1
EXHIBIT 10.11
[LEASE MANAGEMENT SERVICES, INC. LOGO]
EQUIPMENT FINANCING AGREEMENT
(Number 10802)
THIS EQUIPMENT FINANCING AGREEMENT NUMBER 10802 ("Agreement") is dated as of
the date set forth at the foot hereof and is between LEASE MANAGEMENT SERVICES,
INC., ("Secured Party") and ADVANCED CORNEAL SYSTEMS, INC., ("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this Agreement
cover each item of machinery, equipment and other property (individually an
"Item" or "Item of Equipment" and collectively the "Equipment") described in a
schedule now or hereafter executed by the parties hereto and made a part hereof
(individually a "Schedule" and collectively the "Schedules"). Debtor hereby
grants Secured Party a security interest in and to all Debtor's right, title
and interest in and to the Equipment under the Uniform Commercial Code, such
grant with respect to an Item of Equipment to be as of Debtor's execution of a
related Equipment Financing Commitment referencing this Agreement or, if Debtor
then has no interest in such Item, as of such subsequent time as Debtor
acquires an interest in the Item. Such security interest is granted by Debtor
to secure performance by Debtor of Debtor's obligations to Secured Party
hereunder and under any other agreements under which Debtor has or may
hereafter have obligations to Secured Party. Debtor will ensure that such
security interest will be and remain a sole and valid first lien security
interest subject only to the lien of current taxes and assessment not in
default but only if such taxes are entitled to priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this Agreement
respecting an Item of Equipment, except the obligation to pay installment
payments with respect thereto which will commence as set forth in Paragraph 3
below, commence upon the grant to Secured Party of a security interest in the
Item. Debtor's obligations hereunder with respect to an Item of Equipment and
Secured Party's security interest therein will continue until payment of all
amounts due, and performance of all terms and conditions required hereunder
provided, however, that if this Agreement is in default said obligations and
security interest will continue during the continuance of said default. Upon
termination of Secured Party's security interest in an Item of Equipment,
Secured Party will execute such release of interest with respect thereto as
Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances
Secured Party makes on account of the Equipment in installment payments in the
amounts and at the times set forth in the Schedules, whether or not Secured
Party has rendered an invoice therefor, at the office of Secured Party set
forth at the foot hereof, or to such person and/or at such other place as
Secured Party may from time to time designate by notice to Debtor. Any other
amounts required to be paid Secured Party by Debtor hereunder are due upon
Debtor's receipt of Secured Party's invoice therefor and will be payable as
directed in the invoice. Payments under this Agreement may be applied to
Debtor's then accrued obligations to Secured Party in such order as Secured
Party may choose.
4. NET AGREEMENT; NO OFFSET, SURVIVAL. This Agreement is a net agreement, and
Debtor will not be entitled to any abatement of installment payments or other
payments due hereunder or any reduction thereof under any circumstance or for
any reason whatsoever. Debtor hereby waives any and all existing and future
claims, as offsets, against any installment payments or other payments due
hereunder and agrees to pay the installment payments and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Debtor or on its behalf. The obligations and liabilities of Debtor
hereunder will survive the termination of the Agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND
ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND
WILL NOT BE THE VENDOR OF ANY
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ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT, FINANCING AGREEMENT NUMBER 10802
PAGE 2 OF 8
EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT,
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION,
QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT OR
ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR OTHER
SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN CONNECTION
WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY IS NOT BOUND BY
A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN PARAGRAPH 27 BELOW,
THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR CONCERNING THE FINANCING OF THE
EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS IT MAY BE AMENDED ONLY AS PROVIDED
IN THAT PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering
the Equipment or any Items thereof will conclusively establish that such
Equipment has been included under and will be subject to all the terms and
conditions of this Agreement. If Debtor has not furnished Secured Party with an
executed Schedule by the earlier of fourteen (14) days after receipt thereof or
expiration of the commitment period set forth in the applicable Equipment
Financing Agreement, Secured Party may terminate its obligation to advance
funds as to the applicable Equipment.
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control at the
Equipment Location designated in the applicable Schedule, or at such other
location to which such Item may have been moved with the prior written consent
of Secured Party. Whenever requested by Secured Party, Debtor will advise
Secured Party as to the exact location of an Item of Equipment. Secured Party
will have the right to inspect the Equipment and observe its use during normal
business hours, subject to Debtor's security procedures and to enter into and
upon the premises where the Equipment may be located for such purpose. The
Equipment will at all times be used solely for commercial or business purposes
and operated in a careful and proper manner and in compliance with all
applicable laws, ordinances, rules and regulations, all conditions and
requirements of the policy or policies of insurance required to be carried by
Debtor under the terms of this Agreement and all manufacturer's instructions
and warranty requirements. Any modifications or additions to the Equipment
required by any such governmental edict or insurance policy will be promptly
made by Debtor.
9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written
consent of Secured Party, Debtor will not make any alterations, additions or
improvements to any Item of Equipment which detract from its economic value or
functional utility, except as may be required pursuant to Paragraph 8 above.
Secured Party's security interest in the Equipment will include all
modifications and additions thereto and replacements and substitutions
therefor, in whole or in part. Such reference to replacements and substitutions
will not grant Debtor greater rights to replace or substitute than are provided
in Paragraph 11 below or as may be allowed upon the prior written consent of
Secured Party.
10. MAINTENANCE. Debtor will maintain the Equipment in good repair, condition
and working order. Debtor will also cause each Item of Equipment for which a
service contract is generally available to be covered by such a contract which
provides coverages typical to property of the type involved and is issued by a
competent servicing entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment ("Casualty
Occurrence"), Debtor will give Secured Party prompt notice thereof and will
thereafter place such Item in good repair,
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EQUIPMENT FINANCING AGREEMENT NUMBER 10802
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condition and working order, provided, however, that if such Item is determined
by Secured Party to be lost, stolen, destroyed or damaged beyond repair, is
requisitioned or suffers a constructive total loss as defined in any applicable
insurance policy carried by Debtor in accordance with Paragraph 14 below,
Debtor, at Secured Party's option, will (a) replace such Item with like
Equipment in good repair, condition and working order whereupon such replacement
equipment will be deemed such Item for all purposes hereof or (b) pay Secured
Party the "Casualty Value" of such Item which will equal the total of (i) all
installment payments and other amounts due from Debtor to Secured Party at the
time of such payment and (ii) future installment payments due with respect to
such Item with each such payment including any final uneven payment discounted
at a rate equal to the discount rate of the Federal Reserve Bank of San
Francisco from the date due to the date of such payment.
Upon such replacement or payment, as appropriate, this Agreement and Secured
Party's security interest will terminate with, and only with, respect to the
Item of Equipment so replaced or as to which such payment is made in accordance
with Paragraph 2 above.
12. TITLING; REGISTRATION. Each item of Equipment subject to title
registration laws will at all times be titled and/or registered by Debtor as
Secured Party's agent and attorney-in-fact with full power and authority to
register (but without power to affect title to) the Equipment in such manner and
in such jurisdiction or jurisdictions as Secured Party directs. Debtor will
promptly notify Secured Party of any necessary or advisable retitling and/or
reregistration of an Item of Equipment in a jurisdiction other than the one in
which such Item is then titled and/or registered. Any and all documents of title
will be furnished or caused to be furnished Secured Party by Debtor within sixty
(60) days of the date any titling or registering or restating or reregistering,
as appropriate, is directed by Secured Party.
