Document:

Exhibit

4.9

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR

OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT

OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE

CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

WARRANT TO PURCHASE STOCK

 

	

  Corporation:

  	

  RIGEL PHARMACEUTICALS, INC., a Delaware

  Corporation

  
	

  Number of Shares:

  	

  138,889

  
	

  Class of Stock:

  	

  Common

  
	

  Initial Exercise Price:

  	

  $2.70 per share 

  
	

  Issue Date:

  	

  July 12, 2002

  
	

  Expiration Date:

  	

  July 12, 2012 (Subject to Section 4.1)

  

 

THIS WARRANT CERTIFIES THAT, for good and valuable

consideration, the receipt of which is hereby acknowledged, COMERICA BANK -

CALIFORNIA or its assignee (“Holder”) is entitled to purchase the number of

fully paid and nonassessable shares of the class of securities (the “Shares”)

of the corporation (the “Company”) at the initial exercise price per Share (the

“Warrant Price”) all as set forth above and as adjusted pursuant to

Article 2 of this warrant, subject to the provisions and upon the terms

and conditions set forth in this warrant.

 

ARTICLE 1.  EXERCISE.

 

1.1                                 Method

of Exercise.  Holder may exercise

this warrant by delivering this warrant and a duly executed Notice of Exercise

in substantially the form attached as Appendix 1 to the principal office of the

Company.  Unless Holder is exercising

the conversion right set forth in Section 1.2, Holder shall also deliver to the

Company a check for the aggregate Warrant Price for the Shares being purchased.

 

1.2                                 Conversion

Right.  In lieu of exercising this

warrant as specified in Section 1.1, Holder may from time to time convert

this warrant, in whole or in part, into a number of Shares determined by

dividing (a) the aggregate fair market value of the Shares or other

securities otherwise issuable upon exercise of this warrant minus the aggregate

Warrant Price of such Shares by (b) the fair market value of one Share.  The fair market value of the Shares shall be

determined pursuant to Section 1.3.

 

1.3                                 Fair

Market Value.  If the Shares are

traded regularly in a public market, the fair market value of the Shares shall

be the average closing price of the Shares (or the closing price of the

Company’s stock into which the Shares are convertible) reported for the five

business days immediately before Holder delivers its Notice of Exercise to the

Company.  If the Shares are not regularly

traded in a public market, the Board of Directors of the Company shall

determine fair market value in its reasonable good faith judgment.

 

1.4                                 Delivery

of Certificate and New Warrant. 

Promptly after Holder exercises or converts this warrant, the Company

shall deliver to Holder certificates for the Shares acquired and, if this

warrant has not been fully exercised or converted and has not expired, a new

warrant representing the Shares not so acquired.

 

1.5                                 Replacement

of Warrants.  On receipt of evidence

reasonably satisfactory to the Company of the loss, theft, destruction or

mutilation of this warrant and, in the case of loss, theft or destruction, on

delivery of an indemnity agreement reasonably satisfactory in form and amount

to the Company or, in the case of mutilation, on surrender and cancellation of

this warrant, the Company at its expense shall execute and deliver, in lieu of

this warrant, a new warrant of like tenor.

 

 

1.6        Repurchase on Sale,

Merger, or Consolidation of the Company.

 

1.6.1                        “Acquisition.”  For the purpose of this warrant,

“Acquisition” means any sale, license, or other disposition of all or

substantially all of the assets (including intellectual property) of the

Company, or any reorganization, consolidation, or merger of the Company where

the holders of the Company’s securities before the transaction beneficially own

less than 50% of the outstanding voting securities of the surviving entity

after the transaction.

 

1.6.2                        Assumption

of Warrant.  If upon the closing of

any Acquisition the successor entity assumes the obligations of this warrant,

then this warrant shall be exercisable for the same securities, cash, and

property as would be payable for the Shares issuable upon exercise of the

unexercised portion of this warrant as if such Shares were outstanding on the

record date for the Acquisition and subsequent closing.  The Warrant Price shall be adjusted

accordingly.  The Company shall use

reasonable efforts to cause the surviving corporation to assume the obligations

of this warrant.

 

1.6.3                        Nonassumption.  If upon the closing of any Acquisition the

successor entity does not assume the obligations of this warrant and Holder has

not otherwise exercised this warrant in full, then this warrant shall be deemed

to have been automatically converted pursuant to Section 1.2 and thereafter

Holder shall participate in the Acquisition on the same terms as other holders

of the same class of securities of the Company.

 

ARTICLE 2.  ADJUSTMENTS TO

THE SHARES.

 

2.1                                 Stock

Dividends, Splits, Etc.  If the

Company declares or pays a dividend on its common stock payable in common

stock, or other securities, subdivides the outstanding common stock into a

greater amount of common stock, then upon exercise of this warrant, for each

Share acquired, Holder shall receive, without cost to Holder, the total number

and kind of securities to which Holder would have been entitled had Holder

owned the Shares of record as of the date the dividend or subdivision occurred.

 

2.2                                 Reclassification,

Exchange or Substitution.  Upon any

reclassification, exchange, substitution, or other event that results in a

change of the number and/or class of the securities issuable upon exercise or

conversion of this warrant, Holder shall be entitled to receive, upon exercise

or conversion of this warrant, the number and kind of securities and property

that Holder would have received for the Shares if this warrant had been

exercised immediately before such reclassification, exchange, substitution, or

other event.  The Company or its successor

shall promptly issue to Holder a new warrant for such new securities or other

property.  The new warrant shall provide

for adjustments which shall be as nearly equivalent as may be practicable to

the adjustments provided for in this Article 2 including, without limitation,

adjustments to the Warrant Price and to the number of securities or property

issuable upon exercise of the new warrant. 

The provisions of this Section 2.2 shall similarly apply to successive

reclassifications, exchanges, substitutions, or other events.

 

2.3                                 Adjustments

for Combinations, Etc.  If the

outstanding Shares are combined or consolidated, by reclassification or

otherwise, into a lesser number of shares, the Warrant Price shall be

proportionately increased. If the outstanding Shares are combined or

consolidated, by reclassification or otherwise, into a greater number of

shares, the Warrant Price shall be proportionately decreased.

 

2.4                                 No

Impairment.  The Company shall not,

by amendment of its Certificate of Incorporation or through a reorganization,

transfer of assets, consolidation, merger, dissolution, issue, or sale of

securities or any other voluntary action, avoid or seek to avoid the observance

or performance of any of the terms to be observed or performed under this

warrant by the Company, but shall at all times in good faith assist in carrying

out all the provisions of this Article 2 and in taking all such action as may

be necessary or appropriate to protect Holder’s rights under this Article

against impairment.

 

2.5                                 Certificate

as to Adjustments.  Upon written

request of the Holder following an adjustment of the Warrant Price, the Company

at its expense shall promptly compute such adjustment, and furnish Holder with

a certificate of its Chief Financial Officer setting forth such adjustment and

the facts upon which such adjustment is 

 

2

 

based.  The Company shall, upon

written request, furnish Holder a certificate setting forth the Warrant Price

in effect upon the date thereof and the series of adjustments leading to such

Warrant Price.

 

ARTICLE 3.  REPRESENTATIONS

AND COVENANTS OF THE COMPANY.

 

3.1                                 Representations

and Warranties.  The Company hereby

represents and warrants to the Holder as follows:

 

(a)                                  The

initial Warrant Price referenced on the first page of this warrant is not

greater than the fair market value of the Shares as of the date of this

warrant.

 

(b)                                 All

Shares which may be issued upon the exercise of the purchase right represented

by this warrant, and all securities, if any, issuable upon conversion of the

Shares, shall, upon issuance, be duly authorized, validly issued, fully paid

and nonassessable, and free of any liens and encumbrances except for

restrictions on transfer provided for herein or under applicable federal and

state securities laws.

 

3.2                                 Notice

of Certain Events.  If the Company

proposes at any time (a) to declare any dividend or distribution upon its

common stock, whether in cash, property, stock, or other securities and whether

or not a regular cash dividend; (b) to offer for subscription pro rata to the

holders of any class or series of its stock any additional shares of stock of

any class or series or other rights; (c) to effect any reclassification or

recapitalization of common stock; or (d) to merge or consolidate with or into any

other corporation, or sell, lease, license, or convey all or substantially all

of its assets, or to liquidate, dissolve or wind up, then, in connection with

each such event, the Company shall give Holder (1) at least 20 days prior

written notice of the date on which a record will be taken for such dividend,

distribution, or subscription rights (and specifying the date on which the

holders of common stock will be entitled thereto) or for determining rights to

vote, if any, in respect of the matters referred to in (a) and (b) above; and

(2) in the case of the matters referred to in (c) and (d) above at least 20

days prior written notice of the date when the same will take place (and

specifying the date on which the holders of common stock will be entitled to

exchange their common stock for securities or other property deliverable upon

the occurrence of such event).

 

3.3                                 Information

Rights.  So long as the Holder holds

this warrant and/or any of the Shares, unless (i) the Company is delivering

financial information pursuant to a Loan Agreement between the Company and the

Holder or (ii) at least one class of the Company’s securities is traded in a

public market, the Company shall deliver to the Holder (a) promptly after

mailing, copies of all communiques to the shareholders of the Company, (b)

within ninety (90) days after the end of each fiscal year of the Company, the

annual audited financial statements of the Company certified by independent

public accountants of recognized standing and (c) within forty-five (45) days

after the end of each of the first three quarters of each fiscal year, the

Company’s quarterly, unaudited financial statements.

 

ARTICLE 4.  REPRESENTATIONS

AND COVENANTS OF THE HOLDER.

 

4.1                                 Representations

and Warranties.  The Holder hereby

represents and warrants to the Company as follows:

 

(a)                                  Acquisition

of Warrant for Personal Account. 

The Holder represents and warrants that it is acquiring the warrant

solely for its own and its affiliates’ account for investment and not with a

view to or for sale or distribution of said warrant or any part thereof.  The Holder also represents that the entire

legal and beneficial interests of the warrant and Shares the Holder is

acquiring is being acquired for, and will be held for, its and its affiliates’

account only.

 

(b)                                 Securities

Are Not Registered.  

 

(i)                                     The

Holder understands that the warrant and the Shares have not been registered

under the Act on the basis that no distribution or public offering of the stock

of the Company is to be effected.  The

Holder realizes that the basis for the exemption may not be present if,

notwithstanding its representations, the Holder has a present intention of

acquiring the securities for a fixed or determinable period in the future,

selling (in

 

3

 

connection with a distribution or otherwise), granting any

participation in, or otherwise distributing the securities, other than to its

affiliates.  The Holder has no such

present intention.

 

(ii)                                  The

Holder recognizes that the warrant and the Shares must be held indefinitely

unless they are subsequently registered under the Act or an exemption from such

registration is available.  The Holder

recognizes that the Company has no obligation to register the warrant or the

Shares of the Company, or to comply with any exemption from such registration.

 

(iii)                               The

Holder is aware that neither the warrant nor the Shares may be sold pursuant to

Rule 144 adopted under the Act unless certain conditions are met, including,

among other things, the existence of a public market for the shares, the

availability of certain current public information about the Company, the

resale following the required holding period under Rule 144 and the number of

shares being sold during any three month period not exceeding specified

limitations.  Holder is aware that the

conditions for resale set forth in Rule 144 have not been satisfied and that

the Company presently has no plans to satisfy these conditions in the foreseeable

future.

 

ARTICLE 5.  MISCELLANEOUS.

 

5.1                                 Term:

Notice of Expiration.  This warrant

is exercisable in whole or in part, at any time and from time to time on or

before the Expiration Date set forth above. 

If this warrant has not been exercised prior to the Expiration Date,

this warrant shall be deemed to have been automatically exercised on the

Expiration Date by “cashless” conversion pursuant to Section 1.2.

 

5.2                                 Legends.  This warrant and the Shares (and the

securities issuable, directly or indirectly, upon conversion of the Shares, if

any) shall be imprinted with a legend in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,

AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN

EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN

OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL

THAT SUCH REGISTRATION IS NOT REQUIRED.

 

5.3                                 Compliance

with Securities Laws on Transfer. 

This warrant and the Shares issuable upon exercise of this warrant (and

the securities issuable, directly or indirectly, upon conversion of the Shares,

if any) may not be transferred or assigned in whole or in part without

compliance with applicable federal and state securities laws by the transferor and

the transferee (including, without limitation, the delivery of investment

representation letters and legal opinions reasonably satisfactory to the

Company).  The Company shall not require

Holder to provide an opinion of counsel if the transfer is to an affiliate of

Holder or if there is no material question as to the availability of current

information as referenced in Rule 144(c), Holder represents that it has

complied with Rule 144(d) and (e) in reasonable detail, the selling broker

represents that it has complied with Rule 144(f), and the Company is provided

with a copy of Holder’s notice of proposed sale.

 

5.4                                 Transfer

Procedure.  Subject to the

provisions of Section 4.3, Holder may transfer all or part of this warrant or

the Shares issuable upon exercise of this warrant (or the securities issuable,

directly or indirectly, upon conversion of the Shares, if any) by giving the

Company notice of the portion of the warrant being transferred setting forth

the name, address and taxpayer identification number of the transferee and

surrendering this warrant to the Company for reissuance to the transferee(s)

(and Holder, if applicable); provided, however, that Holder may transfer

all or part of this warrant to its affiliates, including, without limitation,

Comerica Incorporated, at any time without notice to the Company, and such

affiliate shall then be entitled to all the rights of Holder under this warrant

and any related agreements, and the Company shall cooperate fully in ensuring

that any stock issued upon exercise of this warrant is issued in the name of

the affiliate that exercises the warrant. 

The terms and conditions of this warrant shall inure to the benefit of,

and be binding upon, the Company and the holders hereof and their respective

permitted successors and assigns.  The

Company shall have the right to refuse to transfer any portion of this warrant

to any person who directly competes with the Company, unless the Company is

filing financial information with the SEC pursuant to the Securities Exchange Act

of 1934.

 

4

 

5.5                                 Notices.  All notices and other communications from

the Company to the Holder, or vice versa, shall be deemed delivered and

effective when given personally or mailed by first-class registered or

certified mail, postage prepaid, at such address as may have been furnished to

the Company or the Holder, as the case may be, in writing by the Company or

such Holder from time to time.  All

notices to the Holder shall be addressed as follows:

 

Comerica Bank - California

Attn:  Warrant

Administrator

Technology and Life Sciences Division

P.O. Box 7279

San Francisco, CA 94120-7279

 

5.6                                 Waiver.  This warrant and any term hereof may be

changed, waived, discharged or terminated only by an instrument in writing

signed by the party against which enforcement of such change, waiver, discharge

or termination is sought.

 

5.7                                 Attorneys’

Fees.  In the event of any dispute

between the parties concerning the terms and provisions of this warrant, the

party prevailing in such dispute shall be entitled to collect from the other

party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

5.8                                 Governing

Law.  This warrant shall be governed

by and construed in accordance with the laws of the State of California,

without giving effect to its principles regarding conflicts of law.

 

	

   

  	

  RIGEL PHARMACEUTICALS, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

     /s/ James

  H. Welch

  	 

	

   

  	

   

  
	

   

  	

  Name:

  	

      James H.

  Welch

  	 

	

   

  	

   

  
	

   

  	

  Title:

  	

       Chief

  Financial Officer

  	 

						

 

5

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.                                       The

undersigned hereby elects to purchase

                    

shares of the

                      stock of RIGEL PHARMACEUTICALS, INC.

pursuant to the terms of the attached warrant, and tenders herewith payment of

the purchase price of such shares in full.

