THIS LOAN AGREEMENT made as of the 28th day of January, 2003.
B E T W E E N :
WORLD HEART CORPORATION
(hereinafter called the "Borrower")
OF THE FIRST PART
and
▇▇▇▇▇▇▇ LIFESCIENCES LLC
(hereinafter called "▇▇▇▇▇▇▇") and
SHERFAM INC. (hereinafter called "Sherfam" and together with
▇▇▇▇▇▇▇, the "Lenders" and each a "Lender")
OF THE SECOND PART
and
WORLD HEART INC.
(hereinafter called the "Guarantor")
OF THE THIRD PART
WHEREAS the Borrower, the Guarantor, Argosy Bridge Fund L.P.I. ("Argosy")
and Sherfam have entered into a senior loan agreement dated January 28, 2003
(including as same may be amended, supplemented, revised, restated or replaced
from time to time, the "Senior Loan Agreement");
WHEREAS the Borrower, the Guarantor, Argosy, Sherfam and ▇▇▇▇▇▇▇ have
entered into an inter-creditor agreement dated January 28, 2003 which sets out
the parties respective rights and priorities with respect to the repayment of
the indebtedness owing to them and the security granted in connection therewith;
WHEREAS the Lenders have agreed to loan to the Borrower the principal sum
of THREE MILLION DOLLARS ($3,000,000) (the "Principal Sum") on the terms and
conditions set forth in this Agreement;
WHEREAS the Lenders have agreed that all obligations outstanding under this
Loan Agreement to a Lender shall be pari passu to all obligations outstanding
under this Loan Agreement to the other;
NOW THEREFORE WITNESSETH that in consideration of the mutual covenants set
forth in this Agreement the parties hereto covenant and agree as follows:
1. Interpretation: Capitalized terms used herein shall have the meanings
ascribed to them herein and the following terms shall have the following
meanings:
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"Business Day" means a day, other than a Saturday, Sunday or statutory holiday,
on which banks are open for the transaction of normal business in the City of
Ottawa, Ontario.
"Non Cash Accounting Entries" means:
(a) adjustments to goodwill;
(b) reserves against provincial tax credits receivable; and
(c) the implicit value of the Warrants.
"Operating Loss" occurs when net income from operations, before foreign exchange
expense, interest expense, depreciation expense and amortization expense is less
than zero.
"Permitted Encumbrances" means the encumbrances described on Schedule "A".
"Potential Prior-Ranking Claims" means all amounts owing or required to be paid,
where the failure to pay any such amount could give rise to a claim pursuant to
any law, statute, regulation or otherwise, which ranks, or is capable of
ranking, in priority to the Lenders' security or otherwise in priority to any
claim by the Lenders for repayment of any amounts owing under this Agreement.
"Replacement Financing" means one or more financings in favour of the Borrower
whether by way of new debt or equity in an aggregate amount at least equal to
$7,000,000 but not including the Required Funding.
"Required Funding" means the loan of $7,000,000 provided to the Borrower under
the Senior Loan Agreement.
"Shareholders' Equity" means the sum of the value of the preferred shares of the
Borrower and the common shares of the Borrower.
2. Establishment of Credit: Subject to the terms and conditions of this
Agreement, the Lenders hereby establish in favour of the Borrower a term loan in
an aggregate principal amount of $3,000,000, comprised of $2,000,000 from
▇▇▇▇▇▇▇ and $1,000,000 from Sherfam (the "Loan"), for the purposes of financing
the working capital requirements of the Borrower and its subsidiaries, as
approved by the Lenders. The first and only advance under the Loan shall occur
on such date (the "Funding Date") which shall be no later than January 31, 2003
or such other date as agreed to by the Lenders, failing which all obligations on
the part of the Lenders hereunder shall, at the Lenders' option, become null and
void. The Borrower may avail itself of the Loan by way of one advance.
3. (a) Term: The Loan shall be repaid in full upon the earlier of:
(i) July 31, 2003 ("Maturity Date");
(ii) the completion of the Replacement Financing; and
(iii) the occurrence of an Event of Default which is continuing.
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(b) Prepayment: Notwithstanding the provisions of Subsection 3(a) above,
the Borrower shall have the right to prepay the Loan in full or any
part thereof together with all other amounts owing hereunder at any
time. Any part or all of the Loan shall be available for prepayment on
two (2) Business Days' prior written notice to each of the Lenders;
provided that in the event the Loan is repaid prior to the six month
anniversary date of the Funding Date the Borrower shall pay to each of
the Lenders a prepayment fee equal to the amount of interest that
would have accrued on their pro rata portion of the Loan during the
period commencing on the date of such prepayment and ending on the six
month anniversary of the Funding Date.