13. TAXES. Debtor will make all filings as to any pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges and
assessments based on the ownership or use of the Equipment and will pay as
directed by Secured Party or reimburse Secured Party for all other taxes,
including, but not limited to, gross receipt taxes (exclusive of federal and
state taxes based on Secured Party's net income, unless such net income taxes
are in substitution for or relieve Debtor from any taxes which Debtor would
otherwise be obligated to pay under the terms of this Paragraph 13), fees,
charges and assessments whatsoever, however designated, whether based on the
installment payments or other amounts due hereunder, levied, assessed or imposed
upon the Equipment or otherwise related hereto or to the Equipment, now or
hereafter levied, assessed or imposed under the authority of a federal, state,
or local taxing jurisdiction, regardless of when and by whom payable. Filings
with respect to such other amounts will, at Secured Party's option, be made by
Secured Party or by Debtor as directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk insurance
against loss or damage to the Equipment from any cause whatsoever for not less
than the full replacement value thereof naming Secured Party as Loss Payee. Such
insurance must be in a form and with companies approved by Secured Party, must
provide at least thirty (30) days advance written notice to Secured Party of
cancellation, change or modification in any term, condition, or amount of
protection provided therein, must provide full breach of warranty protection
and must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide Secured
Party with an original policy or certificate evidencing such insurance. In the
event of an assignment of this Agreement of which Debtor has notice, Debtor
will cause such insurance to provide the same protection to the assignee as its
interests may appear. The proceeds of such insurance, at the option of the
Secured Party or such assignee, as appropriate, will be applied toward (a)
repair or replacement of the appropriate Item or Items of Equipment, (b)
payment of the Casualty Value thereof and/or (c) payment of, or as provision
for, satisfaction of any other accrued obligations of Debtor hereunder. Debtor
hereby appoints Secured Party as Debtor's attorney-in-fact with full power and
authority to do all things, including, but not limited to, making claims,
receiving payments and endorsing documents, checks or drafts, necessary to
secure payments due under any policy contemplated hereby on account of a
Casualty
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Occurrence. Debtor and Secured Party contemplate that the jurisdictions where
the Equipment will be located will not impose any liability upon Secured Party
for personal injury and/or property damage resulting out of the possession, use,
operation or condition of the Equipment. In the event Secured Party determines
that such is not or may not be the case with respect to a given jurisdiction,
Debtor will provide Secured Party with public liability and property damage
coverage applicable to the Equipment in such amounts and in such form as Secured
Party requires.
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due hereunder
or to perform any of its other obligations under this Agreement, Secured Party
may, at its option, but without any obligation to do so, pay such amounts or
perform such obligations, and Debtor will reimburse Secured Party the amount of
such payment or cost of such performance, plus interest at 1.5% per month.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from and
against any and all liabilities, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including court costs and legal
expenses, of whatever kind and nature, imposed on, incurred by or asserted
against Secured Party (whether or not also indemnified against by any other
person) in any way relating to or arising out of this Agreement or the
manufacture, financing, ownership, delivery, possession, use, operation,
condition or disposition of the Equipment by Secured Party or Debtor,
including, without limitation, any claim alleging latent and other defects,
whether or not discoverable by Secured Party or Debtor, and any other claim
arising out of strict liability in tort, whether or not in either instance
relating to an event occurring while Debtor remains obligated under this
Agreement, and any claim for patent, trademark or copyright infringement. Debtor
agrees to give Secured Party and Secured Party agrees to give Debtor notice of
any claim or liability hereby indemnified against promptly following learning
thereof.
17. DEFAULT. Any of the following will constitute an event of default
hereunder: (a) Debtor's failure to pay when due any installment payment or other
amount due hereunder, which failure continues for ten (10) days after the due
date thereof; (b) Debtor's default in performing any other obligation, term or
condition of this Agreement or any other agreement between Debtor and Secured
Party or default under any further agreement providing security for the
performance by Debtor of its obligations hereunder provided such default has
continued for more than twenty (20) days, except as provided in (c) and (d)
hereinbelow, or, without limiting the generality of subparagraph (1)
hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the real
property where an Item of Equipment is located; (c) any writ or order of
attachment or execution or other legal process being levied on or charged
against any Item of Equipment and not being released or satisfied within ten
(10) days; (d) Debtor's failure to comply with its obligations under Paragraph
14 above or any transfer by Debtor in violation of Paragraph 21 below; (e) a
non-appealable judgment for the payment of money in excess of $100,000 being
rendered by a court of record against Debtor which Debtor does not discharge or
make provision for discharge in accordance with the terms thereof within ninety
(90) days from the date of entry thereof; (f) death or judicial declaration of
incompetency of Debtor, if an individual; (g) the filing by Debtor of a petition
under the Bankruptcy Code or any amendment thereto or under any other insolvency
law or law providing for the relief of debtors, including, without limitation, a
petition for reorganization, arrangement or extension, or the commission by
Debtor of an act of bankruptcy; (h) the filing against Debtor of any such
petition not dismissed or permanently stayed within thirty (30) days of the
filing thereof; (i) the voluntary or involuntary making of an assignment of
substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's assets,
institution by or against Debtor or any other type of insolvency proceeding
(under the Bankruptcy Code or otherwise) or of any formal or informal proceeding
for dissolution, liquidation, settlement of claims against or winding up of the
affairs or Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets or
inventory not in the ordinary course of business; (j) the occurrence of any
event described in parts (e), (f), (g), (h) or (i) hereinabove with respect to
any guarantor or
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EQUIPMENT FINANCING AGREEMENT NUMBER 10802
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other party liable for payment or performance of this Agreement; (k) any
certificate, statement, representation, warranty or audit heretofore or
hereafter furnished with respect hereto by or on behalf of Debtor or any
guarantor or other party liable for payment or performance of this Agreement
proving to have been false in any material respect at the time as of which the
facts therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor or any
such guarantor or other party; (l) breach by Debtor of any lease or other
agreement providing financial accommodation under which Debtor or its property
is bound; or (m) a transfer of effective control of Debtor, if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a Secured Party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial Code
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and, without limiting
the foregoing, Secured Party may exercise any one or more of the following
remedies: (a) declare the Casualty Value or such lesser amount as may be set by
law immediately due and payable with respect to any or all Items of Equipment
without notice or demand to Debtor; (b) ▇▇▇ from time to time for and recover
all installment payments and other payments then accrued and which accrue during
the pendency of such action with respect to any or all Items of Equipment; (c)
take possession of and, if deemed appropriate, render unusable any or all Items
of Equipment, without demand or notice, wherever same may be located, without
any court order or other process of law and without liability for any damages
occasioned by such taking of possession and remove, keep and store the same or
use and operate or lease the same until sold; (d) require Debtor to assemble any
or all Items of Equipment at the Equipment Location therefor, or at such
location to which such Equipment may have been moved with the written consent of
Secured Party or such other location in reasonable proximity to either of the
foregoing as Secured Party designates; (e) upon ten (10) days notice to Debtor
or such other notice as may be required by law, sell or otherwise dispose of any
Item of Equipment, whether or not in Secured Party's possession, in a
commercially reasonable manner at public or private sale at any place deemed
appropriate and apply the new proceeds of such sale, after deducting all costs
of such sale, including, but not limited to, costs of transportation,
repossession, storage, refurbishing, advertising and brokers' fees, to the
obligations of Debtor to Secured Party hereunder or otherwise, with Debtor
remaining liable for any deficiency and with any excess being returned to
Debtor; (f) upon thirty (30) days notice to Debtor, retain any repossessed or
assembled Items of Equipment as Secured Party's own property in full
satisfaction of Debtor's liability for the installment payments due hereunder
with respect thereto, provided that Debtor will have the right to redeem such
Items by payment in full of its obligations to Secured Party hereunder or
otherwise or to require Secured Party to sell or otherwise dispose of such Items
in the manner set forth in subparagraph (e) hereinabove upon notice to Secured
Party within such thirty (30) day period; or (g) utilize any other remedy
available to Secured Party under the Uniform Commercial Code or similar
provision of law or otherwise at law or in equity.