 

2.                                       The

undersigned hereby elects to convert the attached warrant into shares in the

manner specified in the warrant.  This

conversion is exercised with respect to

                      of the shares covered by the warrant.

 

[Strike paragraph that does not

apply.]

 

3.                                       Please

issue a certificate or certificates representing said shares in the name of the

undersigned or in such other name as is specified below:

 

Comerica Bank - California

Attn:  Warrant

Administrator

Technology and Life Sciences Division

P.O. Box 7279

San Francisco, CA 94120-7279

 

OR Registered Assignee

 

4.                                       The

undersigned represents it is acquiring the shares solely for its own account

and not as a nominee for any other party and not with a view toward the resale

or distribution thereof except in compliance with applicable securities laws.

 

	

  COMERICA BANK – CALIFORNIA or Registered

  Assignee

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  (Signature)

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  (Date)

  	

   

  

 

6Exhibit

10.24

 

 

 

 

 

	

   

  
	

  RIGEL PHARMACEUTICALS, INC.

  LOAN AND SECURITY AGREEMENT

  
	

   

  

 

 

 

 

 

 

 

This LOAN AND SECURITY AGREEMENT is entered into as of

July 12, 2002, by and between COMERICA BANK - CALIFORNIA (“Bank”) and RIGEL

PHARMACEUTICALS, INC. (“Borrower”).

 

RECITALS

 

Borrower wishes to obtain credit from time to time

from Bank, and Bank desires to extend credit to Borrower.  This Agreement sets forth the terms on which

Bank will advance credit to Borrower, and Borrower will repay the amounts owing

to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.          DEFINITIONS AND

CONSTRUCTION.

 

1.1                                 Definitions.  As used in this Agreement, the following

terms shall have the following definitions:

 

“Accounts” means all presently existing and hereafter

arising accounts, contract rights, and all other forms of obligations owing to

Borrower arising out of the sale or lease of goods (including, without

limitation, the licensing of software and other technology) or the rendering of

services by Borrower, whether or not earned by performance, and any and all

credit insurance, guaranties, and other security therefor, as well as all

merchandise returned to or reclaimed by Borrower and Borrower’s Books relating

to any of the foregoing.

 

“Affiliate” means, with respect to any Person, any

Person that owns or controls directly or indirectly such Person, any Person

that controls or is controlled by or is under common control with such Person,

and each of such Person’s senior executive officers, directors, and partners.

 

“Bank Expenses” means all:  reasonable costs or expenses (including reasonable attorneys’

fees and expenses) incurred in connection with the preparation, negotiation,

administration, and enforcement of the Loan Documents; reasonable Collateral

audit fees; and Bank’s reasonable attorneys’ fees and expenses incurred in

amending, enforcing or defending the Loan Documents (including fees and

expenses of appeal), incurred before, during and after an Insolvency

Proceeding, whether or not suit is brought.

 

“Borrower’s Books” means all of Borrower’s books and

records including:  ledgers; records

concerning Borrower’s assets or liabilities, the Collateral, business

operations or financial condition; and all computer programs, or tape files,

and the equipment, containing such information.

 

“Business Day” means any day that is not a Saturday,

Sunday, or other day on which banks in the State of California are authorized

or required to close.

 

“Change in Control” shall mean a transaction in which

any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of

the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined

in Rule 13d-3 under the Securities Exchange Act of 1934), directly or

indirectly, of a sufficient number of shares of all classes of stock then

outstanding of Borrower ordinarily entitled to vote in the election of

directors, empowering such “person” or “group” to elect a majority of the Board

of Directors of Borrower, who did not have such power before such transaction.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code.

 

“Collateral” means the property described on Exhibit A

attached hereto.

 

1

 

“Contingent Obligation” means, as applied to any Person,

any direct or indirect liability, contingent or otherwise, of that Person with

respect to (i) any indebtedness, lease, dividend, letter of credit or other

obligation of another, including, without limitation, any such obligation

directly or indirectly guaranteed, endorsed, co-made or discounted or sold with

recourse by that Person, or in respect of which that Person is otherwise

directly or indirectly liable; (ii) any obligations with respect to undrawn

letters of credit, corporate credit cards, or merchant services issued or

provided for the account of that Person; and (iii) all obligations arising

under any interest rate, currency or commodity swap agreement, interest rate

cap agreement, interest rate collar agreement, or other agreement or arrangement

designed to protect such Person against fluctuation in interest rates, currency

exchange rates or commodity prices; provided, however, that the term

“Contingent Obligation” shall not include endorsements for collection or

deposit in the ordinary course of business. 

The amount of any Contingent Obligation shall be deemed to be an amount

equal to the stated or determined amount of the primary obligation in respect

of which such Contingent Obligation is made or, if not stated or determinable,

the maximum reasonably anticipated liability in respect thereof as determined

by such Person in good faith; provided, however, that such amount shall not in

any event exceed the maximum amount of the obligations under the guarantee or

other support arrangement.

 

“Credit Extension” means each Equipment Advance, or

any other extension of credit by Bank for the benefit of Borrower hereunder.

 

“Daily Balance” means the amount of the Obligations

owed at the end of a given day.

 

“Equipment” means all present and future machinery,

equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and

attachments in which Borrower has any interest.

 

“Equipment Advance” has the meaning set forth in

Section 2.1(a).

 

“Equipment Line” means a credit extension of up to

Fifteen Million Dollars ($15,000,000).

 

“Equipment Maturity Date” means January 12, 2006.

 

“ERISA” means the Employee Retirement Income Security

Act of 1974, as amended, and the regulations thereunder.

 

“Event of Default” has the meaning assigned in

Article 0.

 

“GAAP” means generally accepted accounting principles

as in effect from time to time.

 

“Indebtedness” means (a) all indebtedness for

borrowed money or the deferred purchase price of property or services,

including without limitation reimbursement and other obligations with respect

to surety bonds and letters of credit, (b) all obligations evidenced by

notes, bonds, debentures or similar instruments, (c) all capital lease

obligations and (d) all Contingent Obligations.

 

“Insolvency Proceeding” means any proceeding commenced

by or against any person or entity under any provision of the United States

Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,

including assignments for the benefit of creditors, formal or informal

moratoria, compositions, extension generally with its creditors, or proceedings

seeking reorganization, arrangement, or other relief.

 

“Inventory” means all present and future inventory in

which Borrower has any interest, including merchandise, raw materials, parts, supplies,

packing and shipping materials, work in process and finished products intended

for sale or lease or to be furnished under a contract of service, of every kind

and description now or at any time hereafter owned by or in the custody or

possession, actual or constructive, of Borrower, including such inventory as is

temporarily out of its custody or possession or in transit and including any

returns upon any accounts or other proceeds, including insurance proceeds,

resulting from the sale or disposition of any of the foregoing and any

documents of title representing any of the above, and Borrower’s Books relating

to any of the foregoing.

 

2

 

“Investment” means any beneficial ownership of

(including stock, partnership interest or other securities) any Person, or any

loan, advance or capital contribution to any Person.

 

“IRC” means the Internal Revenue Code of 1986, as

amended, and the regulations thereunder.

 

“Landlord Accounts” means amounts owing to Borrower by

Slough Estates pursuant to the Slough / Rigel Build-to-Suite Lease dated May

16, 2001, provided that such accounts shall represent unconditional obligations

of landlord and shall have been outstanding less than 45 days from invoice date

and provided further that the total amount of all “Landlord Accounts” cannot

exceed $18,300,000 in aggregate at any given time.

 

“Lien” means any mortgage, lien, deed of trust,

charge, pledge, security interest or other encumbrance.

 

“Loan Documents” means, collectively, this Agreement,

any note or notes executed by Borrower, and any other agreement entered into

between Borrower and Bank in connection with this Agreement, all as amended or

extended from time to time.

 

“Material Adverse Effect” means a material adverse effect

on (i) the business operations or condition (financial or otherwise) of

Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower

to repay the Obligations or otherwise perform its obligations under the Loan

Documents or (iii) the value or priority of Bank’s security interests in the

Collateral or (iv) the prospect of repayment of any portion of the Obligations.

 

“Negotiable Collateral” means all of Borrower’s

present and future letters of credit of which it is a beneficiary, notes,

drafts, instruments, securities, documents of title, and chattel paper, and

Borrower’s Books relating to any of the foregoing.

 

“Obligations” means all debt, principal, interest,

Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement

or any other agreement, whether absolute or contingent, due or to become due,

now existing or hereafter arising, including any interest that accrues after

the commencement of an Insolvency Proceeding and including any debt, liability,

or obligation owing from Borrower to others that Bank may have obtained by

assignment or otherwise.

 

“Periodic Payments” means all installments or similar

recurring payments that Borrower may now or hereafter become obligated to pay

to Bank pursuant to the terms and provisions of any instrument, or agreement

now or hereafter in existence between Borrower and Bank.

 

“Permitted Indebtedness” means:

 

(a)                                  Indebtedness

of Borrower in favor of Bank arising under this Agreement or any other Loan

Document;

 

(b)                                 Indebtedness

existing on the Closing Date and disclosed in the Schedule;

 

(c)                                  Indebtedness

secured by a lien described in clause 0 of the defined term “Permitted

Liens,” provided such Indebtedness does not exceed the cost of the equipment

financed with such Indebtedness;

 

(d)                                 Subordinated

Debt;

 

(e)                                  Indebtedness

not otherwise permitted by Section 7.4 incurred in the ordinary course of

Borrower’s business not exceeding $250,000 in the aggregate outstanding at any

time; and

 

3

 

(f)                                    Extensions,

refinancings, modifications, amendments and restatements of any items of

Permitted Indebtedness (a) through (e) above, provided that the principal

amount thereof is not increased or the terms thereof are not modified to impose

more burdensome terms upon Borrower or its Subsidiary, as the case may be, and

provided that such extension, refinancing, modification, amendment or

restatement is permitted by any applicable subordination agreement.

 

“Permitted Investment”

means:

 

(a)                                  Investments

existing on the Closing Date disclosed in the Schedule;

 

(b)                                 Investments

in other entities in connection with acquisitions, joint ventures or other

strategic transactions in the ordinary course of Borrower’s business, provided

that (A) no Event of Default has occurred which is continuing or would exist

after giving effect to such Investment and (B) the consideration paid by

Borrower in exchange for such Investments consists solely of (i) equity

interests of the Borrower or its Subsidiaries, (ii) licenses, sublicenses,

leases or subleases in the ordinary course of business, (iii) technical or

scientific support or services, and/or (iv) the contribution of intellectual

property;

 

(c)                                  

(i) marketable direct obligations issued or unconditionally guaranteed by

the United States of America or any agency or any State thereof maturing within

one (1) year from the date of acquisition thereof, (ii) commercial paper

maturing no more than one (1) year from the date of creation thereof and

currently having rating of at least A-2 or P-2 from either

Standard & Poor’s Corporation or Moody’s Investors Service,

(iii) certificates of deposit maturing no more than one (1) year from the

date of investment therein issued by Bank and (iv) Bank’s money market

accounts;

 

(d)                                 Investments

consisting of notes receivable or, prepaid royalties and other credit

extensions to customers and suppliers who are not Affiliates, in the ordinary

course of business which do not exceed $250,000 in the aggregate at any given

time;

 

(e)                                  Investments

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

advances, employee relocation loans and other employee loans and advances in

the ordinary course of business and (ii) loans to employees, officers or

directors relating to the purchase of equity securities of Borrower or its

Subsidiaries pursuant to employee stock purchase plans or agreements approved

by Borrower’s Board of Directors;

 

(f)                                    Investments

(including debt obligations) received in connection with the bankruptcy or

reorganization of customers or suppliers and in settlement of delinquent

obligations of, and other disputes with, customers or suppliers arising in the

ordinary course of business; and

 

(g)                                 Investments

not otherwise permitted by Section 7.7 not exceeding $250,000 in the aggregate

outstanding at any time.

 

“Permitted Liens” means

the following:

 

(a)                                  Any

Liens existing on the Closing Date and disclosed in the Schedule or arising

under this Agreement or the other Loan Documents;

 

(b)                                 Liens

for taxes, fees, assessments or other governmental charges or levies, either

not delinquent or being contested in good faith by appropriate proceedings,

provided the same have no priority over any of Bank’s security interests;

 

(c)                                  Liens

(i) upon or in any equipment which was not financed by Bank acquired or

held by Borrower or any of its Subsidiaries to secure the purchase price of

such equipment or indebtedness incurred solely for the purpose of financing the

acquisition of such equipment, or (ii) existing on such equipment at the

time of its acquisition, provided that the Lien is confined solely to the

property so acquired and improvements thereon, and the proceeds of such

equipment;

 

4

 

(d)                                 Liens

securing Subordinated Debt;

 

(e)                                  Liens

arising from judgments, decrees or attachments in circumstances not

constituting an Event of Default under Section 8.8;

 

(f)                                    Leases

or subleases and licenses and sublicenses granted to others in the ordinary

course of Borrower’s business, not interfering in any material respect with the

business of Borrower and its Subsidiaries taken as a whole, if the leases,

subleases, license and sublicenses permit Bank by their terms or under

applicable law to have a security interest in such leases, subleases,

nonexclusive licenses, and sublicenses;

 

(g)                                 Easements,

reservations, rights-of-way, restrictions, minor defects or irregularities in

title and other similar charges or encumbrances affecting real property not

constituting a Material Adverse Effect;

 

(h)                                 Deposits

or Liens in the ordinary course of business under worker’s compensation,

unemployment insurance, social security and other similar laws, or to secure

the performance of bids, tenders or contracts (other than for the repayment of

borrowed money) or to secure indemnity, performance or other similar bonds for

the performance of bids, tenders or contracts (other than for the repayment of

borrowed money) or to secure statutory obligations (other than liens arising

under ERISA or environmental liens) or surety or appeal bonds, or to secure

indemnity, performance or other similar bonds, provided that all of the

foregoing do not exceed $25,000 in the aggregate at any given time;

 

(i)                                     Liens

in favor of customs and revenue authorities arising as a matter of law to

secure payments of custom duties in connection with the importation of goods;

 

(j)                                     Liens

of materialmen, mechanics, warehousemen, carriers, artisan’s or other similar

Liens arising in the ordinary course of Borrower’s business or by operation of

law, which are not past due or which are being contested in good faith by

appropriate proceedings and for which reserves have been established in

accordance with GAAP;

 

(k)                                  Liens

in favor of other financial institutions arising in connection with Borrower’s

accounts held at such institutions, provided that Bank has a perfected security

interest in the amounts held in such accounts; and

 

(l)                                     Liens

incurred in connection with the extension, renewal or refinancing of the

indebtedness secured by Liens of the type described in clauses (a) through

(k) above, provided that any extension, renewal or replacement Lien shall be

limited to the property encumbered by the existing Lien and the principal

amount of the indebtedness being extended, renewed or refinanced does not

increase.

 

“Person” means any

individual, sole proprietorship, partnership, limited liability company, joint

venture, trust, unincorporated organization, association, corporation,

institution, public benefit corporation, firm, joint stock company, estate,

entity or governmental agency.

 

“Prime Rate” means the

variable rate of interest, per annum, most recently announced by Bank, as its

“prime rate,” whether or not such announced rate is the lowest rate available

from Bank.

