, and all records, files, computer programs and files, data and
writings relating to the foregoing, and all equipment containing the foregoing.

     Equipment means all machinery, equipment, furniture, fixtures, conveyors,
     ---------
tools, materials, storage and handling equipment, hydraulic presses, cutting
equipment, computer equipment and hardware, including central processing units,
terminals, drives, memory units, printers, keyboards, screens, peripherals and
input or output devices, molds, dies, stamps, vehicles, and other equipment of
every kind and nature and wherever situated now or hereafter owned by Borrower
or in which Borrower may have any interest as lessee or otherwise (to the extent
of such interest), together with all additions and accessions thereto, all
replacements and all accessories and parts therefor, all manuals, blueprints,
know-how, warranties and records in connection therewith, all rights against
suppliers, warrantors, manufacturers, sellers or others in connection therewith,
and together with all substitutes for any of the foregoing; and

     Inventory means all present and future goods intended for sale, lease or
     ---------
other disposition by Borrower including, without limitation, all raw materials,
work in process, finished goods and other retail inventory, goods in the
possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same; and

     Investment Property means any and all investment property of Borrower,
     -------------------
including all securities, whether or certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising; and

     Other Property means all present and future instruments, documents,
     --------------
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to

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receive proceeds of letters of credit, deposit accounts, chattel paper,
certificates, insurance policies, insurance proceeds, leases, computer tapes,
causes of action, judgments, claims against third parties, leasehold rights in
any personal property, books, ledgers, files and records, general intangibles
(including without limitation, all contract rights, tax refunds, rights to
receive tax refunds, patents, patent applications, copyrights (registered and
unregistered), royalties, licenses, permits, franchise rights, authorizations,
customer lists, rights of indemnification, contribution and subrogation,
computer programs, discs and software, trade secrets, computer service
contracts, trademarks, trade names, service marks and names, logos, goodwill,
deposits, choices in action, designs, blueprints, plans, know-how, telephone
numbers and rights thereto, credits, reserves, and all forms of obligations
whatsoever now or hereafter owing to Borrower), all property at any time in the
possession or under the control of Lender, and all security given by Borrower to
Lender pursuant to any other loan document or agreement; and

     Receivables means all present and future accounts and accounts receivable,
     -----------
together with all security therefor and guaranties thereof and all rights and
remedies relating thereto, including any right of stoppage in transit.

     SECTION 3.  THE CREDIT FACILITY.

     SECTION 3.1.  BORROWINGS.  The Lender, subject to the terms and conditions
of this Agreement, agrees to make a Loan to Borrower in a single drawdown, at
Borrower's request, in a principal amount not to exceed $2,000,000.  Such Loan
shall be in an amount not less than $2,000,000.  Notwithstanding anything herein
to the contrary, the Lender shall be obligated to make such Loan only after the
Lender, in its sole discretion, determines that the applicable conditions for
borrowing contained in Sections 3.3 and 3.4 are satisfied.

     SECTION 3.2.  APPLICATION OF PROCEEDS.  The Borrower shall use the proceeds
of the Loans for its general working capital purposes.

     SECTION 3.3.  CONDITIONS TO LOAN.

     (a) The obligation of the Lender to make the Loan is subject to the
Lender's receipt of the following, on or before the Closing Date, each dated the
date of the Loan or as of an earlier date acceptable to the Lender, in form and
substance satisfactory to the Lender and its counsel:

     (i) completed requests for information (Form UCC-l1) listing all effective
     Uniform Commercial Code financing statements naming the Borrower as debtor
     and all tax lien, judgment, and litigation searches for the Borrower as the
     Lender shall deem necessary or desirable;

     (ii) acknowledgment copies of Uniform Commercial Code financing statements
     (naming the Lender as secured party and the Borrower as debtor), duly filed
     in all jurisdictions that the Lender deems necessary or desirable to
     perfect and protect the security interests created hereunder, and evidence
     that all other filings, registrations and recordings have been made in the
     appropriate governmental offices, and all other action has been taken,
     which shall be necessary to create, in favor of the Lender, a perfected
     first priority Lien on the Collateral;

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     (iii)  a Note duly executed by the Borrower evidencing the amount of such
     Loan;

     (iv) an Intellectual Property Security Agreement, in form and substance
     satisfactory to the Lender and its counsel, duly executed by the Borrower,
     specifically identifying and granting to the Lender a security interest in
     all of the Borrower's intellectual property;

     (v) if requested by the Lender, a Collateral Access Agreement duly executed
     by the lessor or mortgagee, as the case may be, of each premises where the
     equipment Collateral is located;

     (vi) a Notice of Security Interest, in form and substance satisfactory to
     the Lender and its counsel, to each financial institution at which any
     deposit accounts of Borrower are maintained;

     (vii)  the warrants described in the Commitment Letter, if any;

     (viii)  certificates of insurance required under Section 5.4 of this
     Agreement together with loss payee endorsements for all such policies
     naming the Lender as lender loss payee and as an additional insured;

     (ix) a certificate of the Secretary or an Assistant Secretary of the
     Borrower ("Secretary's Certificate") certifying (A) that attached to the
     Secretary's Certificate is a tine, complete, and accurate copy of the
     resolutions of the Board of Directors of the Borrower (or a unanimous
     consent of directors in lieu thereof) authorizing the execution, delivery,
     and performance of this Agreement, the other Loan Documents, and the
     transactions contemplated hereby and thereby, and that such resolutions
     have not been amended or modified since the date of such certification and
     are in full force and effect; (B) the incumbency, names, and true
     signatures of the officers of the Borrower authorized to sign the Loan
     Documents to which it is a party; (C) that attached to the Secretary's
     Certificate is a true and correct copy of the Articles or Certificate of
     Incorporation of the Company, as amended, which Articles or Certificate of
     Incorporation have not been further modified, repealed or rescinded and are
     in full force and effect; (D) that attached to the Secretary's Certificate
     of the Borrower is a true and correct copy of the Bylaws, as amended, which
     Bylaws of the Company have not been further modified, repealed or rescinded
     and are in full force and effect, and (F) that attached to the Secretary's
     Certificate is a valid Certificate of Existence issued by the Secretary of
     the State of the Borrower's state of incorporation;

     (xi) the opinion of counsel for the Borrower covering such matters incident
     to the transactions contemplated by this Agreement as the Lender may
     reasonably require;

     (xii)  evidence of the consent or authorization of, filing with or other
     act by or in respect of any governmental agency or authority or any other
     Person required in connection with the execution, delivery, performance,
     validity or enforceability of this Agreement, or the other Loan Documents
     or the consummation of the transactions contemplated hereby or thereby; and

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     (xiii)  such other documents, agreements and instruments as the Lender
     deems necessary in its sole and absolute discretion in connection with the
     transactions contemplated hereby.

     (b) The security interests in the Collateral granted in favor of the Lender
under this Agreement shall have been duly perfected and shall constitute first
priority liens, except for Permitted Liens.

     SECTION 3.4.  ADDITIONAL CONDITIONS PRECEDENT.  The obligation of the
Lender to make the Loan is subject to the satisfaction of the following
additional conditions precedent:

     (a) There shall be no pending or, to the knowledge of the Borrower after
due inquiry, threatened litigation, proceeding, inquiry, or other action (i)
seeking an injunction or other restraining order, damages, or other relief with
respect to the transactions contemplated by this Agreement or the other Loan
Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not reasonably be
expected to have a Material Adverse Effect in the judgment of the Lender;

     (b) all representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;

     (c) no Event of Default or event which with the giving of notice or the
passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and

     (d) the Borrower shall be deemed to have hereby reaffirmed and ratified all
security interests, liens, and other encumbrances heretofore granted by the
Borrower to the Lender.

     SECTION 3.5.  INTEREST RATE; REPAYMENT.  The interest rate applicable to
the Loan made by the Lender hereunder, and the repayment date for such Loan, are
as set forth in the Note evidencing such Loan.

     SECTION 4.  REPRESENTATIONS AND WARRANTIES.

     SECTION 4.1.  GOOD STANDING; QUALIFIED TO DO BUSINESS.  The Borrower (a) is
duly organized, validly existing, and in good standing under the laws of the
State of its organization, (b) has the power and authority to own its properties
and assets and to transact the businesses in which it is presently, or proposes
to be, engaged, and (c) is duly qualified and authorized to do business and is
in good standing in every jurisdiction in which the failure to be so qualified
could have a Material Adverse Effect on (i) the Borrower, (ii) the Borrower's
ability to perform its obligations under the Loan Documents, or (iii) the rights
of the Lender hereunder.

     SECTION 4.2.  DUE EXECUTION, ETC.  The execution, delivery, and performance
by the Borrower of each of the Loan Documents to which it is a party are within
the powers of the

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Borrower, do not contravene the organizational documents, if any, of the
Borrower, and do not (a) violate any law or regulation, or any order or decree
of any court or governmental authority, (b) conflict with or result in a breach
of, or constitute a default under, any material indenture, mortgage, or deed of
trust or any material lease, agreement, or other instrument binding on the
Borrower or any of its properties, or (c) require the consent, authorization by,
or approval of or notice to or filing or registration with any governmental
authority or other Person, except as may be set forth in the Schedule. This
Agreement is, and each of the other Loan Documents to which the Borrower is or
will be a party, when delivered hereunder or thereunder, will be, the legal,
valid, and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.

     SECTION 4.3.  SOLVENCY; NO LIENS.  The Borrower is Solvent and will be
Solvent upon the completion of all transactions contemplated to occur hereunder
(including, without limitation, the Loan to be made on the Effective Date); the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral other than Permitted Liens; and the
Borrower is, or will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer, and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than Permitted Liens.

     SECTION 4.4.  NO JUDGMENTS, LITIGATION.  No judgments are outstanding
against the Borrower nor is there now pending or, to the best of the Borrower's
knowledge, threatened any litigation, contested claim, or governmental
proceeding by or against the Borrower except judgments and pending or threatened
litigation, contested claims, and governmental proceedings which would not, in
the aggregate, have a Material Adverse Effect on the Borrower.