No right or remedy conferred herein is exclusive of any other right or remedy
conferred herein or by law; but all such remedies are cumulative of every other
right or remedy conferred hereunder or at law or in equity, by statute or
otherwise, and may be exercised concurrently or separately from time to time.
Any sale contemplated by subparagraph (e) of this Paragraph 18 may be adjourned
from time to time by announcement at the time and place appointed for such sale,
or for any such adjourned sale, without further published notice, Secured Party
may bid and become the purchaser at any such sale. Any sale of an Item of
Equipment, whether under said subparagraph or by virtue of judicial proceedings,
will operate to divest all right, title, interest, claim and demand whatsoever;
either at law or in equity, of Debtor in and to said item and will be a
perpetual bar to any claim against such Item, both at law and in equity, against
Debtor and all persons claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this Agreement and such proceedings are discontinued or abandoned for any
reason or are
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ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
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determined adversely, then and in every such case Debtor and Secured Party will
be restored to their former positions and rights hereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorney's fees and court costs and sales costs not offset
against sales proceeds under Paragraph 18 above, incurred by Secured Party in
exercising any of its rights or remedies hereunder or enforcing any of the
terms, conditions or provisions hereof. This obligation includes the payment or
reimbursement of all such amounts whether an action is ultimately filed and
whether an action is ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor
will not sell, lease, pledge or hypothecate, except as provided in this
Agreement, any Item of Equipment or any interest therein or assign, transfer,
pledge, or hypothecate this Agreement or any interest in this Agreement or
permit the Equipment to be subject to any lien, charge or encumbrance of any
nature except the security interest of Secured Party contemplated hereby.
Debtor's interest herein is not assignable and will not be assigned or
transferred by operation of law. Consent to any of the foregoing prohibited acts
applies only in the given instance and is not a consent to any subsequent like
act by Debtor or any other person.
All rights of Secured Party hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without notice
to Debtor but always, however, subject to the rights of Debtor under this
Agreement. If Debtor is given notice of any such assignment, Debtor will
acknowledge receipt thereof in writing. In the event Secured Party assigns this
Agreement or the installment payments due or to become due hereunder or any
other interest herein, whether as security for any of its indebtedness or
otherwise, no breach or default by Secured Party hereunder or pursuant to any
other agreement between Secured Party and Debtor, should there be one, will
excuse performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor will pursue
any rights on account thereof solely against Secured Party. No such assignee,
unless such assignee agrees in writing, will be obligated to perform any duty,
covenant or condition required to be performed by Secured Party in connection
with this Agreement.
Subject always to the foregoing, this Agreement inures to the benefit of, and is
binding upon, the heirs, legatees, personal representative, successors and
assigns of the parties hereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with labels,
plates, decals or other markings stating that Secured Party has an interest in
the Equipment, Debtor will affix and keep the same prominently displayed on the
Equipment or will otherwise ▇▇▇▇ the Equipment or its then location or
locations, as appropriate, at Secured Party's request to indicate Secured
Party's security interest in the Equipment. The Equipment is, and at all times
will remain, personal property notwithstanding that the Equipment or any Item
thereof may now be, or hereafter become, in any manner affixed or attached to,
or embedded in, or permanently resting upon real property or any improvement
thereof or attached in any manner to what is permanent as by means of cement,
plaster, nails, bolts, screws or otherwise. If requested by Secured Party,
Debtor will obtain and deliver to Secured Party waivers of interest or liens in
recordable form satisfactory to Secured Party from all persons claiming any
interest in the real property on which an Item of Equipment is or is to be
installed or located.
23. LATE CHARGES. Time is of the essence in this Agreement and if any
Installment Payment is not paid within ten (10) days after the due date thereof,
Secured Party shall have the right to add and collect, and Debtor agrees to pay:
(a) a late charge on and in addition to, such Installment Payment equal to five
percent (5%) of such Installment Payment or a lesser amount if established by
any state or federal statute applicable thereto, and (b) interest on such
Installment Payment from thirty (30) days after the due date until paid at the
highest contract rate enforceable against Debtor under applicable law but never
to exceed eighteen percent (18%) per annum.
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EQUIPMENT FINANCING AGREEMENT NUMBER 10802
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24. NON-WAIVER. No covenant or condition of this Agreement can be waived
except by the written consent of Secured Party. Forbearance or indulgence by
Secured Party in regard to any breach hereunder will not constitute a waiver of
the related covenant or condition to be performed by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party hereunder
Debtor will execute and deliver to Secured Party such financing statements and
similar documents as Secured Party requests. Debtor authorizes Secured Party
where permitted by law to make filings of such financing statements without
Debtor's signature. Debtor further will furnish Secured Party (a) on a timely
basis, Debtor's future financial statements, including Debtor's most recent
annual report, balance sheet and income statement, prepared in accordance with
generally accepted accounting principles, which reports, Debtor warrants, shall
fully and fairly represent the true financial condition of Debtor (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this Agreement and the Equipment,
including, without limitation, copies of vendor proposals and purchase orders
and agreements, listings of serial numbers or other identification data and
confirmations of such information, as Secured Party may from time to time
reasonably request. Debtor will procure and/or execute, have executed,
acknowledge, have acknowledged, deliver to Secured Party, record and file such
other documents and showings as Secured Party deems necessary or desirable to
protect its interest in and rights under this Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all filing, search, title report, legal and other fees incurred by
Secured Party in connection with any documents to be provided by Debtor pursuant
to this Paragraph or Paragraph 22 and any further similar documents Secured
Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial
data and other information which Debtor has submitted, or will submit, to
Secured Party in connection with this Agreement is, or will be at time of
delivery, as appropriate, a true and complete statement of the matters therein
contained. Debtor further certifies and warrants; (a) this Agreement has been
duly authorized by Debtor and when executed and delivered by the person signing
on behalf of Debtor below will constitute the legal, valid and binding
obligation, contract and agreement of Debtor enforceable against Debtor in
accordance with its respective terms; (b) this Agreement and each and every
showing provided by or on behalf of Debtor in connection herewith may be relied
upon by Secured Party in accordance with the terms thereof notwithstanding the
failure of Debtor or other applicable party to ensure proper attestation
thereto, whether by absence of a seal or acknowledgement or otherwise; (c)
Debtor has the right, power and authority to grant a security interest in the
Equipment to Secured Party for the uses and purposes herein set forth and (d)
each Item of Equipment will, at the time such Item becomes subject hereto, be
in good repair, condition and working order.
27. ENTIRE AGREEMENT. This instrument with exhibits and related documentation
constitutes the entire agreement between Secured Party and Debtor and will not
be amended, altered or changed except by a written agreement signed by the
parties.
