<PAGE>
LMSI Venture Finance
2500 Sand Hill Road, Suite 101.
Menlo Park, CA 94025
Telephone; (650) 854-9450 o Fax: (650) 854-9457
July 28, 1999
Revised
-------
Mr. David J. Borges
Controller
Rosetta Inpharmatics, Inc.
12040 115th Avenue, NE
Kirkland, WA 98034
Dear David:
This will confirm approval of a time and line extension of $605,000 for Rosetta
Inpharmatics. The terms will be the same as Rosetta's prior line (5/13/98
proposal and subsequent credit approval) except that
- Equipment allotments have been changed to allow more soft
costs. The new allotments are lab and test equipment (> 32%);
computers, furniture, & similar (=34%); and soft costs
(leaseholds, software, & similar) (Greater than or equal to
34%)
- LMSI will retain a continuing lien on all equipment financed
or to be financed under Equipment Financing Agreements #10819
and #10821 until all of Rosetta's obligations under this new
financing are fulfilled. (With LMSI's prior approval, Rosetta
may sell or dispose of some items of equipment)
- The line expires 6/30/00, however, fundings after 12/31/99 are
contingent upon Rosetta closing a major corporate partnership
as represented.
Cynthia Murayama, Contract Manager, will be calling shortly to update
information and to expedite the few additional documents we need. Equipment
purchased since the expiration of Rosetta's prior line may be financed under
this line. Please send any invoices you have accumulated.
We are delighted to be able to continue working with you and with Rosetta!
Best regards,
/s/ Barbara Kaiser
Barbara B.. Kaiser
EVP/ General Manager
<PAGE>
Lease Management Services, Inc.
2500 Sand Hill Road. Suite 101
Menlo Park CA 94025
Telephone (650) 854-9450 o Fax (650) 854-9457
April 24, 1998
Revised: May 13, 1998
Mr. John J. King, II CONFIDENTIAL
Chief Operating Officer
Rosetta Inpharmatics, Inc.
12040 115th Avenue NE
Kirkland, WA 98034
Dear John:
We are pleased to present the following equipment financing proposal to Rosetta
Inpharmatics, Inc.:
BORROWER: Rosetta Inpharmatics, Inc.
LENDER: Lease Management Services, Inc.
EQUIPMENT: A master line of credit for $1,500,000 equipment per
the attached list, including:
Greater than or equal to $750,000 lab & scientific
equipment
Less than or equal to 500,000 computers, furniture &
similar
Greater than or equal to 250,000 leaseholds, software &
similar
-------
$1,500,000
Previously-purchased and used equipment may be
included in this line. All equipment is subject to
Lenders final approval.
TERM &
PAYMENT:
OPTION 1: Forty-two (42) months at 2.604% of
equipment cost, payable monthly in advance for each
loan schedule, plus a 15% balloon at end of term.
[Subject to satisfactory credit review, the balloon
may be paid over 9 months at 1.740% per month.]
OPTION 2: Forty-eight (48) months at 2.615% of
equipment cost, payable monthly in advance for each
loan schedule, plus a $1.00 payment at end of term.
-2-
<PAGE>
The yield in this transaction will be adjusted
relative to any increase in comparable term U.S.
Treasury maturities. The payment factor for each
schedule will be set at the time it is documented and
will be FIXED for the term. The payment factors above
are based on the average of the Federal Reserve 3-
and 5-year treasuries (5.575%) for the week ending
4/17/98.
STRUCTURE: Secured loan. Borrower retains title and keeps
depreciation. Borrower will grant Lender a first
security interest in the equipment to be financed.
WARRANT: In consideration for this financing, Borrower will
grant to Lender a warrant to purchase Borrower's
common or preferred stock. The warrant will be for
2.5% of equipment cost at the lower of $5.20 per
share or Borrower's next round (> $2MM new - equity)
share price. The exercise price will be the lower of
$5.20 per share or the price half-way between the
price per share of Borrower's Series A and next round
financing. The warrant will be for the greater of
7,000 shares or the number of shares based pro rata
on the actual amount of equipment financed. The
warrant may be exercised by cash or net issue and
will include standard anti-dilution provisions. The
exercise period shall end 72 months from the date of
issue.