     SECTION 4.5.  NO DEFAULTS.  The Borrower is not in default or has not
received a notice of default under any material contract, lease, or commitment
to which it is a party or by which it is bound.  The Borrower knows of no
dispute regarding any contract, lease, or commitment which could have a Material
Adverse Effect on the Borrower.

     SECTION 4.6.  COLLATERAL LOCATIONS.  The address of the principal place of
business and chief executive office of Borrower is, and the books and records of
Borrower and all of its chattel paper and records relating to Collateral are
maintained exclusively in the possession of Borrower at, the address of Borrower
specified in the heading of this Agreement.  Borrower has places of business,
and Collateral is located, only at such address and at the addresses set forth
in the Schedule and at any additional locations reported to the Lender as
provided in Section 5.7 as to which the Lender has taken all necessary action to
perfect and protect its security interests in the Collateral at any such
locations.

     SECTION 4.7.  CORPORATE AND TRADE NAMES; FEDERAL TAX ID.  During the past
five years, Borrower has not been known by or used any other corporate, trade or
fictitious name except for its name as set forth on the signature page of this
Agreement and the other names specified in the Schedule.  The Borrower's Federal
Tax ID number is as set forth in the Schedule.

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     SECTION 4.8.  NO EVENTS OF DEFAULT.  No Event of Default has occurred and
is continuing nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.

     SECTION 4.9.  NO LIMITATION ON LENDER'S RIGHTS.  Except as permitted
herein, none of the Collateral is subject to contractual obligations that may
restrict or inhibit the Lender's rights or abilities to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.

     SECTION 4.10.  PERFECTION AND PRIORITY OF SECURITY INTEREST.  This
Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected, and first priority and exclusive, security
interest in the Collateral, except for any Permitted Liens, securing the payment
of all the Obligations.

     SECTION 4.11.  INTELLECTUAL PROPERTY.  Set forth in the Schedule is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights (registered and unregistered), and all applications
therefor and licenses thereof, of Borrower.  Borrower owns or licenses all
material patents, trademarks, service marks, logos, tradenames, trade secrets,
know-how, copyrights, or licenses and other rights with respect to any of the
foregoing, which are necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted.  To the best of its knowledge,
Borrower has not infringed any patent, trademark, service mark, tradename,
copyright, license or other right owned by any other Person by the sale or use
of any product, process, method, substance, part or other material presently
contemplated to be sold or used, where such sale or use would reasonably be
expected to have a Material Adverse Effect and no claim or litigation is
pending, or to the best of Borrower's knowledge, threatened against or affecting
Borrower that contests its right to sell or use any such product, process,
method, substance, part or other material.

     SECTION 4.12.  CONSENTS AND FILINGS.  No consent, authorization or approval
of, or filing with or other act by, any shareholders of Borrower or any
governmental authority or, to Borrower's knowledge, any other Person is required
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Loan Document, the consummation of
the transactions contemplated hereby or thereby or the continuing operations of
Borrower following such consummation, except (i) those that have been obtained
or made, (ii) the filing of financing statements under the Code (iii) any
necessary filings with U.S. Copyright Office and the U.S. Patent and Trademark
Office and (iv) those the absence of which could not reasonably be expected to
result in a Material Adverse Effect.

     SECTION 4.13.  YEAR 2000 COMPLIANCE.  The Borrower has (i) initiated a
review and assessment of all areas within its business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Borrower (or its suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable.  The Borrower reasonably believes that all
computer applications (including those of its suppliers and vendors) that are
material to its business and operations will on a timely basis

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be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so could not reasonably be expected to have Material
Adverse Effect.

     SECTION 4.14.  TAXES.  Borrower has properly completed and timely filed all
income tax returns it is required to file, and all Taxes, assessments, fees and
other governmental charges for periods beginning prior to the date of this
Agreement have been timely paid (or, if not yet due or being disputed in good
faith, adequate reserves therefor have been established in accordance with GAAP)
and Borrower has no material liability for Taxes in excess of the amounts so
paid or reserves so established.  No deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental agency or authority
against Borrower and no notice of any tax lien has been filed.  There are no
pending or (to the best knowledge of Borrower) threatened audits, investigations
or claims for or relating to any liability for Taxes and there are no matters
under discussion with any governmental agency or authority which could result in
an additional material liability for Taxes.

     SECTION 4.15.  FINANCIAL STATEMENTS.  Borrower has provided to the Lender
complete and accurate Financial Statements, which have been prepared in
accordance with GAAP (except for the absence of footnotes and subject to normal
year-end adjustments with respect to unaudited financial statements)
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes.  Borrower has no material
Contingent Obligation or liability for Taxes, unrealized losses, unusual forward
or long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto.  Since the last date covered by
such Financial Statements, there has been no sale, transfer or other disposition
by Borrower of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the financial condition of Borrower at
said date.  Since said date, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of Borrower has been
redeemed, retired, purchased or otherwise acquired for value by Borrower.

     SECTION 4.16.  ACCURACY AND COMPLETENESS OF INFORMATION.  All data,
reports, and information heretofore, contemporaneously, or hereafter furnished
by or on behalf of the Borrower in writing to the Lender or for purposes of or
in connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports, and information are dated
or certified and not incomplete by omitting to state any material fact necessary
to make such data, reports, and information not misleading at such time.  There
are no facts now known to the Borrower which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect and which have
not been specified herein, in the Financial Statements, or in any certificate,
opinion, or other written statement previously furnished by the Borrower to the
Lender.

                                       10
<PAGE>

     SECTION 5.  COVENANTS OF THE BORROWER.

     SECTION 5.1.  EXISTENCE, ETC.  The Borrower shall: (a) retain its existence
and its current yearly accounting cycle, (b) maintain in full force and effect
all licenses, bonds, franchises, leases, trademarks, patents, contracts, and
other rights necessary or desirable to the profitable conduct of its business
unless the failure to do so could not reasonably be expected to have a Material
Adverse Effect on the Borrower, (c) continue in, and limit its operations to,
the same general lines of business as those presently conducted by it, and (d)
comply with all applicable laws and regulations of any federal, state, or local
governmental authority, except for such laws and regulations the violations of
which would not, in the aggregate, have a Material Adverse Effect on the
Borrower.

     SECTION 5.2.  NOTICE TO THE LENDER.  As soon as possible, and in any event
within five days after the Borrower learns of the following, the Borrower will
give written notice to the Lender of the following:

     (a) any proceeding instituted or threatened to be instituted by or against
the Borrower in any federal, state, local, or foreign court or before any
commission or other regulatory body (federal, state, local, or foreign)
involving a sum, together with the sum involved in all other similar
proceedings, in excess of $50,000 in the aggregate,

     (b) any material contract that is terminated or amended and which has had
or could reasonably be expected to have a Material Adverse Effect on the
Borrower,

     (c) the occurrence of any Material Adverse Change with respect to the
Borrower;

     (d) the occurrence of any Event of Default or event or condition which,
with notice or lapse of time or both, would constitute an Event of Default,
together with a statement of the action which the Borrower has taken or proposes
to take with respect thereto;

     (e) any discovery or determination by Borrower that any computer
application (including those of its suppliers and vendors) that is material to
its business and operations will not be Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect;

     (f) any material damage to, the destruction of or any other material loss
to any Collateral owned or used by Borrower other than any such Collateral with
a net book value (individually or in the aggregate) less than $10,000 or any
condemnation, confiscation or other taking, in whole or in part, or any event
that otherwise diminishes so as to render impracticable or unreasonable the use
of such Collateral owned or used by Borrower together with the amount of the
damage, destruction, loss or diminution in value;

     (g) any material copyright registration made by it, any material rights
Borrower may obtain to any copyrightable works, new trademarks or any new
patentable inventions, and of any renewal or extension of any material trademark
registration, or if it shall otherwise become entitled to the benefit of any
patent or patent application or material trademark or trademark application; and

                                       11
<PAGE>

     (h) the opening of any new bank account or other deposit account, and any
new securities account.

     SECTION 5.3.  MAINTENANCE OF BOOKS AND RECORDS.  Borrower shall (i)
maintain books and records (including computer records) pertaining to the
Collateral in such detail, form and scope as is customary for companies in
similar businesses in similar situations and (ii) provide the Lender and its
agents access to the premises of Borrower at any time and from time to time,
during normal business hours and upon reasonable notice under the circumstances,
and at any time on and after the occurrence and during the existence of an Event
of Default, or event or condition which, with notice or lapse of time or both,
would constitute an Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Borrower's expense) any
and all records reasonably pertaining thereto, and (C) discussing the affairs,
finances and business of Borrower with any officer, employee or director of
Borrower or with Borrower's accountants.  Borrower shall reimburse the Lender
for the reasonable travel and related expenses of the Lender's employees or, at
the Lender's option, of such outside accountants or examiners as may be retained
by the Lender to verify or inspect Collateral, records or documents of Borrower
on a regular basis or for a special inspection if the Lender deems the same
appropriate.  If the Lender's own employees are used, Borrower shall also pay
the reasonable allocated cost for such employee (or such other amount as shall
represent the Lender's then current standard charge for the same), or, if
outside examiners or accountants are used, Borrower shall also pay the Lender
such reasonable sum as the Lender may be obligated to pay as fees therefor.

     SECTION 5.4.  INSURANCE.  Borrower shall maintain public liability
insurance, business interruption insurance, third party property damage
insurance and replacement value insurance on its assets (including the
Collateral) under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times reasonably satisfactory
to the Lender in its commercially reasonable judgment, all of which policies
covering the Collateral shall name the Lender as an additional insured and
lender loss payee in case of loss, and contain other provisions as the Lender
may reasonably require to protect fully the Lender's interest in the Collateral
and any payments to be made under such policies.

     SECTION 5.5.  TAXES.  The Borrower will pay, when due, all taxes,
assessments, claims, and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP.  If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
with notice to the Borrower, and on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.

