Exhibit 10.11
MASTER SECURITY AGREEMENT
NO. 5051091
Dated as of May 31, 2005 ("AGREEMENT")
THIS AGREEMENT is between OXFORD FINANCE CORPORATION (together with its
successors and assigns, if any, "SECURED PARTY") and Alsius Corporation
("DEBTOR"). Secured Party has an office at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇. Debtor is a corporation organized and existing under the laws of the
state of California. Debtor's mailing address and chief place of business is
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. CREATION OF SECURITY INTEREST.
Debtor grants to Secured Party, its successors and assigns, a security
interest in and against the Collateral (as that term is defined herein). This
security interest is given to secure the payment and performance of all debts,
obligations and liabilities of any kind whatsoever of Debtor to Secured Party
under this Agreement and the Debt Documents, now existing or arising in the
future, including but not limited to the payment and performance of certain
Promissory Notes from time to time executed by Debtor (collectively "NOTES" and
each a "NOTE"), and any renewals, extensions and modifications of such debts,
obligations and liabilities (such Notes, debts, obligations and liabilities are
called the "INDEBTEDNESS").
If Debtor shall at any time acquire a commercial tort claim, as defined in
the Code, Debtor shall immediately notify Secured Party in writing signed by
Debtor of the brief details thereof and grant to Secured Party in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Secured Party.
Unless otherwise provided by applicable law, notwithstanding anything to
the contrary contained in this Agreement, to the extent that Secured Party
asserts a purchase money security interest in any items of Collateral (the "PMSI
COLLATERAL"): (i) the PMSI Collateral shall secure only that portion of the
Indebtedness which has been advanced by Secured Party to enable Debtor to
purchase, or acquire rights in or the use of such PMSI Collateral (the "PMSI
INDEBTEDNESS"), and (ii) no other Collateral shall secure the PMSI Indebtedness.
If Debtor at any time achieves Seven Million Dollars ($7,000,000) in
revenues during a continuous 12-month period, then Debtor may, at its option,
incur Additional Indebtedness as set forth in clause (v) of the definition of
Permitted Indebtedness (the "A/R FACILITY"). Secured Party agrees that the Liens
granted to it hereunder in Account Collateral shall be subordinate to the Liens
of the future lender providing the A/R Facility. Notwithstanding the foregoing,
the Indebtedness hereunder shall not be subordinate in right of payment to any
obligations to other lender and Secured Party's rights and remedies hereunder
shall not in any way be subordinate to the rights and remedies of any such
lender. So long as no default has occurred, Secured Party agrees to execute and
deliver such agreements and documents as may be reasonably requested by Debtor
or other lenders from time to time which set forth the lien subordination
described in this paragraph and are reasonably acceptable to Secured Party.
Secured Party shall have no obligation to execute any agreement or document
which would impose obligations, restrictions or lien priority on Secured Party
which are less favorable to Secured Party than those described in this
paragraph. "ACCOUNT COLLATERAL" means Debtor's accounts receivable due or to
become due to Debtor under all purchase orders and contracts for the sale of
products or the performance of services or both by Debtor (and related general
intangibles in the nature of rights to payment) and the proceeds thereof).
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor represents, warrants and covenants as of the date of this Agreement
and as of the date of each Note (as appropriate) that:
(a) Due Organization. Debtor's exact legal name is as set forth in the
preamble of this Agreement and Debtor is, duly organized, existing and
in good standing under the laws of the State set forth in the preamble
of this Agreement, has its chief executive offices at the location
specified in the preamble, and is, and will remain duly qualified and
licensed in every jurisdiction wherever necessary to carry on its
business and operations;
(b) Power and Capacity to Enter Into and Perform Obligations. Debtor has
adequate power and capacity to enter into, and to perform its
obligations under this Agreement, each Note and any other documents
evidencing, or given in connection with, any of the Indebtedness (all
of the foregoing are called the "DEBT DOCUMENTS");
(c) Due Authorization. This Agreement and the other Debt Documents have
been duly authorized, executed and delivered by Debtor and constitute
legal, valid and binding agreements enforceable in accordance with
their terms, except to the extent that the enforcement of remedies may
be limited under applicable bankruptcy and insolvency laws;
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(d) Approvals and Consents. No approval, consent or withholding of
objections is required from any governmental authority or
instrumentality with respect to the entry into, or performance by
Debtor of any of the Debt Documents, except any already obtained;
(e) No Violations or Defaults. The entry into, and performance by, Debtor
of the Debt Documents will not (i) violate any of the organizational
documents of Debtor or any judgment, order, law or regulation
applicable to Debtor, or (ii) result in any breach of or constitute a
default under any contract to which Debtor is a party, or result in
the creation of any lien, claim or encumbrance on any of Debtor's
property (except for liens in favor of Secured Party) pursuant to any
indenture, mortgage, deed of trust, bank loan, credit agreement, or
other agreement or instrument to which Debtor is a party;
(f) Litigation. There are no suits or proceedings pending in court or
before any commission, board or other administrative agency against or
affecting Debtor which could, in the aggregate, have a material
adverse effect on Debtor, its business or operations, or its ability
to perform its obligations under the Debt Documents, nor does Debtor
have reason to believe that any such suits or proceedings are
threatened;
(g) Solvency. The fair salable value of Debtor's assets (including
goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Debtor is not left with unreasonably small capital
after the transactions in this Agreement or any Notes and Debtor is
able to pay its debts (including trade debts) as they mature.