(c) Withholding:
(i) Any and all payments made by the Borrower hereunder shall be made
to ▇▇▇▇▇▇▇ in full, without set-off or counter claim and free and
clear of and without deduction or withholding for, or on account
of, any and all present and future taxes under Part XIII of the
Income Tax Act (Canada). If the Borrower is required by law to
deduct or withhold any such taxes from or in respect of any sum
payable hereunder to ▇▇▇▇▇▇▇, (i) the sum payable shall be
increased, as may be necessary, so that after making all required
deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this
Section 3(c)) ▇▇▇▇▇▇▇, as the case may be, receives an amount
equal to the sum that it would have received had no such
deductions or withholdings been made, (ii) the Borrower shall
make such deductions or withholdings, and (iii) the Borrower
shall pay the full amount deducted or withheld to the relevant
taxing authority in accordance with applicable laws. Within 30
days after the date of any payment of taxes withheld by the
Borrower in respect of any payment by the Borrower to ▇▇▇▇▇▇▇,
the Borrower shall furnish to ▇▇▇▇▇▇▇, the original or a
certified copy of a receipt issued by the relevant taxing
authority evidencing payment by the Borrower to such taxing
authority of any taxes with respect to any payment payable to
▇▇▇▇▇▇▇.
(ii) If the ▇▇▇▇▇▇▇ receives the benefit of a tax credit or an
allowance resulting from a payment which includes an additional
amount paid by the Borrower under this Section 3(c), ▇▇▇▇▇▇▇
shall pay to the Borrower such part of that benefit as in the
opinion ▇▇▇▇▇▇▇ will leave ▇▇▇▇▇▇▇ (after such payment) in no
less favourable a position than ▇▇▇▇▇▇▇ would have been in if no
additional amount had been required to be paid (and no deduction
had been required).
4. (a) Interest: The Borrower shall pay interest to the Lenders collectively
on the amount outstanding under the Loan from time to time, both
before and after any or all of maturity, judgment and default, at the
rate of eighteen per cent (18%) per annum (the "Interest Rate")
calculated and compounded monthly (on the basis of the actual number
of days elapsed over a year of 365 or 366, as the case may be), and
paid monthly in arrears on the first day of each and every month. The
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Borrower shall make interest payments separately to each of the
Lenders based on their pro rata share of the Loan.
(b) Application of Funds: Each of the Lenders shall apply any funds
received hereunder from time to time, in the following order of
priority (i) towards current interest owing to it, (ii) towards
accrued interest owing to it, if any, (iii) toward fees owing to it,
and (iv) towards principal, in each case owing under the Loan until
repaid in full.
5. Place and Time of Payment: All payments of the Loan, interest and fees shall
be paid to each of the Lenders in respect of each Lender's respective
contribution to the Loan at the addresses set out in Section 27(b) or such other
place as the Lenders may from time to time direct. Payments to ▇▇▇▇▇▇▇ shall be
made by cheque and deliverable to it at the address set out in Section 27(b) to
the attention of ▇▇▇ ▇▇▇▇▇▇▇▇▇, Assistant Treasurer, or such other means as
▇▇▇▇▇▇▇ may direct. Any payments made on account of the Loan must be delivered
to, and received by, the Lenders by no later than one (1) p.m. Toronto time for
same day credit.
6. Administration Fee: The Borrower acknowledges and agrees that the Lenders
have fully earned a fee, representing compensation to the Lenders for their
efforts and expenditures of time by its officers, agents and employees in the
review and study of the documentation pertaining to this transaction, review of
financial statements, physical inspections and reviews, and for committing the
Loan, in the sum of ONE HUNDRED AND TWENTY THOUSAND ($120,000) (the "Commitment
Fee"), $80,000 of the Commitment Fee shall be apportioned to ▇▇▇▇▇▇▇ and the
remaining $40,000 of the Commitment Fee shall be apportioned to Sherfam. The
unpaid balance of the Commitment Fee shall be paid on the Funding Date.