     SECTION 5.6.  BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON
COLLATERAL.  The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens.  The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees,

                                       12
<PAGE>

assessments, charges, permit fees, and taxes (municipal, state, and federal)
which may now or hereafter be imposed upon the ownership, leasing, renting,
possession, sale, or use of the Collateral, other than taxes on or measured by
the Lender's income and fees, assessments, charges, and taxes which are being
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves are maintained to the extent required by
GAAP.

     SECTION 5.7.  CHANGE OF LOCATION, STRUCTURE, OR IDENTITY.  The Borrower
will give Lender at least 30 days prior written notice of any change of
Borrower's chief executive office or of the opening of any additional place of
business.  The Borrower will not move or permit the movement of any item of
Collateral from the locations specified in the Schedule, except that the
Borrower may keep Collateral at other locations within the United States
provided that the Borrower has delivered to the Lender (i) prior written notice
thereof and (ii) duly executed financing statements and other agreements and
instruments (all in form and substance satisfactory to the Lender) necessary or,
in the opinion of the Lender, desirable to perfect and maintain in favor of the
Lender a first priority security interest in the Collateral subject only to
Permitted Liens.  Notwithstanding anything to the contrary in the immediately
preceding sentence, the Borrower may keep any Collateral consisting of motor
vehicles or rolling stock at any location in the United States provided that the
Lender's security interest in any such Collateral is conspicuously marked on the
certificate of title thereof and the Borrower has complied with the provisions
of Section 5.9.

     SECTION 5.8.  USE OF COLLATERAL; LICENSES; REPAIR.  The Collateral shall be
operated by competent, qualified personnel in connection with the Borrower's
business purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every reasonable precaution to prevent
loss or damage to the Collateral from fire and other hazards.  The Borrower
shall procure and maintain in effect all orders, licenses, certificates,
permits, approvals, and consents required by federal, state, or local laws or by
any governmental body, agency, or authority in connection with the delivery,
installation, use, and operation of the Collateral, except where the failure.
to do so could not reasonably be expected to have a Material Adverse Effect.

     SECTION 5.9.  FURTHER ASSURANCES.  The Borrower will, promptly upon request
by the Lender, execute and deliver or use its best efforts to obtain any
document required by the Lender (including, without limitation, warehouseman or
processor disclaimers, mortgagee waivers, landlord disclaimers, or subordination
agreements with respect to the Obligations and the Collateral), give any
notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the reasonable opinion of the
Lender, desirable to perfect or continue the perfection and the first priority
of the Lender's security interest in the Collateral, to protect the Collateral
against the rights, claims, or interests of any Persons, or to effect the
purposes of this Agreement.  The Borrower hereby authorizes the Lender to file
one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of the
Borrower where permitted by law.  A carbon, photographic, or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be

                                       13
<PAGE>

sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs reasonably
incurred in connection with any of the foregoing.

     SECTION 5.10.  NO DISPOSITION OF COLLATERAL.  The Borrower will not in any
way hypothecate or create or permit to exist any lien, security interest,
charge, or encumbrance on or other interest in any of the Collateral, except for
the lien and security interest granted hereby and Permitted Liens.  In the event
the Collateral, or any part thereof, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of this Agreement, the security interest
of the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender.  Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.

     SECTION 5.11.  NO LIMITATION ON LENDER'S RIGHTS.  The Borrower will not
enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or any
part thereof.

     SECTION 5.12.  PROTECTION OF COLLATERAL.  Upon notice to the Borrower and
Borrower's failure to remedy the subject of such notice within ten (10) Business
Days (provided that if an Event of Default has occurred and is continuing the
Lender need not give any notice or allow Borrower to cure the subject of such
notice), the Lender shall have the right at any time to make any payments and do
any other acts the Lender may deem necessary to protect its security interests
in the Collateral, including, without limitation, the rights to satisfy,
purchase, contest, or compromise any encumbrance, charge, or lien which, in the
reasonable judgment of the Lender, appears to be prior to or superior to the
security interests granted hereunder, and appear in, and defend any action or
proceeding purporting to affect its security interests in, or the value of, any
of the Collateral The Borrower hereby agrees to reimburse the Lender for all
payments made and expenses incurred under this Agreement including fees,
expenses, and disbursements of attorneys and paralegals (including the allocated
costs of in-house counsel) acting for the Lender, including any of the foregoing
payments under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.

     SECTION 5.13.  DELIVERY OF ITEMS.  The Borrower will (a) promptly (but in
no event later than three Business Days) after its receipt thereof, deliver to
the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.

     SECTION 5.14.  SOLVENCY.  The Borrower shall be and remain Solvent at all
times.

                                       14
<PAGE>

     SECTION 5.15.  INTELLECTUAL PROPERTY.  Borrower shall do and cause to be
done all things necessary to preserve, maintain and keep in full force and
effect all of its registrations of trademarks, service marks and other marks,
trade names and other trade rights, patents, copyrights and other intellectual
property in accordance with prudent business practices, except to the extent
that the failure to preserve or maintain any of the foregoing would not
reasonably be expected to have a Material Adverse Effect.  Without limiting the
generality of the foregoing, Borrower agrees promptly, and in any event not
later than 30 days after the date hereof, to submit applications to have any of
its currently unregistered copyrightable software, computer programs and other
materials registered with the U.S. Copyright Office in Washington, D.C. (the
"Copyright Office") and to promptly provide TBCC with evidence of such
registration when available.  Borrower will, on an ongoing basis, promptly
submit applications to register any future unregistered copyrightable software,
computer programs and other materials with the Copyright Office.

     SECTION 5.16.  FUNDAMENTAL CHANGES.  The Borrower shall not (a) amend or
modify its name, unless the Borrower delivers to the Lender thirty days prior to
any such proposed amendment or modification written notice of such amendment or
modification and within ten days before such amendment or modification delivers
executed Uniform Commercial Code financing statements (in form and substance
satisfactory to the Lender) or (b) merge or consolidate with any other entity or
make any material change in its capital structure, in each case without the
Lender's prior written consent which shall not be unreasonably withheld.

     SECTION 5.17.  CONTINGENT OBLIGATIONS.  Borrower will not, directly or
indirectly, incur, assume, or suffer to exist any Contingent Obligation,
excluding indemnities given in connection with this Agreement or the other Loan
Documents m favor of the Lender or in connection with the sale of inventory or
other asset dispositions permitted hereunder, except Contingent Obligations and
other similar third party credit support relating to obligations of vendors and
suppliers of Borrower in respect of transactions entered into in `the normal
course of business, provided that the aggregate amount of any such guarantees
and other similar third party credit support shall not exceed $100,000 at any
time outstanding, and provided further that no Default or Event of Default shall
exist either immediately prior to or after giving effect to the making of the
foregoing guarantees or the entering into any third party credit support
transactions.

     SECTION 5.18.  CHANGE IN NATURE OF BUSINESS.  Borrower will not at any time
make any material change in the lines of its business as carried on at the date
of this Agreement or enter into any new line of business; provided that Borrower
may enter businesses reasonably related or incidental to its current lines of
business.

     SECTION 5.19.  SALES OF ASSETS.  Borrower will not, directly or indirectly,
in any fiscal year, sell, transfer or otherwise dispose of any assets, or grant
any option or other right to purchase or otherwise acquire any assets other than
(i) equipment with an aggregate value of less than $25,000 the proceeds of which
shall be paid to the Lender and applied to the Obligations, (ii) sales of
inventory in the ordinary course of business and (iii) licenses or sublicenses
on a non-exclusive basis of intellectual property in the ordinary course of
Borrower's business.

                                       15
<PAGE>

     SECTION 5.20.  LOANS TO OTHER PERSONS.  Borrower will not at any time make
loans or advance any credit (except to trade debtors in the ordinary course of
business) to any Person in excess of $25,000 in the aggregate at any time for
all such loans, except that Borrower may make cashless advances of credit to
senior members of Borrower's management team to purchase restricted stock of
Borrower.

     SECTION 5.21.  DIVIDENDS, STOCK REDEMPTIONS.  Borrower will not, directly
or indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or rights
to purchase any such capital stock, whether now or hereafter outstanding
("Stock"), or make any payment on account of or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Borrower, except for dividends paid solely in stock of the
Borrower and repurchases of stock owned by employees, directors and consultants
of Borrower pursuant to terms of employment, consulting or other stock
restrictions agreements at such time as any such employee, director or
consultant terminates his or her affiliations with the Borrower, provided that
no Default or Event of Default shall exist either immediately prior to or after
giving effect to such repurchase, and provided further that the total amount
paid in connection therewith by Borrower shall not exceed $50,000 in any
consecutive 12-month period.

     SECTION 5.22.  INVESTMENTS IN OTHER PERSONS.  Borrower will not, directly
or indirectly, at any time make or hold any Investment in any Person (whether in
cash, securities or other property of any kind) other than investments in Cash
Equivalents.

     SECTION 5.23.  ACQUISITION OF STOCK OR ASSETS.  Borrower will not acquire
or commit or agree to acquire all or any stock, securities or assets of any
other Person other than inventory and equipment acquired in the ordinary course
of business.

     SECTION 5.24.  PARTNERSHIPS; SUBSIDIARIES; JOINT VENTURES; MANAGEMENT
CONTRACTS.  Borrower will not at any time create any direct or indirect
Subsidiary, enter into any joint venture or similar arrangement (other than
joint ventures or strategic partnerships consisting of non-exclusive licensing
of technology or the providing of technical support, or extending and supporting
existing lines of business) or become a partner in any general or limited
partnership or enter into any management contract (other than an employment
contract for the employment of an officer or employee entered into in the
regular course of Borrower's business) permitting third party management rights
with respect to Borrower's business.

     SECTION 5.25.  LIMITATION ON ADDITIONAL INDEBTEDNESS.  Borrower shall not
incur additional indebtedness, other than indebtedness secured by Permitted
Liens, without the prior consent of the Lender.

     SECTION 5.26.  ADDITIONAL REQUIREMENTS.  The Borrower shall take all such
further actions and execute all such further documents and instruments as the
Lender may reasonably request.