 

“Quick Assets” means, at

any date as of which the amount thereof shall be determined, the sum of the

unrestricted cash (excluding any cash specifically pledged to support any

Obligation) plus cash-equivalents, plus net billed accounts

receivable plus interest receivable on cash or short term investments plus

100% of Landlord Accounts, of Borrower each determined in accordance with GAAP.

 

“Responsible Officer”

means each of the Chief Executive Officer, the Chief Operating Officer, the

Chief Financial Officer and the Controller of Borrower.

 

5

 

“Schedule” means the

schedule of exceptions attached hereto and approved by Bank, if any.

 

“Subordinated Debt” means

any debt incurred by Borrower that is subordinated to the debt owing by

Borrower to Bank on terms acceptable to Bank (and identified as being such by

Borrower and Bank).

 

“Subsidiary” means any

corporation, company or partnership in which (i) any general partnership

interest or (ii) more than 50% of the stock or other units of ownership

which by the terms thereof has the ordinary voting power to elect the Board of

Directors, managers or trustees of the entity, at the time as of which any

determination is being made, is owned by Borrower, either directly or through

an Affiliate (other than an officer or director).

 

1.2                                 Accounting

Terms.  All accounting terms not

specifically defined herein shall be construed in accordance with GAAP and all

calculations made hereunder shall be made in accordance with GAAP.  When used herein, the terms “financial

statements” shall include the notes and schedules thereto.

 

2.                                       LOAN

AND TERMS OF PAYMENT.

 

2.1                                 Credit

Extensions.

 

Borrower promises to pay to the order of Bank, in

lawful money of the United States of America, the aggregate unpaid principal

amount of all Credit Extensions made by Bank to Borrower hereunder.  Borrower shall also pay interest on the

unpaid principal amount of such Credit Extensions at rates in accordance with

the terms hereof.

 

(a)                                  Equipment

Advances.

 

(i)                                     Subject

to and upon the terms and conditions of this Agreement, at any time from the

date hereof through July 12, 2003, Bank agrees to make advances (each an

“Equipment Advance” and, collectively, the “Equipment Advances”) to Borrower in

an aggregate amount not to exceed the Equipment Line.  Each Equipment Advance shall not exceed one hundred percent

(100%) of the invoice amount of equipment, software, tenant improvements, and

soft costs (which Borrower shall, in any case, have purchased within 90 days of

the date of the corresponding Equipment Advance), including taxes, shipping,

warranty charges, freight discounts and installation expense.

 

(ii)                                  Interest

shall accrue from the date of each Equipment Advance at the rate specified in

Section 2.2(a), and shall be payable monthly on the twelfth (12th) day of

each month so long as any Equipment Advances are outstanding.  Any Equipment Advances that are outstanding

on January 13, 2003 shall be payable in thirty six (36) equal monthly

installments of principal, plus accrued interest, beginning on February 12, 2003,

and continuing on the same day of each month thereafter through the Equipment

Maturity Date.  Any Equipment Advances

extended on or after January 13, 2003 that are outstanding on July 13, 2003

shall be payable in thirty (30) equal monthly installments of principal, plus

accrued interest, beginning on August 12, 2003, and continuing on the same day

of each month thereafter through the Equipment Maturity Date, at which time all

amounts owing under this Section 2.1(a) and any other amounts owing under

this Agreement shall be immediately due and payable.  Equipment Advances, once repaid, may not be reborrowed.  Borrower may prepay any Equipment Advances

or portion thereof at any time without penalty or premium.

 

(iii)                               When

Borrower desires to obtain an Equipment Advance, Borrower shall notify Bank

(which notice shall be irrevocable) by facsimile transmission to be received no

later than 3:00 p.m. Pacific time one (1) Business Day before the day on

which the Equipment Advance is to be made. 

Such notice shall be substantially in the form of Exhibit B.  The notice shall be signed by a Responsible

Officer or its designee and include a copy of the invoices (including invoices

for progress payments) for any Equipment to be financed.

 

(iv)                              Borrower

shall maintain a money market account or a certificate of deposit with Bank in

an amount equal to or greater than the amount by which the outstanding

principal balance of

 

6

 

the Equipment Advances exceeds $7,500,000 (the “Equipment Cash

Collateral”) at all times.  Sufficient

Equipment Cash Collateral shall be deposited with Bank as a condition precedent

to the issuance of any Equipment Advance which shall cause the aggregate

outstanding principal balance of all Equipment Advances to exceed $7,500,000.

 

2.2                                 Interest

Rates, Payments, and Calculations.

 

(a)                                  Interest

Rates.

 

(i)                                     Equipment

Advances.  Except as set forth in

Section 2.2(b), the portion of the outstanding Equipment Advances which are not

cash secured pursuant to Sections 2.1(a)(iv), 6.9 and 4.4 shall bear interest,

on the outstanding Daily Balance thereof, at a rate equal to six percent (6.0%)

above the Prime Rate.  Except as set

forth in Sections 2.1(a)(iv), 6.9 and 4.4, the portion of the outstanding

Equipment Advances which are cash secured pursuant to Section 4.4 shall bear

interest, on the outstanding Daily Balance thereof, at a rate equal to the

Prime Rate.

 

(b)                                 Late

Fee; Default Rate.  If any payment

is not made within ten (10) days after the date such payment is due, Borrower

shall pay Bank a late fee equal to the lesser of (i) five percent (5%) of

the amount of such unpaid amount or (ii) the maximum amount permitted to

be charged under applicable law.  All

Obligations shall bear interest, from and after the occurrence and during the

continuance of an Event of Default, at a rate equal to five (5) percentage

points above the interest rate applicable immediately prior to the occurrence

of the Event of Default.

 

(c)                                  Payments.  Interest hereunder shall be due and payable

on the twelfth (12th) calendar day of each month during the term hereof.  Bank shall, at its option if an Event of

Default has occurred which is continuing, (i) charge such interest, all Bank

Expenses, and all Periodic Payments against any of Borrower’s deposit accounts

or (ii) against the Equipment Line, in which case those amounts shall

thereafter accrue interest at the rate then applicable hereunder.  Any interest not paid when due shall be

compounded by becoming a part of the Obligations, and such interest shall

thereafter accrue interest at the rate then applicable hereunder.  All payments shall be free and clear of any

taxes, withholdings, duties, impositions or other charges, to the end that Bank

will receive the entire amount of any Obligations payable hereunder, regardless

of source of payment.

 

(d)                                 Computation.  In the event the Prime Rate is changed from

time to time hereafter, the applicable rate of interest hereunder shall be

increased or decreased, effective as of the day the Prime Rate is changed, by

an amount equal to such change in the Prime Rate.  All interest chargeable under the Loan Documents shall be

computed on the basis of a three hundred sixty (360) day year for the actual

number of days elapsed.

 

2.3                                 Crediting

Payments.  Prior to the occurrence

of an Event of Default, Bank shall credit a wire transfer of funds, check or

other item of payment to such deposit account or Obligation as Borrower

specifies.  After the occurrence of an

Event of Default, the receipt by Bank of any wire transfer of funds, check, or

other item of payment shall be immediately applied to conditionally reduce

Obligations, but shall not be considered a payment on account unless such

payment is of immediately available federal funds or unless and until such check

or other item of payment is honored when presented for payment.  Notwithstanding anything to the contrary

contained herein, any wire transfer or payment received by Bank after

12:00 noon Pacific time shall be deemed to have been received by Bank as

of the opening of business on the immediately following Business Day.  Whenever any payment to Bank under the Loan

Documents would otherwise be due (except by reason of acceleration) on a date

that is not a Business Day, such payment shall instead be due on the next

Business Day, and additional fees or interest, as the case may be, shall accrue

and be payable for the period of such extension.

 

7

 

2.4                                 Fees.  Borrower shall pay to Bank the following:

 

(a)                                  Facility

Fee.  On the Closing Date, a

Facility Fee equal to $56,250, which shall be nonrefundable and has been

received by the Bank prior to the date of this Agreement;

 

(b)                                 Additional

Fee.  On the date on which Borrower

requests its first Equipment Advance (and as a condition precedent to the

making of such Equipment Advance), an Additional Fee equal to Twenty Five

Thousand Dollars ($25,000) if Borrower does not have cash balances at Bank or

Comerica Securities, Inc. of at least Ten Million Dollars ($10,000,000) in the

aggregate at the time such Equipment Advance is requested;

 

(c)                                  Bank

Expenses.  On the Closing Date, all

Bank Expenses incurred through the Closing Date, including reasonable

attorneys’ fees and expenses and, after the Closing Date, all Bank Expenses, including

reasonable attorneys’ fees and expenses, as and when they become due.

 

2.5                                 Additional

Costs.  In case any law, regulation,

treaty or official directive or the interpretation or application thereof by

any court or any governmental authority charged with the administration thereof

or the compliance with any guideline or request of any central bank or other

governmental authority (whether or not having the force of law):

 

(a)                                  subjects

Bank to any tax with respect to payments of principal or interest or any other

amounts payable hereunder by Borrower or otherwise with respect to the

transactions contemplated hereby (except for taxes on the overall net income of

Bank imposed by the United States of America or any political subdivision

thereof);

 

(b)                                 imposes,

modifies or deems applicable any deposit insurance, reserve, special deposit or

similar requirement against assets held by, or deposits in or for the account

of, or loans by, Bank; or

 

(c)                                  imposes

upon Bank any other condition with respect to its performance under this

Agreement, and the result of any of the foregoing is to increase the cost to

Bank, reduce the income receivable by Bank or impose any expense upon Bank with

respect to the Obligations, Bank shall notify Borrower thereof.  Borrower agrees to pay to Bank the amount of

such increase in cost, reduction in income or additional expense as and when

such cost, reduction or expense is incurred or determined, upon presentation by

Bank of a statement of the amount and setting forth Bank’s calculation thereof,

all in reasonable detail, which statement shall be deemed true and correct

absent manifest error.

 

2.6                                 Term.  This Agreement shall become effective on the

Closing Date and, subject to Section 0, shall continue in full force and

effect for so long as any Obligations remain outstanding or Bank has any

obligation to make Credit Extensions under this Agreement.  Notwithstanding the foregoing, Bank shall

have the right to terminate its obligation to make Credit Extensions under this

Agreement immediately and without notice upon the occurrence and during the

continuance of an Event of Default. 

Notwithstanding termination, Bank’s Lien on the Collateral shall remain

in effect for so long as any Obligations are outstanding.

 

3.                                       CONDITIONS

OF LOANS.

 

3.1                                 Conditions

Precedent to Initial Credit Extension. 

The obligation of Bank to make the initial Credit Extension is subject

to the condition precedent that Bank shall have received, in form and substance

satisfactory to Bank, the following:

 

(a)                                  this

Agreement;

 

(b)                                 a

certificate of the Secretary of Borrower with respect to incumbency and

resolutions authorizing the execution and delivery of this Agreement;

 

8

 

(c)                                  a

financing statement (Form UCC-1);

 

(d)                                 agreement

to provide insurance;

 

(e)                                  a

warrant to purchase stock;

 

(f)                                    payment

of the fees and Bank Expenses then due specified in Section 0 hereof; and

 

(g)                                 such

other documents, and completion of such other matters, as Bank may reasonably

deem necessary or appropriate.

 

3.2                                 Conditions

Precedent to all Credit Extensions. 

The obligation of Bank to make each Credit Extension, including the

initial Credit Extension, is further subject to the following conditions:

 

(a)                                  timely

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

 

(b)                                 the

representations and warranties contained in Section 0 shall be true and

correct in all material respects on and as of the date of such Payment/Advance

Form and on the effective date of each Credit Extension as though made at and

as of each such date, and no Event of Default shall have occurred and be

continuing, or would exist after giving effect to such Credit Extension

(provided, however, that those representations and warranties expressly

referring to another date shall be true, correct and complete in all material

respects as of such date).  The making

of each Credit Extension shall be deemed to be a representation and warranty by

Borrower on the date of such Credit Extension as to the accuracy of the facts

referred to in this Section 0.

 

4.                                       CREATION

OF SECURITY INTEREST.

 

4.1                                 Grant

of Security Interest.  Borrower

grants and pledges to Bank a continuing security interest in all presently

existing and hereafter acquired or arising Collateral in order to secure prompt

repayment of any and all Obligations and in order to secure prompt performance

by Borrower of each of its covenants and duties under the Loan Documents.  Except as set forth in the Schedule and

Permitted Liens, such security interest constitutes a valid, first priority

security interest in the presently existing Collateral, and will constitute a

valid, first priority security interest in Collateral acquired after the date

hereof.  Borrower also hereby agrees not

to sell, transfer, assign, mortgage, pledge, lease, grant a security interest

in, or encumber any of its intellectual property, except in the ordinary course

of Borrower’s business.

 

4.2                                 Delivery

of Additional Documentation Required. 

Borrower shall from time to time execute and deliver to Bank, at the

request of Bank, all Negotiable Collateral, all financing statements and other

documents that Bank may reasonably request, in form satisfactory to Bank, to

perfect and continue the perfection of Bank’s security interests in the

Collateral and in order to fully consummate all of the transactions

contemplated under the Loan Documents.

 

4.3                                 Right

to Inspect.  Bank (through any of

its officers, employees, or agents) shall have the right, upon reasonable prior

notice, from time to time during Borrower’s usual business hours but no more

than twice a year (unless an Event of Default has occurred and is continuing),

to inspect Borrower’s Books and to make copies thereof and to check, test, and

appraise the Collateral in order to verify Borrower’s financial condition or

the amount, condition of, or any other matter relating to, the Collateral.

 

4.4                                 Cash

Collateral.  Borrower grants and

pledges to Bank a continuing security interest in all presently existing and

hereafter acquired or arising money market accounts or certificates of deposit

opened by Borrower or on Borrower’s behalf at Bank pursuant to Section

2.1(a)(iv) or Section 6.9 hereof, including without limitation the Liquidity

Cash Collateral and the Equipment Cash Collateral (collectively, the “Cash Collateral”)

in order to secure prompt repayment of any and all Obligations and in order to

secure prompt performance by Borrower of each of its covenants and duties under

the Loan Documents.  Such security

interest constitutes a valid,

 

9

 

first priority security interest in the Cash Collateral, and will

constitute a valid, first priority security interest in Cash Collateral

acquired after the date hereof. 

Borrower hereby authorizes Bank to place a “hold” or similar restriction

on the Cash Collateral which is required pursuant to Section 2.1(a)(iv) or

Section 6.9 of this Agreement to be held at Bank to ensure that Borrower

maintains such Cash Collateral at Bank pursuant to the terms and conditions of

this Agreement.  Prior to the maturity

of any Cash Collateral held by Bank pursuant hereto, Borrower and Bank shall

agree upon a security or instrument similar in form, quality and substance to

the original Cash Collateral in which the proceeds of the Cash Collateral can

be reinvested on maturity.  Upon

maturity of the Cash Collateral in accordance with its terms, or in the event

the Cash Collateral otherwise becomes payable during the term of this

Agreement, such maturing Cash Collateral may be presented for payment,

exchange, or otherwise marketed by Bank on behalf of Borrower and the proceeds

therefrom used to purchase the security or instrument agreed to by Borrower and

Bank in accordance with the immediately preceding sentence.  If no agreement has been made, such proceeds

shall be placed into an interest bearing account offered by Bank in which Bank

has a first priority security interest until such time as an agreement as to

the security replacing the original Cash Collateral can be reached.  Bank may retain its Lien on any such

successor collateral and the proceeds therefrom as Cash Collateral in

accordance with the terms of this Agreement for so long as any Obligations are

owing from Borrower to Bank unless otherwise provided in Sections 2.1(a)(iv)

and 6.9.  Notwithstanding termination of

this Agreement, Bank’s Lien on the Cash Collateral shall remain in effect for

so long as any Obligations are outstanding. 