28. NOTICES. Notices under this Agreement must be in writing and must be
mailed by United States mail, certified mail with return receipt requested,
duly addressed, with postage prepaid, to the party involved at its respective
address set forth at the foot hereof or at such other address as each party may
provide on notice to the other from time to time. Notices will be effective
when deposited. Each party will promptly notify the other of any change in that
party's address.
29. GENDER, NUMBER: JOINT AND SEVERAL LIABILITY. Whenever the context of this
Agreement requires, the neuter gender includes the feminine or masculine and
the singular number includes the plural; and whenever the words "Secured Party"
are used herein, they include all assignees of Secured Party, it being
understood that specific reference to "assignee" in
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Paragraph 14 above is for further emphasis. If there is more than one Debtor
named in this Agreement, the liability of each will be joint and several.
30. TITLES. The titles to the Paragraphs of this Agreement are solely for the
convenience of the parties and are not an aid in the interpretation of the
instrument.
31. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in
accordance with the laws of the State of California. Venue for any action
related to the Agreement will be in an appropriate court in San Mateo County,
California, to which Debtor consents, or in another court selected by Secured
Party which has jurisdiction over the parties. In any event any provision hereof
is declared invalid, such provision will be deemed severable from the remaining
provisions of this Agreement, which will remain in full force and effect.
32. TIME. Time is of the essence of this Agreement and for each and all of
its provisions.
In WITNESS WHEREOF, the undersigned have executed this Agreement as of October
7, 1996.
DEBTOR:
ADVANCED CORNEAL SYSTEMS, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Title: V.P., Chief Financial Officer
SECURED PARTY:
LEASE MANAGEMENT SERVICES, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ [illegible]
-----------------------------
Title: EVP/ General Manager
9
[LEASE MANAGEMENT SERVICES, INC. LOGO]
CERTIFIED COPY OF RESOLUTIONS OF
BOARD OF DIRECTORS
I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, hereby certify that I am the Corporate Secretary and
official custodian of certain records including the Charter, By-Laws, and the
Minutes of the Meetings of the Board of Directors of ADVANCED CORNEAL SYSTEMS,
INC., a Corporation duly organized and existing under the laws of the State of
California, that the following is a true, accurate and compared transcript of
the Resolutions contained in the Minute Book of the Corporation, duly adopted
by the Board of Directors of said Corporation at a Meeting of the Board of
Directors of said Corporation duly held on the 10th day of September, 1996, at
which time a quorum was present and acted throughout and authorized its
officers to transact the business hereinafter described, and that the
proceedings of said meeting were in accordance with the Charter and By-Laws of
said Corporation and that said Resolutions have not been rescinded or amended
and are in full force and effect:
RESOLVED, that this Corporation enter into a Lease Agreement and/or an
Equipment Financing Agreement with LEASE MANAGEMENT SERVICES, INC. for the
funding of that certain property as is set forth in the Master Equipment Lease
Agreement and/or Equipment Financing Agreement, and it is further
RESOLVED, that any officers of this Corporation be and they are hereby
authorized and empowered in the name of and on behalf of this Corporation to
execute any and all documents as may be required by LEASE MANAGEMENT SERVICES,
INC. to effectuate the provisions hereof.
I CERTIFY, that I have examined the Articles of Incorporation, the By-Laws
of the Corporation, and all amendments therewith and I am fully familiar with
all of said documents and that there are no restrictions imposed on the power
and authority of the Board of Directors of said Corporation to adopt the
foregoing resolutions whereupon the Corporation and its officers are authorized
to act in accordance therewith.
IN WITNESS WHEREOF, I have hereupon subscribed my name on the 7th day of
October, 1996.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Corporate Secretary
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: V.P. CFO
-----------------------------
10
[LEASE MANAGEMENT SERVICES, INC. LOGO]
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, do hereby certify that I am duly elected, qualified and
acting Secretary of ADVANCED CORNEAL SYSTEMS, INC., (Debtor), a California
corporation; that the persons whose names, titles and signatures appear below
are duly elected (or appointed) qualified and acting officers of said
corporation and hold on the date of this Certificate, and on the date of
execution of the Master Lease documents and/or Equipment Certificate, and on the
date of execution of the Master Lease documents and/or Equipment Financing
documents, the offices set opposite their respective names; that the signatures
appearing opposite their respective names are the genuine signatures of such
officers; that each such officer is duly authorized for and on behalf of said
corporation to execute and deliver any Equipment Financing Agreement between
said corporation and said Secured Party, LEASE MANAGEMENT SERVICES, INC., and
all agreements, documents, and instruments in connection therewith, including
without limitation, Rental Schedules and Certificates of Equipment Acceptance,
and that the execution and delivery of any such equipment financing agreement,
and all agreements, documents, and instruments in connection therewith for and
on behalf of said corporation is not prohibited by or in any manner restricted
by the terms of said corporation's Certificate of Incorporation, its by-laws, or
of any loan agreement, indenture or contract to which said corporation is a
party or under which it is bound. I do further certify that the foregoing
authority shall remain in full force and effect, and LEASE MANAGEMENT SERVICES,
INC. shall be entitled to rely upon the same, until written notice of the
modification, rescission or revocation of same, in whole or in part, has been
delivered to LEASE MANAGEMENT SERVICES, INC., but no such modification,
rescission or revocation shall, in any event, be effective with respect to any
documents executed or actions taken in reliance upon the foregoing authority
prior to the delivery to LEASE MANAGEMENT SERVICES, INC. of said written notice
of said modification, rescission or revocation.
NAME OF OFFICER TITLE OF OFFICER SIGNATURE OF OFFICER
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ President and CEO /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, CFO /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of October, 1996.
Debtor:
ADVANCED CORNEAL
SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: Secretary
------------------------
11
[LEASE MANAGEMENT SERVICES, INC. LOGO]
ADDENDUM TO
EQUIPMENT FINANCING AGREEMENT
NUMBER 10802
BY AND BETWEEN
ADVANCED CORNEAL SYSTEMS, INC., AS DEBTOR,
AND
LEASE MANAGEMENT SERVICES, INC., AS SECURED PARTY
ADVANCED CORNEAL SYSTEMS, INC., as Debtor, hereby acknowledges its
responsibility to pay, and agrees to pay any taxes which may be due to the
State of California or where applicable, for the collateral covered under the
above referenced agreement.
DEBTOR:
ADVANCED CORNEAL
SYSTEMS, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: V.P. Chief Financial Officer
-----------------------------
Date: October 7, 1996
------------------------------
12
[LMS LOGO] LEASE MANAGEMENT SERVICES, INC.
REQUEST FOR CERTIFICATE OF INSURANCE
To: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇ Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
We, as Lessee/Debtor, have entered into a Master Equipment Lease Agreement
and/or an Equipment Financing Agreement with LEASE MANAGEMENT SERVICES, INC., as
Lessor/Secured Party, to finance the purchase of equipment.
Accordingly, you are hereby authorized to:
1. Insure said equipment in the name of LEASE MANAGEMENT SERVICES, INC.
2. Issue a written endorsement naming LEASE MANAGEMENT SERVICES, INC., as
Additional Insured and First Loss Payee, and provide LMSI with thirty (30)
day written notice of material change of coverage, cancellation or
non-renewal. LMSI shall have the right to name additional parties as
Additional Insured and First Loss Payee and notices will also be provided
to those parties upon LMSI's request.