                                       16
<PAGE>

     SECTION 6.  FINANCIAL STATEMENTS.  Until the payment and satisfaction in
full of all Obligations, the Borrower shall deliver to the Lender the following
financial information:

     SECTION 6.1.  ANNUAL FINANCIAL STATEMENTS.  As soon as available, but not
later than 120 days after the end of each fiscal year of the Borrower and its
consolidated subsidiaries, the consolidated balance sheet, income statement, and
statements of cash flows and shareholders equity for the Borrower and its
consolidated subsidiaries (the "Financial Statements") for such year, reported
on by independent certified public accountants without an adverse qualification;
and

     SECTION 6.2.  QUARTERLY FINANCIAL STATEMENTS.  As soon as available, but
not latex than 45 days after the end of each of the first three fiscal quarters
in any fiscal year of the Borrower and its consolidated subsidiaries, the
Financial Statements for such fiscal quarter, together with a certification duly
executed by a responsible officer of the Borrower that such Financial Statements
have been prepared in accordance with GAAP and are fairly stated in all material
respects (subject to normal year-end audit adjustments).

     SECTION 7.  EVENTS OF DEFAULT.  The occurrence of any of the following
events shall constitute an Event of Default hereunder:

     (a) the Borrower shall fail to pay within two (2) days after notice when
due any principal, interest, fee or other amount required to be paid by the
Borrower under or in connection with any Note and this Agreement;

     (b) any representation or warranty made or deemed made by the Borrower
under or in connection with any Loan Document or any Financial Statement shall
prove to have been false or incorrect in any material respect when made or
deemed made;

     (c) the Borrower shall fail to perform or observe (i) any of the terms,
covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14 or 5.16
through 5.25 hereof or (ii) any other term, covenant, or agreement contained in
any Loan Document (other than the other Events of Default specified in this
Section 7) and such failure remains unremedied for the earlier of thirty days
from (A) the date on which the Lender has given the Borrower written notice of
such failure and (B) the date on which the Borrower knew or should have known of
such failure;

     (d) any defined "Event of Default" shall occur under any other Loan
Document; or Borrower or any Person shall deny or disaffirm in writing its
obligations under any of the Loan Documents or any Liens granted in connection
therewith or shall otherwise challenge any of its obligations under any of the
Loan Documents; or any Liens granted in any of the Collateral shall be
determined to be void, voidable or invalid, are subordinated or are not given
the priority contemplated by this Agreement; or any Loan Document shall for any
reason cease to create a valid and perfected Lien on the Collateral purported to
be covered thereby, of first priority (except for Permitted Liens);

     (e) dissolution, liquidation, winding up, or cessation of the Borrower's
business, failure of the Borrower generally to pay its debts as they mature,
admission in writing by the Borrower of its inability generally to pay its debts
as they mature, or calling of a meeting of the Borrower's creditors for purposes
of compromising any of the Borrower's debts;

                                       17
<PAGE>

     (f) the commencement by or against the Borrower of any bankruptcy,
insolvency, arrangement, reorganization, receivership, or similar proceedings
under any federal or state law and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for sixty days
following the commencement thereof, or any action by the Borrower is taken
authorizing any such proceedings;

     (g) an assignment for the benefit of creditors is made by the Borrower,
whether voluntary or involuntary, the appointment of a trustee, custodian,
receiver, or similar official for the Borrower or for any substantial property
of the Borrower, or any action by the Borrower authorizing any such proceeding;

     (h) the Borrower shall default in (i) the payment of principal or interest
on any indebtedness in excess of $100,000 (other than the Obligations) beyond
the period of grace, if any, provided in the instrument or agreement under which
such indebtedness was created, and such payment default has not been cured
within any applicable grace period unless such default has been waived by such
Person; or (ii) the observance or performance of any other agreement or
condition relating to any such indebtedness or contained in any instrument or
agreement relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such indebtedness to cause, with the giving of
notice if required, such indebtedness to become due prior to its stated
maturity, and such default has not been cured within any applicable grace period
unless such default has been waived by such Person; or (iii) any loan or other
agreement under which the Borrower has received financing from Transamerica
Corporation or any of its affiliates;

     (i) the Borrower suffers or sustains a Material Adverse Change;

     (j) any tax lien, other than a Permitted Lien, is filed of record against
the Borrower and is not bonded or discharged within five Business Days;

     (k) any judgment or order for the payment of money in excess of $100,000
and not otherwise covered by applicable insurance shall be rendered against the
Borrower and such judgment or order shall not be stayed, vacated, bonded, or
discharged within sixty days;

     (l) any material covenant, agreement, or obligation, as determined in the
good faith business judgment of the Lender, made by the Borrower and contained
in or evidenced by any of the Loan Documents shall cease to be enforceable, or
shall be determined to be unenforceable, in accordance with its terms; the
Borrower shall deny or disaffirm the Obligations under any of the Loan Documents
or any liens granted in connection therewith; or any liens granted on any of the
Collateral in favor of the Lender shall be determined to be void, voidable, or
invalid, or shall not be given the priority contemplated by this Agreement; or

     (m) there is a change, which change results from a single transaction or
series of related transactions, but not from the sale of newly issued securities
to investors, in more than 35% of the ownership of any equity interests of the
Borrower on the date hereof or more than 35% of such interests become subject to
any contractual, judicial, or statutory lien, charge, security interest, or
encumbrance.

                                       18
<PAGE>

     SECTION 8.  REMEDIES.  If any Event of Default shall have occurred and be
                 --------
continuing:

     (a) The Lender may, without prejudice to any of its other rights under any
Loan Document or Applicable Law, declare all Obligations to be immediately due
and payable (except with respect to any Event of Default set forth in Section
7(f) hereof, in which case all Obligations shall automatically become
immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.

     (b) The Lender may take possession of the Collateral and, for that purpose
may enter, with the aid and assistance of any person or persons, any premises
where the Collateral or any part hereof is, or may be placed, and remove the
same.

     (c) The obligation of the Lender, if any, to make additional Loans or
financial accommodations of any kind to the Borrower shall immediately
terminate.

     (d) The Lender may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein (or in any Loan Document) or
otherwise available to it, all the rights an remedies of a secured party under
the applicable Uniform Commercial Code (the "Code") whether or not the Code
applies to the affected Collateral and also may (i) require the Borrower to, and
the Borrower hereby agrees that it will at its expense and upon request of the
Lender forthwith, assemble all or part of the Collateral as directed by the
Lender and make it available to the Lender at a place to be designated by the
Lender that is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Lender's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such other
terms as the Lender may deem commercially reasonable.

     (e) The Lender may accelerate or extend the time of payment, compromise,
issue credits, or bring suit on all accounts receivable ("Receivables") and
other Collateral (in the name of Borrower or the Lender) and otherwise
administer and collect the Receivables and other Collateral.

     (f) The Lender may collect, receive, dispose of and realize upon any
investment property Collateral, including withdrawal of any and all funds from
any securities accounts.

     (g) The Lender may (i) settle or adjust disputes or claims directly with
account debtors for amounts and upon terms which it considers advisable, and
(ii) notify account debtors on the Receivables and other Collateral that the
Receivables and Collateral have been assigned to the Lender, and that payments
in respect thereof shall be made directly to the Lender.  If an Event of Default
has occurred and is continuing, Borrower hereby irrevocably authorizes and
appoints the Lender, or any Person the Lender may designate, as its attorney-in-
fact, at Borrower's sole cost and expense, to exercise, all of the following
powers, which are coupled with an interest and are irrevocable, until all of the
Obligations have been indefeasibly paid and satisfied in full in cash: (A) to
receive, take, endorse, sign, assign and deliver, all in the name of the Lender
or Borrower, any and all checks, notes, drafts, and other documents or
instruments

                                       19
<PAGE>

relating to the Collateral; (B) to receive, open and dispose of all mail
addressed to Borrower and to notify postal authorities to change the address for
delivery thereof to such address as the Lender may designate; and (C) to take or
bring, in the name of the Lender or Borrower, all steps, actions, suits or
proceedings deemed by the Lender necessary or desirable to enforce or effect
collection of Receivables and other Collateral or file and sign Borrower's name
on a proof of claim in bankruptcy or similar document against any obligor of
Borrower.

     (h) The Borrower agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  The Lender shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given.  The
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.  Borrower recognizes
that the Lender may be unable to make a public sale of any or all of any
investment property Collateral, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.

     (e) Unless expressly prohibited by any licensor thereof, the Lender is
hereby granted a license to use all computer software programs, data bases,
processes, trademarks, tradenames and materials used by Borrower in connection
with its businesses or in connection with the Collateral.

     (e) All cash proceeds received by the Lender in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Lender, be held by the Lender as collateral for,
or then or at any time thereafter applied in whole or in part by the Lender
against, all or any part of the Obligations in such order as the Lender shall
elect Any surplus of such cash or cash proceeds held by the Lender and remaining
after the full and final payment of all the Obligations shall be paid over to
the Borrower or to such other Person to which the Lender may be required under
applicable law, or directed by a court of competent jurisdiction, to make
payment of such surplus.

     SECTION 9.  MISCELLANEOUS PROVISIONS.

     SECTION 9.1.  Notices.  Except as otherwise provided herein, all notices,
approvals, consents, correspondence, or other communications required or desired
to be given hereunder shall be given in writing and shall be delivered by
overnight courier, hand delivery, or certified or registered mail, postage
prepaid, if to the Lender, then to at 76 Batterson Park Road, Farmington,
Connecticut 06032, with a copy to the Lender at Riverway II, West Office Tower,
9399 West Higgins Road, Rosemont, Illinois 60018, and if to the Borrower, then
to P.O.  Box 14528, 104 Alexander Drive, Building 2, Research Triangle Park,
North Carolina, 27709-4528, or such other address as shall be designated by the
Borrower or the Lender to the other party in accordance herewith.  All such
notices and correspondence shall be effective when received.

                                       20
<PAGE>

     SECTION 9.2.  HEADINGS.  The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.