Borrower shall execute and deliver to Bank such pledge agreements as are

reasonably requested by Bank to perfect or continue the perfected status of

Bank’s Lien on the Cash Collateral contained in this Section 4.4.

 

5.                                       REPRESENTATIONS

AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

5.1                                 Due

Organization and Qualification. 

Borrower and each Subsidiary is a corporation duly existing under the

laws of its state of incorporation and qualified and licensed to do business in

any state in which the conduct of its business or its ownership of property

requires that it be so qualified except where the failure to do so could not

reasonably be expected to cause a Material Adverse Effect.

 

5.2                                 Due

Authorization; No Conflict.  The

execution, delivery, and performance of the Loan Documents are within

Borrower’s powers, have been duly authorized, and are not in conflict with nor

constitute a breach of any provision contained in Borrower’s Certificate of

Incorporation or Bylaws, nor will they constitute an event of default under any

material agreement to which Borrower is a party or by which Borrower is bound.  Borrower is not in default under any

material agreement to which it is a party or by which it is bound.

 

5.3                                 No

Prior Encumbrances.  Borrower has

good and marketable title to its property, free and clear of Liens, except for

Permitted Liens.

 

5.4                                 Bona

Fide Accounts.  The Accounts are

bona fide existing obligations.  The

property and services giving rise to Eligible Accounts has been delivered or

rendered to the account debtor or to the account debtor’s agent for immediate

and unconditional acceptance by the account debtor.

 

5.5                                 Merchantable

Inventory.  All Inventory is in all

material respects of good and marketable quality, free from all material

defects, except for Inventory for which adequate reserves have been made.

 

5.6                                 Intellectual

Property.  Borrower is the sole

owner of its federally registered patents, trademarks, and copyrights, except

for licenses granted by Borrower to its customers, collaborators, joint

venturers and strategic partners in the ordinary course of business.  To Borrower’s knowledge, each of Borrower’s

issued patents is valid and enforceable, and no part of its intellectual

property has been judged invalid or unenforceable, in whole or in part, and no

claim has been made that any part of its intellectual property violates the

rights of any third party, except, in each case, as disclosed in the Borrower’s

filings with the Securities and Exchange Commission.

 

5.7                                 Name;

Location of Chief Executive Office. 

Except as disclosed in the Schedule, Borrower has not done business

under any name other than that specified on the signature page hereof.  The chief

 

10

 

executive office of Borrower is located at the address indicated in

Section 0 hereof.  Except as

disclosed in the Schedule, all Borrower’s Inventory and Equipment is located

only at the location set forth in Section 10 hereof.

 

5.8                                 Litigation.  Except as set forth in the Schedule, there

are no actions or proceedings pending by or against Borrower or any Subsidiary

before any court or administrative agency in which an adverse decision could

reasonably be expected to have a Material Adverse Effect.

 

5.9                                 No

Material Adverse Change in Financial Statements.  All consolidated and consolidating financial statements related

to Borrower and any Subsidiary that Bank has received from Borrower fairly

present in all material respects Borrower’s financial condition as of the date

thereof and Borrower’s consolidated and consolidating results of operations for

the period then ended.  There has not

been a material adverse change in the consolidated or the consolidating

financial condition of Borrower since the date of the most recent of such

financial statements submitted to Bank.

 

5.10                           Solvency,

Payment of Debts.  Borrower is

solvent and able to pay its debts (including trade debts) as they mature.

 

5.11                           Regulatory

Compliance.  Borrower and each

Subsidiary have met the minimum funding requirements of ERISA with respect to

any employee benefit plans subject to ERISA, and no event has occurred

resulting from Borrower’s failure to comply with ERISA that could reasonably be

expected to result in Borrower’s incurring any material liability.  Borrower is not an “investment company” or a

company “controlled” by an “investment company” within the meaning of the Investment

Company Act of 1940.  Borrower is not

engaged principally, or as one of the important activities, in the business of

extending credit for the purpose of purchasing or carrying margin stock (within

the meaning of Regulations T and U of the Board of Governors of the

Federal Reserve System).  Borrower has

complied with all material provisions of the Federal Fair Labor Standards

Act.  Borrower has not violated any

statutes, laws, ordinances or rules applicable to it, violation of which could

reasonably be expected to have a Material Adverse Effect.

 

5.12                           Environmental

Condition.  Except as disclosed in

the Schedule, none of Borrower’s or any Subsidiary’s properties or assets has

ever been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge,

by previous owners or operators, in the disposal of, or to produce, store,

handle, treat, release, or transport, any hazardous waste or hazardous

substance other than in accordance with applicable law; to the best of

Borrower’s knowledge, none of Borrower’s properties or assets has ever been

designated or identified in any manner pursuant to any environmental protection

statute as a hazardous waste or hazardous substance disposal site, or a

candidate for closure pursuant to any environmental protection statute; no lien

arising under any environmental protection statute has attached to any revenues

or to any real or personal property owned by Borrower or any Subsidiary; and

neither Borrower nor any Subsidiary has received a summons, citation, notice,

or directive from the Environmental Protection Agency or any other federal,

state or other governmental agency concerning any action or omission by

Borrower or any Subsidiary resulting in the releasing, or otherwise disposing

of hazardous waste or hazardous substances into the environment.

 

5.13                           Taxes.  Borrower and each Subsidiary have filed or

caused to be filed all tax returns required to be filed, and have paid, or have

made adequate provision for the payment of, all taxes reflected therein, except

those taxes being contested in good faith with adequate reserves under GAAP.

 

5.14                           Subsidiaries.  Borrower does not own any stock, partnership

interest or other equity securities of any Person, except for Permitted

Investments and except as disclosed on the Schedule.

 

5.15                           Government

Consents.  Borrower and each

Subsidiary have obtained all consents, approvals and authorizations of, made

all declarations or filings with, and given all notices to, all governmental

authorities that are necessary for the continued operation of Borrower’s

business as currently conducted, the failure to obtain which could reasonably

be expected to have a Material Adverse Effect.

 

5.16                           Accounts.  Except as set forth on the Schedule, none of

Borrower’s nor any Subsidiary’s cash or cash equivalents or investment property

is maintained or invested with a Person other than Bank.

 

11

 

5.17                           Full

Disclosure.  No representation,

warranty or other statement made by Borrower in any certificate or written

statement furnished to Bank contains any untrue statement of a material fact or

omits to state a material fact necessary in order to make the statements

contained in such certificates or statements not misleading.

 

6.                                       AFFIRMATIVE

COVENANTS.

 

Borrower covenants and

agrees that, until payment in full of all outstanding Obligations, and for so

long as Bank may have any commitment to make a Credit Extension hereunder,

Borrower shall do all of the following:

 

6.1                                 Good

Standing.  Borrower shall maintain its

and each of its Subsidiaries’ corporate existence and good standing in its

jurisdiction of incorporation and maintain qualification in each jurisdiction

in which it is required under applicable law except where the failure to do so

could not reasonably be expected to have a Material Adverse Effect.  Borrower shall maintain, and shall cause

each of its Subsidiaries to maintain, in force all licenses, approvals and

agreements, the loss of which could reasonably be expected to have a Material

Adverse Effect.

 

6.2                                 Government

Compliance.  Borrower shall meet,

and shall cause each Subsidiary to meet, the minimum funding requirements of

ERISA with respect to any employee benefit plans subject to ERISA to the extent

that not meeting them could reasonably be expected to have a Material Adverse

Effect.  Borrower shall comply, and

shall cause each Subsidiary to comply, with all statutes, laws, ordinances and

government rules and regulations to which it is subject, noncompliance with

which could reasonably be expected to have a Material Adverse Effect.

 

6.3                                 Financial

Statements, Reports, Certificates. 

Borrower shall deliver the following to Bank:  (a) as soon as available, but in any event within thirty

(30) days after the end of each calendar month, a company prepared consolidated

balance sheet, income, and cash flow statement covering Borrower’s consolidated

operations during such period, prepared in accordance with GAAP, consistently

applied, in a form acceptable to Bank and certified by a Responsible Officer;

(b) as soon as available, but in any event within one hundred twenty (120)

days after the end of Borrower’s fiscal year, audited consolidated financial

statements of Borrower prepared in accordance with GAAP, consistently applied,

together with an unqualified opinion on such financial statements of an

independent certified public accounting firm reasonably acceptable to Bank;

(c) if applicable, copies of all statements, reports and notices sent or

made available generally by Borrower to its security holders or to any holders

of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the

Securities and Exchange Commission; (d) promptly upon receipt of notice

thereof, a report of any legal actions pending or threatened against Borrower

or any Subsidiary that could result in damages or costs to Borrower or any

Subsidiary of Two Hundred Fifty Thousand Dollars ($250,000) or more; and

(e) such budgets, sales projections, operating plans or other financial

information as Bank may reasonably request from time to time generally prepared

by Borrower in the ordinary course of business.

 

Borrower shall deliver to Bank with the monthly

financial statements a Compliance Certificate signed by a Responsible Officer

in substantially the form of Exhibit C hereto.

 

6.4                                 Inventory;

Returns.  Borrower shall keep all

Inventory in good and marketable condition, free from all material defects

except for ordinary wear and tear and Inventory for which adequate reserves

have been made.  If applicable, returns

and allowances, if any, as between Borrower and its account debtors shall be on

the same basis and in accordance with the usual customary practices of

Borrower, as they exist at the time of the execution and delivery of this

Agreement.  Borrower shall promptly

notify Bank of all returns and recoveries and of all disputes and claims, where

the return, recovery, dispute or claim involves more than Two Hundred Fifty

Thousand Dollars ($250,000).

 

6.5                                 Taxes.  Borrower shall make, and shall cause each

Subsidiary to make, due and timely payment or deposit of all material federal,

state, and local taxes, assessments, or contributions required of it by law,

and will execute and deliver to Bank, within a reasonable period of time after

demand by Bank, appropriate certificates attesting to the payment or deposit

thereof; and Borrower will make, and will cause each Subsidiary to make, timely

payment or deposit of all material tax payments and withholding taxes required

of it by applicable

 

12

 

laws, including, but not limited to, those laws concerning F.I.C.A.,

F.U.T.A., state disability, and local, state, and federal income taxes, and

will, upon request within a reasonable period of time, furnish Bank with proof

satisfactory to Bank indicating that Borrower or a Subsidiary has made such

payments or deposits; provided that Borrower or a Subsidiary need not make any

payment if the amount or validity of such payment is contested in good faith by

appropriate proceedings and is reserved against (to the extent required by

GAAP) by Borrower.

 

6.6                                 Insurance.

 

(a)                                  Borrower,

at its expense, shall keep the Collateral insured against loss or damage by

fire, theft, explosion, sprinklers, and all other hazards and risks, and in

such amounts, as ordinarily insured against by other owners in similar

businesses conducted in the locations where Borrower’s business is conducted on

the date hereof.  Borrower shall also

maintain insurance relating to Borrower’s business, ownership and use of the

Collateral in amounts and of a type that are customary to businesses similar to

Borrower’s.

 

(b)                                 All

such policies of insurance shall be in such form, with such companies, and in

such amounts as reasonably satisfactory to Bank.  All such policies of property insurance shall contain a lender’s

loss payable endorsement, in a form satisfactory to Bank, showing Bank as an

additional loss payee thereof, and all liability insurance policies shall show

the Bank as an additional insured and shall specify that the insurer must give

at least twenty (20) days notice to Bank before canceling its policy for any

reason.  Upon Bank’s request, Borrower

shall deliver to Bank certified copies of such policies of insurance and

evidence of the payments of all premiums therefor.  All proceeds payable under any such policy shall, at the option

of Bank, be payable to Bank to be applied on account of the Obligations.

 

6.7                                 Accounts.  Borrower shall maintain and shall cause each

of its Subsidiaries to maintain its primary operating accounts with Bank, provided

that Borrower shall have up to 30 days after the Closing Date to move such

accounts to Bank.

 

6.8                                 Quick

Ratio.  Borrower shall maintain,

measured as of the last day of each calendar month, a ratio of (i) Quick Assets

to (ii) total current liabilities, less non-cancelable deferred revenue, plus

all long term bank and lease debt minus any cash held at Bank which is

specifically pledged to support any Obligation of at least 1.50 to 1.00.

 

6.9                                 Liquidity;

Cash Burn.  Borrower shall maintain,

measured as of the last day of each calendar month, a balance of unrestricted

cash and cash equivalents plus net billed accounts receivable (collectively,

“Liquidity”) in an amount of at least eight (8) times Borrower’s Average Cash

Burn.  As used herein, “Average Cash Burn”

means the change in Borrower’s cash during the three months immediately

preceding the date of measurement, net of any changes in debt, equity, minority

interests, and capital expenditures financed by Bank under the Equipment Line,

divided by three (3).

 

If at any time Borrower’s Liquidity is less than eight

(8) times its Cash Burn, Borrower shall at its sole option either (i)

immediately repay all Obligations in full and Bank shall have no further

obligation to make Credit Extensions to Borrower or (ii) immediately open and

thereafter maintain a money market account or a certificate of deposit account

with Bank in an amount equal to or greater than 100% of the aggregate balance

of all outstanding Obligations (the “Liquidity Cash Collateral”) pursuant to

Section 4.4 so long and only for such period as Borrower’s Liquidity is less

than eight (8) times its Cash Burn (provided that during such time period, Bank

shall have no further obligation to make Credit Extensions to Borrower).

 

6.10                           Intellectual

Property.  Borrower shall use

commercially reasonable efforts to (i) protect, defend and maintain the

validity and enforceability of its trademarks, patents and copyrights, (ii)

detect infringements of its trademarks, patents and copyrights and promptly

advise Bank in writing of material infringements detected and (iii) not allow

any of its material trademarks, Patents or copyrights to be abandoned,

forfeited or dedicated to the public except where Borrower may determine such

abandonment, forfeiture or dedication to the public to be commercially

reasonable.

 

13

 

6.11                           Further

Assurances.  At any time and from

time to time Borrower shall execute and deliver such further instruments and

take such further action as may reasonably be requested by Bank to effect the

purposes of this Agreement.

 

7.                                       NEGATIVE

COVENANTS.

 

Borrower covenants and

agrees that, so long as any credit hereunder shall be available and until

payment in full of the outstanding Obligations or for so long as Bank may have

any commitment to make any Credit Extensions, Borrower will not do any of the

following:

 

7.1                                 Dispositions.  Convey, sell, lease, transfer or otherwise

dispose of (collectively, a “Transfer”), or permit any of its Subsidiaries to

Transfer, all or any part of its business or property other than:  (i) Transfers of Inventory in the

ordinary course of business; (ii) Transfers of licenses and similar

arrangements for the use of the property of Borrower or its Subsidiaries in the

ordinary course of business; (iii) Transfers of worn-out or obsolete

Equipment which was not financed by Bank; (iv) Transfers of intellectual

property in the ordinary course of Borrower’s business; or (v) Transfers

permitted in clause (b) of the definition of Permitted Investments.