3. INSURANCE MUST INCLUDE COVERAGE AS INDICATED BELOW:
(x) Bodily Injury and Property Damage Insurance with limits of $6,500,000
(x) Physical Damage (all risk) from any cause whatsoever, except
earthquake and flood.
4. Loss, if any, under this endorsement shall be payable SOLELY to LEASE
MANAGEMENT SERVICES, INC. or its assigns and shall not be invalidated due
to any violation of any conditional warranty contained in any policy or
application therefor by Lessee/Debtor, or by reason of any act of the
Lessee/Debtor.
5. THIS POLICY MUST CONTAIN THE FOLLOWING ENDORSEMENT:
The insurance under this policy shall be primary insurance, and the company
insurer shall be liable under this policy for the full amount of the loss
up to and including the total limits of liability herein without right of
contribution from any other insurance effected by LEASE MANAGEMENT
SERVICES, INC., under any policy with any insurance company covering a loss
covered under this policy.
Forward evidence of coverage to: LEASE MANAGEMENT SERVICES, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Insurance Administrator
DEBTOR:
ADVANCED CORNEAL SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: Chief Financial Officer
-----------------------
Date: October 7, 1996
------------------------
13
[LMS LOGO] LEASE MANAGEMENT SERVICES, INC.
SECURITY DEPOSIT PLEDGE AGREEMENT
PLEDGEE: LEASE MANAGEMENT SERVICES, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
PLEDGOR: ADVANCED CORNEAL SYSTEMS, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
In consideration of, and as an inducement for Pledgee to enter into an Equipment
Financing Agreement Number 10802 and all Schedules thereunder (hereinafter
collectively referred to as the "Agreements") with Pledgor, and to secure the
payment and performance of all Pledgor's obligations under the Agreements,
Pledgor hereby grants and assigns to Pledgee, its successors and assigns, a
security interest in, and hereby deposits and pledges with Pledgee a Security
Deposit in an amount equivalent to twenty-two percent (22%) of aggregate
Equipment cost (including any soft costs) leased or financed for each Schedule.
As used herein, "Security Deposit" shall refer to the aggregate of all
component deposits made under the applicable Schedules. Such pledge is to be
upon the terms and conditions set forth below:
1. Pledgor delivers the Security Deposit to Pledgee to secure the due and
punctual payment and performance of the obligations of Pledgor under the
Agreements. Pledgee will pay 4.5% simple interest per annum on the Security
Deposit, which interest will be accrued for each respective component of
the Security Deposit from the commencement date of the applicable Schedule
and paid when the Security Deposit is returned to Pledgor.
2. Upon any default by Pledgor under the Agreements, interest accrual on the
Security Deposit shall cease and Pledgee may, at its option, apply the
Security Deposit and any interest accrued to that date toward the
satisfaction of Pledgor's obligations under the Agreements, and the payment
of all costs and expenses incurred by Pledgee as a result of such default,
including reasonable attorney's fees, Pledgee is liable to Pledgor only for
any surplus remaining from said Security Deposit after the full
satisfaction of the foregoing obligations, costs and expenses.
3. Pledgor waives any rights to require Pledgee to (i) proceed against Pledgor
or any other party; (ii) proceed against or exhaust any security held from
Pledgor; or (iii) pursue any other remedy in Pledgee's power whatsoever
before enforcing the provisions of, and proceeding under the provisions of,
this Security Deposit Pledge Agreement. The obligations of Pledgor under
this Security Deposit Pledge Agreement shall be absolute and unconditional,
and shall remain in full force and effect without regard to, and shall not
be released or discharged or in any way affected by (a) any amendment or
modification of or supplement to the Agreements; (b) any exercise or
non-exercise of any right, remedy or privilege under or in respect to this
Security Deposit Pledge Agreement, the Agreements, or any other instrument
provided for in the Agreements, or any waiver, consent, explanation,
indulgence or actions or inaction
14
SECURITY DEPOSIT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 2 of 3
with respect to any such instrument; or (c) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceedings of Pledgor.
4. Pledgee shall have no obligation to segregate said Security Deposit and
Pledgor hereby irrevocably authorizes Pledgee, at Pledgee's sole election,
to commingle said Security Deposit with other assets and funds held by or
belonging to Pledgee. Pledgor may not assign, pledge or transfer to any
party its interest in the Security Deposit and any attempt to do so shall
be null and void.
5. Without notice to Pledgor, Pledgee may freely assign its rights and
obligations hereunder, in whole or in part, at any time and this Security
Deposit Pledge Agreement shall inure to the successors and assignees of
Pledgee. In the event Pledgee assigns or transfers one or more Schedules
under the Agreements without assigning or transferring the Security
Deposit, Pledgor agrees that it will look solely to Pledgee for the return
of the Security Deposit and will not assert any claim against any assignee
of Pledgee for the return of said Security Deposit and further agrees that
it will not assert against any payments due such assignee of Pledgee any
offset that Pledgor may have against Pledgee for the return of said
Security Deposit. In the event Pledgee assigns or transfers this Security
Deposit Pledge Agreement along with the Security Deposit, Pledgor agrees
that it shall look solely to the assignee of Pledgee for the return of said
Security Deposit and Pledgee shall have no further liability to Pledgor
with respect thereto.
6. Provided that the Pledgor is not then in default of its obligations to the
Pledgee under the Agreements or otherwise, any remaining Security Deposit
and accrued interest will be returned to Pledgor when Pledgor's
unrestricted cash becomes equal to or greater than $7,000,000.
ADDITIONAL COLLATERAL REQUIREMENTS WILL THEN BE AS DEFINED IN THE NEGATIVE
COVENANT PLEDGE AGREEMENT DATED OCTOBER 7, 1996.
All accounting terms used herein shall be interpreted in accordance with
generally accepted accounting principles.
9. Any reduction/return of the Security Deposit and any payment of interest
prior to the Termination of the Agreements (as defined below) is contingent
upon the following additional conditions: (a) verification of all
benchmarks; (b) Pledgor has made all payments on a timely basis according
to the terms of the Agreements; (c) Pledgor is not, nor ever has been, in
default of any financial obligation; (d) Pledgor, if privately held, has
provided monthly financial statements to Pledgee within 30 days of each
month-end, or if Pledgor is publicly held, has provided quarterly
statements as required to be filed by the Securities and Exchange
Commission (the "SEC"); (e) Pledgor, if privately held, has provided an
annual audited financial statements to Pledgee within 90 days of Pledgor's
fiscal year end or if Pledgor is publicly held, has provided Pledgee with
annual statements as required to be filed by the SEC; and (f) Pledgor has
not suffered any material adverse change.
The Termination of the Agreements shall be defined as the satisfaction of
all Pledgor's obligations under the Agreements.
15
SECURITY DEPOSIT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 3 of 3
10. If the Security Deposit has not previously been returned, upon the
Termination of the Agreements, Pledgee shall deliver the Security Deposit and
accrued interest (less any portion of same cashed, sold, assigned or delivered
pursuant to, and under the circumstances specified in, Paragraph 2 hereof) to
Pledgor, and this Security Deposit Pledge Agreement shall thereupon be without
further effect.
PLEDGOR: PLEDGEE:
ADVANCED CORNEAL LEASE MANAGEMENT SERVICES, INC.
SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ [illegible]
-------------------------------- --------------------------------
Title: V.P. Chief Financial Officer Title: EVP/General Manager
----------------------------- -----------------------------
Date: 10/7/96 Date: 10/7/96
------------------------------ ------------------------------
16
[LEASE MANAGEMENT SERVICES, INC. LOGO]
LEASE MANAGEMENT SERVICES, INC.
NEGATIVE COVENANT PLEDGE AGREEMENT
Agreement made and entered into as of the 7th day of October, 1996, by and
between ADVANCED CORNEAL SYSTEMS, INC., a California corporation, with its
principal place of business at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Pledgor") and LEASE MANAGEMENT SERVICES, INC., a California Corporation, with
its principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ #▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ ("Pledgee").
In consideration of, and as an inducement for Pledgee to enter into Equipment
Financing Agreement Number 10802, and all Schedules thereunder, (referred to
hereinafter as the "Agreements") with Pledgor, and to secure the payment and
performance of all Pledgor's obligations under the Agreements, Pledgor and
Pledgee agree as follows:
1) If at any point in time after the full return of the Security Deposit and
accrued interest as specified in the Security Deposit Pledge Agreement
dated October 7, 1996, Pledgor's Unrestricted Cash (as defined below) falls
below the financial requirements listed in A) or B), or Pledgor is in
default of the Agreements, Pledgor agrees to provide to Pledgee within 10
days of such occurrence a cash security deposit in an amount equal to
twenty-two percent (22%) of the total aggregate Equipment cost (including
any soft costs) which are included in the Agreements ("Collateral Pledge"),
but in any event not to exceed the remaining gross receivable.
A) PRE-IPO: In the event unrestricted cash falls below the greater of
$3,000,000 or 6 month's cash needs (defined as the cash burn for the 3
months just completed, multiplied by a factor of 2.3).
B) POST-IPO: In the event unrestricted cash falls below the greater of
$7,000,000 or 11 months' cash needs (defined as the cash burn for the
3 months just completed, multiplied by a factor of 3.8).
Unrestricted Cash shall be defined as cash on hand, including investments
in marketable securities with maturities of less than one (1) year, less
all debt which is not subordinated to Pledgee.
The failure to timely provide the Collateral Pledge to Pledgee shall
constitute an event of default under the Agreements.
2) Pledgor if privately held, agrees to provide financial statements,
including a cash flow statement, balance sheet and statement of operations,
to Pledgee within 30 days of each month-end and audited annual financial
statements within 90 days of Pledgor's fiscal year end or if Pledgor is
publicly held, agrees to provide quarterly and annual audited financial
statements as required by the Securities and Exchange Commission (the
"SEC"). All such statements are to be prepared using generally accepted
accounting principles and are to be in compliance with SEC requirements.
Failure to provide these statements as specified herein will constitute an
event of default under the Agreements.
3) Pledgor agrees to keep all Unrestricted Cash within the following financial
institutions:
17
NEGATIVE COVENANT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
PAGE 2 OF 3
3) Pledgor agrees to keep all Unrestricted Cash within the following
financial institutions:
Financial Institution: UNION BANK
-----------------------------------------
Account Number: 4500153666
-----------------------------------------
Officer Contact:
-----------------------------------------
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------
Financial Institution: U.S. COMMUNITY SAVINGS BANK
-----------------------------------------
Account Number: 01082262
-----------------------------------------
Officer Contact: ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------
Financial Institution: ▇▇▇▇▇▇▇▇▇ LUFKIN & ▇▇▇▇▇▇▇▇
-----------------------------------------
Account Number: 219-246121
-----------------------------------------
Officer Contact: ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------
Any changes in the above information shall be provided in writing by the
Pledgor to Pledgee within fifteen (15) days of such change.
Pledgor hereby authorizes these financial institutions to give specific
account balance information to Pledgee and agrees to execute any other
documents or take any other action required to provide verification of
unrestricted cash balances.
4) Pledgee agrees to pay interest on the Collateral Pledge at a simple
interest rate equal to 4.5%, which interest will accrue from the date the
Collateral Pledge is received until the date the Collateral Pledge and
interest are returned to the Pledgor.
5) Pledgor agrees to recognize the Collateral Pledge as a contingent
liability and to establish the appropriate reserves.
6) Upon any default by Pledgor under the Agreements, interest accrual on the
Collateral Pledge shall cease and Pledgee may, at its option, apply the
Collateral Pledge and any interest accrued to that date toward the
satisfaction of Pledgor's obligations under the Agreements, and the payment
of all costs and expenses incurred by Pledgee as a result of such default,
including reasonable attorney's fees. Pledgee is liable to Pledgor only for
any surplus remaining from said Collateral Pledge after the full
satisfaction of the foregoing obligations, costs and expenses.
7) Pledgee shall have no duty to first commence an action against or seek
recourse from Pledgor, in the event of a default under the Agreements,
before enforcing the provisions of, and proceeding under the provisions of,
this Negative Covenant Pledge Agreement. The obligations of Pledgor under
this Negative Covenant Pledge Agreement shall be absolute and unconditional
and shall remain in full force and effect without regard to, and shall not
be released or discharged or in any way affected by:
a) any amendment or modification of or supplement to the Agreements;
b) any exercise or non-exercise of any right, remedy or privilege under
or in respect to this Negative Covenant Pledge Agreement, the
Agreements, or any other Instrument provided for in the Agreement(s),
or any waiver, consent,
18
NEGATIVE COVENANT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 3 of 3
explanation, indulgency or actions or inaction with respect to any
such instrument; or
(c) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding of Pledgor.
8) The entire Collateral Pledge and any accrued interest will be returned to
Pledgor when Pledgor's Unrestricted Cash exceeds the benchmark defined
above for a period of at least one fiscal quarter and continues to remain
greater and Pledgor is not in default under the Agreements or any other
financial obligations.
Return of any required Collateral Pledge prior to the Termination of the
Agreements (as defined below) is contingent upon the following additional
conditions: (a) verification of all benchmarks; (b) Pledgor has made all
payments in a timely manner to Pledgee according to the terms of the
Agreements; (c) Pledgor is not then, nor has ever been in default of its
obligation to the Pledgee under the Agreements, and Pledgor has not
defaulted on any other financial obligation; (d) Pledgor, if privately
held, has provided monthly financial statements to Pledgee within 30 days
of each month-end or if Pledgor is publicly held, has provided quarterly
statements as required to be filed by the Securities and Exchange
Commission (the "SEC"); (e) Pledgor, if privately held, has provided an
annual audited financial statements to Pledgee within 90 days of
Pledgor's fiscal year end or if Pledgor is publicly held, has provided
Pledgee with annual statements as required to be filed by the SEC; and (f)
Pledgor has not suffered any material adverse change.
The Termination of the Agreements shall be defined as the satisfaction of
all Pledgor's obligations under the Agreements.
If the Collateral Pledge is returned prior to the Termination of the
Agreements, this Negative Covenant Pledge Agreement shall remain in full
force and effect.
9) If the Collateral Pledge has not been previously returned upon Termination
of the Agreements and the satisfaction of all obligations of Pledgor
thereunder, Pledgee shall deliver the Collateral Pledge (less any portion
of same cashed, sold, assigned or delivered pursuant to, and under the
circumstances specified in, Paragraph 6 hereof) to Pledgor, and this
Negative Covenant Pledge Agreement shall thereupon be without further
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Negative Covenant Pledge
to be executed as of the date first above written.