7. Advance: The Lenders shall not be required to make an advance under the Loan
unless the following conditions have been satisfied by the Borrower at or prior
to the time of such advance under the Loan:
(a) no Event of Default or circumstance or event which with the lapse of
time or notice or both would constitute an Event of Default
("Default"), shall have occurred and be continuing;
(b) the Borrower shall have delivered a request for funds not less than
two (2) Business Days prior to the date of the requested advance,
which request shall provide that interest as provided for herein shall
be payable on the amount of the advance requested, notwithstanding
that funds may not be advanced on the date requested, unless the
failure to advance is attributable to the Lenders;
(c) the Borrower shall have, as security for the payment and performance
of the obligations and liabilities of the Borrower contained in this
Agreement, executed and delivered in form and content satisfactory to
the Lenders and their counsel each of the following:
(i) a general security agreement from the Borrower charging all of
its right, title and interest in all of its property, assets and
undertaking subject only to Permitted Encumbrances;
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(ii) an assignment of insurance coverages for the assets of the
Borrower satisfactory to the Lenders with the Lenders noted as
additional insured and as loss payee;
(iii) an assignment of all pending and registered, present and future,
patents, trademarks and license agreements of the Borrower
subject to Permitted Encumbrances (the "Borrower IP Security");
(iv) a guarantee ("Guarantee") of the obligations arising hereunder
from the Guarantor;
(v) a general security agreement from the Guarantor charging all of
its right, title and interest in all of its property, assets and
undertaking subject only to prior Permitted Encumbrances;
(vi) assignment of insurance coverages for the assets of the Guarantor
satisfactory to the Lenders with the Lenders noted as additional
insured and as loss payee;
(vii) an assignment of all pending and registered, present and future,
patents, trademarks and license agreements of the Guarantor
subject to Permitted Encumbrances (the "Guarantor IP Security");
(collectively, the "Security");
(d) the Security or a notice, caveat or financing statement shall have
been registered or filed in all places necessary or advisable in
connection therewith to preserve, perfect and protect the security
interests created thereby and all other additional documents and
opinions incidental thereto shall have been provided to the Lenders
and all action required by the Borrower, the Guarantor or any other
individual, partnership, corporation, trust or unincorporated
organization, including a government agency or political subdivision
thereof (collectively "person") to fully perfect and maintain the
Security as a charge and assignment of and upon the properties secured
thereby shall have been successfully completed; provided that the
Borrower IP Security and the Guarantor IP Security need not be
registered until such time as the Lenders elect in their sole
discretion;
(e) the Lenders shall have received evidence satisfactory to them that the
Borrower has not granted any security in competition with any of the
Security, save and except for Permitted Encumbrances;
(f) the Borrower shall have executed and issued in favour of the Lenders
1,320,000 common shares warrants (the "Warrants") of the Borrower, of
which 880,000 Warrants shall be apportioned to ▇▇▇▇▇▇▇ and 440,000
Warrants shall be apportioned to Sherfam, in form and substance
satisfactory to each of them, together with all necessary approvals
from the Toronto Stock Exchange approving the issuance and exercise of
the Warrants shall have been received. Each Warrant
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shall be exercisable in accordance with its terms at a price of $1.60
per share up to 5:00 p.m. on fifth anniversary date of this Agreement.
(g) the Lenders shall have received opinions of counsel for the Borrower
and the Guarantor acceptable to the Lenders;
(h) receipt and approval by the Lenders of evidence that the Borrower has
filed all material tax returns and paid or made provision for payment
of all taxes (including interest and penalties) and Potential
Prior-Ranking Claims when due;
(i) the Lenders shall have received and approved a detailed schedule of
fixed assets owned by each of the Borrower and the Guarantor;
(j) the Lenders shall have received and approved a current accounts
receivable listing for each of the Borrower and the Guarantor;
(k) the Lenders shall have received and approved the most recent available
quarterly and monthly financial statements for each of the Borrower
and the Guarantor;
(l) in the opinion of the Lenders, acting reasonably, no material adverse
change in the business of the Borrower or any associated, affiliated
or related company to the Borrower shall have occurred and there shall
not have occurred since September 30, 2002 any occurrence of national
or international consequence or any event, action, condition, law,
governmental action of any nature whatsoever, which in the reasonable
opinion of the Lenders, could materially adversely affect the business
operations, assets or affairs of World Heart or any related company or
enterprise; and
(m) the Lenders shall have received evidence satisfactory to it that the
Required Funding has been received by the Borrower or will be received
concurrently with the advance hereunder.