 

7.2                                 Change

in Business; Change in Control or Executive Office.  Engage in any business, or permit any of its

Subsidiaries to engage in any business, other than the businesses currently

engaged in by Borrower and any business substantially similar or related

thereto (or incidental thereto); or conduct business in a manner materially

different than the manner conducted by Borrower as of the Closing Date which

manner could reasonably be expected to have an adverse effect on Borrower; or

suffer or permit a Change in Control; or without thirty (30) days prior written

notification to Bank within thirty (30) days, relocate its chief executive

office or state of incorporation; or without prior written notice to Bank,

change the date on which its fiscal year ends.

 

7.3                                 Mergers

or Acquisitions.  Merge or

consolidate, or permit any of its Subsidiaries to merge or consolidate, with or

into any other business organization, or acquire, or permit any of its

Subsidiaries to acquire, all or substantially all of the capital stock or

property of another Person. 

Notwithstanding the foregoing, this Section 7.3 shall not apply to

transactions in which the sole consideration is Borrower’s stock, Borrower is

the surviving entity, and, after giving effect to such transaction, there is no

Change in Control, provided that at the time of any such transaction an Event

of Default has not occurred which is continuing and no Event of Default would

exist after giving effect to any such transaction.

 

7.4                                 Indebtedness.  Create, incur, assume or be or remain liable

with respect to any Indebtedness, or permit any Subsidiary so to do, other than

Permitted Indebtedness.

 

7.5                                 Encumbrances.  Create, incur, assume or suffer to exist any

Lien with respect to any of its property, including its intellectual property,

or assign or otherwise convey any right to receive income, including the sale

of any Accounts, or permit any of its Subsidiaries so to do, except for

Permitted Liens.

 

7.6                                 Distributions.  Pay any dividends or make any other distribution

or payment on account of or in redemption, retirement or purchase of any

capital stock, or permit any of its Subsidiaries to do so, except that Borrower

may repurchase the stock of former employees or directors pursuant to stock

repurchase plans or agreements as long as an Event of Default does not exist

prior to such repurchase or would not exist after giving effect to such

repurchase.

 

7.7                                 Investments.  Directly or indirectly acquire or own, or

make any Investment in or to any Person, or permit any of its Subsidiaries so

to do, other than Permitted Investments; or maintain or invest any of its cash,

cash equivalents, or investment property with a Person other than Bank or

permit any of its Subsidiaries to do so unless such Person has entered into an

account control agreement with Bank in form and substance reasonably

satisfactory to Bank (provided that such account control agreement requirement

shall not be applicable until 30 days after the Closing Date); or suffer or

permit any Subsidiary to be a party to, or be bound by, an agreement that

restricts such Subsidiary from paying dividends or otherwise distributing

property to Borrower.

 

14

 

7.8                                 Transactions

with Affiliates.  Directly or

indirectly enter into or permit to exist any material transaction with any

Affiliate of Borrower except for transactions that are in the ordinary course

of Borrower’s business, upon fair and reasonable terms that are no less

favorable to Borrower than would be obtained in an arm’s length transaction

with a non-affiliated Person.

 

7.9                                 Subordinated

Debt.  Make any payment in respect

of any Subordinated Debt, or permit any of its Subsidiaries to make any such

payment, except in compliance with the terms of such Subordinated Debt, or

amend any provision contained in any documentation relating to the Subordinated

Debt without Bank’s prior written consent.

 

7.10                           Inventory

and Equipment.  Store the Inventory

or the Equipment with a bailee, warehouseman, or other third party unless the

third party has been notified of Bank’s security interest and Bank (a) has

received an acknowledgment from the third party that it is holding or will hold

the Inventory or Equipment for Bank’s benefit or (b) is in pledge possession of

the warehouse receipt, where negotiable, covering such Inventory or Equipment.

Store or maintain any Equipment or Inventory at a location other than the

location set forth in Section 10 of this Agreement.

 

7.11                           Compliance.  Become an “investment company” or be

controlled by an “investment company,” within the meaning of the Investment

Company Act of 1940, or become principally engaged in, or undertake as one of

its important activities, the business of extending credit for the purpose of

purchasing or carrying margin stock, or use the proceeds of any Credit

Extension for such purpose.  Fail to

meet the minimum funding requirements of ERISA, permit a Reportable Event or

Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the

Federal Fair Labor Standards Act or violate any law or regulation, which

violation could reasonably be expected to have a Material Adverse Effect, or

permit any of its Subsidiaries to do any of the foregoing.

 

8.                                       EVENTS

OF DEFAULT.

 

Any one or more of the

following events shall constitute an Event of Default by Borrower under this

Agreement:

 

8.1                                 Payment

Default.  If Borrower fails to pay,

when due, any of the Obligations and such failure continues for 3 days or more

after the due date, provided that within such 3 day cure period, the failure to

pay shall not be deemed an Event of Default, but no Credit Extensions will be

made;

 

8.2                                 Covenant

Default.  If Borrower fails to

perform any obligation under Article 0 or violates any of the covenants

contained in Article 0 of this Agreement, or fails or neglects to perform,

keep, or observe any other material term, provision, condition, covenant, or

agreement contained in this Agreement, in any of the Loan Documents, or in any

other present or future agreement between Borrower and Bank and as to any

default under such other term, provision, condition, covenant or agreement that

can be cured, has failed to cure such default within ten (10) days after

Borrower receives notice thereof or any officer of Borrower becomes aware

thereof; provided, however, that if the default cannot by its nature be cured

within the ten (10) day period or cannot after diligent attempts by Borrower be

cured within such ten (10) day period, and such default is likely to be cured

within a reasonable time, then Borrower shall have an additional reasonable

period (which shall not in any case exceed thirty (30) days) to attempt to cure

such default, and within such reasonable time period the failure to have cured

such default shall not be deemed an Event of Default (provided that no Credit

Extensions will be required to be made during such cure period);

 

8.3                                 Material

Adverse Effect.  If there occurs any

circumstance or circumstances that could reasonably be expected to have a

Material Adverse Effect;

 

8.4                                 Attachment.  If any material portion of Borrower’s assets

is attached, seized, subjected to a writ or distress warrant, or is levied

upon, or comes into the possession of any trustee, receiver or person acting in

a similar capacity and such attachment, seizure, writ or distress warrant or

levy has not been removed, discharged or rescinded within ten (10) Business

Days, or if Borrower is enjoined, restrained, or in any way prevented by court

 

15

 

order from continuing to conduct all or any material part of its

business affairs, or if a judgment or other claim becomes a lien or encumbrance

upon any material portion of Borrower’s assets, or if a notice of lien, levy,

or assessment is filed of record with respect to any of Borrower’s assets by

the United States Government, or any department, agency, or instrumentality

thereof, or by any state, county, municipal, or governmental agency, and the

same is not paid within ten (10) Business Days after Borrower receives notice

thereof, provided that none of the foregoing shall constitute an Event of

Default where such action or event is stayed or an adequate bond has been

posted pending a good faith contest by Borrower (provided that no Credit

Extensions will be required to be made during such cure period);

 

8.5                                 Insolvency.  If an Insolvency Proceeding is commenced by

Borrower, or if an Insolvency Proceeding is commenced against Borrower and is

not dismissed or stayed within sixty (60) days (provided that no Credit

Extensions will be made prior to the dismissal of such Insolvency Proceeding);

 

8.6                                 Other

Agreements.  If there is a default

or other failure to perform in any agreement to which Borrower is a party or by

which it is bound resulting in a right by a third party or parties, whether or

not exercised, to accelerate the maturity of any Indebtedness in an amount in

excess of Two Hundred Fifty Thousand Dollars ($250,000); or which could

reasonably be expected to have a Material Adverse Effect;

 

8.7                                 Subordinated

Debt.  If Borrower makes any payment

on account of Subordinated Debt, except to the extent such payment is allowed

under any subordination agreement entered into with Bank;

 

8.8                                 Judgments.  If a judgment or judgments for the payment

of money in an amount, individually or in the aggregate, of at least Two

Hundred Fifty Thousand Dollars ($250,000) shall be rendered against Borrower

and shall remain unsatisfied and unstayed for a period of thirty (30) days

(provided that no Credit Extensions will be made prior to the satisfaction or

stay of such judgment); or

 

8.9                                 Misrepresentations.  If any material misrepresentation or

material misstatement exists now or hereafter in any warranty or representation

set forth herein or in any certificate delivered to Bank by any Responsible

Officer pursuant to this Agreement or to induce Bank to enter into this

Agreement or any other Loan Document.

 

9.                                       BANK’S

RIGHTS AND REMEDIES.

 

9.1                                 Rights

and Remedies.  Upon the occurrence

and during the continuance of an Event of Default, Bank may, at its election,

without notice of its election and without demand, do any one or more of the

following, all of which are authorized by Borrower:

 

(a)                                  Declare

all Obligations, whether evidenced by this Agreement, by any of the other Loan

Documents, or otherwise, immediately due and payable (provided that upon the

occurrence of an Event of Default described in Section 0, all Obligations

shall become immediately due and payable without any action by Bank);

 

(b)                                 Cease

advancing money or extending credit to or for the benefit of Borrower under

this Agreement or under any other agreement between Borrower and Bank;

 

(c)                                  Settle

or adjust disputes and claims directly with account debtors for amounts, upon

terms and in whatever order that Bank reasonably considers advisable;

 

(d)                                 Make

such payments and do such acts as Bank considers necessary or reasonable to

protect its security interest in the Collateral.  Borrower agrees to assemble the Collateral if Bank so requires,

and to make the Collateral available to Bank as Bank may reasonably designate.  Borrower authorizes Bank to enter the

premises where the Collateral is located, to take and maintain possession of

the Collateral, or any part of it, and to pay, purchase, contest, or compromise

any encumbrance, charge, or lien which in Bank’s determination appears to be

prior or superior to its security interest and to pay all reasonable expenses

incurred in connection therewith.  With

respect to any of Borrower’s owned premises, Borrower hereby grants Bank a

license

 

16

 

upon the occurrence and during the continuance of an Event of Default

to enter into possession of such premises and to occupy the same, without

charge, in order to exercise any of Bank’s rights or remedies provided herein,

at law, in equity, or otherwise;

 

(e)                                  Set

off and apply to the Obligations any and all (i) balances and deposits of

Borrower held by Bank, or (ii) indebtedness at any time owing to or for

the credit or the account of Borrower held by Bank;

 

(f)                                    Ship,

reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise

for sale, and sell (in the manner provided for herein) the Collateral.  Bank is hereby granted a license or other

right, solely pursuant to the provisions of this Section 0, to use, without

charge, Borrower’s labels, patents, copyrights, rights of use of any name,

trade secrets, trade names, trademarks, service marks, and advertising matter,

or any property of a similar nature, as it pertains to the Collateral, in

completing production of, advertising for sale, and selling any Collateral and,

in connection with Bank’s exercise of its rights under this Section 0,

Borrower’s rights under all licenses and all franchise agreements shall inure

to Bank’s benefit;

 

(g)                                 Dispose

of the Collateral by way of one or more contracts or transactions, for cash or

on terms, in such manner and at such places (including Borrower’s premises) as

Bank determines is commercially reasonable, and apply any proceeds to the

Obligations in whatever manner or order Bank deems appropriate;

 

(h)                                 Bank

may credit bid and purchase at any public sale; and

 

(i)                                     Any

deficiency that exists after disposition of the Collateral as provided above

will be paid immediately by Borrower.

 

9.2                                 Power

of Attorney.  Effective only upon

the occurrence and during the continuance of an Event of Default, Borrower

hereby irrevocably appoints Bank (and any of Bank’s designated officers, or

employees) as Borrower’s true and lawful attorney to:  (a) send requests for verification of Accounts or notify account

debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s

name on any checks or other forms of payment or security that may come into

Bank’s possession; (c) sign Borrower’s name on any invoice or bill of lading

relating to any Account, drafts against account debtors, schedules and

assignments of Accounts, verifications of Accounts, and notices to account

debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims

under and decisions with respect to Borrower’s policies of insurance; (f)

settle and adjust disputes and claims respecting the accounts directly with

account debtors, for amounts and upon terms which Bank determines to be

reasonable; and (g) to file, in its sole discretion, one or more financing or

continuation statements and amendments thereto, relative to any of the

Collateral without the signature of Borrower where permitted by law; provided

Bank may exercise such power of attorney to sign the name of Borrower on any of

the documents described in Section 4.2 to perfect and continue the perfection

of Bank’s security interests in the Collateral regardless of whether an Event

of Default has occurred.  The

appointment of Bank as Borrower’s attorney in fact, and each and every one of

Bank’s rights and powers, being coupled with an interest, is irrevocable until

all of the Obligations have been fully repaid and performed and Bank’s

obligation to provide Credit Extensions hereunder is terminated.

 

9.3                                 Accounts

Collection.  Upon the occurrence and

during the continuance of an Event of Default, Bank may notify any Person owing

funds to Borrower of Bank’s security interest in such funds and verify the

amount of such Account.  Upon the

occurrence and during the continuance of an Event of Default, Borrower shall

collect all amounts owing to Borrower for Bank, receive in trust all payments

as Bank’s trustee, and, upon Bank’s request, immediately deliver such payments

to Bank in their original form as received from the account debtor, with proper

endorsements for deposit.

 

9.4                                 Bank

Expenses.  If Borrower fails to pay

any amounts or furnish any required proof of payment due to third persons or

entities, as required under the terms of this Agreement, then Bank may do any

or all of the following after reasonable notice to Borrower:  (a) make payment of the same or any

part thereof; (b) set up such reserves under a facility in Section 2.1 as

Bank reasonably deems necessary to protect Bank from the exposure created by

such failure; or (c) obtain and maintain insurance policies of the type

discussed in Section 0 of this Agreement, and take any action with respect

to such policies as Bank reasonably deems prudent.  Any amounts so 

 

17

 

paid or deposited by Bank shall constitute Bank Expenses, shall be

immediately due and payable, and shall bear interest at the then applicable

rate hereinabove provided, and shall be secured by the Collateral.  Any payments made by Bank shall not

constitute an agreement by Bank to make similar payments in the future or a

waiver by Bank of any Event of Default under this Agreement.

 

9.5                                 Bank’s

Liability for Collateral.  So long

as Bank complies with reasonable banking practices, Bank shall not in any way

or manner be liable or responsible for: 

(a) the safekeeping of the Collateral; (b) any loss or damage

thereto occurring or arising in any manner or fashion from any cause;

(c) any diminution in the value thereof; or (d) any act or default of

any carrier, warehouseman, bailee, forwarding agency, or other person

whomsoever.  All risk of loss, damage or

destruction of the Collateral shall be borne by Borrower.  Notwithstanding the foregoing, Bank shall be

responsible for its own gross negligence or willful conduct.

 

9.6                                 Remedies

Cumulative.  Bank’s rights and

remedies under this Agreement, the Loan Documents, and all other agreements

shall be cumulative.  Bank shall have

all other rights and remedies not inconsistent herewith as provided under the

Code, by law, or in equity.  No exercise

by Bank of one right or remedy shall be deemed an election, and no waiver by

Bank of any Event of Default on Borrower’s part shall be deemed a continuing

waiver.  No delay by Bank shall

constitute a waiver, election, or acquiescence by it.  No waiver by Bank shall be effective unless made in a written

document signed on behalf of Bank and then shall be effective only in the

specific instance and for the specific purpose for which it was given.