(h) Financial Statements Prepared In Accordance with GAAP. All financial
statements delivered to Secured Party in connection with the
Indebtedness have been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent financial
statement, there has been no material adverse change in Debtor's
financial condition;
(i) Use of Collateral. The Collateral is not, and will not be, used by
Debtor for personal, family or household purposes;
(j) Collateral in Good Condition and Repair. The Collateral is, and will
remain, in good condition and repair and Debtor will not be negligent
in its care and use;
(k) Ownership of Collateral. Debtor is, and will remain, the sole and
lawful owner, and in possession of, the Collateral, and has the sole
right and lawful authority to grant the security interest described in
this Agreement;
(l) Encumbrances. The Collateral is, and will remain, free and clear of
all liens, claims and encumbrances of any kind whatsoever, except for
Permitted Liens;
(m) Intellectual Property. Debtor will take all reasonable steps to (i)
protect, defend and maintain the validity and enforceability of the
Intellectual Property and promptly advise Secured Party in writing of
material infringements and (ii) not allow any Intellectual Property
material to Debtor's business to be abandoned, forfeited or dedicated
to the public without Secured Party's written consent;
(n) Taxes. All federal, state and local tax returns required to be filed
by Debtor have been filed with the appropriate governmental agencies
and all taxes due and payable by Debtor have been timely paid. Debtor
will pay when due all taxes, assessments and other liabilities except
as contested in good faith and by appropriate proceedings and for
which adequate reserves have been established;
(o) No Defaults. No event or condition exists under any material
agreement, instrument or document to which Debtor is a party or may be
subject, or by which Debtor or any of its properties are bound, which
constitutes a default or an event of default thereunder, or will, with
the giving of notice, passage of time, or both, would constitute a
default or event of default thereunder;
(p) Certification of Financial Information. All reports, certificates,
schedules, notices and financial information submitted by Debtor to
the Secured Party pursuant to this Agreement shall be certified as
true and correct by the president or chief financial officer of
Debtor; and
(q) Notice of Material Adverse Change. Debtor shall give the Secured Party
prompt written notice of any event, occurrence or other matter which
(a) has resulted or is likely to result in a material adverse change
in its financial condition, business operations, prospects, product
development, technology, or business or contractual relations with
third parties of Debtor, or (b) which would impair the ability of
Debtor to perform its obligations hereunder or under any of the other
financing agreements to which it is a party, or (c) which would impair
the ability of Secured Party to enforce the Indebtedness or realize
upon the Collateral.
(r) .[intentionally omitted]
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(s) Transactions with Affiliates. Debtor shall not, without the prior
written consent of Secured Party, directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Debtor
except for equity financings and transactions that are in the ordinary
course of Debtor's business, upon fair and reasonable terms that are
no less favorable to Debtor than would be obtained in an arm's length
transaction with a nonaffiliated Person.
(t) Audits. Debtor shall allow Secured Party to audit Debtor's Collateral
at Debtor's expense, which amount shall not exceed $2,500. Such audits
will be conducted no more often than annually unless a default has
occurred and is continuing.
(u) Primary Account and Wire Transfer Instructions. Debtor maintains its
Primary Account (the "PRIMARY OPERATING ACCOUNT") and the Wire
Transfer Instructions for the Primary Operating Account are as
follows:
Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA No.: ▇▇▇▇▇▇▇▇▇
Account No.: 3300392162 (Checking Account)
Account Name: Alsius Corporation
Debtor hereby agrees that Loans will be advanced to the account specified
above and regularly scheduled payments will be automatically debited from
the same account. In addition to the Primary Operating Account identified
hereinabove, Debtor maintains the following other deposit and investment
accounts:
Silicon Valley Bank
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▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA No.: ▇▇▇▇▇▇▇▇▇
Account No.: ▇▇▇▇▇▇▇▇▇▇ (Money Market Account
#886-00101-1-8ZGQ - Investment Securities)
Account Name: Alsius Corporation
(v) Right to Invest. Debtor hereby grants to Secured Party a right (but
not an obligation) to invest in each Subsequent Financing of Debtor,
up to (A) $750,000 if the Subsequent Financing is $4,000,000 or more
of gross cash proceeds to Debtor, or (B) $375,000 if the Subsequent
Financing is less than $4,000,000 gross cash proceeds to Debtor, all
on the same terms, conditions and pricing offered to the lead investor
of such financing. Debtor shall give Secured Party at least twenty
(20) days prior written notice of each Subsequent Financing containing
the terms, conditions and pricing of each Subsequent Financing. As
used herein, "SUBSEQUENT FINANCING" shall mean the next and any future
round of private equity financing in which the Debtor receives, in the
aggregate, at least $2,000,000 of gross cash proceeds (excluding any
bridge debt financing except to the extent actually converted to
equity in the Debtor). The rights granted to Secured Party under this
Section 2(v) shall terminate upon Debtor's merger with or
consolidation into any other entity or a sale of all or substantially
all of Debtor's assets
(w) Notice of Investor Abandonment. Debtor shall give the Secured Party
prompt written notice Secured Party if (a) it is the clear intention
of Debtor's investors to not continue to fund the Debtor in the
amounts and timeframe necessary to enable Debtor to satisfy the
Indebtedness as it becomes due and payable or (b) there is a material
impairment in the perfection or priority of the Secured Party's
security interest in the Collateral.
3. COLLATERAL.
The Debtor, covenants and agrees that, so long as any of the Debt Documents
shall remain in effect, or unless the Secured Party shall otherwise consent
in writing:
(a) Possession of Collateral; Inspection of Collateral. Until the
declaration of any default, Debtor shall remain in possession of the
Collateral; except that Secured Party shall have the right to possess
(i) any chattel paper or instrument that constitutes a part of the
Collateral, and (ii) any other Collateral in which Secured Party's
security interest may be perfected only by possession. Secured Party
may inspect any of the Collateral during normal business hours after
giving Debtor reasonable prior notice.
(b) Maintenance of Collateral. Debtor shall (i) use the Collateral only in
its trade or business, (ii) maintain all of the Collateral in good
operating order and repair, normal wear and tear excepted, (iii) use
and maintain the Collateral only in compliance with manufacturers
recommendations and all applicable laws, and (iv) keep all of the
Collateral free and clear of all liens, claims and encumbrances
(except for Permitted Liens).
(c) Disposition of Collateral. Secured Party does not authorize and Debtor
agrees it shall not (i) part with possession of any of the Collateral
(except to Secured Party, for maintenance and repair or in the sale of
goods in the ordinary course of business), (ii) remove any of the
Collateral from the continental United States (other than the
following Collateral: (aa) approximately 40 Cool Guard Systems located
at customer sites in Europe, and
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(bb) office furniture, laptop computers, 2 vehicles, leasehold
improvements, inventory necessary for maintenance and repair of
customer systems and other miscellaneous equipment necessary for
Debtor's service center in the Netherlands in an aggregate value not
exceeding $400,000.00] or (iii) sell, rent, lease, mortgage, license,
grant a security interest in or otherwise transfer or encumber (except
for Permitted Liens or the sale of goods in the ordinary course of
business) any of the Collateral. Once goods are sold in the ordinary
course of business, Secured Party shall have no further security
interest in such goods, and such goods shall be released from any
liens by Secured Party; provided that Secured Party keeps a security
interest in all proceeds of such sold goods. .
(d) Taxes. Debtor shall pay promptly when due all taxes, license fees,
assessments and public and private charges levied or assessed on any
of the Collateral, on its use, or on this Agreement or any of the
other Debt Documents. At its option, if Debtor has failed to do so,
Secured Party may discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on the Collateral and may
pay for the maintenance, insurance and preservation of the Collateral
and effect compliance with the terms of this Agreement or any of the
other Debt Documents. Debtor agrees to reimburse Secured Party, on
demand, all reasonable costs and expenses incurred by Secured Party in
connection with such payment or performance and agrees that such
reimbursement obligation shall constitute Indebtedness.