     SECTION 9.3.  ASSIGNMENTS AND PARTICIPATIONS.  The Borrower shall not have
the right to assign any Note or this Agreement or any interest therein unless
the Lender shall have given the Borrower prior written consent and the Borrower
and its assignee shall have delivered assignment documentation in form and
substance satisfactory to the Lender in its sole discretion.  The Lender may
assign (without the consent of Borrower) to one or more Persons all or a portion
of its rights and obligations under this Agreement and the other Loan Documents
(provided that such Person shall not be a direct or indirect competitor of the
Borrower).  The Lender may sell participations in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of any Loans); provided, however, that the Lender's obligations
under this Agreement shall remain unchanged.  The Lender may, in connection with
any permitted assignment or participation or proposed assignment or
participation pursuant to this Agreement, disclose to the assignee or
participant or proposed assignee or participant any information relating to
Borrower furnished to the Lender by or on behalf of Borrower only for the
purpose of analyzing a potential assignment or participation of the Loan and
provided that Lender requests assignee to hold such information confidential.

     SECTION 9.4.  AMENDMENTS, WAIVERS, AND CONSENTS.  Any amendment or waiver
of any provision of this Agreement and any consent to any departure by the
Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.

     SECTION 9.5.  INTERPRETATION OF AGREEMENT.  Time is of the essence in each
provision of this Agreement of which time is an element.  All terms not defined
herein or in a Note shall have the meaning set forth in the applicable Code,
except where the context otherwise requires.  To the extent a term or provision
of this Agreement conflicts with any Note, or any term or provision thereof, and
is not dealt with herein with more specificity, this Agreement shall control
with respect to the subject matter of such term or provision.  Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant in determining the meaning of this Agreement even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.

     SECTION 9.6.  CONTINUING SECURITY INTEREST.  This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, (ii)
be binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.

     SECTION 9.7.  REINSTATEMENT.  To the extent permitted by law, this
Agreement and the rights and powers granted to the Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or

                                       21
<PAGE>

upon the appointment of any receiver, intervenor, conservator, trustee, or
similar official for the Borrower or any substantial part of its assets, or
otherwise, all as though such payments had not been made.

     SECTION 9.8.  SURVIVAL OF PROVISIONS.  All representations, warranties, and
covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.

     SECTION 9.9.  INDEMNIFICATION.  The Borrower agrees to indemnify and hold
harmless the Lender and its directors, officers, agents, employees, and counsel
from and against any and all costs, expenses, claims, or liability incurred by
the Lender or such Person hereunder and under any other Loan Document or in
connection herewith or therewith, unless such claim or liability shall be due to
willful misconduct or gross negligence on the part of the Lender or such Person.
In addition and without limiting the generality of the foregoing, Borrower
shall, upon demand, pay to the Lender all reasonable costs and expenses incurred
by the Lender (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to the
Lender all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by the Lender
in order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the Obligations
or otherwise administer this Agreement, foreclose or otherwise realize upon the
Collateral or any part thereof, prosecute actions against, or defend actions by,
account debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim, examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of;
or otherwise enforce the Lender's security interest in, the Collateral; and
otherwise represent the Lender in any litigation relating to Borrower.

     SECTION 9.10.  COUNTERPARTS; SIGNATURES BY FACSIMILE.  This Agreement may
be executed in counterparts, each of which when so executed and delivered shall
be an original, but both of which shall together constitute one and the same
instrument.  This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
facsimile transmission all with the same force and effect as if the same was a
fully executed and delivered original manual counterpart.

     SECTION 9.11.  SEVERABILITY.  In case any provision in or obligation under
this Agreement or any Note or any other Loan Document shall be invalid, illegal,
or unenforceable in any jurisdiction, the validity, legality, and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.

     SECTION 9.12.  DELAYS; PARTIAL EXERCISE OF REMEDIES.  No delay or omission
of the Lender to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a

                                       22
<PAGE>

waiver of any such Event of Default. No single or partial exercise by the Lender
of any right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.

     SECTION 9.13.  ENTIRE AGREEMENT.  The Borrower and the Lender agree that
this Agreement, the Schedule hereto, and the Commitment Letter are the complete
and exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof.  Should there exist any inconsistency between the terms
of the Commitment Letter and this Agreement, the terms of this Agreement shall
prevail.

     SECTION 9.14.  SETOFF.  In addition to and not in limitation of all rights
of offset that the Lender may have under Applicable Law, and whether or not the
Lender has made any demand or the Obligations of the Borrower have matured, the
Lender shall have the right to appropriate and apply to the payment of the
Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.

     SECTION 9.15  JOINT AND SEVERAL LIABILITY.  If Borrower consists of more
than one Person, their liability shall be joint and several, and the compromise
of any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.

     SECTION 9.16  MAXIMUM RATE.  Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the parties
hereto hereby agree that all agreements between them under this Agreement and
the other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to the Lender for the
use, forbearance, or detention of the money loaned to Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of the
State of Illinois (or the laws of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement and
the other Loan Documents), or under applicable federal laws which may presently
or hereafter be in effect and which allow a higher maximum non-usurious interest
rate than under the laws of the State of Illinois (or such other jurisdiction),
in any case after taking into account, to the extent permitted by applicable
law, any and all relevant payments or charges under this Agreement and the other
Loan Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions (the "Highest Lawful Rate").  If due to any
circumstance whatsoever, fulfillment of any provisions of this Agreement or any
of the other Loan Documents at the time performance of such provision shall be
due shall exceed the Highest Lawful Rate, then, automatically, the obligation to
be fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance the
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount

                                       23
<PAGE>

then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to the Lender for the use, forbearance, or
detention of the Obligations and other indebtedness of Borrower to the Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness, until
payment in full thereof; so that the actual rate of interest on account of all
such indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents and
all other agreements between the parties hereto.

     SECTION 9.17.  WAIVER OF JURY TRIAL.  THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

     SECTION 9.18.  GOVERNING LAW.  THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.

     SECTION 9.19.  VENUE; SERVICE OF PROCESS.  ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF THE UNITED STATES
OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS.  THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED
IN SECTION 9.1 HEREOF.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMUTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION,
SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND
REMEDIES.

                                       24
<PAGE>

     IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement to
be duly executed and delivered by its proper and duly authorized officer as of
the date first set forth above.

                                    PARADIGM GENETICS, INC.

                                    By: /s/ John A. Ryals
                                       ------------------------------------
                                    Name:  John A. Ryals
                                    Title: President, CEO

Accepted as of the
____ day of July, 1999

TRANSAMERICA BUSINESS CREDIT CORPORATION

By: /s/ Gary P. Moro
    -------------------------------
     Name:  Gary P. Moro
     Title: Senior Vice President
             Credit

                                       25
<PAGE>

                                   SCHEDULE A

                                       TO

                          LOAN AND SECURITY AGREEMENT

Consents and Approvals (Section 4.2):

Other Places of Business and Locations of Collateral (Section 4.16):

Prior Names of Obligor (Section 4.7):

Prior Trade Names of Obligor (Section 4.7):

Existing Trade Names of Obligor (Section 4.7):

Federal Tax ID (Section 4.7):

Registered and Unregistered Patents (Section 4.11):

Registered and Unregistered Trademarks (Section 4.11):

Registered Copyrights (Section 4.11):

                                       26
<PAGE>

                             CONSENTS AND APPROVALS
                                 (SECTION 4.2)

                                      NONE

                                       27
<PAGE>

                            OTHER PLACES OF BUSINESS
                                      AND
                            LOCATIONS OF COLLATERAL
                                 (SECTION 4.16)

                                      NONE

                                       28
<PAGE>

                            PRIOR NAMES OF BORROWER
                                 (SECTION 4.7)

                                      NONE

                                       29
<PAGE>

                         PRIOR TRADE NAMES OF BORROWER
                                 (SECTION 4.7)

                                      NONE

                                       30
<PAGE>

                        EXISTING TRADE NAMES OF BORROWER
                                 (SECTION 4.7)

                                      NONE

                                       31
<PAGE>

                 FEDERAL TAX IDENTIFICATION NUMBER OF BORROWER
                                 (SECTION 4.7)

        The federal tax identification number of Borrower is 56-2047837.

                                       32
<PAGE>

                REGISTERED AND UNREGISTERED PATENTS OF BORROWER
                                 (SECTION 4.11)

         See Schedule A to the Intellectual Property Security Agreement

                                       33
<PAGE>

               REGISTERED AND UNREGISTERED TRADEMARKS OF BORROWER
                                 (SECTION 4.11)

         See Schedule B to the Intellectual Property Security Agreement

                                       34
<PAGE>

                       REGISTERED COPYRIGHTS OF BORROWER
                                 (SECTION 4.11)

         See Schedule C to the Intellectual Property Security Agreement

                                       35<PAGE>

                                                                  Exhibit 10.32
                                                                  -------------

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

     THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT is made and entered into as
of this 20th day of July, 1999 (this "Agreement"), between PARADIGM GENETICS,
INC., a North Carolina corporation (the "Grantor"), with and in favor of
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation (the "Lender").

     WHEREAS, the Grantor is entering into a Loan and Security Agreement dated
as of even date herewith (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement"; terms which are capitalized herein and not
otherwise defined shall have the meanings given to them in the Loan Agreement)
with the Lender, pursuant to which the Lender agreed to make loans and advances
to the Grantor, subject to the terms and conditions set forth in the Loan
Agreement; and

     WHEREAS, under the Loan Agreement, the Grantor has granted to the Lender a
security interest in and lien on substantially all of its assets; and

     WHEREAS, it is a condition precedent to the effectiveness of the Loan
Agreement that the Grantor shall have executed and delivered this Agreement and
granted a security interest in all of the Grantor's right, title and interest in
and to all of the Intellectual Property Collateral (as hereinafter defined) in
favor of the Lender, as contemplated hereby.