PLEDGOR: PLEDGEE:
ADVANCED CORNEAL SYSTEMS, INC. LEASE MANAGEMENT SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ [Illegible]
-------------------------------- --------------------------------
Its: VP, Chief Financial Officer Its: EVP/General Manager
------------------------------- -------------------------------
19
[LOGO]
LEASE MANAGEMENT SERVICES, INC.
COLLATERAL SECURITY AGREEMENT
Agreement made and entered into as of this 7th day of October, 1996, by and
between ADVANCED CORNEAL SYSTEMS, INC., Debtor and LEASE MANAGEMENT SERVICES,
INC., Secured Party.
As security for the payment and performance by ADVANCED CORNEAL SYSTEMS, INC.
("ACSI") to LEASE MANAGEMENT SERVICES, INC. ("LMSI") under (a) Equipment
Financing Agreement Number 10802, and all schedules thereunder between ACSI and
LMSI (hereinafter collectively referred to as the "Agreements"); (b) any and
all obligations of ACSI to LMSI hereunder and any and all indebtedness and
obligations of ACSI to LMSI, direct, indirect or contingent, joint or several,
whether or not otherwise secured, and whether now existing or hereafter
incurred; and (c) any and all amounts advanced or expended by LMSI for the
maintenance or preservation of the Collateral (as defined below). ACSI hereby
pledges, assigns and grants to LMSI, a first security interest in:
All fixed assets now owned and all fixed assets hereinafter acquired through
the later of a) July 31, 1997 or b) the expiration of the funding period stated
in the Proposal Letter dated August 16, 1996 and any extensions thereunder,
including, but not limited to, laboratory equipment, laboratory furniture, test
equipment, electronic equipment, computer equipment, office equipment, office
furniture, fume hoods, autoclaves, and leasehold improvements together with all
accessories, parts, upgrades, renewals and replacements of, and repairs,
improvements and accessions to the fixed assets and any insurance proceeds or
revenue derived from the sale or other disposition of the fixed assets
(collectively, the "Collateral").
ACSI hereby warrants that it is the sole owner in possession of all Collateral
and that the Collateral is free and clear of all liens, encumbrances and
adverse claims, with the exception of the security interest herein created and
all other security interests previously granted to LMSI. ACSI agrees to execute
and deliver to LMSI at any time and from time to time such other security
agreements or mortgages of chattel as LMSI may reasonably request, covering the
Collateral. ACSI also agrees to appear in and defend any and all actions and
proceedings, at its own expense, affecting title to the Collateral or any part
thereof, or affecting the security interest of LMSI therein.
ACSI also agrees to: do all acts which may necessary to maintain, preserve and
protect the Collateral and to keep the Collateral in good condition and repair;
not to cause or permit any waste or unusual or unreasonable depreciation
thereof or any act for which the Collateral might be confiscated; to pay before
delinquency all taxes, assessments and liens now or hereafter imposed upon the
Collateral; not to sell, lease, encumber or dispose of all or any part of the
Collateral; at any time upon demand of LMSI to exhibit to and allow inspection
by LMSI of the Collateral; not to remove or permit the removal of the
Collateral from the premises where it is now located without the prior written
consent of LMSI, which consent shall not be unreasonably withheld; to provide,
maintain and deliver to LMSI policies insuring the Collateral against loss or
damage by such risks and in such amounts, forms and companies as LMSI
reasonably requires and with loss payable to LMSI. If LMSI takes possession of
the Collateral in the event of a Default, the insurance policy or policies of
any unearned or returned premium shall, at the option of LMSI, be assigned by
ACSI to LMSI, upon LMSI crediting the amount of any unearned premium upon the
obligation secured hereby.
In the event the Collateral or an item thereof is destroyed and payment
upon such policies of insurance is made to ACSI and ACSI chooses not to replace
the Collateral with equipment of like kind or value, LMSI will retain all
insurance proceeds except to the extent that the proceeds exceed the remaining
obligation of ACSI to LMSI. If ACSI chooses to replace the
20
COLLATERAL SECURITY AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 2 of 3
Collateral or any item thereof with equipment of like kind and value, the
replacement must be completed within 60 days of loss, unless otherwise agreed
by LMSI, ACSI must acquire title to the replacement free and clear of liens and
encumbrances and grant to LMSI a first priority perfected security interest
therein; otherwise LMSI shall be entitled to the insurance proceeds. The
provisions of this paragraph shall not apply to Collateral specifically covered
by any schedules to a Master Lease Agreement or Equipment Financing Agreement
between ACSI and LMSI which shall governed by the provisions of the applicable
Master Lease Agreement and Equipment Financing Agreement.
If ACSI fails to make any payment or do any act as herein required, then LMSI
may, but without obligation to do so, and without notice to or demand upon
ACSI, make such payments and do such acts as LMSI may deem necessary to protect
its security interest in the Collateral. LMSI is hereby authorized (without
limiting the general nature of the authority hereinabove conferred) to take
possession of the Collateral; to pay, purchase, contest, and compromise any
encumbrance, charge or lien which in the judgment of LMSI appears to be prior
or superior to its security interest; and, in exercising any such powers and
authority, to pay necessary expenses, employ counsel and pay reasonable fees
therefor. ACSI hereby agrees to repay immediately, and without demand, all sums
so expended by LMSI, with interest from date of expenditure at the rate of
Eighteen Percent (18%), but never to exceed any legal limit for such interest.
Any officer of LMSI is hereby irrevocably appointed the attorney-in-fact of
ACSI, with full power of substitution, only to sign any certificate of
ownership, registration card, application therefor, affidavits or documents
necessary to transfer title to any of the Collateral, to receive and give
receipt for all licenses, registration cards and certificates of ownership, and
to do all acts necessary or incident to the powers granted to LMSI herein, as
full as ACSI might.
Should ACSI default under the Lease, upon written notice, pursuant to the terms
and conditions of the Agreements, LMSI may (a) immediately take possession of
the Collateral wherever it may be found, using all necessary force to do so or
require ACSI to assemble the Collateral and make it available to LMSI at a
place designated by LMSI which is reasonably convenient to LMSI, and ACSI
waives all claims for damages due to or arising from or connected with any such
taking; (b) proceed in the foreclosure of LMSI's security interest and the sale
of the Collateral in any manner permitted by law, or provided for herein; (c)
sell, lease or otherwise dispose of the Collateral at public or private sale,
with or without having the Collateral at the place of sale, and upon terms and
in such manner as LMSI may determine, and LMSI may purchase the same at any
such sale; (d) retain the Collateral in full satisfaction of the obligations
secured thereby; (e) exercise any remedies of a LMSI under the Uniform
Commercial Code.
Prior to any such disposition, LMSI may, at its option, cause any of the
Collateral to be repaired or reconditioned in such manner and to such extent as
LMSI may deem advisable, and any sums expended therefor by LMSI shall be repaid
by ACSI and secured hereby; LMSI shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
stop or prevent LMSI from pursuing any further remedy which it may have
hereunder or by law. If a sufficient sum is not realized from any such
disposition of Collateral to pay all obligations secured by this agreement,
ACSI hereby promises and agrees to pay LMSI any deficiency.
Time and exactitude of each of the terms, obligations, covenants and conditions
are hereby declared to be the essence hereof. No waiver by LMSI of any breach
or default shall be deemed a waiver of any breach or default thereafter
occurring and the taking of any action by LMSI shall not be deemed to be an
election of that action but rather the rights and privileges and options
granted to LMSI under the terms hereof shall be deemed cumulative, the one with
the other and not alternative.