(e) Books and Records. Debtor shall, at all times, keep accurate and
complete records of the Collateral, and Secured Party shall have the
right to inspect and make copies of all of Debtor's books and records
relating to the Collateral during normal business hours, after giving
Debtor reasonable prior notice.
(f) Third Party Possession of Collateral. Debtor agrees and acknowledges
that any third person who may at any time possess all or any portion
of the Collateral shall be deemed to hold, and shall hold, the
Collateral as the agent of, and as pledge holder for, Secured Party.
Secured Party may at any time give notice to any third person
described in the preceding sentence that such third person is holding
the Collateral as the agent of, and as pledge holder for, the Secured
Party.
(g) Receivables. As to each and every Receivable (a) it is a bona fide
existing obligation, valid and enforceable against the Account Debtor
for a sum certain for sales of goods shipped or delivered, or goods
leased, or services rendered in the ordinary course of business; (b)
all supporting documents, instruments, chattel paper and other
evidence of indebtedness, if any, delivered to the Secured Party are
complete and correct and valid and enforceable in accordance with
their terms, and all signatures and endorsements that appear thereon
are genuine, and all signatories and endorsers, to Debtor's knowledge,
have full capacity to contract; (c) to the best of the Debtor's
knowledge, the Account Debtor is liable for and will make payment of
the amount expressed in such Receivable according to its terms; (d)
except in the ordinary course of business, it will be subject to no
discount, deduction, setoff, counterclaim, return, allowance or
special terms of payment without the prior approval of the Secured
Party; (e) it is subject to no dispute, defense or offset, real or
claimed; (f) it is not subject to any prohibition or limitation upon
assignment; (g) it has not been redated or reissued in satisfaction of
prior Receivables; (h) the Debtor has full right and power to grant
the Secured Party a security interest therein and the security
interest granted in such Receivable to the Secured Party in this
Agreement, when perfected, will be a valid first security interest
which will inure to the benefit of the Secured Party without further
action. The warranties set out herein shall be deemed to have been
made with respect to each and every Receivable now owned or hereafter
acquired by the Debtor.
(h) Bailees. The Inventory is not now and shall not at any time hereafter
be stored with a bailee, warehouseman, or similar party without the
Secured Party's prior written consent. If any Inventory is so stored,
the Debtor will, concurrent with storing such Inventory, cause any
such bailee, warehouseman, or similar party to issue and deliver to
the Secured Party, in a form acceptable to the Secured Party,
warehouse receipts in the Secured Party's name evidencing the storage
of the Inventory. All such warehouse receipts do and will evidence
ownership of the Inventory stored by the issuers thereof, and the
holder thereof is and will continue to be the owner of good and
marketable title of same, free and clear of any Liens or encumbrances.
All such warehouse receipts are and will be genuine, valid and
enforceable by the holder thereof in accordance with their terms and
all statements thereon are and will be true and accurate in all
respects.
(i) Change of Address. All of the Collateral is located in and will in the
future be in the possession of the Debtor at its address stated above
or at such other addresses as may be set forth on the attached
Schedule A. The Debtor has not at any time within the past four (4)
months either (a) maintained Inventory or Equipment or (b) maintained
its chief executive office or its records with respect to the
Receivables at any other location and shall not do so hereafter except
with the prior written consent of the Secured Party. The Secured Party
shall be entitled to rely upon the foregoing unless it receives 14
days' advance written notice of a change in the address of the
Debtor's executive offices or location of the Collateral.
(j) Schedules of Receivables. Upon the written request of Secured Party,
deliver to the Secured Party schedules of all outstanding Receivables.
Such schedules shall be in form satisfactory to the Secured Party and
shall show the age of such Receivables in intervals of not more than
thirty (30) days, and contain such other information and be
accompanied by such supporting documents as the Secured Party may from
time to time prescribe. The Debtor shall also deliver to the Secured
Party copies of the Debtor's invoices, sales journals, evidences of
shipment or delivery and such other schedules and information as the
Secured Party may reasonably request. The items to be provided under
this Section are to be prepared and
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delivered to the Secured Party from time to time solely for its
convenience in maintaining records of the Collateral and the Debtor's
failure to give any of such items to the Secured Party shall not
affect, terminate, modify or otherwise limit the Secured Party's
security interest granted herein.
(k) Consignment. If at any time any of the Inventory is placed by the
Debtor on consignment, other than goods placed with dealers, with any
person or entity ("CONSIGNEE"), the Debtor shall, prior to the
delivery of such consigned Inventory:
a. Provide the Secured Party with all consignment agreements
and other instruments and documentation to be used in
connection with such consignment, all of which agreements,
instruments, and documentation shall be acceptable in form
and substance to the Secured Party;
b. Prepare and file appropriate financing statements with
respect to any consigned Inventory showing the Consignee as
debtor, the Debtor as secured party, and the Secured Party
as assignee of the Debtor;
c. Prepare and file appropriate financing statements with
respect to any consigned Inventory showing the Debtor as
debtor, and the Secured Party as secured party;
d. After all financing statements referred to in the previous
two subsections have been filed, conduct a search of all
filings made against the Consignee in all jurisdictions in
which the Inventory to be consigned is to be located while
on consignment, and deliver to the Secured Party copies of
the results of all such searches; and
e. Notify, in writing, all creditors of the Consignee that are
or may be holders of security interests in the Inventory to
be consigned, that the Debtor expects to deliver certain
Inventory to the Consignee, all of which Inventory shall be
described in such notice by item or type.
(l) Fixtures. Not permit any item of the Equipment to become a fixture to
real estate or an accession to other property without the prior
written consent of the Secured Party, and the Equipment is now and
shall at all times remain personal property except with the Secured
Party's prior written consent. If any of the Collateral is or will be
attached to real estate in such a manner as to become a fixture under
applicable state law and if such real estate is encumbered, the Debtor
will obtain from the holder of each Lien or encumbrance a written
consent and subordination to the security interest hereby granted, or
a written disclaimer of any interest in the Collateral, in a form
acceptable to the Secured Party.
(m) Chattel Paper. Promptly, upon request by the Secured Party, deliver,
assign, and endorse to the Secured Party all chattel paper and all
other documents held by the Debtor in connection therewith.