 

9.7                                 Demand;

Protest.  Borrower waives demand,

protest, notice of protest, notice of default or dishonor, notice of payment

and nonpayment, notice of any default, nonpayment at maturity, release,

compromise, settlement, extension, or renewal of accounts, documents,

instruments, chattel paper, and guarantees at any time held by Bank on which

Borrower may in any way be liable.

 

10.                                 NOTICES.

 

Unless otherwise provided

in this Agreement, all notices or demands by any party relating to this

Agreement or any other agreement entered into in connection herewith shall be

in writing and (except for financial statements and other informational

documents which may be sent by first-class mail, postage prepaid) shall be

personally delivered or sent by a recognized overnight delivery service,

certified mail, postage prepaid, return receipt requested, or by telefacsimile

to Borrower or to Bank, as the case may be, at its addresses set forth below:

 

	

  If to Borrower:

  	

  RIGEL PHARMACEUTICALS, INC.

  
	

   

  	

  240 East Grand Avenue

  
	

   

  	

  South San Francisco, CA 94080

  
	

   

  	

  Attn:  Chief

  Financial Officer

  
	

   

  	

  FAX:  (650)

  624-1101

  
	

   

  	

   

  
	

  If to Bank:

  	

  COMERICA BANK - CALIFORNIA

  
	

   

  	

  333 W. Santa Clara St.

  
	

   

  	

  San Jose, CA 95113

  
	

   

  	

  Attn: 

  Corporate Banking Center

  
	

   

  	

   

  
	

  with a copy to:

  	

  COMERICA BANK - CALIFORNIA

  
	

   

  	

  Five Palo Alto Square - 8th Floor

  
	

   

  	

  3000 El Camino Real

  
	

   

  	

  Palo Alto, CA 

  94306

  
	

   

  	

  Attn: Jonathan H. Norris

  
	

   

  	

  FAX:  (650)

  213-1710

  

 

The parties hereto may change the address at which

they are to receive notices hereunder, by notice in writing in the foregoing

manner given to the other.

 

18

 

11.                                 CHOICE

OF LAW AND VENUE; JURY TRIAL WAIVER.

 

This Agreement shall be

governed by, and construed in accordance with, the internal laws of the State

of California, without regard to principles of conflicts of law.  Each of Borrower and Bank hereby submits to

the exclusive jurisdiction of the state and Federal courts located in the

County of Santa Clara, State of California. 

BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY

TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE

LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING

CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW

OR STATUTORY CLAIMS.  EACH PARTY

RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL

INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT.  EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS

WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS

JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

12.                                 GENERAL

PROVISIONS.

 

12.1                           Successors

and Assigns.  This Agreement shall

bind and inure to the benefit of the respective successors and permitted

assigns of each of the parties; provided, however, that neither this Agreement

nor any rights hereunder may be assigned by Borrower without Bank’s prior

written consent, which consent may be granted or withheld in Bank’s sole

discretion.  Bank shall have the right

without the consent of or notice to Borrower to sell, transfer, negotiate, or

grant participation in all or any part of, or any interest in, Bank’s

obligations, rights and benefits hereunder.

 

12.2                           Indemnification.  Borrower shall defend, indemnify and hold

harmless Bank and its officers, employees, and agents against:  (a) all obligations, demands, claims,

and liabilities claimed or asserted by any other party in connection with the

transactions contemplated by this Agreement; and (b) all losses or Bank

Expenses in any way suffered, incurred, or paid by Bank as a result of or in

any way arising out of, following, or consequential to transactions between

Bank and Borrower whether under this Agreement, or otherwise (including without

limitation reasonable attorneys’ fees and expenses), except for losses caused

by Bank’s gross negligence or willful misconduct.

 

12.3                           Time

of Essence.  Time is of the essence

for the performance of all obligations set forth in this Agreement.

 

12.4                           Severability

of Provisions.  Each provision of

this Agreement shall be severable from every other provision of this Agreement

for the purpose of determining the legal enforceability of any specific

provision.

 

12.5                           Amendments

in Writing, Integration.  Neither

this Agreement nor the Loan Documents can be amended or terminated orally.  All prior agreements, understandings, representations,

warranties, and negotiations between the parties hereto with respect to the

subject matter of this Agreement and the Loan Documents, if any, are merged

into this Agreement and the Loan Documents.

 

12.6                           Counterparts.  This Agreement may be executed in any number

of counterparts and by different parties on separate counterparts, each of

which, when executed and delivered, shall be deemed to be an original, and all

of which, when taken together, shall constitute but one and the same Agreement.

 

12.7                           Survival.  All covenants, representations and

warranties made in this Agreement shall continue in full force and effect so

long as any Obligations remain outstanding. 

The obligations of Borrower to indemnify Bank with respect to the

expenses, damages, losses, costs and liabilities described in Section 0

shall survive until all applicable statute of limitations periods with respect

to actions that may be brought against Bank have run.

 

12.8                           Confidentiality.  In handling any confidential information

Bank and all employees and agents of Bank, including but not limited to

accountants, shall exercise the same degree of care that it exercises with

respect to its own proprietary information of the same types to maintain the

confidentiality of any non-public

 

19

 

information thereby received or received pursuant to this Agreement

except that disclosure of such information may be made (i) to the subsidiaries

or affiliates of Bank in connection with their present or prospective business

relations with Borrower, provided that they are subject to the same

confidentiality restrictions as Bank, (ii) to prospective transferees or

purchasers of any interest in the Loans, provided that they have entered into a

comparable confidentiality agreement in favor of Borrower and have delivered a

copy to Borrower, (iii) as required by law, regulations, rule or order,

subpoena, judicial order or similar order, (iv) as may be required in

connection with the examination, audit or similar investigation of Bank and (v)

as Bank may reasonably determine in connection with the enforcement of any

remedies hereunder.  Confidential

information hereunder shall not include information that either:  (a) is in the public domain or in the

knowledge or possession of Bank when disclosed to Bank because it was disclosed

to Bank by a third party provided Bank does not have actual knowledge that such

third party is prohibited from disclosing such information, or becomes part of

the public domain after disclosure to Bank through no fault of Bank; or (b) is

disclosed to Bank by a third party, provided Bank does not have actual

knowledge that such third party is prohibited from disclosing such information.

 

IN WITNESS WHEREOF, the parties hereto have caused

this Agreement to be executed as of the date first above written.

 

 

	

   

  	

  RIGEL PHARMACEUTICALS, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

       /s/

  James H. Welch

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  Chief Financial Officer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  COMERICA BANK - CALIFORNIA

  
	

   

  	

   

  
	

   

  	

  By:

  	

      /s/ John

  Norris

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  VP, Technology & Life Sciences Group

  
				

 

20

 

	

  DEBTOR

  	

  RIGEL

  PHARMACEUTICALS, INC.

  
	

   

  	

   

  
	

  SECURED

  PARTY:

  	

  COMERICA

  BANK - CALIFORNIA

  

 

EXHIBIT A

 

COLLATERAL DESCRIPTION

ATTACHMENT

TO LOAN AND SECURITY AGREEMENT

 

All personal property of Borrower (herein referred to

as “Borrower” or “Debtor”) whether presently existing or hereafter created or

acquired, and wherever located, including, but not limited to:

 

(a)                                  all

accounts (including health-care-insurance receivables), chattel paper (including

tangible and electronic chattel paper), deposit accounts, documents (including

negotiable documents), equipment (including all accessions and additions

thereto), general intangibles (including payment intangibles and software),

goods (including fixtures), instruments (including promissory notes), inventory

(including all goods held for sale or lease or to be furnished under a contract

of service, and including returns and repossessions), investment property

(including securities and securities entitlements), letter of credit rights,

money, and all of Debtor’s books and records with respect to any of the

foregoing, and the computers and equipment containing said books and records;

and

 

(b)                                 any

and all cash proceeds and/or noncash proceeds of any of the foregoing,

including, without limitation, insurance proceeds, and all supporting

obligations and the security therefor or for any right to payment.  All terms above have the meanings given to

them in the California Uniform Commercial Code, as amended or supplemented from

time to time, including revised Division 9 of the Uniform Commercial

Code-Secured Transactions, added by Stats. 1999, c.991 (S.B. 45), Section 35,

operative July 1, 2001.

 

Notwithstanding the

foregoing, the Collateral shall not include any copyrights, patents,

trademarks, servicemarks, trade styles, trade names, logos, business names,

applications for any of the foregoing, data, know-how, confidential or

proprietary information, derivative works, inventions, blueprints, mask works,

designs, design rights, trade secrets, software, rights in software, goodwill,

proprietary information on computer discs, computer tapes, literature, and

catalogs, now owned or hereafter acquired, or any claims for damages by way of

any past, present and future infringement of any of the foregoing

(collectively, the “Intellectual Property”); provided, however, that the

Collateral shall include (i) all equipment financed by Bank and (ii) all

accounts and general intangibles that consist of rights to payment and proceeds

from the sale, licensing or disposition of all or any part, or rights in, the

foregoing (the “Rights to Payment”). 

Notwithstanding the foregoing, if a judicial authority (including a U.S.

Bankruptcy Court) holds that a security interest in the underlying Intellectual

Property is necessary to have a security interest in the Rights to Payment,

then the Collateral shall automatically, and effective as of the Closing Date,

include the Intellectual Property to the extent necessary to permit perfection

of Bank’s security interest in the Rights to Payment.

 

Notwithstanding the

foregoing, the term “Collateral” shall not include any Equipment not financed

by Bank, proceeds of such Equipment, or rights of Borrower as a licensee to the

extent the granting of a security interest therein (i) would be contrary to

applicable law or (ii) is prohibited by or would constitute a default under any

agreement or document governing such property (but only to the extent such

prohibition is enforceable under applicable law); provided that upon the

termination or lapsing of any such prohibition, such property shall

automatically be part of the Collateral; and provided further that the

provisions of this paragraph shall in no case exclude from the definition of

“Collateral” any Accounts, proceeds of the disposition of any property, or

general intangibles consisting of rights to payment (other than proceeds of

such excluded Equipment), all of which shall at all times constitute

“Collateral”; and provided further that any Equipment financed by Bank will at

all times constitute “Collateral”.

 

21

 

EXHIBIT B

 

LOAN PAYMENT/ADVANCE

TELEPHONE REQUEST FORM

 

DEADLINE FOR SAME DAY

PROCESSING IS 3:00 P.M., PACIFIC TIME

 

	

  TO: 

  TECHNOLOGY AND LIFE SCIENCES DIVISION

  	

  DATE:

  	

   

  
	

   

  	

   

  
	

  FAX #: 

  650-846-6840

  	

  TIME:

  	

   

  
	

   

  
	

  FROM:

  	

  RIGEL PHARMACEUTICALS,

  INC.

  
	

  CLIENT NAME

  (BORROWER)

  
	

  REQUESTED BY:

  	

   

  
	

  AUTHORIZED

  SIGNER’S NAME

  
	

   

  
	

  AUTHORIZED SIGNATURE:

  	

   

  
	

   

  
	

  PHONE NUMBER:

  	

   

  
	

   

  
	

  FROM ACCOUNT #

  	

   

  	

  TO ACCOUNT #

  	

   

  
	

   

  
	

   

  	

   

  	

   

  
	

  REQUESTED TRANSACTION TYPE

  	

   

  	

  REQUEST DOLLAR AMOUNT

  
	

   

  	

   

  	

  $

  	

   

  
	

  PRINCIPAL INCREASE (ADVANCE)

  	

   

  	

  $

  	

   

  
	

  PRINCIPAL PAYMENT (ONLY)

  	

   

  	

  $

  	

   

  
	

  INTEREST PAYMENT (ONLY)

  	

   

  	

  $

  	

   

  
	

  PRINCIPAL AND INTEREST (PAYMENT)

  	

   

  	

  $

  	

   

  
	

   

  
	

  OTHER INSTRUCTIONS:

  	

   

  
	

   

  
	

   

  
	

  All representations and

  warranties of Borrower stated in the Loan and Security Agreement are true,

  correct and complete in all material respects as of the date of the telephone

  request for an Advance confirmed by this Borrowing Certificate; provided,

  however, that those representations and warranties expressly referring to

  another date shall be true, correct and complete in all material respects as

  of such date.  

  
	

   

  
	

  BANK USE ONLY

  
	

  TELEPHONE REQUEST:

  
	

   

  
	

  The following person is

  authorized to request the loan payment transfer/loan advance on the advance

  designated account and is known to me.

  
	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Authorized

  Requester

  	

   

  	

  Phone #

  	

   

  
	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Received By

  (Bank)

  	

   

  	

  Phone #

  	

   

  
	

   

  
	

   

  
	

   

  	

   

  	

   

  
	

  Authorized

  Signature (Bank)

  
																				

 

22

 

EXHIBIT C

 

COMPLIANCE CERTIFICATE

 

	

  TO:

  	

  COMERICA BANK - CALIFORNIA

  
	

   

  	

   

  
	

  FROM:

  	

  RIGEL PHARMACEUTICALS, INC.

  

 

The undersigned authorized officer of RIGEL

PHARMACEUTICALS, INC. hereby certifies on behalf and in the name of the

Borrower that in accordance with the terms and conditions of the Loan and

Security Agreement between Borrower and Bank (the “Agreement”),

(i) Borrower is in complete compliance for the period ending

                

with all required covenants except as noted below and (ii) all

representations and warranties of Borrower stated in the Agreement are true and

correct in all material respects as of the date hereof.  Attached herewith are the required documents

supporting the above certification.  The

Officer further certifies that these are prepared in accordance with Generally

Accepted Accounting Principles (GAAP) and are consistently applied from one

period to the next except as explained in an accompanying letter or footnotes.

 

Please indicate compliance status by circling Yes/No under

“Complies” column.

 

	

  Reporting

  Covenant

  	

   

  	

  Required

  	

   

  	

  Complies

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Monthly financial statements

  	

   

  	

  Monthly within 30 days

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Annual (CPA Audited)

  	

   

  	

  FYE within 120 days

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  10K and 10Q

  	

   

  	

  (as applicable)

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Total amount of Borrower’s cash and investments

  	

   

  	

  Amount: 

  $             

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Total amount of Borrower’s cash and investments

  maintained with Bank

  	

   

  	

  Amount: 

  $             

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  

 

	

  Financial

  Covenant

  	

   

  	

  Required

  	

   

  	

  Actual

  	

   

  	

  Complies

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  On a monthly

  basis:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Adjusted Quick

  Ratio

  	

   

  	

  1.50:1.00

  	

   

  	

        :1.00

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Minimum RML

  	

   

  	

  8.00:1.00

  	

   

  	

        :1.00

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  If RML falls below 8.00 to 1.00

  	

   

  	

  100% Cash Security

  	

   

  	

  $            

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  

 

Comments

Regarding Exceptions: 

See Attached.

 

	

   

  	

  No

  
	

   

  	

  Received by:

  	

   

  	

   

  
	

  Sincerely,

  	

  AUTHORIZED

  SIGNER

  
	

   

  	

   

  
	

  RIGEL PHARMACEUTICALS,

  INC.

  	

  Date: 

  	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  Verified: 

  	

   

  	

   

  
	

  SIGNATURE

  	

  AUTHORIZED

  SIGNER

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  	

   

  
	

  TITLE

  	

   

  
	

   

  	

  Compliance Status

  	

  Yes

  
	

   

  	

   

  	

   

  
	

  DATE

  	

   

  
									

 

23

 

CORPORATE RESOLUTIONS TO BORROW

 

	

  Borrower:

  	

  RIGEL PHARMACEUTICALS, INC.