     NOW, THEREFORE, in consideration of the premises hereof and to induce the
Lender to enter into the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     SECTION 1.  Security for Obligations.
                 ------------------------

          (a) Security Interest in Patents. To secure the full and prompt
              ----------------------------
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations, the Grantor hereby grants and conveys to
the Lender a first and valid security interest in, with a power of sale to the
extent permitted by law, all of its right, title and interest in the United
States and throughout the world, in and to all of the now owned and hereafter
acquired United States and foreign patents and all patent and design patent
applications, and all issues, reissues, re-examinations, continuations,
continuations-in-part or divisions thereof, and all proceeds thereof
(hereinafter collectively referred to as the "Patents"). All unexpired patents
and all currently pending patent applications in which the Grantor has an
interest are listed on Schedule A attached hereto and made a part hereof.
Subject to the provisions of Section 2(n), the Grantor hereby further grants and
conveys to the Lender a first and valid security interest, having priority over
all other security interests, in all of the right, title and interest of the
Grantor in and to all products, proceeds, income, royalties, damages and
payments now or hereafter due and payable under or in respect of all Patents
and, subject to the provisions of Section 2(n), in and to all rights during the
term of this Agreement to sue, collect and retain for the Lender's benefit
damages and payments for past or future infringements of the Patents.

          (b) Security Interest in Trademarks. To secure the payment and
              -------------------------------
performance of all of the Obligations, the Grantor hereby grants and conveys to
the Lender a first and valid security interest in, with a power of sale to the
extent permitted by applicable law, all of its right, title and interest, in the
United States and throughout the world, in and to all of its now owned and
hereafter acquired trademarks, service marks and trade names, and all variants
thereof (whether or not such name is the subject of a registration or an
application therefor), and all registrations and applications to register the
same, and all renewals thereof, and the goodwill of the business relating
thereto, and all proceeds thereof (hereinafter
<PAGE>

collectively referred to as the "Trademarks"). All United States trademark
registrations and all currently pending trademark applications in which the
Grantor has an interest and all foreign trademark registrations and all
currently pending trademark applications in which the Grantor has an interest,
are listed on Schedule B attached hereto and made a part hereof. Subject to the
provisions of Section 2(n), the Grantor hereby further grants to the Lender a
first and valid security interest in all of its right, title and interest in and
to (i) all products, proceeds, income, royalties, damages and payments now and
hereafter due and payable under or in respect of all Trademarks, (ii) subject to
the provisions of Section 2(n), all rights during the term of this Agreement to
sue, collect and retain for the Lender's benefit damages and payments for past
or future infringements of the Trademarks and (iii) all rights under or interest
in any trademark license agreements or service mark license agreements with any
other party, whether the Grantor is a licensee or licensor under any such
license agreement, and the right to prepare for sale and sell any and all assets
now or hereafter owned by the Grantor and now or hereafter covered by such
licenses.

          (c) Security Interest in Copyrights. To secure the payment and
              -------------------------------
performance of all of the Obligations, the Grantor hereby grants to the Lender a
first and valid security interest in all of its right, title and interest, in
the United States and throughout the world, in and to all of its now owned and
hereafter acquired copyrights, and all registrations and applications to
register the same, all renewals thereof, any written agreement, naming the
Grantor as licensor or licensee, granting any right under any copyright, any
work which is or may be subject to copyright protection pursuant to Title 17 of
the U.S. Code, and all physical things embodying such works (including, without
limitation, copies thereof) created or otherwise used in the business of the
Grantor, and all proceeds thereof (hereinafter collectively referred to as the
"Copyrights"). All copyright registrations and all currently pending copyright
applications in which the Grantor has an interest are listed on Schedule C
attached hereto and made a part hereof. Subject to the provisions of Section
2(n), the Grantor hereby further grants to the Lender a first and valid security
interest in all of its right, title and interest in and to all products,
proceeds, income, royalties, damages and payments now and hereafter due and
payable under or in respect of all Copyrights and, subject to the provisions of
Section 2(n), in and to all rights during the term of this Agreement to sue,
collect and retain for the Lender's benefit damages and payments for past or
future infringements of the Copyrights.

          (d) Security Interest in Proprietary Information. To secure the
              --------------------------------------------
payment and performance of all of the Obligations, the Grantor hereby grants to
the Lender a first and valid security interest in all of its right, title and
interest, in the United States and throughout the world, in and to all of its
now owned and hereafter acquired inventions, discoveries, trade secrets,
improvements, processes, methods, formulae, applications, ideas, know-how,
customer lists, license rights, advertising materials, operating manuals, sales
literature, drawings, specifications, descriptions, name plates, catalogues,
proprietary information, and goodwill (and all other assets which uniquely
reflect such goodwill), and to all income, royalties, damages and payments now
and hereafter due or payable therefor or in respect thereof (collectively, the
"Proprietary Information" and, together with the Patents, the Trademarks and the
Copyrights, the "Intellectual Property Collateral").

     SECTION 2.  Representations, Warranties and Covenants of the Grantor.
                 --------------------------------------------------------

          (a) Except as otherwise provided in this Agreement, the Grantor is and
will continue to be the owner of all of the Intellectual Property Collateral,
free from any adverse claim, security interest, lien or encumbrance in favor of
any Person except for the security interest granted to the Lender and except for
Permitted Liens.

          (b) None of the Intellectual Property Collateral is or shall become
subject to any Lien in favor of any Person other than the Lender and except for
any Permitted Liens, and the Grantor

                                       2
<PAGE>

agrees that it shall not license, transfer, convey or encumber any interest in
or to the Intellectual Property Collateral, except for: (i) licenses of
Intellectual Property Collateral granted in the ordinary course of the business
of the Grantor; (ii) transfers or conveyances of Intellectual Property
Collateral not otherwise permitted under this Agreement for consideration not to
exceed an amount in any fiscal year of the Grantor in excess of ten percent
(10%) of the Grantor's gross revenues for the prior fiscal year and provided
that (1) adequate consideration is received and (2) the Board of Directors
determines it is in the best interest of the corporation; (iii) licenses,
transfers, conveyances or encumbrances of Intellectual Property Collateral as
described in Schedule E hereto; (iv) licenses for use outside of the United
States; and (v) any other licenses, transfers, conveyances or encumbrances of
Intellectual Property Collateral requested by the Grantor and consented to by
the Lender (any such consent not to be unreasonably withheld). Any license of
the Intellectual Property Collateral granted by the Grantor (each, a "License")
shall be in writing and shall reserve all rights in the Grantor except those
reasonably necessary in the ordinary course of business to fulfill the permitted
purposes herein. The Grantor shall cause a copy of each License to be delivered
to the Lender within thirty (30) days of execution by all parties thereto.

          (c) Except as disclosed in Schedule D hereto, the Grantor has made no
previous assignment, transfer or agreement in conflict herewith or constituting
a present or future assignment, transfer, or encumbrance of any of the
Intellectual Property Collateral.

          (d) Except as disclosed in Schedule D hereto, there is no financing
statement or other document or instrument now signed or on file in any public
office granting a security interest in or otherwise encumbering any part of the
Intellectual Property Collateral, except those showing the Lender as secured
party. So long as any Obligations remain outstanding, the Grantor will not
execute, and there will not be on file in any public office, any such financing
statement or other document or instruments, except as permitted under Section
2(b) or financing statements filed or to be filed in favor of the Lender.

          (e) Subject to any limitation stated therein or in connection
therewith, all information furnished to the Lender concerning the Intellectual
Property Collateral and proceeds thereof is and will be accurate and correct in
all material respects.

          (f) All Intellectual Property Collateral consisting of applications
for Patents and for registrations of Trademarks and Copyrights has been duly and
properly filed and all Intellectual Property Collateral consisting of issued or
granted Patents and of registrations of Trademarks and Copyrights (including,
without limitation, any and all renewals, reissues, continuations or divisions
thereof, as the case may be) has been duly and properly maintained.

          (g) Not later than forty-five (45) days after the end of each of the
first three fiscal quarters of each fiscal year of the Grantor, and not later
than 120 days after the end of each fiscal quarter ending with a fiscal year of
the Grantor, the Grantor shall provide Lender with a summary report for the
immediately preceding fiscal quarter of all patent applications or applications
for registration of a trademark filed by the Grantor with the U.S. Patent and
Trademark Office during such fiscal quarter, all applications for registration
of copyrights filed by the Grantor with the U.S. Copyright Office during such
fiscal quarter, and of all patents issued to the Grantor, and trademark and
copyright registrations granted to the Grantor, during such fiscal quarter.
Thereafter, at Lender's request, the Grantor shall execute all documents
necessary to perfect a security interest in any patent, trademark or copyright
application or patent or trademark or copyright registration, and the Grantor
shall annually, or more frequently as the Lender shall request, cause an
instrument sufficient to perfect, protect or establish any Lien hereunder to be
recorded in the U.S. Patent and Trademark Office with respect to all United
States patent applications filed by it or patents issued to it during the prior
calendar year and with respect to all trademark applications filed by it or
trademark registrations issued to it during the prior calendar year, and the
Grantor shall annually, or more frequently as the Lender reasonably shall
request, cause an instrument

                                       3
<PAGE>

sufficient to perfect, protect or establish any Lien hereunder to be recorded in
the U.S. Copyright Office with respect to United States copyright applications
filed by it or copyright registrations issued to it during the prior calendar
year.

          (h) The Grantor shall not take any action, or permit any action to be
taken by others subject to the Grantor's control, including licensees, or fail
to take any action, or permit others subject to the Grantor's control, including
licensees, to fail to take any action, subject to the provisions of Section
2(g), which would, in the case of any such actions or failures to act taken
singly or together, adversely affect the validity, grant and enforceability of
the security interest granted to the Lender hereunder. Notwithstanding the
foregoing, the Grantor shall be permitted to abandon any of the Intellectual
Property Collateral in accordance with the terms of Section 2(l).

          (i) The Grantor shall promptly notify the Lender, in writing, of any
suit, action, proceeding, claim or counterclaim brought against the Grantor that
would reasonably be expected to affect adversely the Intellectual Property
Collateral, and shall, on request, deliver to the Lender a copy of all
pleadings, papers, orders or decrees theretofore and thereafter filed in any
such suit, action or proceeding, and shall keep the Lender duly advised in
writing of the progress of any such suit.