The Lenders shall have the sole discretion to waive (in writing) any
condition set forth above for the advance of the Loan.
8. Covenants: The Borrower and the Guarantor, as the case may be, covenant and
agree with the Lenders that until all amounts advanced under the Loan and all
interest, fees and any other amounts owing under this Agreement or the Security
have been paid in full:
(a) not to, without the express written consent of the Lenders, which
consent may be unreasonably withheld, further mortgage, charge, or in
any manner encumber or grant a security interest in any of the
collateral secured by the Security save and except for Permitted
Encumbrances, ordinary course equipment leases and purchase money
security interests;
(b) not to incur or create any further funded debt (other than in respect
of Permitted Encumbrances) which for greater certainty shall not
include accounts payable or debts incurred in the ordinary course of
business, or provide any security by way of debenture, charge, pledge,
specific security interest, general security
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agreement, general assignment of its assets or undertaking or
otherwise without the prior written consent and approval of the
Lenders which the Lenders may arbitrarily withhold;
(c) to obey or cause to be obeyed the laws, rules, regulations and by-laws
whether federal, provincial, state, regional or municipal which in any
way relate to their assets or the use thereof;
(d) to allow the Lenders and their authorized representatives access to
the assets of the Borrower and the Guarantor from time to time and
also access to the business and financial records of the Borrower and
the Guarantor at all reasonable times;
(e) to maintain full and complete up-to-date accounting records, income
statements, appropriate cash management systems, controls and reports
acceptable to the Lenders and to provide copies of same to Lenders
upon request. In the event the Borrower or the Guarantor fails to
provide proper accounting, as provided for herein, the Lenders may
hire as an agent of the Borrower or the Guarantor and at the expense
of the Borrower, appropriate accountants or bookkeepers as the Lenders
deems necessary to prepare such information and each of the Borrower
and the Guarantor covenants to cooperate fully with any such parties;
(f) to provide to the Lenders:
(i) within 21 days of each month end, internally prepared monthly
financial statements of the Borrower and the Guarantor together
with an Officer's Certificate substantially in the form attached
hereto as Schedule "C";
(ii) within 140 days of each fiscal year end of the Borrower and the
Guarantor audited consolidated annual financial statements of the
Borrower and the Guarantor audited by PricewaterhouseCoopers LLP;
(iii) a detailed operating budget, monthly reports, profit and loss
statement, balance sheet and operating and variance report upon
request of the Lender;
(g) to promptly deliver to the Lenders all material and information
presented to the Board of Directors of the Borrower and to permit the
Lenders to meet with the management of the Borrower at least once
during each fiscal quarter of the Borrower while the Loan is
outstanding;
(h) to promptly deliver to the Lenders regular progress reports on:
(i) any and all efforts made by the Borrower and/or the Guarantor to
raise further debt and/or equity funds;
(ii) updates with respect to all Federal Drug Administration approval
matters and like approvals in the United States together with
copies of any and all materials provided from time to time to
members of the Board of Directors of the Borrower and the
Guarantor or their respective committees;
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and such other reports as the Lenders may reasonably request
from time to time. The Borrower and the Guarantor and their
consultants shall cooperate fully in providing the above and
any other information requested by the Lenders;
(i) to ensure that each financial statement provided to the Lenders shall
be prepared in accordance with generally accepted accounting
principles consistently applied, shall be correct and complete and
fairly present the financial position of the person or entity which
each purports to reflect and, if such statement is audited, will be
accompanied by a report of the auditor, acceptable to the Lenders;
(j) to promptly pay all reasonable legal fees or other out-of-pocket
expenses incurred by the Lenders in connection with the Loan;
(k) save and except for a conversion of preferred shares held by ▇▇▇▇▇▇▇,
not to effect or allow to be effected a change in the Guarantor's
corporate structure without the express prior written consent of the
Lenders, which consent may not be unreasonably withheld;
(l) to pay out and discharge any and all liens, charges and encumbrances
affecting the collateral secured by the Security save and except only
the Permitted Encumbrances;
(m) except as provided herein or in the ordinary course of business, not
to sell, transfer, convey or encumber in any way the collateral
secured by the Security, or any part thereof, without the prior
written consent of the Lenders;
(n) to file all material tax returns which are to be filed by the Borrower
and the Guarantor from time to time, to pay or make provision for
payment of all taxes (including interest and penalties) and Potential
Prior-Ranking Claims when due, and to provide adequate reserves for
the payment of any tax, the payment of which is being contested; and
(o) not to, without prior written consent of the Lenders:
(i) declare any dividends or distributions payable to shareholders of
the Borrower;
(ii) reduce the Borrower's share capital by any means, including but
not limited to redeeming, purchasing or otherwise retiring any of
its issued and outstanding shares;
(iii) directly or indirectly invest in or lend money to its
shareholders, directors, officers or to any individual,
partnership, joint venture, trust, incorporated organization or
other person, which for greater certainty shall not include
inter-company payments between the Borrower and Guarantor;
(iv) directly or indirectly guarantee or otherwise provide for direct,
indirect or on a contingent basis, the payment of any monies or
the performance of any obligations by any third party; or
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(v) increase the remuneration paid to ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or Dr. Tofy
Mussivand beyond their current levels whether by way of salary,
bonus or otherwise.