COVENANT: No additional collateral will be required except in
the event Borrower's unrestricted cash, excluding
long-term debt, falls below the appropriate benchmark
below. In that event, Borrower will provide to Lender
a cash security deposit equivalent to 12.5% of
original, aggregate equipment cost, but in no event
to exceed the remaining gross receivable.
PRE-IPO BENCHMARK: unrestricted cash, excluding
long-term debt, must be equal to the greater of
$2,000,000 or 6 months' cash needs. ["6 months' cash
needs" will be defined as the cash bum for the 3
months just completed, multiplied by a factor of
2.3.]
POST-IPO BENCHMARK: unrestricted cash, excluding
long-term debt, must be equal to the greater of
$5,000,000 or 10 months' cash needs. ["10 months'
cash needs" will be defined as the cash burn for the
3 months just completed, multiplied by a factor of
3.6.]
Interest will be accrued at 5.0% annually and will be
paid with the return of the deposit.
This deposit will be released when Borrower's
unrestricted cash, excluding long-term debt, recovers
and is greater than the appropriate benchmark above
for at least one quarter and continues to remain
greater. (Or, will be returned immediately if
Borrower's new equity or other non-refundable cash is
great enough to dearly keep Borrower above the
appropriate benchmark for at least three quarters.)
-3-
<PAGE>
Verification of achievement of benchmarks is to be
acceptable to Lender. Return of deposits prior to end
of term is contingent upon receipt of all payments
and financials to date as agreed, no default under
any financial obligation, and no material adverse
change.
CONTINGENCIES:
1) Standard documentation satisfactory to
Borrower and Lender.
2) Releases against this credit line are
contingent upon Borrower providing evidence
of reasonable performance against the 1998
Budget or subsequent Board-approved plan
acceptable to Lender. This credit line,
unless extended in writing, expires 5/31/99.
3) Throughout the loan term, Borrower will
provide monthly financials within 30 days of
each month-end, and annually, an audited
statement within 90 days of fiscal year end
or at such time as Borrower's Board receives
the audit All such financial statements are
to be prepared using generally accepted
accounting principles.
4) Invoices must be less than 45 days old ~
funded within 45 days of credit approval.
All equipment is to be located at Borrower's
Seattle area facilities unless Lender gives
prior approval to do otherwise.
Custom equipment; upgrades to equipment to
which Lender does not have clear title or
first security interest; disposables; and
"soft costs" such as sales tax, freight, and
installation are excluded from this line.
5) Subject to final approval by Lender's Credit
Committee.
6) This is a statement of mutual intent and not
an agreement to finance. The terms set forth
above are not therefore binding until a loan
agreement is executed between Borrower and
Lender for specific items of equipment.
COMMITMENT
FEE: $10,000.00 commitment fee. This fee shall be fully
credited pro-rata to schedules as financed. All or a
portion of said fee will be forfeited If this
transaction is approved by Lender and not executed by
Borrower as called for in this proposal. However, in
the event Borrower uses the line in good faith but
does not use the entire line, then any remaining fee
will be applied to any new line agreed to by Borrower
and Lender prior to
-4-
<PAGE>
9/30/98. The entire fee will be returned to Borrower
promptly in the event Len4er fails to approve this
transaction.
If the terms of this proposal meet with your approval, please sign and return
with your commitment fee, and we will proceed. Unless previously accepted, this
proposal will expire 5/16/98.
We look forward to meeting your equipment financing needs and continuing a
mutually rewarding relationship.
----------------------------- --------------------------------------------------
Sincerely, ACCEPTED: Rosetta Inpharmatics, Inc.
/s/ Barbara B. Kaiser By: /s/
------------------------------------------
Barbara B. Kaiser Title: SR. V.P. & C.O.O.
EVP/General Manager ---------------------------------------
Date: MAY 14, 1998
----------------------------------------
----------------------------- --------------------------------------------------
Pricing:
Option 1:
------
Option 2: X
------
-5-