(n) Copies of Government Contracts. Make available to the Secured Party,
at the request of the Secured Party, a copy of each Government
Contract in which the Secured Party has a security interest and a copy
of each amendment thereto or modification thereof which changes the
price of such contract or the amount funded to pay for such contract,
except to the extent that furnishing such copies may be prohibited by
government security regulations. Attached hereto as Schedule B is a
complete list of all Government Contracts under which Receivables now
exist or may hereafter arise, identified by the names of the
contracting parties thereto, the date thereof and the number
identifying the Government Contract or agreement and providing
information in the form specified by the Secured Party from time to
time regarding the contracting officer, the identity of any sureties
and the disbursing officer, whether progress payments are to be made
and the rate thereof, whether the Government Contract or agreement has
been fully performed and such other information as the Secured Party
may request. A true, complete and correct copy of each such Government
Contract (including all modifications thereto and notice of exercise
of options thereunder) now existing has been provided to the Secured
Party by the Debtor. The Debtor shall as soon as practicable (but in
no event later than five days prior to the date of execution thereof)
notify the Secured Party of any additional Government Contracts, or
any renewals or extensions of any Government Contract or the exercise
of any options thereunder or modifications thereof, identified by the
names of the contracting parties thereto, the date thereof and the
number identifying the Government Contract or agreement and providing
information in the form specified by the Secured Party from time to
time regarding the contracting officer, the identity of any sureties
and the disbursing officer, whether progress payments are to be made
and the rate thereof, and such other information as the Secured Party
may request, and a true, complete and correct copy of each such
Government Contract, amendment or modification or exercise of option
shall be provided to the Secured Party by the Debtor no later than the
date of execution thereof.
(o) Claims and Disputes. Immediately upon learning thereof, report to the
Secured Party any reclamation, return or repossession of goods except
returns made in the ordinary course of business, any claim or dispute
asserted by any Account Debtor or other obligor, and any other matter
affecting the value and enforceability or collectability of any of the
Collateral. In addition, the Debtor shall, at its sole cost and
expense (including attorneys' fees), settle any and all such claims
and disputes and indemnify and protect the Secured Party against any
liability, loss or expense arising therefrom or out of any such
reclamation, return or repossession of goods, provided, however, that
the Secured Party, if Debtor is not doing so, and if it shall so
elect, shall have the right at all times to settle, compromise, adjust
or litigate all claims or disputes directly with the Account Debtor or
other obligor upon such terms and conditions as the Secured Party
deems advisable and charge all costs and expenses thereof (including
reasonable attorneys' fees) to the Debtor's account and add them to
the principal amount of the Indebtedness.
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(p) Government Contracts Are Binding, Etc. Take the necessary or
appropriate steps to ensure that all Government Contracts have been,
or if arising hereafter will be, legally awarded and binding on the
parties thereto; no payment has been or will be made by the Debtor,
any affiliate, or any person acting on their behalf, to any person
that was, is or will be contingent upon the award of any Government
Contract in violation of applicable procurement law or that would
otherwise be in violation of applicable procurement law (including,
but not limited to, the Federal Acquisition Regulations, the Defense
Acquisition Regulations, the Federal Procurement Regulations and the
Armed Services Procurement Regulations); there is no claim that has
been asserted by any government agency or authority concerning the
award or performance of any Government Contract and the Debtor shall
immediately notify the Secured Party of the assertion of any such
claim or the existence of any basis therefor; neither the Debtor nor
any director, employee or Affiliate has been debarred or suspended
from participation in the award of contracts with the federal
government or any state or local government, or any agency or
instrumentality thereof, or is a party to or the subject of any
pending or threatened proceeding or investigation relating to
debarment or suspension, and the Debtor shall immediately notify the
Secured Party of the occurrence of any of the foregoing or the
existence of any basis therefor; and neither the Debtor nor any
Affiliate, nor any officer, director or employee of any of them, is
permanently or temporarily enjoined or barred from engaging in or
continuing any conduct or practice relating to the conduct of their
business, or enjoining or requiring any of them to take any action of
any kind relating thereto, and the Debtor shall immediately notify the
Secured Party of the occurrence of any of the foregoing or the
existence of any basis therefor.
(q) No Provisions Prohibiting Assignment of Government Contracts. Take the
necessary or appropriate steps to ensure that each Government Contract
(i) does not and will not contain any provision prohibiting assignment
thereof as provided herein, (ii) contains a "no set-off" clause or
does not permit any set-off against or reduction of the obligation to
make payments thereunder for liability of the Debtor to the government
because of re-negotiation, fine, penalty (other than as specifically
permitted by the federal Assignment of Claims Act with respect to
Government Contracts with the federal government), taxes, social
security contributions, or withholding or failing to withhold taxes,
social security contributions or similar amounts, whether arising from
or independent of the Government Contract. The Debtor shall promptly
notify the Secured Party of any claimed set-off or reduction or the
disallowance of progress payment requests.
(r) Cost Accounting and Procurement Systems. The Debtor's cost accounting
and procurement systems are and at all times have been, and will
continue to be, in compliance with all applicable requirements.
(s) Compliance with Assignment Requirements for Government Contracts. The
Debtor is now in compliance and hereby covenants and agrees that the
Debtor will in the future comply with any and all of the requirements
of Title 31 Section 3727 and Title ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Code and any similar state or local law and all rules and regulations
relating thereto, as amended, where such statutes, rules and
regulations are applicable to a particular Receivable, and shall at
all times take all such other action as may be necessary to facilitate
and/or ensure perfection of the Secured Party's security interest in
and the assignment to the Secured Party of any Government Account and
Government Contract.
(t) Information Concerning Government Contracts. At the request of the
Secured Party, submit to the Secured Party for the Secured Party's
approval each Government Contract which the Debtor desires to be
included in determining eligible Government Accounts, and provide such
other information concerning such Government Contract as the Secured
Party may reasonably request.
(u) Domain Name. Take the necessary or appropriate steps to ensure that
the identity and location of the servers used in connection with the
Debtor's domain name and the identity of the party having control over
the domain name server and of the administrative contact with the
registry have been disclosed to the Secured Party. The Debtor shall
not change the domain name server without notification to the Secured
Party. The Debtor shall maintain the trademark of the domain name by
defending against any infringement suits and by policing the
trademark. The Debtor shall renew the domain name registration during
the loan term. The Debtor shall make all payments to the domain name
registrar necessary to maintain the domain name.