21
COLLATERAL SECURITY AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
PAGE 3 OF 3
Should the Collateral be sold, with or without the consent of LMSI, then it is
expressly agreed that the proceeds from said sale are hereby assigned to LMSI
who shall immediately receive the entire proceeds.
ACSI agrees to execute any additional documents deemed necessary by LMSI to
assure the perfection of the security interest created hereunder and to pay any
fees or charges paid by LMSI in connection with the perfection of, or continue
the perfection of, the security interest created hereunder.
Upon termination of the Agreements and the satisfaction of all obligations of
ACSI thereunder, LMSI shall release its security interest in the Collateral,
and this Collateral Security Agreement shall thereupon be without further
effect.
IN WITNESS WHEREOF, the parties have caused this Collateral Security Agreement
to be executed as of this 7th day of October, 1996.
LESSEE/DEBTOR: LESSOR/SECURED PARTY
ADVANCED CORNEAL LEASE MANAGEMENT SERVICES, INC.
SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ [Illegible]
Title: V.P. Chief Financial Officer Title: EVP/General Manager
22
To: ▇▇▇▇▇▇ Way
From: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
The following is the information you requested for the lease documents with the
corresponding item number:
1. Advanced Corneal Systems, Inc.
2. ▇▇-▇▇▇▇▇▇▇
3. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
4. Same as # 3.
5. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
6. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇--President and CEO
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇--Vice President, Chief Technical Officer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇--Vice President, Chief Financial Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇--Vice President, Marketing
7. California
8. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
9. Aetna Life Insurance Company
▇.▇. ▇▇▇ ▇▇▇▇▇, 30 Executive Park, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
10. Same as #3.
23
[LMSI VENTURE FINANCE LOGO]
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, , do hereby certify that I am the duly elected, qualified and
acting Secretary of ADVANCED CORNEAL SYSTEMS, INC. ("Borrower"), a California
corporation; that the persons whose names, titles and signatures appear below
are duly elected (or appointed) qualified and acting officers of said
corporation and hold on the date of this Certificate, and on the date of
execution of the Master Loan and Security Agreement documents, the office set
opposite their respective names; that the signatures appearing opposite their
respective names are the genuine signatures of such officers; that each such
officer is duly authorized for and on behalf of said corporation to execute and
deliver any Master Loan and Security Agreement between said corporation and said
Lender, LMSI VENTURE FINANCE, and all agreements, documents, and instruments in
connection therewith, including without limitation, Loan Schedules and
Certificates of Equipment Acceptance, and that the execution and delivery of any
such Master Loan and Security Agreement, and all agreements, documents, and
instruments in connection therewith for and on behalf of said corporation is not
prohibited by or in any manner restricted by the terms of said corporation's
Certificate of Incorporation, its by-laws, or of any loan agreement, indenture
or contract to which said corporation is a party or under which it is bound. I
do further certify that the foregoing authority shall remain in full force and
effect, and LMSI VENTURE FINANCE shall be entitled to rely upon the same, until
written notice of the modification, rescission or revocation of same, in whole
or in part, has been delivered to LMSI VENTURE FINANCE, but no such
modification, rescission or revocation shall, in any event, be effective with
respect to any documents executed or actions taken in reliance upon the
foregoing authority prior to the delivery to LMSI VENTURE FINANCE of said
written notice of said modification, rescission or revocation.
NAME OF OFFICER TITLE OF OFFICER SIGNATURE OF OFFICER
▇.▇. ▇▇▇▇▇▇ Vice President & Chief /s/ ▇.▇. ▇▇▇▇▇▇
Financial Officer -------------------------
IN WITNESS WHEREOF, I have hereunto set my hand this 9 day of April, 1999.
/s/ ▇.▇. ▇▇▇▇▇▇
---------------------
(Corporate Secretary)
Name: ▇.▇. ▇▇▇▇▇▇
------------------------------------
Title: Vice President, Assistant Secretary
-----------------------------------
24
[LMSI VENTURE FINANCE LOGO]
AMENDMENT TO
EQUIPMENT FINANCING AGREEMENT
NO. 10802
BY AND BETWEEN
ADVANCED CORNEAL SYSTEMS, INC., AS DEBTOR
AND
LMSI VENTURE FINANCE, A DIVISION OF PHOENIXCOR, INC., AS
SECURED PARTY
(FORMERLY KNOWN AS LEASE MANAGEMENT SERVICES, INC.)
Debtor and Secured Party hereby agree to amend Equipment Financing Agreement
No. 10802 and all Schedules thereunder and all other related documents (herein
collectively referred to as the "Agreements") to reflect Secured Party's name
change from Lease Management Services, Inc. to LMSI Venture Finance, a division
of Phoenixcor, Inc., a Delaware Corporation ("LMSI Venture Finance").
All other terms and conditions remain the same.
IN WITNESS WHEREOF, Debtor and Secured Party have each caused this Amendment to
be duly executed in their respective names.
DEBTOR: SECURED PARTY:
ADVANCED CORNEAL SYSTEMS, INC. LMSI VENTURE FINANCE, A DIVISION OF
PHOENIXCOR, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------- ----------------------
Title: Administrative Manager Title: EVP/General Manager
---------------------- ----------------------
Date: 4/8/99 Date: 4/8/99
---------------------- ----------------------
25
[LOGO] LEASE MANAGEMENT SERVICES, INC.
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, do hereby certify that I am a duly elected, qualified and
acting Chairman of the Board of Directors of ADVANCED CORNEAL SYSTEMS, INC.,
(Debtor), a California corporation; that the persons whose names, titles and
signatures appear below are duly elected (or appointed) qualified and acting
officers or managers of said corporation and hold on the date of this
Certificate, and on the date of execution of the Master Lease documents and/or
Equipment Financing documents, the offices/positions set opposite their
respective names; that the signatures appearing opposite their respective names
are the genuine signatures of such officers/managers; that each such
officer/manager is duly authorized for and on behalf of said corporation to
execute and deliver any Equipment Financing Agreement between said corporation
and said Secured Party, LEASE MANAGEMENT SERVICES, INC., and all agreements,
documents, and instruments in connection therewith, including without
limitation, Rental Schedules and Certificates of Equipment Acceptance, and that
the execution and delivery of any such equipment financing agreement, and all
agreements, documents, and instruments in connection therewith for and on
behalf of said corporation is not prohibited by or in any manner restricted by
the terms of said corporation's Certificate of Incorporation, its by-laws, or
of any loan agreement, indenture or contract to which said corporation is a
party or under which it is bound. I do further certify that the foregoing
authority shall remain in full force and effect, and LEASE MANAGEMENT SERVICES,
INC. shall be entitled to rely upon the same, until written notice of the
modification, rescission or revocation of same, in whole or in part, has been
delivered to LEASE MANAGEMENT SERVICES, INC., but no such modification,
rescission or revocation shall, in any event, be effective with respect to any
documents executed or actions taken in reliance upon the foregoing authority
prior to the delivery to LEASE MANAGEMENT SERVICES, INC. of said written notice
of said modification, rescission or revocation.
NAME OF MANAGER TITLE OF MANAGER SIGNATURE OF MANAGER
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Administrative Manager /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of July, 1997.
Debtor:
ADVANCED CORNEAL
SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: Co-Chairman
---------------------------