9. Representations and Warranties: The Borrower and the Guarantor, as the case
may be, hereby represent and warrant (to the extent such representation and
warranty is applicable to it) to the Lenders that:
(a) each of this Agreement and the Security has been duly executed and
delivered by or on behalf of the Borrower and the Guarantor and each
of this Agreement, the Security and the Warrants constitutes a legal,
valid and binding obligation of the Borrower and the Guarantor, as the
case may be, enforceable in accordance with its terms;
(b) each of the Borrower and the Guarantor has and will at all time
hereafter have title to the collateral secured by the Security, free
and clear of any registered restrictions, mortgages, charges, liens
and other encumbrances subject to prior encumbrances agreed to in
writing by the Lenders;
(c) all the warranties and representations of the Borrower and the
Guarantor and the covenants contained in this Section 9 of this
Agreement and in the Security, will be true as at the time they are
made and will continue to be true and correct until the Loan is repaid
in full, and all covenants and agreements herein contained have been
observed and performed;
(d) none of the Borrower or the Guarantor is in default in any material
respect under, nor will the execution, delivery or performance by the
Borrower and the Guarantor of the Security, the Warrants and this
Agreement conflict with or constitute a default under any agreement,
document or instrument to which any of them is a party or by which any
of them may be bound or under any valid regulation, order, writ,
injunction or decree of any court or governmental authority and no
consent or approval of any such authority is required in connection
with the valid execution, delivery and performance by the Borrower and
the Guarantor of this Agreement, the Security or the Warrants;
(e) each of the Borrower and the Guarantor is duly qualified to carry on
its business and to own its assets, and has all necessary power,
authority, licenses and approvals required in connection with its
business and undertaking;
(f) each of the Borrower and the Guarantor is in good standing and is a
valid, subsisting corporation under the laws of its incorporating
jurisdiction;
(g) the contents of the documents furnished to the Lenders by or on behalf
of the Borrower and the Guarantor to induce it to lend the monies
hereby provided for are true and correct and accurately set out all
the facts required by the Lenders and contained therein;
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(h) save and except for the proceedings described in Schedule "B" hereto,
there is no outstanding judgment or award against the Borrower or the
Guarantor, there is no undisclosed material liability and there is no
action, suit, proceeding pending or threatened against or affecting
the Borrower or the Guarantor, which if determined against the
interests of the Borrower or the Guarantor, would result in a material
and adverse change in or effect on its financial position or business
or ability to repay the obligations and liabilities owing to the
Lenders hereunder and under the Loan;
(i) the Borrower and the Guarantor are in material compliance with all
conditions, ordinances, codes, regulations and laws of governmental
departments, and all agencies having authority, direction over or any
interest in their respective assets;
(j) the corporate structure provided to the Lenders relating to the
parties hereto is true and correct and accurately sets out the facts
required by the Lenders contained therein; and
(k) the registrations made in favour of ▇▇▇▇▇▇▇ against the Borrower or
Guarantor under the Personal Property Security Act (Ontario) having
reference file numbers 889333938 and 889333947 and similar filings
with the Secretary of States of California and Delaware relate solely
to transfers of receivables made by the Borrower to ▇▇▇▇▇▇▇ pursuant
to agreements, copies of which have been delivered to the Lenders and
are not in respect of any security interests granted by the Borrower
in favour of ▇▇▇▇▇▇▇.