(v) Account Control Agreements. Debtor shall at all times maintain all
Cash Equivalents owned by Debtor on deposit in a Deposit Account or
accounts holding securities in Debtor's name at Silicon Valley Bank or
in a Deposit Account or accounts holding securities at another
institution (a "THIRD PARTY INSTITUTION") covered by an account
control agreement in favor of Secured Party (the terms of which shall
be substantially identical to the terms of that certain Control
Agreement, dated May 31, 2005, between Debtor and Secured Party, or
otherwise acceptable to Secured Party). At any time that the Cash
Equivalents or any portion thereof are held in an account or accounts
in one or more Third Party Institutions, the related account control
agreement shall provide that Secured Party is to receive monthly
account statements, in form and substance acceptable to Secured Party,
evidencing that the Cash Equivalents are maintained in the related
account. With respect to each such Deposit Account, Debtor, Secured
Party, and each Third Party Institution with which a Deposit Account
is maintained, shall enter into a written agreement, granting Secured
Party control of the Deposit Account and providing that, upon an event
of default by Debtor, the Third Party Institution will comply with
instructions originated by the Secured Party directing disposition of
the funds in the Deposit Account without further consent by Debtor.
Such account control agreement may in accordance with the provisions
thereof provide terms under which Debtor may remove funds from the
Deposit Account; provided all funds in or transferred into the Deposit
Account on or after the effectiveness of this Agreement shall be
subject to the security interest granted under this Agreement.
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(w) Distributions. Debtor shall not (i) pay any dividends or make any
distributions on its equity securities; (ii) purchase, redeem, retire,
defease or otherwise acquire for value any of its equity securities
(other than repurchases pursuant to the terms of employee stock
purchase plans, employee restricted stock agreements or similar
arrangements in an aggregate amount not to exceed Fifty Thousand
Dollars ($50,000) per annum); (iii) return any capital to any holder
of its equity securities as such; (iv) make any distribution of
assets, equity securities, obligations or securities to any holder of
its equity securities as such; or (v) set apart any sum for any such
purpose; provided, however, Debtor may pay dividends payable solely in
common stock.
(x) Indebtedness Payments. Debtor shall not (i) prepay, redeem, purchase,
defease or otherwise satisfy in any manner prior to the scheduled
repayment thereof any Additional Indebtedness for borrowed money or
lease obligations, (ii) amend, modify or otherwise change the terms of
any Additional Indebtedness for borrowed money or lease obligations so
as to accelerate the scheduled repayment thereof or (iii) repay any
notes to officers, directors or shareholders except as expressly
provided for in a duly executed subordination agreement in favor of,
and approved by Secured Party.
(y) Additional Indebtedness. Debtor shall not create, incur, assume or
permit to exist any Additional Indebtedness except Permitted
Indebtedness.
(z) Negative Pledge on Intellectual Property. Debtor's Intellectual
Property is, and will remain, free and clear of all liens, claims and
encumbrances of any kind whatsoever, except for Permitted Liens.
Debtor shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of its Intellectual
Property, or enter into any agreement, document, instrument or other
arrangement (except with or in favor of Secured Party) with any entity
which directly or indirectly prohibits or has the effect of
prohibiting Debtor from selling, transferring, assigning, mortgaging,
pledging, leasing, granting a security interest in or upon, or
encumbering any of Debtor's Intellectual Property; provided, however,
that Debtor may grant non-exclusive licenses with respect to
components of Debtor's Intellectual Property in connection with joint
ventures, corporate collaborations and distribution arrangements in
the ordinary course of business.
4. INSURANCE.
(a) Risk of Loss. Debtor shall at all times bear the entire risk of any
loss, theft, damage to, or destruction of, any of the Collateral from
any cause whatsoever.
(b) Insurance Requirements. Debtor agrees to maintain general liability
insurance and to keep the Collateral insured against loss or damage by
fire and extended coverage perils, theft, burglary, risk of loss by
collision (for any or all Collateral which are vehicles) and such
other risks as Secured Party may reasonably require. The liability
insurance coverage shall be in an amount standard for companies
similar to Debtor in Debtor's industry in Debtor's geographic region.
The property insurance coverage shall be in an amount no less than the
full replacement value of the Collateral. All insurance policies shall
be in a form, with companies and with deductible amounts, acceptable
to Secured Party. Debtor shall deliver to Secured Party policies or
certificates of insurance evidencing such coverage. Each policy shall
name Secured Party as a loss payee and an additional insured, shall
provide for coverage to Secured Party regardless of the breach by
Debtor of any warranty or representation made therein, shall not be
subject to co-insurance, and shall provide that coverage may not be
canceled or altered by the insurer except upon thirty (30) days prior
written notice to Secured Party. Debtor appoints Secured Party as its
attorney-in-fact to make proof of loss, claim for insurance and
adjustments with insurers, and to receive payment of and execute or
endorse all documents, checks or drafts in connection with insurance
payments. Secured Party shall not act as Debtor's attorney-in-fact
unless Debtor is in default. Proceeds of insurance shall be applied,
at the option of Secured Party, to repair or replace the Collateral or
to reduce any of the Indebtedness.
5. REPORTS.
(a) Notice of Events. Debtor shall promptly notify Secured Party of (i)
any change in the name of Debtor, (ii) any change in the state of its
incorporation or registration, (iii) any relocation of its chief
executive offices, (iv) any of the Collateral being lost, stolen,
missing, destroyed, materially damaged or worn out, (v) any lien,
claim or encumbrance other than Permitted Liens attaching to or being
made against any of the Collateral, or (vi) any occurrence of any
default pursuant to Section 7 herein.
(b) Financial Statements, Reports and Certificates. Debtor will deliver to
Secured Party within one hundred twenty (120) days of the close of
each fiscal year of Debtor, Debtor's complete financial statements
including a balance sheet, income statement, statement of
shareholders' equity and statement of cash flows, each prepared in
accordance with generally accepted accounting principles consistently
applied, certified by a recognized firm of certified public
accountants satisfactory to Secured Party. Debtor will deliver to
Secured Party copies of Debtor's quarterly financial statements
including a balance sheet, income statement and statement of cash
flows, each prepared by Debtor in accordance with generally accepted
accounting principles consistently applied by Debtor and certified by
Debtor's president or chief financial officer, within forty-five (45)
days after the close of each of Debtor's fiscal quarter. Debtor will
deliver to Secured Party copies of all Forms 10-K and 10-Q, if any,
within 30 days after the
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dates on which they are filed with the Securities and Exchange
Commission. Debtor will deliver to Secured Party copies of Debtor's
monthly financial statements including a balance sheet and income
statement, each prepared by Debtor in accordance with generally
accepted accounting principles consistently applied by Debtor and
certified by Debtor's president or chief financial officer, within
thirty (30) days after the close of each month. Concurrently with
delivery of the foregoing information, and from time to time promptly
upon request of Secured Party, Debtor will deliver to Secured Party a
Compliance Certificate substantially consistent with the form of the
document attached hereto as Schedule C. Debtor will deliver to Secured
Party promptly upon request of Secured Party, in form satisfactory to
Secured Party, such other and additional information as Secured Party
may reasonably request from time to time.