  

 

I, the undersigned Secretary or Assistant Secretary of

RIGEL PHARMACEUTICALS, INC. (the “Corporation”), HEREBY CERTIFY, on behalf of

the Corporation, that the Corporation is organized and existing under and by

virtue of the laws of the State of Delaware.

 

I FURTHER CERTIFY that attached hereto as

Attachments 1 and 2 are true and complete copies of the Certificate of

Incorporation, as amended, and the Restated Bylaws of the Corporation, each of

which is in full force and effect on the date hereof.

 

I FURTHER CERTIFY that at a meeting of the Directors

of the Corporation, duly called and held, at which a quorum was present and

voting (or by other duly authorized corporate action in lieu of a meeting), the

following resolutions were adopted.

 

BE IT RESOLVED, that any one (1) of the following

named officers, employees, or agents of this Corporation, whose actual

signatures are shown below:

 

	

  NAMES

  	

   

  	

  POSITION

  	

   

  	

  ACTUAL

  SIGNATURES

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  

 

acting for and on behalf of this Corporation and as its act and deed

be, and they hereby are, authorized and empowered:

 

Borrow Money.  To borrow from time to time from COMERICA BANK - CALIFORNIA

(“Bank”), on such terms as may be agreed upon between the officers, employees,

or agents of the Corporation and Bank, such sum or sums of money as in their

judgment should be borrowed, without limitation.

 

Execute Loan Documents.  To execute and deliver to Bank that certain

Loan and Security Agreement dated as of July 12, 2002 (the “Loan Agreement”)

and any other agreement entered into between Corporation and Bank in connection

with the Loan Agreement, including any amendments, all as amended or extended

from time to time (collectively, with the Loan Agreement, the “Loan

Documents”), and also to execute and deliver to Bank one or more renewals,

extensions, modifications, refinancings, consolidations, or substitutions for

the Loan Documents, or any portion thereof.

 

Grant Security.  To grant a security interest to Bank in the Collateral described

in the Loan Documents, which security interest shall secure all of the

Corporation’s Obligations, as described in the Loan Documents.

 

Negotiate Items.  To draw, endorse, and discount with Bank all drafts, trade

acceptances, promissory notes, or other evidences of indebtedness payable to or

belonging to the Corporation or in which the Corporation may have an interest,

and either to receive cash for the same or to cause such proceeds to be

credited to the account of the Corporation with Bank, or to cause such other

disposition of the proceeds derived therefrom as they may deem advisable.

 

Warrants. 

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

 

Further Acts.  In the case of lines of credit, to designate additional or

alternate individuals as being authorized to request advances thereunder, and

in all cases, to do and perform such other acts and things, to pay any and all

fees and costs, and to execute and deliver such other documents and agreements

as they may in their discretion deem reasonably necessary or proper in order to

carry into effect the provisions of these Resolutions.

 

BE IT FURTHER RESOLVED, that any and all acts

authorized pursuant to these resolutions and performed prior to the passage of

these resolutions are hereby ratified and approved, that these Resolutions

shall remain in full force and effect and Bank 

 

1

 

may rely on these Resolutions until written notice of their revocation

shall have been delivered to and received by Bank.  Any such notice shall not affect any of the Corporation’s

agreements or commitments in effect at the time notice is given.

 

I FURTHER CERTIFY that the officers, employees, and

agents named above are duly elected, appointed, or employed by or for the

Corporation, as the case may be, and occupy the positions set forth opposite

their respective names; that the foregoing Resolutions now stand of record on

the books of the Corporation; and that the Resolutions are in full force and

effect and have not been modified or revoked in any manner whatsoever.

 

IN WITNESS WHEREOF, I have hereunto set my hand on

July 12, 2002 and attest that the signatures set opposite the names listed

above are their genuine signatures.

 

	

   

  	

  CERTIFIED AND ATTESTED

  BY:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  X

  	

  /s/ James H. Welch

  	

   

  
	

   

  	

  Secretary

  

 

2

 

COMERICA BANK - CALIFORNIA

Member FDIC

 

ITEMIZATION OF AMOUNT FINANCED

DISBURSEMENT INSTRUCTIONS

(Equipment Line)

 

	

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

  
	

   

  	

   

  
	

  $

  	

  credited to deposit account No.

                       

  when Advances are requested by Borrower

  
	

   

  
	

  Amounts paid to others on your behalf:

  
	

  $56,250

  	

  to COMERICA BANK - CALIFORNIA for Loan Fee

  
	

  $

  	

  to Bank counsel fees and expenses 

  
	

  $

  	

  to                       

  
	

  $

  	

  to

                        

  
	

  $15,000,000

  	

  TOTAL (AMOUNT FINANCED)

  

 

Upon consummation of this transaction, this document will also serve as

the authorization for COMERICA BANK - CALIFORNIA to disburse the loan proceeds

as stated above.

 

	

   

  	

   

  	

   

  
	

  Signature

  	

   

  	

  Signature

  

 

 

AGREEMENT TO PROVIDE INSURANCE

 

	

  TO:

  	

  COMERICA BANK - CALIFORNIA

  	

  Date:  July

  12, 2002

  
	

   

  	

  attn: 

  Collateral Operations, M/C 4604

  	

   

  
	

   

  	

  9920 South La Cienega Blvd, 14th Floor

  	

   

  
	

   

  	

  Inglewood, CA 

  90301

  	

  Borrower:  RIGEL PHARMACEUTICALS, INC.

  

 

In consideration of a loan in the amount of

$15,000,000, secured by all tangible personal property including inventory and

equipment.

 

I/We agree to obtain adequate insurance coverage to

remain in force during the term of the loan.

 

I/We also agree to advise the below named agent to add

COMERICA BANK - CALIFORNIA as lender’s loss payable on the new or existing

insurance policy, and to furnish Bank at above address with a copy of said

policy/endorsements and any subsequent renewal policies.

 

I/We understand that the policy must contain:

 

1.                                       Fire

and extended coverage in an amount in accordance with the terms of the Loan and

Security Agreement by and between Borrower and Comerica Bank-California.

 

2.                                       Lender’s

“Loss Payable” Endorsement Form 438 BFU in favor of COMERICA BANK -

CALIFORNIA, or any other form acceptable to Bank.

 

INSURANCE INFORMATION

 

Insurance Co./Agent                                                                                                                                                                                                                     Telephone

No.:

 

Agent’s Address:

 

	

  Signature of Obligor:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Signature of Obligor:

  	

   

  	

   

  

 

	

  FOR BANK USE ONLY

  	

   

  
	

   

  	

   

  
	

  INSURANCE VERIFICATION:

  Date:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Person Spoken to:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Policy Number:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Effective From: 

  	

   

  	

  To:

  	

   

  	

   

  
	

   

  
	

  Verified by:

  	

   

  	

   

  
								

 

 

	

  DEBTOR:

  	

  RIGEL

  PHARMACEUTICALS, INC.

  
	

   

  	

   

  
	

  SECURED

  PARTY:

  	

  COMERICA

  BANK - CALIFORNIA

  

 

EXHIBIT A

 

COLLATERAL DESCRIPTION

ATTACHMENT

TO UCC-1 FINANCING STATEMENT

 

All personal property of Borrower (herein referred to

as “Borrower” or “Debtor”) whether presently existing or hereafter created or

acquired, and wherever located, including, but not limited to:

 

(a)                                  all

accounts (including health-care-insurance receivables), chattel paper

(including tangible and electronic chattel paper), deposit accounts, documents

(including negotiable documents), equipment (including all accessions and

additions thereto), general intangibles (including payment intangibles and software),

goods (including fixtures), instruments (including promissory notes), inventory

(including all goods held for sale or lease or to be furnished under a contract

of service, and including returns and repossessions), investment property

(including securities and securities entitlements), letter of credit rights,

money, and all of Debtor’s books and records with respect to any of the

foregoing, and the computers and equipment containing said books and records;

and

 

(b)                                 any

and all cash proceeds and/or noncash proceeds of any of the foregoing,

including, without limitation, insurance proceeds, and all supporting

obligations and the security therefor or for any right to payment.  All terms above have the meanings given to

them in the California Uniform Commercial Code, as amended or supplemented from

time to time, including revised Division 9 of the Uniform Commercial

Code-Secured Transactions, added by Stats. 1999, c.991 (S.B. 45), Section 35,

operative July 1, 2001.

 

Notwithstanding the

foregoing, the Collateral shall not include any copyrights, patents,

trademarks, servicemarks, trade styles, trade names, logos, business names,

applications for any of the foregoing, data, know-how, confidential or

proprietary information, derivative works, inventions, blueprints, mask works,

designs, design rights, trade secrets, software, rights in software, goodwill,

proprietary information on computer discs, computer tapes, literature, and

catalogs, now owned or hereafter acquired, or any claims for damages by way of

any past, present and future infringement of any of the foregoing

(collectively, the “Intellectual Property”); provided, however, that the

Collateral shall include (i) all equipment financed by Bank and (ii) all

accounts and general intangibles that consist of rights to payment and proceeds

from the sale, licensing or disposition of all or any part, or rights in, the

foregoing (the “Rights to Payment”). 

Notwithstanding the foregoing, if a judicial authority (including a U.S.

Bankruptcy Court) holds that a security interest in the underlying Intellectual

Property is necessary to have a security interest in the Rights to Payment,

then the Collateral shall automatically, and effective as of the Closing Date,

include the Intellectual Property to the extent necessary to permit perfection

of Bank’s security interest in the Rights to Payment.

 

Notwithstanding the foregoing, the term “Collateral”

shall not include any Equipment not financed by Bank, proceeds of such

Equipment, or rights of Borrower as a licensee to the extent the granting of a

security interest therein (i) would be contrary to applicable law or (ii) is

prohibited by or would constitute a default under any agreement or document

governing such property (but only to the extent such prohibition is enforceable

under applicable law); provided that upon the termination or lapsing of any

such prohibition, such property shall automatically be part of the Collateral;

and provided further that the provisions of this paragraph shall in no case

exclude from the definition of “Collateral” any Accounts, proceeds of the

disposition of any property, or general intangibles consisting of rights to

payment (other than proceeds of such excluded Equipment), all of which shall at

all times constitute “Collateral”; and provided further that any Equipment

financed by Bank will at all times constitute “Collateral”.

 

 

	

   

  	

  SECURITIES

  ACCOUNT

  CONTROL AGREEMENT

  	

   

  

 

July 12, 2002

 

Attn:  Jack Singer

 

Re:                               Comerica

Bank   –   California /Security Interest in Securities Account of RIGEL PHARMACEUTICALS,

INC.

 

Dear Sir or Madam:

 

This agreement (“Control Agreement”) is entered by and

among COMERICA BANK - CALIFORNIA (“Bank”), RIGEL PHARMACEUTICALS, INC.

(“Pledgor”) and Comerica Securities, Inc. (“Securities Intermediary”).

 

1.                                       This

Control Agreement concerns any account (collectively, the “Securities Account”)

established by Pledgor with Securities Intermediary, whether now existing or

hereafter arising.  Pursuant to that

certain Loan and Security Agreement dated as of the date hereof (as amended

from time to time, the “Security Agreement”), Bank has a security interest in

all of Pledgor’s present and future right, title and interest in, to and under

the Securities Account maintained with Securities Intermediary in connection

with the securities, securities entitlements or other investment property,

instruments and financial assets contained in the Securities Account, and all

investment property, instruments and financial assets at any time held or

maintained in the Securities Account, together with all investment property,

instruments and financial assets substituted therefore or for any part thereof,

all interest, dividends, increases, profits, new financial assets or other

increments, distributions or rights of any kind received on account of any of

the foregoing, and all other income received in connection therewith and all

products or proceeds thereof (whether cash or non-cash proceeds)(collectively,

the “Securities Entitlement”).  Bank,

Pledgor and Securities Intermediary are entering into this Control Agreement to

perfect Bank’s security interest in the Securities Account.

 

2.                                       The

Securities Entitlement is to be held in the Securities Account and is and will

remain subject to a first priority security interest in favor of Bank.  The Securities Account is not a margin

account or subject to check writing privileges. All rights of Securities

Intermediary in the Securities Account except for Permitted Liens as defined

below shall be subordinated and postponed in favor of Bank’s rights and interests

therein under and pursuant to the Security Agreement.

 

3.                                       Until

Securities Intermediary is notified to the contrary by Bank in any entitlement

order or other notice (“Notice”), Securities Intermediary is authorized to act

upon the instruction of Pledgor, or its authorized representatives, and comply

with Pledgor’s (or its authorized representatives) instructions for the

following purposes:

 

ý                     make

trades of any and all of the financial assets held in the Securities Account

&/or

 

ý                     receiving

any distributions relating to the Securities Entitlement &/or

 

ý                     making

any withdrawals of any and all of the financial assets held in the Securities

Account or the

 

1

 

proceeds thereof.

 

Upon and following receipt of Notice until revocation or withdrawl of

such Notice in writing by Bank, (i) Securities Intermediary shall immediately

cease complying with instructions concerning the Securities Account and the

Securities Entitlement originated by the Pledgor, or its representatives, and

thereafter shall comply with the instructions of Bank without further consent

by Pledgor; (ii) Securities Intermediary shall not be authorized to release any

of the Securities Entitlement or any proceeds thereof or make any distribution from

the Securities Account to any party other than Bank, until otherwise instructed

by Bank in writing; (iii) Securities Intermediary is instructed to hold the

Securities Account and Securities Entitlement for the benefit of Bank; and (iv)

Bank shall be the only person authorized to make any withdrawals of and/or to

authorize or receive any distribution of or relating to the Securities

Entitlement.

 

4.                                       By

its execution hereof, Securities Intermediary acknowledges and agrees to the

terms set forth herein, and that this Control Agreement constitutes written

notice to Securities Intermediary and acknowledgment by Securities Intermediary

of Bank’s security interest in the Securities Account.  Said security interest shall be noted by the

Securities Intermediary on its books and records.

 

5.                                       Securities

Intermediary has established the Securities Account in Pledgor’s name.  A true and complete copy of the account

agreement entered into between Pledgor and Securities Intermediary with respect

to the Securities Account (the “Account Agreement”)is attached as Exhibit

A.  Exhibit A contains a complete and

accurate statement of the investment property, financial assets and credit

balances credited to the Securities Account as of the date(s) set forth in the

statement.  Except for the claims and

interest of Bank and Pledgor in the Securities Account and liens to secure fees

owed to Securities Intermediary by Pledgor with respect to the operation of the

Securities Account (“Permitted Liens”), Securities Intermediary does not know

of any claim to or interest in the Securities Account.

 

6.                                       Securities

Intermediary shall send copies of all statements and confirmations regarding

the Securities Account simultaneously to Pledgor and to Bank.  Securities Intermediary shall promptly notify

Bank and Pledgor if a person asserts a lien, encumbrance or adverse claim

against the Securities Account without Bank’s prior written consent, which will

not be unreasonably withheld.

 

7.                                       Securities

Intermediary shall not agree with any third party that Securities Intermediary

will comply with entitlement orders from the third party.  Securities Intermediary shall not amend the

Account Agreement, including its choice of law clause and the provision

providing for treatment of property held in the securities account as a

financial asset, without Bank’s written consent.  Securities Intermediary shall not permit Pledgor to terminate the

Securities Account.