          (j) To the best knowledge and belief of the Grantor after due inquiry,
no infringement or unauthorized use presently is being made of any Intellectual
Property Collateral. In the event of any material infringement of the
Intellectual Property Collateral by others or in the event of any other conduct
detrimental to the Intellectual Property Collateral by others known or brought
to the attention of the Grantor, the Grantor shall promptly notify the Lender in
writing at its address set forth in Section 5(a) of such infringement or other
conduct and the full nature, extent, evidence and facts of such infringement or
other conduct known to the Grantor.

          (k) If requested by the Lender, the Grantor, upon reasonable notice
and at the Lender's expense, shall provide the Lender with access to the
Intellectual Property Collateral records maintained by the Grantor.

          (l) The Grantor shall notify the Lender in writing at the address set
forth in Section 5(a) at least sixty days prior to any proposed voluntary
abandonment of any Intellectual Property Collateral (other than items of
Intellectual Property Collateral that are not useful or beneficial to the
business and operations of the Grantor) and obtain the prior written consent of
the Lender to such abandonment, which consent shall not be unreasonably
withheld.

          (m) During the term of this Agreement, the Grantor agrees:

               (i) whenever any of the registered Trademarks are used by or on
     behalf of the Grantor, if reasonably practicable, to affix or cause to be
     affixed a notice that the mark is a registered trademark or service mark,
     which notice shall be in a form accepted or required by the trademark
     marking laws of each country in which the mark is so used and registered;
     and

               (ii) whenever any of the underlying works covered by registered
     Copyrights are used by or on behalf of the Grantor, if reasonably
     practicable, to affix or cause to be affixed a notice that said underlying
     works are so covered, which notice shall be in a form accepted or required
     by the copyright laws of such country in which said underlying works are so
     used and registered.

                                       4
<PAGE>

          (n) Subject to the provisions of Section 4(g), during the term of this
Agreement, all income, royalties, payments and damages due and payable to the
Grantor under or in respect of the Intellectual Property Collateral shall be
paid to the Grantor.

          (o) The Grantor agrees, upon the reasonable request by the Lender,
during the term of this Agreement:

               (i) to execute, acknowledge and deliver all additional
          instruments and documents necessary or desirable to effect the
          purposes and intents of this Agreement, in a form reasonably
          acceptable to counsel for the Lender; and

               (ii) to do all such other acts as may be necessary or appropriate
          to carry out the purposes and intents of this Agreement, and to
          create, evidence, perfect and continue the security interests of the
          Lender in the Intellectual Property Collateral.

     SECTION 3.  Indemnity. The Grantor agrees to indemnify the Lender from and
                 ---------
against any and all claims, losses and liabilities arising out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement and any actions taken pursuant to Section 4 or any failure to act
thereunder), unless such claim or liability shall be due to willful misconduct
or gross negligence on the part of the Lender or such person.

     SECTION 4.  Rights and Remedies Upon an Event of Default.
                 --------------------------------------------

          (a) If any Event of Default shall have occurred and be continuing,
then and in every such case, subject to any mandatory Requirements of Law, the
Lender, in addition to other rights and remedies provided for herein and any
rights now or hereafter existing under applicable law, shall have all rights and
remedies as a secured creditor under the Uniform Commercial Code in all relevant
jurisdictions and may:

               (i) personally, or by agents or attorneys, upon five (5) days'
          written notice, take possession of the Intellectual Property
          Collateral or any part thereof, from the Grantor or any other Person
          who then has possession of any part thereof, with or without notice or
          process of law, and for that purpose may enter upon the Grantor's
          premises where any of the Intellectual Property Collateral is located
          and remove the same and use in connection with such removal any and
          all services, supplies, aids and other facilities of the Grantor; and

               (ii) sell, assign or otherwise liquidate, or direct the Grantor
          to sell, assign or otherwise liquidate, any or all of the Intellectual
          Property Collateral or any part thereof, and take possession of the
          proceeds of any such sale or liquidation;

          (b) Any collateral repossessed by the Lender under or pursuant to
Section 4(a) and any other Intellectual Property Collateral whether or not so
repossessed by the Lender, may be sold, assigned, leased or otherwise disposed
of under one or more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in general in such
manner, at such time or times, at such place or places and on such terms as the
Lender may, in compliance with any Requirements of Law, determine to be
commercially reasonable. Any such disposition which shall be a private sale or
other private proceedings permitted by such requirements shall be made upon not
less than 10 days' written notice to the Grantor specifying the time at which
such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of the Grantor or any nominee of the Grantor to
acquire the Intellectual Property

                                       5
<PAGE>

Collateral involved at a price or for such other consideration at least equal to
the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the Grantor specifying the
time and place of such sale and, in the absence of applicable Requirements of
Law, shall be by public auction (which may, at the option of the Lender, be
subject to reserve), after publication of notice of such auction not less than
10 days prior thereto in two newspapers of general circulation in the
jurisdiction in which such auction is to be held. To the extent permitted by any
such Requirements of Law, the Lender may bid for and become the purchaser of the
Intellectual Property Collateral or any item thereof, offered for sale in
accordance with this Section without accountability to the Grantor (except to
the extent of surplus money received). If, under mandatory Requirements of Law,
the Lender shall be required to make disposition of the Intellectual Property
Collateral within a period of time which does not permit the giving of notice to
the Grantor as hereinabove specified, the Lender need give the Grantor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory Requirements of Law. The Lender shall not be obligated to make any
sale of Intellectual Property Collateral regardless of notice of sale having
been given. The Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.

          (c) Upon the occurrence and continuance of an Event of Default, with
notice to the Grantor, if reasonably practical, the Lender shall have the right
at any time to make any payments and do any other acts the Lender may deem
necessary to protect its security interests in the Intellectual Property
Collateral, including, without limitation, the rights to pay, purchase, contest
or compromise any Lien which, in the reasonable judgment of the Lender, appears
to be prior to or superior to the security interests granted hereunder, and
appear in and defend any action or proceeding purporting to affect its security
interests in, or the value of, the Intellectual Property Collateral. The Grantor
hereby agrees to reimburse the Lender for all payments made and expenses
incurred under this Agreement including reasonable fees based upon standard
hourly rates and without regard to any statutory formula, expenses and
disbursements of attorneys and paralegals acting for the Lender, including any
of the foregoing payments under, or acts taken to protect its security interests
in, the Intellectual Property Collateral, which amounts shall be secured under
this Agreement, and agrees it shall be bound by any payment made or act taken by
the Lender hereunder absent the Lender's gross negligence or willful misconduct.
The Lender shall have no obligation to make any of the foregoing payments or
perform any of the foregoing acts.

          (d) The Grantor hereby irrevocably authorizes and appoints the Lender,
or any Person or agent the Lender may designate, as the Grantor's attorney-in-
fact, with full authority in the place and stead of the Grantor and in the name
of the Grantor or otherwise, at the Grantor's cost and expense, in the Lender's
good faith business judgment, to take any action and to execute any instrument
that the Lender may deem necessary or advisable to accomplish the purposes and
intents of this Agreement and to exercise all of the following powers upon and
at any time after the occurrence and during the continuance of an Event of
Default, which powers, being coupled with an interest, shall be irrevocable
until all of the Obligations shall have been paid and satisfied in full:

               (i) ask for, demand, collect, bring suit, recover, compromise,
          administer, accelerate or extend the time of payment, issue credits,
          compromise, receive and give acquittance and receipts for moneys due
          and to become due under or in respect of any of the Intellectual
          Property Collateral;

               (ii) receive, take, endorse, negotiate, sign, assign and deliver
          and collect any checks, notes, drafts or other instruments, documents
          and chattel paper, in connection with clause (i) above;

                                       6
<PAGE>

               (iii)  receive, open and dispose of all mail addressed to the
          Grantor and notify postal authorities to change the address for
          delivery thereof to such address as the Lender may designate;

               (iv)   give customers indebted on the Intellectual Property
          Collateral notice of the Lender's interest therein, or to instruct
          such customers to make payment directly to the Lender for the
          Grantor's account or to request, at any time from customers indebted
          on the Intellectual Property Collateral, verification of information
          concerning the Intellectual Property Collateral and the amounts owing
          thereon;

               (v)    convey any item of Intellectual Property Collateral to any
          purchaser thereof;

               (vi)   record any instruments under Section 2(g) hereof;

               (vii)  make any payments or take any acts under Section 4(c)
          hereof; and

               (viii) file any claims or take any action or institute any
          proceedings that the Lender may reasonably deem necessary or desirable
          for the collection of any of the Intellectual Property Collateral or
          otherwise to enforce the rights of the Lender with respect to any of
          the Intellectual Property Collateral.

The Lender's authority under this Section 4(d) shall include, without
limitation, the authority to execute and give receipt for any certificate of
ownership or any document, transfer title to any item of Intellectual Property
Collateral, sign the Grantor's name on all financing statements or any other
documents deemed necessary or appropriate to preserve, protect or perfect the
security interest in the Intellectual Property Collateral and to file the same,
prepare, file and sign the Grantor's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with any Intellectual
Property Collateral and prepare, file and sign the Grantor's name on a proof of
claim in bankruptcy or similar document against any customer of the Grantor, and
to take any other actions arising from or incident to the rights, powers and
remedies granted to the Lender in this Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Grantor.

          (e) All cash proceeds received by the Lender in respect of any sale
of, collection from, or other realization upon all or any part of the
Intellectual Property Collateral shall be applied by the Lender against the
Obligations in such order as the Lender may determine.

          (f) The Lender shall have the right of setoff with respect to the
Intellectual Property Collateral as provided Section 9.14 of the Loan Agreement.

          (g) Upon the occurrence and during the continuance of an Event of
Default, all income, royalties, payments and damages under or in respect of the
Intellectual Property Collateral, if any, received thereafter shall be held by
the Grantor in trust for the benefit of the Lender, separate from the Grantor's
own property or funds and immediately turned over to the Lender with proper
assignments or endorsements. Upon the occurrence and during the continuance of
an Event of Default, the Lender shall have the right to notify payors of income,
royalties, payments and damages under or in respect of the Intellectual Property
Collateral to make payment directly to the Lender.