6. FURTHER ASSURANCES.
(a) Further Assurances Regarding Security Interests. Debtor shall, upon
request of Secured Party, furnish to Secured Party such further
information, execute and deliver to Secured Party such documents and
instruments (including, without limitation, Uniform Commercial Code
financing statements) and shall do such other acts and things as
Secured Party may at any time reasonably request relating to the
perfection or protection of the security interest created by this
Agreement or for the purpose of carrying out the intent of this
Agreement. Without limiting the foregoing, Debtor shall cooperate and
do all acts deemed necessary or advisable by Secured Party to continue
in Secured Party a perfected first security interest in the
Collateral, and shall obtain and furnish to Secured Party any
subordinations, releases, landlord waivers, lessor waivers, mortgagee
waivers, or control agreements, and similar documents as may be from
time to time reasonably requested by, and in form and substance
satisfactory to, Secured Party.
(b) Authorization To File Financing Statements. Debtor shall perform any
and all acts requested by the Secured Party to establish, maintain and
continue the Secured Party's security interest and liens in the
Collateral, including but not limited to, executing or authenticating
financing statements and such other instruments and documents when and
as reasonably requested by the Secured Party. Debtor hereby authorizes
Secured Party through any of Secured Party's employees, agents or
attorneys to file any and all financing statements, including, without
limitation, any original filings, continuations, transfers or
amendments thereof required to perfect Secured Party's security
interest and liens in the Collateral under the UCC without
authentication or execution by Debtor. Debtor hereby irrevocably
authorizes the Secured Party at any time and from time to time to file
in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statement(s) and amendments thereto that (a)
indicate the Collateral (i) as all assets of the Debtor or words of
similar effect, regardless of whether any particular asset comprised
in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the State or such jurisdiction, or (ii) as being of
an equal or lesser scope or with greater detail, and (b) provide any
other information required by part 5 of Article 9 of the Uniform
Commercial Code of the State or such other jurisdiction for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Debtor is an organization, the
type of organization and any organization identification number issued
to the Debtor, and (ii) in the case of a financing statement filed as
a fixture filing, a sufficient description of real property to which
the Collateral relates. The Debtor agrees to furnish any such
information to the Secured Party promptly upon the Secured Party's
request.
(c) Indemnification. Debtor shall indemnify and defend the Secured Party,
its successors and assigns, and their respective directors, officers
and employees, from and against all claims, actions and suits
(including, without limitation, related attorneys' fees) of any kind
whatsoever arising, directly or indirectly, in connection with any of
the Collateral or the Debt Documents.
7. DEFAULT AND REMEDIES.
(a) Defaults. Debtor shall be in default under this Agreement and each of
the other Debt Documents if any one of the following should occur:
(i) Debtor breaches its obligation to pay when due any installment or
other amount due or coming due under any of the Debt Documents;
(ii) Debtor, without the prior written consent of Secured Party,
attempts to or does sell, rent, lease, license, mortgage, grant a
security interest in, or otherwise transfer or encumber, or allow
Liens (except for Permitted Liens) upon, any of the Collateral
(other than the sale of goods in the ordinary course of business)
and Debtor fails to cure such breach within thirty (30) days
after the occurrence thereof;
(iii) Debtor breaches any of its insurance obligations under Section
4;
(iv) Debtor breaches any of its obligations under Sections 2(v) or
2(w) or Sections 3(v), (w), (x), (y) or (z);
(v) Debtor breaches any of its other non-payment obligations under
any of the Debt Documents and fails to cure that breach within
thirty (30) days after it has occurred;
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(vi) Any warranty, representation or statement made by Debtor in any
of the Debt Documents or otherwise in connection with any of the
Indebtedness shall be false or misleading in any material
respect;
(vii) Any of the Collateral is subjected to attachment, execution,
levy, seizure or confiscation in any legal proceeding or
otherwise, or if any legal or administrative proceeding is
commenced against Debtor or any of the Collateral, which in the
good faith judgment of Secured Party subjects any of the
Collateral to a material risk of attachment, execution, levy,
seizure or confiscation and no bond is posted or protective order
obtained to negate such risk;
(viii) Debtor breaches or is in default under any other agreement
between Debtor and Secured Party;
(ix) Debtor or any guarantor or other obligor for any of the
Indebtedness (collectively "GUARANTOR") dissolves, terminates its
existence, becomes insolvent or ceases to do business as a going
concern;
(x) If Debtor or any Guarantor is a natural person, and Debtor or any
such Guarantor dies or becomes incompetent;
(xi) A receiver is appointed for all or of any part of the property of
Debtor or any Guarantor, or Debtor or any Guarantor makes any
assignment for the benefit of creditors;
(xii) Debtor or any Guarantor files a petition under any bankruptcy,
insolvency or similar law, or any such petition is filed against
Debtor or any Guarantor and is not dismissed within forty-five
(45) days;
(xiii) Debtor's improper filing of an amendment or termination
statement relating to a filed financing statement describing the
Collateral and Debtor fails to cure such breach within thirty
(30) days after the occurrence thereof;
(xiv) Debtor shall merge with or consolidate into any other entity or
sell all or substantially all of its assets or in any manner
terminate its existence;
(xv) If Debtor is a privately held corporation, more than 50% of
Debtor's voting capital stock, or effective control of Debtor's
voting capital stock, issued and outstanding from time to time,
is not retained by the holders of such stock on the date the
Agreement is executed; provided, however, this provision shall
not apply to an equity financing of Debtor;
(xvi) If Debtor is a publicly held corporation, there shall be a
change in the ownership of Debtor's stock such that Debtor is no
longer subject to the reporting requirements of the Securities
Exchange Act of 1934 or no longer has a class of equity
securities registered under Section 12 of the Securities Act of
1933;
(xvii) Debtor defaults under any agreement to pay Additional
Indebtedness or any other financing arrangement between Debtor
and a third party and Debtor fails to cure such breach within
thirty (30) days after the occurrence thereof;
(xviii) [omitted intentionally]
(xix) Secured Party shall have determined in its sole and good faith
judgment that there has been a material adverse change in the
financial condition, business, operations, prospects, product
development, technology, or business or contractual relations
with third parties of Debtor from the date hereof, or a change or
event shall have occurred which would impair the ability of
Debtor to perform its obligations hereunder or under any of the
other financing agreements to which it is a party or of Secured
Party to enforce the Indebtedness or realize upon the Collateral.