10. Default: Each of the following events shall constitute an event of default
("Event of Default") under this Agreement:
(a) (i) if the Borrower defaults in payment of
(1) any principal payment due from time to time under the Loan;
or
(2) interest on the principal amount due from time to time under
the Loan; or
(3) any fee, or any other sum due under the Loan or the
Security; and
(ii) any such default is not remedied within ten (10) days of its
occurrence;
(b) if any representation or warranty made by the Borrower or the
Guarantor and contained in this Agreement or the Security or otherwise
in writing in connection herewith or therewith shall be untrue on the
date as of which made, on the Funding Date, or any date prior to the
date the Loan is repaid;
(c) if the Borrower or the Guarantor shall fail to perform or observe any
covenant, condition or provision to be performed or observed by either
of them under the terms of this Agreement, the Security or the
Warrants or any other agreement in writing in connection therewith or
herewith and such default is not remedied within ten (10) days
following receipt of written notice from the Lenders;
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(d) if any material order, approval, consent, exemption, permit or
authorization having been made or granted to the Borrower or the
Guarantor shall be revoked, rescinded, suspended or otherwise limited
in effect, the result of which would cause a material adverse effect
on the financial position or operations of the Borrower or the
Guarantor;
(e) if ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or Dr. Tofy Mussivand cease to hold directly or
indirectly any of their direct or indirect shareholdings in the
Borrower or shall otherwise dispose of or encumber any rights or
interest in such shares; provided that the pledges of any such shares
made prior to the date hereof shall be permitted to exist but any
enforcement of such pledges will result in a default under this
Section 10(e);
(f) if the Shareholders' Equity (determined before Non-Cash Accounting
Entries) is less than $6,000,000 and such shortfall occurs in each
month for any consecutive two month period;
(g) if revenues (determined before Non-Cash Accounting Entries) of the
Borrower on a consolidated basis are less than $600,000 for any given
month or, on a rolling three month basis starting in March 2003, is
less than $2.5 million for the relevant rolling three month period;
(h) if the Borrower has an Operating Loss in excess of $2,500,000 for each
month during any consecutive two month period;
(i) if any insurance policies to be provided by the Borrower or the
Guarantor pursuant hereto shall be or become cancelled or invalidated
or altered in any material respect for any reason before such policy
is replaced with another policy which complies with the provisions
hereof;
(j) if an encumbrancer shall commence an action to enforce its security
against the collateral secured under the Security or take possession
of or appoint a receiver, trustee, conservator or liquidator in
respect of the collateral secured under the Security or any
substantial part thereof or if a distress, execution, attachment, tax
levy or any similar process be levied or enforced against the
collateral secured under the Security and remain unsatisfied for
thirty (30) days or such shorter period as would permit the collateral
secured under the Security or such part thereof to be sold thereunder;
(k) if the Borrower or the Guarantor suspends or discontinues its
business, or if the Borrower or the Guarantor shall become insolvent
(however such insolvency may be evidenced) or bankrupt or commit an
act of bankruptcy or shall make an assignment for the benefit of or a
composition with creditors, or shall be unable or admit in writing its
inability to pay its debts as they mature, or if bankruptcy,
reorganization, arrangement, insolvency or similar proceedings for
relief of financially distressed debtors shall be instituted against
the Borrower or the Guarantor, or if the Borrower or the Guarantor
shall petition for or there shall be appointed for the Borrower or the
Guarantor, or for a substantial part of the assets
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of the Borrower or the Guarantor, receiver or liquidator, or if the
Borrower or the Guarantor shall take any action for the purpose of
effecting any of the foregoing;
(l) if the Borrower or the Guarantor is in default of any secured
indebtedness in excess of the aggregate amount of $500,000 and such
default shall continue for more than any period of grace specified
with respect to such indebtedness or if there is any other unremedied
default under any encumbrance in respect of the assets of the Borrower
or the Guarantor, or if there is any unremedied default under any
encumbrance of the Borrower or the Guarantor which could result in the
encumbrancer accelerating the payment of debt or exercising its
remedies under its security;
(m) if any adverse change occurs in the information supplied or in the
financial stability of the Borrower, the Guarantor and/or the
collateral given as security for the Loan, or the enforceability of
the Lender's Security, or have a material adverse impact upon the
value of the Lender's Security at any time, or should there be any
action, suits or pending proceedings which in the opinion of the
Lender, acting reasonably, may have a material adverse impact on the
Borrower or the Guarantor or if any event shall have occurred which in
the opinion of the Lender, acting reasonably, materially and adversely
effects the financial position or operations of the Borrower or the
Guarantor;
(n) if at any time the shares of the Borrower are subject to a cease
trading order for a period of 7 consecutive days on which trading is
conducted on the Toronto Stock Exchange other than for a cease trading
for technical reasons relating solely to the Toronto Stock Exchange;
or
(o) if the Borrower is in default of any of its other obligations under
this Agreement or the Security and such default shall continue
unremedied for thirty (30) days.