          (h) Each and every right, power and remedy hereby specifically given
to the Lender shall be in addition to every other right, power and remedy
specifically given under this Agreement or under the other Loan Documents or now
or hereafter existing at law or in equity, or by statute, and each

                                       7
<PAGE>

and every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Lender. All such rights, powers
and remedies shall be cumulative and the exercise or the beginning of exercise
of one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of the Lender in the exercise of any such right,
power or remedy and no renewal or extension of any of the Obligations shall
impair any such right, power or remedy or shall be construed to be a waiver of
any Default or Event of Default or any acquiescence therein.

     SECTION 5.  General Provisions.
                 ------------------

     (a) Notices. All notices, approvals, consents or other communications
         -------
required or desired to be given hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, or by telecopier followed by a hard copy sent
by overnight mail, if to the Lender, then to Transamerica Business Credit
Corporation, 76 Batterson Road, Farmington, Connecticut 06032, Telecopy: (860)
677-6766, Attn.: Legal Department, and if to the Grantor, then to P.O. Box
14528, 104 Alexander Drive, Building 2, Research Triangle Park, North Carolina,
27709-4528, Telecopy: (919) 544-8094, Attn.: Chief Financial Officer, with a
copy to Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500
First Union Capitol Center, Raleigh, North Carolina, 27601, Attention: Gerald F.
Roach, Telecopy: 919-821-6800. All such notices and correspondence shall be
deemed given (i) if sent by certified or registered mail, three Business Days
after being postmarked, (ii) if sent by overnight delivery service, when
received at the above stated addresses or when delivery is refused and (iii) if
sent by telecopier transmission, when receipt of such transmission is
acknowledged.

     (b) Headings. The headings in this Agreement are for purposes of reference
         --------
only and shall not affect the meaning or construction of any provision of this
Agreement.

     (c) Severability. The provisions of this Agreement are severable, and if
         ------------
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect,
in that jurisdiction only, such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.

     (d) Amendments, Waivers and Consents. Any amendment or waiver of any
         --------------------------------
provision of this Agreement and any consent to any departure by the Grantor from
any provision of this Agreement shall not be effective unless the same shall be
in writing and signed by the Grantor and the Lender and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

     (e) Interpretation. Time is of the essence in each provision of this
         --------------
Agreement of which time is an element. All terms not defined herein or in the
Loan Agreement shall have the meaning set forth in the Code, except where the
context otherwise requires. To the extent a term or provision of this Agreement
conflicts with the Loan Agreement and is not dealt with herein with more
specificity, the Loan Agreement shall control with respect to the subject matter
of such term or provision. Acceptance of or acquiescence in a course of
performance rendered under this Agreement shall not be relevant in determining
the meaning of this Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.

     (f) Continuing Security Interest. This Agreement shall create a continuing
         ----------------------------
security interest in the Intellectual Property Collateral and shall (i) remain
in full force and effect until the payment in full in cash of the Obligations
and the termination of the Loan Agreement, (ii) be binding upon the Grantor and

                                       8
<PAGE>

its successors and assigns and (iii) inure, together with the rights and
remedies of the Lender, to the Lender's successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), the Lender may,
in accordance with the terms of the Loan Agreement, assign or otherwise transfer
all or any portion of its rights and obligations under the Loan Documents
(including, without limitation, all or any portion of any Loans or any Notes
held by it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to the Lender herein or
otherwise, in each case as provided in the Loan Agreement.

     (g) Reinstatement. To the extent permitted by law, this Agreement shall
         -------------
continue to be effective or be reinstated if at any time any amount received by
the Lender in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Lender because the Grantor is the subject of an
Insolvency Event, all as though such payments had not been made.

     (h) Survival of Provisions. All representations, warranties and covenants
         ----------------------
of the Grantor contained herein shall survive the execution and delivery of this
Agreement, and shall terminate only upon the full and final payment and
performance by the Grantor of the Obligations secured hereby and termination of
the Loan Agreement and the other Loan Documents.

     (i) Lender May Perform. If the Grantor fails to perform any agreement
         ------------------
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Lender incurred in connection
therewith shall be payable by the Grantor and shall constitute Obligations
secured by this Agreement

     (j) No Duty on Lender. The powers conferred on the Lender hereunder are
         -----------------
solely to protect the interest of the Lenders in the Intellectual Property
Collateral and shall not impose any duty upon the Lender to exercise any such
powers. Except for the safe custody of any Intellectual Property Collateral in
its possession and the accounting for money actually received by it hereunder,
the Lender shall have no duty as to any Intellectual Property Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters related to any Intellectual Property
Collateral, whether or not the Lender has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any Person or any other rights pertaining to any Intellectual Property
Collateral. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of any Intellectual Property Collateral in its
possession if such Intellectual Property Collateral is accorded treatment
substantially equal to that which the Lender accords its own property. To the
extent the Intellectual Property Collateral is held by a custodian, the Lender
shall be deemed to have exercised reasonable care if it has selected the
custodian with reasonable care.

     (k) Delays; Partial Exercise of Remedies. No delay or omission of the
         ------------------------------------
Lender to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Lender of any right or remedy shall preclude any other
or further exercise thereof, or preclude any other right or remedy.

     (1) Release; Termination of Agreement. Subject to the provisions of
         ---------------------------------
subsection (g) hereof, upon the payment in full of the Obligations and the
termination of the Loan Agreement, this Agreement shall terminate and all rights
in the Intellectual Property Collateral shall revert to the Grantor. At such
time, the Lender shall upon the request and at the expense of the Grantor, (A)
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination and (B) reassign and redeliver
to the Grantor all of the Intellectual Property Collateral hereunder which has
not been sold, disposed of, retained or applied by the Lender in accordance with
the terms hereof. Such

                                       9
<PAGE>

reassignment and redelivery shall be without warranty by or recourse to the
Lender, except as to the absence of any prior assignments by the Lender of its
interest in the Intellectual Property Collateral.

     (m) Counterparts. This Agreement may be executed in one or more
         ------------
counterparts, each of which shall be deemed an original but both of which shall
together constitute one and the same agreement.

     (n) GOVERNING LAW.  THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
         -------------
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PRINCIPLES, EXCEPT TO THE EXTENT THAT FEDERAL LAW IS
APPLICABLE.

     (o) SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE GRANTOR AND THE
         --------------------------
LENDER, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE
LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED
BY THE LENDER IN GOOD FAITH TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. THE GRANTOR
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.

     (p) JURY TRIAL. THE GRANTOR AND THE LENDER EACH HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
causing this Agreement to be signed by their respective duly authorized officers
on the day and year first above written.

                              PARADIGM GENETICS, INC.

                              By: /s/ John A. Ryals
                                 --------------------------------------
                                  Name:  John A. Ryals
                                  Title: CEO, President

Accepted and Agreed as of the
date first above written:

TRANSAMERICA BUSINESS CREDIT
CORPORATION

By: /s/ Gary P. Moro
   ------------------------------
   Name:  Gary P. Moro
   Title: Senior Vice President
           Credit

                                       10
<PAGE>

                                   SCHEDULE A
                                     Patents

Paradigm Genetics has filed the following patent applications:

--------------------------------------------------------------------------------
                        United States Patent Applications
--------------------------------------------------------------------------------
 INVENTORS              FILING DATE                  TITLE
--------------------------------------------------------------------------------
Uknes, S                 03/17/99         Sequences of Magnaporthe Grisea
Tanzer, M
Woessner, J
Rameaka, J
Miller, B
Haas, D
Garcia, T
--------------------------------------------------------------------------------
Uknes, 5                 03/17/99         Sequences of Magnaporthe Grisea
Tanzer, M
Woessner, J
Rameaka, J
Miller, B
Hans, D
Garcia, T
--------------------------------------------------------------------------------
Uknes, S                 03/17/99         Sequences of Magnaporthe Grisea
Tanzer, M
Woessner, J
Rameaka, J
Miller, B
Haas, D
Garcia, T
--------------------------------------------------------------------------------
Hamer, J                 03/17/99         Methods and Materials for the Rapid
Hamer, L                                  and High Volume Production of a Gene
                                          Knock-Out Library in an Organism
                                          (TAG-KO)

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

<PAGE>

                                   SCHEDULE B
                                   TRADEMARKS

Paradigm Genetics has filed the following trademark applications:

--------------------------------------------------------------------------------
                        United States Patent Applications
--------------------------------------------------------------------------------
    #          FILING DATE                   TITLE
--------------------------------------------------------------------------------
TM101        09/18/98          Paradigm Genetics
--------------------------------------------------------------------------------
TM102        12/17/98          Paradigm Genetics & Design
--------------------------------------------------------------------------------
TM103        09/17/98          AgDB
--------------------------------------------------------------------------------
TM104        09/18/98          GeneFinder
--------------------------------------------------------------------------------
TM105        09/18/98          FunctionFinder
--------------------------------------------------------------------------------
TM106        09/18/98          TargetFinder
--------------------------------------------------------------------------------
TM107        09/18/98          LeadFinder
--------------------------------------------------------------------------------

                                       2
<PAGE>

                                   SCHEDULE C
                                   COPYRIGHTS

                                      NONE

                                       3
<PAGE>

                                   SCHEDULE D

                                  Assignments

The following assignments of intellectual property have taken place:

Prionics
--------

Any patents arising from an invention first conceived or discovered jointly by
one or more employees of PRIONICS and one or more employees of PARADIGM in the
performance of DEVELOPMENT, which invention relates to the detection of prions,
shall belong to PRIONICS.

                                       4
<PAGE>

                                   SCHEDULE E

              Permitted Intellectual Property Collateral Transfer

     The Grantor shall be permitted to license, transfer, convey or encumber any
Intellectual Property Collateral, as necessary or desirable, in connection with
contractual relationships entered into with Monsanto Company or any of its
affiliates, as previously described to the Lender.

                                       5

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