(b) Acceleration. If Debtor is in default, the Secured Party, at its
option, may declare any or all of the Indebtedness to be immediately
due and payable, without demand or notice to Debtor or any guarantor
(provided that if there is a default as a result of a bankruptcy or
insolvency all Indebtedness shall become immediately due and payable
without any action by Secured Party). The accelerated obligations and
liabilities shall bear interest (both before and after any judgment)
until paid in full at the Default Rate.
(c) Rights and Remedies. Secured Party shall have all of the rights and
remedies of a Secured Party under the Uniform Commercial Code, and
under any other applicable law. Without limiting the foregoing, if
Debtor is in default, Secured Party shall have the right to (i) notify
any Account Debtor of Debtor or any obligor on any instrument which
constitutes part of the Collateral to make payment to the Secured
Party, (ii) with or without legal process, enter any premises where
the Collateral may be and take possession of and remove the Collateral
from the premises or store it on the premises, (iii) sell the
Collateral at public or private sale, in whole or in part, and have
the right to bid and purchase at said sale, (iv) to instruct the bank
maintaining any Deposit Account to transfer the funds in the Deposit
Account to any account of the Secured Party, or (v) lease or otherwise
dispose of all or part of the Collateral, applying proceeds from such
disposition to the obligations then in default. If Debtor is in
default and if
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requested by Secured Party, Debtor shall promptly assemble the
Collateral and make it available to Secured Party at a place to be
designated by Secured Party, which is reasonably convenient to both
parties. If Debtor is in default, Secured Party may also render any or
all of the Collateral unusable at the Debtor's premises and may
dispose of such Collateral on such premises without liability for rent
or costs. Any notice that Secured Party is required to give to Debtor
under the Uniform Commercial Code of the time and place of any public
sale or the time after which any private sale or other intended
disposition of the Collateral is to be made shall be deemed to
constitute reasonable notice if such notice is given to the last known
address of Debtor at least five (5) days prior to such action. Upon
the occurrence and during the continuation of a default, Debtor hereby
appoints Secured Party as Debtor's attorney-in-fact, with full
authority in Debtor's place and stead and in Debtor's name or
otherwise, from time to time in Secured Party's sole and arbitrary
discretion, to take any action and to execute any instrument which
Secured Party may deem necessary or advisable to accomplish the
purpose of this Agreement. Secured Party is granted a non-exclusive
royalty free license to use Debtor's Intellectual Property in
connection with Secured Party's disposition of Collateral in the
exercise of Secured Party's rights or remedies hereunder.
(d) Application of Proceeds. The proceeds and/or avails of the Collateral,
or any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Secured
Party, at the time of or received by Secured Party after the
occurrence of a default hereunder) shall be paid to and applied as
follows:
a. First, to the payment of out-of-pocket costs and expenses,
including all amounts expended to preserve the value of the
Collateral, all costs of repossession, storage, and disposition
including without limitation reasonable attorneys', appraisers',
and auctioneers' fees, of foreclosure or suit, if any, and of
such sale and the exercise of any other rights or remedies, and
of all proper fees, expenses, liability and advances, including
reasonable legal expenses and reasonable attorneys' fees,
incurred or made hereunder by Secured Party, including without
limitation, Secured Party's Expenses;
b. Second, to the payment to Secured Party of the amount then owing
or unpaid on the Loans for scheduled payments, any accrued and
unpaid interest, and all other Indebtedness (provided, however,
if such proceeds shall be insufficient to pay in full the whole
amount so due, owing or unpaid upon the Loans, then to the unpaid
interest thereon, then to the outstanding principal amount of the
Loans, and then to the payment of other amounts then payable to
Secured Party under any of the Debt Documents or otherwise); and
c. Third, to the payment of the surplus, if any, to Debtor, its
successors and assigns, or to whomsoever may be lawfully entitled
to receive the same.
(e) Fees and Costs. Debtor agrees to pay all reasonable attorneys' fees
and other costs incurred by Secured Party in connection with the
enforcement, assertion, defense or preservation of Secured Party's
rights and remedies under this Agreement, or if prohibited by law,
such lesser sum as may be permitted. Debtor further agrees that such
fees and costs shall constitute Indebtedness.
(f) Remedies Cumulative. Secured Party's rights and remedies under this
Agreement or otherwise arising are cumulative and may be exercised
singularly or concurrently. Neither the failure nor any delay on the
part of the Secured Party to exercise any right, power or privilege
under this Agreement shall operate as a waiver, nor shall any single
or partial exercise of any right, power or privilege preclude any
other or further exercise of that or any other right, power or
privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS
RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT
OR PAPER SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING
AND SIGNED BY SECURED PARTY. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future
occasion.
(g) WAIVER OF JURY TRIAL. DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE
THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT
DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS
BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF
THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE.
THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE
WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
8. MISCELLANEOUS.
(a) Assignment. This Agreement, any Note and/or any of the other Debt
Documents may be assigned, in whole or in part, by Secured Party
without notice to Debtor, and Debtor agrees not to assert against any
such assignee, or assignee's assigns, any defense, set-off, recoupment
claim or counterclaim which Debtor has or may at any time have against
Secured Party for any reason whatsoever. Debtor agrees that if Debtor
receives
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written notice of an assignment from Secured Party, Debtor will pay
all amounts payable under any assigned Debt Documents to such assignee
or as instructed by Secured Party. Debtor also agrees to confirm in
writing receipt of the notice of assignment as may be reasonably
requested by Secured Party or assignee.
(b) Notices. All notices to be given in connection with this Agreement
shall be in writing, shall be addressed to the parties at their
respective addresses set forth in this Agreement (unless and until a
different address may be specified in a written notice to the other
party), and shall be deemed given (i) on the date of receipt if
delivered in hand or by facsimile transmission, (ii) on the next
business day after being sent by express mail, and (iii) on the fourth
business day after being sent by regular, registered or certified
mail. As used herein, the term "business day" shall mean and include
any day other than Saturdays, Sundays, or other days on which
commercial banks in New York, New York are required or authorized to
be closed.
(c) Correction of Errors. Upon written notice to Debtor, Secured Party may
correct patent errors and fill in all blanks in this Agreement or in
any Note consistent with the agreement of the parties.
(d) Time is of the Essence. Time is of the essence of this Agreement. This
Agreement shall be binding, jointly and severally, upon all parties
described as the "Debtor" and their respective heirs, executors,
representatives, successors and assigns, and shall inure to the
benefit of Secured Party, its successors and assigns.