11. Remedies: If any amount shall become due and payable by the Borrower
hereunder or under the Security, whether by demand, default or otherwise, and
shall not be paid when due or if any Event of Default shall have occurred and be
continuing, then and in each such event any one or more of the following actions
may be taken:
(a) either of the Lenders may make demand for repayment of the Loan and
the Loan shall thereupon become due and payable in full without
further demand, protest or other notice of any kind to the Borrower,
all of which are hereby expressly waived;
(b) either of the Lenders may realize upon any and all security granted to
it and may commence such legal actions or proceedings against the
Borrower or the Guarantor or against its or their property or assets
as may be permitted hereby, by the Security or by any one or more of
them; or at law or in equity, all as in its sole discretion as the
Lenders or any one of them deems expedient; and the Borrower and the
Guarantor acknowledge that the Lenders' remedies are cumulative and
not exclusive;
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(c) the security constituted by the Security and each and every part of
them shall forthwith be and become enforceable by the Lenders; and
(d) each of the Lenders shall have the right, but shall not be obliged:
(i) to pay (either out of the monies to be advanced hereunder or
otherwise if the full amount to be advanced hereunder has been
advanced) any sums of money required to be paid hereunder or
under the Security by all or any of the Borrower and the
Guarantor and providing that any monies so advanced shall bear
interest at the Interest Rate; and
(ii) to perform any covenant, agreement or obligation of the Borrower
or the Guarantor hereunder or under the Security.
12. Set-off: Each of the Lenders is authorized (but not obligated) at any time
or from time to time (upon the occurrence of an Event of Default which is
continuing and has not been waived) to set off and apply any and all amounts at
any time held by or owing by such Lender to or for the credit of the account of
the Borrower against and on account of the obligations and liabilities of the
Borrower under this Agreement irrespective of currency and although any of the
obligations and liabilities of any of them are matured or contingent.
13. Assignment: None of the Borrower or the Guarantor shall assign any of their
rights or obligations under this Agreement or any of the Security without the
prior written consent of the Lenders, which consent may be arbitrarily withheld.
14. Syndication: The Lenders' rights and obligations under this Agreement may be
assigned by way of syndication or otherwise, providing that the Lenders shall
not be released from its obligations to the Borrower hereunder, save and except
that any Lender may, following an Event of Default, assign all its rights and
obligations to any person. In connection with any assignment by the Lenders, the
Borrower and the Guarantor agree to execute estoppel certificates or other
acknowledgments as required by the Lenders, and agree that the Lenders may make
available to the assignee such documentation and information relating to the
Borrower and the Guarantor and the Loan as may be reasonably required in
connection therewith.
15. No Waiver of Breach: No failure of the Lenders to pursue any remedy
resulting from a breach of this Agreement or any document or agreement delivered
pursuant hereto by the Borrower or the Guarantor shall be construed as a waiver
of that breach by the Lenders or as a waiver of any subsequent or other breach,
and no exercise of any right hereunder shall preclude the exercise of any such
right on any subsequent occasion.
16. Further Assurances: The Borrower and the Guarantor shall execute and deliver
to the Lenders such additional documents and shall provide such additional
information as the Lenders may reasonably require to carry out the terms of this
Agreement.
17. Governing Law: The parties agree that this Agreement shall be conclusively
deemed to be a contract made under, and shall for all purposes be governed by
and construed in accordance with, the laws of the Province of Ontario and the
federal laws of Canada applicable therein.
-14-
18. Amendment and Waiver: No provision of this Agreement or the Security or any
of the documents collateral hereto or thereto may be changed, modified or
amended other than by an agreement in writing signed by each of the parties
hereto or thereto.
19. No Joint Venture: This Agreement does not and shall not be construed to
create any joint venture or partnership or agency whatsoever. All decisions in
respect of the administration of the Loan shall be made jointly by the Lenders
save and except (i) all matters relating to the payment of principal, interest
and fees owed to a particular Lender; and (ii) all matters relating to the
determination of and remedies available and exercised pursuant to an Event of
Default, which, in each case, may be made severally, by each Lender.