 

8.                                       The

rights and powers granted herein to Bank have been granted in order to perfect

its security interest in the Securities Account, are powers coupled with an

interest and will neither be affected by the death or bankruptcy of the Pledgor

nor by the lapse of time.  Securities

Intermediary’s obligations under this Control Agreement shall continue in effect

until the security interest of Bank in the Securities Account has been

terminated pursuant to the terms of the Security Agreement and Bank has

notified you of such termination in writing. 

Upon receipt of such notice Securities Intermediary’s obligations under

this Control Agreement with respect to the operation and maintenance of the

Securities Account after the receipt of such notice shall terminate, Bank shall

have no further right to originate entitlement orders concerning the Securities

Account and Securities Intermediary may take such steps as the Pledgor may

request to vest full ownership and control of the Securities Account in the

Pledgor, including, but not limited to, removing the name of Bank from the

Securities Account or transferring all of the financial assets and credit

balances in the Securities Account to another securities account in the name of

the Pledgor or its designee.

 

9.                                       This

Control Agreement shall be binding upon and inure to the benefit of the

successors and assigns of the parties hereto, and shall be governed by, and in

accordance with, the laws of the State of California without regard to conflict

of laws principles.

 

10.                                 This

Control Agreement may be executed in any number of counterparts, each of which

shall be an original, but all of which taken together shall constitute one and

the same instrument.

 

2

 

11.                                 Pledgor

acknowledges that this Control Agreement supplements Pledgor’s existing

agreements with Securities Intermediary. 

This Control Agreement does not create any obligation or duty of

Securities Intermediary other than those expressly set forth herein.  If this Control Agreement conflicts with any

other agreement between Securities Intermediary and Pledgor, the terms of this

Control Agreement shall prevail.

 

12.                                 This

Control Agreement is an integrated agreement and supplements all negotiations

and agreement with respect to the subject matter hereof. Any amendments hereto

shall be in writing and signed by all parties.

 

13.                                 Unless

otherwise provided in this Control Agreement, all notices or demands relating

to this Control Agreement shall be in writing and (except for account

statements and other informational documents which may be sent by first–class

mail, postage prepaid) shall be personally delivered, sent by certified mail or

by facsimile to Bank, Pledgor or Securities Intermediary, as the case may be,

at the address set forth below:

 

	

  If to Bank:

  	

  Comerica Bank-California

  
	

   

  	

  9920 S. La Cienega Blvd., Suite #628

  
	

   

  	

  Inglewood, CA 

  90301-4423

  
	

   

  	

  Telephone: 

  (310) 417-5600

  
	

   

  	

  Facsimile: 

  (310) 417-5414

  
	

   

  	

  Attention: 

  Manager

  
	

   

  	

   

  
	

  With a copy to :

  	

  Comerica Bank-California

  
	

   

  	

  Five Palo Alto Square - 8th Floor

  
	

   

  	

  3000 El Camino Real

  
	

   

  	

  Palo Alto, CA 

  94306

  
	

   

  	

  Attn: Jonathan H. Norris

  
	

   

  	

  FAX:  (650)

  213-1710

  
	

   

  	

   

  
	

  If to Pledgor:

  	

  RIGEL

  PHARMACEUTICALS, INC.

  
	

   

  	

  240 East Grand

  Avenue

  
	

   

  	

  South San

  Francisco, CA 94080

  
	

   

  	

  Attn:  Chief Financial Officer

  
	

   

  	

  FAX:  (650) 624-1101

  
	

   

  	

   

  
	

  If to Securities Intermediary:

  	

  Comerica Securities, Inc.

  
	

   

  	

  201 N. Figueroa St., 1st. Floor

  
	

   

  	

  Los Angeles, CA 90012

  
	

   

  	

  Telephone: (213)484-3758

  
	

   

  	

  Facsimile: (213)484-3795

  
	

   

  	

  Attn: Jack Singer

  

 

14.                                 WAIVER

OF JURY TRIAL.  THE PARTIES

ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT

IT MAY BE WAIVED.  EACH PARTY, AFTER

CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR

CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND FOR THEIR MUTUAL BENEFIT,

WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE

PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.

 

3

 

Please sign where indicated below to reflect your acknowledgment of and

agreement to the foregoing terms and conditions.

 

	

   

  	

  Very truly yours,

  
	

   

  	

   

  
	

   

  	

  COMERICA BANK - CALIFORNIA

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

     /s/ John

  Norris

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  VP, Technology & Life Sciences Group

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  RIGEL PHARMACEUTICALS, INC.

  
	

   

  	

  Pledgor

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

     /s/ James

  H. Welch

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  Chief Financial

  Officer

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  COMERICA SECURITIES, INC.

  
	

   

  	

  Securities Intermediary

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
					

 

4

 

Exhibit A

Account Agreement

 

5

 

	

   

  	

  SECURITIES

  ACCOUNT

  	

   

  
	

   

  	

  CONTROL

  AGREEMENT

  	

   

  

 

July 12, 2002

 

Attn: Secretary

 

Re:                               Comerica

Bank-California /Security Interest in Securities Account of RIGEL

PHARMACEUTICALS, INC.

 

Dear Sir or Madam:

 

This agreement (“Control Agreement”) is entered by and

among Comerica Bank-California (“Bank”), a California banking corporation,

RIGEL PHARMACEUTICALS, INC., a Delaware corporation (“Pledgor”) and Monarch

Funds, a Delaware business trust (the “Trust”), by Forum Shareholder Services,

LLC, a Delaware limited liability company, as agent therefor.

 

1.                                       This

Control Agreement concerns any account (collectively, the “Securities Account”)

established by Pledgor with Trust, whether now existing or hereafter

arising.  Pursuant to that certain Loan

and Security Agreement dated as of the date hereof (as amended from time to

time, the “Security Agreement”), Bank has a security interest in all of

Pledgor’s present and future right, title and interest in, to and under the

Securities Account maintained with Trust in connection with the securities,

securities entitlements or other investment property, instruments and financial

assets contained in the Securities Account, and all investment property,

instruments and financial assets at any time held or maintained in the

Securities Account, together with all investment property, instruments and

financial assets substituted therefore or for any part thereof, all interest,

dividends, increases, profits, new financial assets or other increments,

distributions or rights of any kind received on account of any of the

foregoing, and all other income received in connection therewith and all

products or proceeds thereof (whether cash or non-cash proceeds)(collectively,

the “Securities Entitlement”).  Bank,

Pledgor and Trust are entering into this Control Agreement to perfect Bank’s

security interest in the Securities Account.

 

2.                                       The

Securities Entitlement is to be held in the Securities Account and is and will

remain subject to a first priority security interest in favor of Bank.  The Securities Account is not a margin

account or subject to check writing privileges. All rights of Trust in the

Securities Account except for Permitted Liens as defined below shall be

subordinated and postponed in favor of Bank’s rights and interests therein

under and pursuant to the Security Agreement.

 

3.                                       Until

Trust is notified to the contrary by Bank in any entitlement order or other

notice (“Notice”), Trust is authorized to act upon the instruction of Pledgor,

or its authorized representatives, and comply with Pledgor’s (or its authorized

representatives) instructions for the following purposes:

 

ý                     make

trades of any and all of the financial assets held in the Securities Account

&/or

 

ý                     receiving

any distributions relating to the Securities Entitlement &/or

 

ý                     making

any withdrawals of any and all of the financial assets held in the Securities

Account or the proceeds thereof.

 

 

Upon and following

receipt of Notice, until revocation or withdrawl of such Notice in writing by

Bank, (i) Trust shall immediately cease complying with instructions

concerning the Securities Account and the Securities Entitlement originated by

the Pledgor, or its representatives, and thereafter shall comply with the

instructions of Bank without further consent by Pledgor; (ii) Trust shall

not be authorized to release any of the Securities Entitlement or any proceeds

thereof or make any distribution from the Securities Account to any party other

than Bank, until otherwise instructed by Bank in writing; (iii) Trust is

instructed to hold the Securities Account and Securities Entitlement for the

benefit of Bank; and (iv) Bank shall be the only person authorized to make any

withdrawals of and/or to authorize or receive any distribution of or relating

to the Securities Entitlement.

 

4.                                       By

its execution hereof, Trust acknowledges and agrees to the terms set forth

herein, and that this Control Agreement constitutes written notice to Trust and

acknowledgment by Trust of Bank’s security interest in the Securities

Account.  Said security interest shall

be noted by the Trust on its books and records.

 

5.                                       Trust

has established the Securities Account in Pledgor’s name.  A true and complete copy of the account

agreement entered into between Pledgor and Trust with respect to the Securities

Account (the “Account Agreement”) is attached as Exhibit A.  Exhibit A is a complete and accurate

statement of the investment property, financial assets and credit balances

credited to the Securities Account as of the date(s) set forth in the

statement.  Except for the claims and

interest of Bank and Pledgor in the Securities Account and liens to secure fees

owed to Trust by Pledgor with respect to the operation of the Securities

Account (“Permitted Liens”), Trust does not know of any claim to or interest in

the Securities Account.

 

6.                                       Trust

shall send copies of all statements and confirmations regarding the Securities

Account simultaneously to Pledgor and to Bank. 

Trust shall promptly notify Bank and Pledgor if a person asserts a lien,

encumbrance or adverse claim against the Securities Account.

 

7.                                       Trust

shall not agree with any third party that Trust will comply with entitlement

orders from the third party.  Trust

shall not amend the Account Agreement, including its choice of law clause and

the provision providing for treatment of property held in the Securities

Account as a financial asset, without Bank’s written consent.  Trust shall not permit Pledgor to terminate

the Securities Account without Bank’s written consent, which shall not be

unreasonably withheld.

 

8.                                       The

rights and powers granted herein to Bank have been granted in order to perfect

its security interest in the Securities Account, are powers coupled with an

interest and will neither be affected by the death or bankruptcy of the Pledgor

nor by the lapse of time.  Trust’s

obligations under this Control Agreement shall continue in effect until the

security interest of Bank in the Securities Account has been terminated

pursuant to the terms of the Security Agreement and Bank has notified you of

such termination in writing.  Upon receipt

of such notice Trust’s obligations under this Control Agreement with respect to

the operation and maintenance of the Securities Account after the receipt of

such notice shall terminate, Bank shall have no further right to originate

entitlement orders concerning the Securities Account and Trust may take such

steps as the Pledgor may request to vest full ownership and control of the

Securities Account in the Pledgor, including, but not limited to, removing the

name of Bank from the Securities Account or transferring all of the financial

assets and credit balances in the Securities Account to another securities

account in the name of the Pledgor or its designee.

 

9.                                       This

Control Agreement shall be binding upon and inure to the benefit of the

successors and assigns of the parties hereto, and shall be governed by, and in

accordance with, the laws of the State of California without regard to conflict

of laws principles.

 

10.                                 Each

of the Pledgor and the Bank hereby agrees to indemnify the Trust for, defend

the Trust against and hold the Trust harmless from all claims, demands, suits,

expenses (including reasonable attorneys’ fees), losses and damages resulting

from or arising out of this Control Agreement and not due to the Trust’s gross

negligence or willful misconduct, including as a result of the Trust’s actions

in honoring instructions from any properly authorized person believed to be

authorized prior to receipt of notification to the contrary or refusing to

honor instructions from persons not demonstrated to the Trust’s reasonable

satisfaction to be so authorized.  The

Pledgor and the Bank agree that, in the event of any dispute between them or

either of them and a third person in connection with which the Trust becomes

subject to conflicting claims with respect the Securities Account, the Trust

 

2

 

may in its sole and absolute discretion initiate an interpleader

action, in which the Pledgor and the Bank consent to being joined, to determine

the relative rights of the claimants with respect to the Securities Account.

 

11.                                 This

Control Agreement may be executed in any number of counterparts, each of which

shall be an original, but all of which taken together shall constitute one and

the same instrument.

 

12.                                 Pledgor

acknowledges that this Control Agreement supplements Pledgor’s existing

agreements with Trust.  This Control

Agreement does not create any obligation or duty of Trust other than those

expressly set forth herein.  If this

Control Agreement conflicts with any other agreement between Trust and Pledgor,

the terms of this Control Agreement shall prevail.

 

13.                                 This

Control Agreement is an integrated agreement and supplements all negotiations

and agreement with respect to the subject matter hereof. Any amendments hereto

shall be in writing and signed by all parties.

 

14.                                 Unless

otherwise provided in this Control Agreement, all notices or demands relating

to this Control Agreement shall be in writing and (except for account

statements and other informational documents which may be sent by first–class

mail, postage prepaid) shall be personally delivered, sent by certified mail or

by facsimile to Bank, Pledgor or Trust, as the case may be, at the address set

forth below:

 

	

  If to Bank:

  	

  Comerica Bank-California

  
	

   

  	

  9920 S. La Cienega Blvd., Suite #628

  
	

   

  	

  Inglewood, CA 

  90301-4423

  
	

   

  	

  Telephone: 

  (310) 417-5600

  
	

   

  	

  Facsimile: 

  (310) 417-5414

  
	

   

  	

  Attention: 

  Manager

  
	

   

  	

   

  
	

  With a copy to :

  	

  Comerica Bank-California

  
	

   

  	

  Five Palo Alto Square - 8th Floor

  
	

   

  	

  3000 El Camino Real

  
	

   

  	

  Palo Alto, CA 

  94306

  
	

   

  	

  Attn: Jonathan H. Norris

  
	

   

  	

  FAX:  (650)

  213-1710

  
	

   

  	

   

  
	

  If to Pledgor:

  	

  RIGEL

  PHARMACEUTICALS, INC.

  
	

   

  	

  240 East Grand

  Avenue

  
	

   

  	

  South San

  Francisco, CA 94080

  
	

   

  	

  Attn:  Chief Financial Officer

  
	

   

  	

  FAX:  (650) 624-1101

  
	

   

  	

   

  
	

  If to Trust:

  	

  Monarch Funds

  
	

   

  	

  P.O. Box 446

  
	

   

  	

  Portland, Maine

  04101

  
	

   

  	

  Telephone:  (207) 822-6680

  
	

   

  	

  Attn.:  Secretary

  

 

15.                                 WAIVER

OF JURY TRIAL.  THE PARTIES

ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT

IT MAY BE WAIVED.  EACH PARTY, AFTER

CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR

CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND FOR THEIR MUTUAL BENEFIT,

WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE

PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.

 

3

 

Please sign where indicated below to reflect your acknowledgment of and

agreement to the foregoing terms and conditions.

 

	

   

  	

  Very truly yours,

  
	

   

  	

   

  
	

   

  	

  COMERICA BANK-CALIFORNIA,

  
	

   

  	

  a California banking corporation

  
	

   

  	

   

  
	

   

  	

  By:

  	

    /s/ Kathy

  Conte

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  Senior Vice President

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  RIGEL PHARMACEUTICALS, INC.

  
	

   

  	

  Pledgor

  
	

   

  	

   

  
	

   

  	

  By:

  	

    /s/ James

  H. Welch

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  Chief Financial Officer

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  MONARCH FUNDS,

  
	

   

  	

  a Delaware business trust

  
	

   

  	

   

  
	

   

  	

  By:

  	

  Forum Shareholders Services, LLC,

  
	

   

  	

   

  	

  a Delaware limited liability company, as agent

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Title: 

  Director

  
							

 

4

 

Exhibit A

Account Agreement

 

5

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