20. Interest: Notwithstanding any term or condition of this Agreement, in the
event that interest payable in respect of the Loan exceeds the maximum amount of
interest payable by law, then the amount of the interest payable in respect of
the Loan shall be automatically reduced to be the maximum amount of interest
permitted by law and the Lenders' right to receive payments shall be so
automatically reduced.
21. Severability: Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
22. No Obligation to Advance: Neither the execution nor delivery of this
Agreement, in and of itself, shall obligate the Lenders to make any advance to
the Borrower hereunder.
23. Survival and Non-Merger: All representations, warranties, covenants and
agreements made in this Agreement or otherwise in writing in connection with
this Agreement by the Borrower and the Guarantor, as the case may be, shall
remain binding on each of the Borrower and the Guarantor notwithstanding the
advance of the Loan. The covenant of the Borrower to pay interest at the rate
provided herein shall not merge in any judgment in respect of any obligation of
the Borrower under this Agreement, and any judgment shall bear interest at the
same rate.
24. Conflict: In the event of a conflict between the provisions of this
Agreement and the provisions of the Security the provisions of this Agreement
shall prevail.
25. Currency: All amounts set forth in this Agreement are in Canadian dollars
unless otherwise indicated.
26. Time of Essence: Time shall be of the essence of this Agreement.
-15-
27. Notices: Any notice or other communication which may be or is required to be
given or made pursuant to this Agreement shall, unless otherwise expressly
provided herein, be in writing, and shall be personally delivered or sent by
telecopy to either party at its address set forth below:
(a) if to the Borrower and the Guarantor at:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Chief Financial Officer
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Lenders, at:
▇▇▇▇▇▇▇ Lifesciences LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
- and -
Sherfam Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change its address for service by delivering a notice in
accordance with the foregoing provisions to the other party hereto. All such
notices, requests, demands or other communications shall be effective when
delivered or sent by facsimile, receipt confirmed.
28. Confidentiality: The Lenders, the Borrower and the Guarantor shall keep
confidential the existence and contents of this Agreement and all documentation
executed and delivered in connection therewith and the Lenders shall keep
confidential all information, documents and materials provided to it in
connection with the business and operations of the Borrower and the Guarantor
except as required under applicable securities law, except for information
required to be given to their professional advisors in connection with this
transaction, except as the Lenders may be legally compelled to disclose and
except for information which has become generally available to the public.
Provided always that the Lenders may disclose, to proposed syndicate
participants and assigns contemplated by Section 14 hereof, this Agreement, the
documents delivered in connection therewith and information regarding the
Borrower and the Guarantor provided to the Lenders as the Lenders may determine
to be necessary for its purposes outlined in Section 13 hereof provided that the
recipients thereof execute an acknowledgement to the Borrower and the Guarantor
to be bound by the terms of this Section 28 with respect to all such materials.
-16-
29. Indemnity: The Borrower and the Guarantor agree to indemnify and hold each
of the Lenders and their respective officers, directors, employees, counsel,
agents and attorneys in fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loan) be imposed on, incurred by or asserted against any such
person in any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby,
or any action taken or omitted by any such person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including any insolvency proceeding or appellate proceeding) related
to or arising out of this Agreement or the Loan or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that neither
the Borrower nor the Guarantor shall have any obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely from
the gross negligence or wilful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other obligations
hereunder.
30. Interpretation: This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
The section and other headings set forth in this Agreement are inserted for
convenience and reference only and shall in no way define or limit the intent or
interpretation of any of the provisions hereof. This Agreement shall be read and
construed with all the changes of gender and number of the party or parties
referred to in each case as required by the context. The terms and conditions
set forth on any Schedules referred to or attached to this Agreement are deemed
to be included in this Agreement and form a part hereof. 31. Successors and
Assigns: All covenants, agreements, representations and warranties made herein
or in any certificate delivered in connection herewith shall bind and enure to
the benefit of the successors and permitted assigns of the Borrower and the
Guarantor and the successors and assigns of the Lenders.
32. Counterparts: This Agreement may be executed in several counterparts, each
of which when so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Loan Agreement as of the
day and year first above written.
WORLD HEART CORPORATION
Per: /s/▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: VP Finance and CFO
▇▇▇▇▇▇▇ LIFESCIENCES LLC
Per: /s/▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President and General
Counsel
SHERFAM INC.
Per: /s/▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
WORLD HEART INC.
Per: /s/▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