(e) Entire Agreement. This Agreement and the Debt Documents constitute the
entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior understandings
(whether written, verbal or implied) with respect to such subject
matter. THIS AGREEMENT AND THE DEBT DOCUMENTS SHALL NOT BE CHANGED OR
TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING
SIGNED BY BOTH PARTIES. Section headings contained in this Agreement
have been included for convenience only, and shall not affect the
construction or interpretation of this Agreement. This Agreement is
the result of negotiations between and has been reviewed by each of
Debtor and Secured Party executing this Agreement as of the date
hereof and their respective counsel; accordingly, this Agreement shall
be deemed to be the product of the parties hereto, and no ambiguity
shall be construed in favor of or against Debtor or Secured Party.
(f) Termination of Agreement. This Agreement shall continue in full force
and effect until all of the Indebtedness has been indefeasibly paid in
full to Secured Party or its assignee; provided, that Debtor's
indemnity obligations set forth in Section 6(c) shall survive until
all applicable statute of limitations periods with respect to actions
that may be brought against Secured Party have run ; provided further
that, Debtor's obligations under Section 2(v) shall survive
indefinitely until, by their terms, they are no longer operative. The
surrender, upon payment or otherwise, of any Note or any of the other
documents evidencing any of the Indebtedness shall not affect the
right of Secured Party to retain the Collateral for such other
Indebtedness as may then exist or as it may be reasonably contemplated
will exist in the future. This Agreement shall automatically be
reinstated if Secured Party is ever required to return or restore the
payment of all or any portion of the Indebtedness (all as though such
payment had never been made). Secured Party shall, at Debtor's sole
cost and expense, execute such further documents and take such further
actions as may be reasonably necessary to effect the release of its
security interests contemplated by this paragraph, including duly
executing and delivering termination statements for filing in all
relevant jurisdictions under the Code.
(g) CHOICE OF LAW. DEBTOR AGREES THAT SECURED PARTY AND/OR ITS SUCCESSORS
AND ASSIGNS SHALL HAVE THE OPTION BY WHICH STATE LAWS THIS AGREEMENT
SHALL BE GOVERNED AND CONSTRUED: (A) THE LAWS OF THE COMMONWEALTH OF
VIRGINIA; OR (B) IF COLLATERAL HAS BEEN PLEDGED TO SECURE THE
LIABILITIES, THEN BY THE LAWS OF THE STATE OR STATES WHERE THE
COLLATERAL IS LOCATED, AT SECURED PARTY'S OPTION. THIS CHOICE OF STATE
LAWS IS EXCLUSIVE TO THE SECURED PARTY. DEBTOR SHALL NOT HAVE ANY
OPTION TO CHOOSE THE LAWS BY WHICH THIS AGREEMENT SHALL BE GOVERNED.
DEBTOR ACKNOWLEDGES THAT THIS AGREEMENT IS BEING SIGNED BY THE SECURED
PARTY IN PARTIAL CONSIDERATION OF SECURED PARTY'S RIGHT TO ENFORCE IN
THE JURISDICTION STATED ABOVE. DEBTOR CONSENTS TO JURISDICTION IN THE
COMMONWEALTH OF VIRGINIA OR THE STATE IN WHICH ANY COLLATERAL IS
LOCATED AND VENUE IN ANY FEDERAL OR STATE COURT IN THE COMMONWEALTH OF
VIRGINIA OR THE STATE IN WHICH COLLATERAL IS LOCATED FOR SUCH PURPOSES
AND WAIVES ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE
AND ANY OBJECTION THAT SAID COUNTY IS NOT CONVENIENT. DEBTOR WAIVES
ANY RIGHTS TO COMMENCE ANY ACTION AGAINST SECURED PARTY IN ANY
JURISDICTION EXCEPT VIRGINIA, OR IF SECURED PARTY CHOOSES TO LITIGATE
IN A STATE WHERE COLLATERAL IS LOCATED THEN IN SUCH COUNTY AND STATE.
(h) Limitation of Liability. The Secured Party shall not, under any
circumstances, be liable for any error or omission or delay of any
kind occurring in the settlement, collection or payment of any
Receivables or any instrument received in payment thereof or for any
damage resulting therefrom. The Secured Party is authorized to accept
the return of the goods represented by any of the Receivables, without
notice to or consent by the Debtor, or without discharging or in any
manner affecting the Loan.
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(i) Notification to Account Debtors. Secured Party shall have the right at
any time to notify any Account Debtor of the Secured Party's security
interest in the Receivables and, after an event of default by Debtor,
to require payments to be made directly to the Secured Party. To
facilitate direct collection, the Debtor hereby appoints the Secured
Party and any officer or employee of the Secured Party, as the Secured
Party may from time to time designate, as attorney-in-fact for the
Debtor to, upon an event of default, (a) receive, open and dispose of
all mail addressed to the Debtor and take therefrom any payments on or
proceeds of Receivables; (b) take over the Debtor's post office boxes
or make such other arrangements, in which the Debtor shall cooperate,
to receive the Debtor's mail, including notifying the post office
authorities to change the address for delivery of mail addressed to
the Debtor to such address as the Secured Party shall designate; (c)
endorse the name of the Debtor in favor of the Secured Party upon any
and all checks, drafts, money orders, notes, acceptances or other
evidences of payment or Collateral that may come into the Secured
Party's possession; (d) sign and endorse the name of the Debtor on any
invoice or ▇▇▇▇ of lading relating to any of the Receivables, on
verifications of Receivables sent to any Account Debtor, to drafts
against any Account Debtor, to assignments of Receivables, and to
notices to any Account Debtor; and (e) do all acts and things
necessary to carry out this Agreement and the transactions
contemplated hereby, including signing the name of the Debtor on any
instruments required by law in connection with the transactions
contemplated hereby and on financing statements as permitted by the
Virginia Uniform Commercial Code. The Debtor hereby ratifies and
approves all acts of such attorneys-in-fact, and neither the Secured
Party nor any other such attorney-in-fact shall be liable for any acts
of commission or omission, or for any error of judgment or mistake of
fact or law of any such attorney-in-fact. This power, being coupled
with an interest, is irrevocable so long as the Loan remains
unsatisfied, or any Debt Document remains effective, as solely
determined by the Secured Party.
(j) Loss, Depreciation or Other Damage. The Secured Party shall not be
liable for or prejudiced by any loss, depreciation or other damage to
Receivables or other Collateral unless caused by the Secured Party's
willful and malicious act, and the Secured Party shall have no duty to
take any action to preserve or collect any Receivable or other
Collateral.
(k) Demand; Protest. Debtor waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments,
chattel paper, and guarantees at any time held by Secured Party on
which Debtor may in any way be liable.
9. DEFINITIONS.
As used herein, the following terms, when initial capital letters are used,
shall have the respective meanings set forth below. In addition, all terms
defined in the Code shall have the meanings given therein unless otherwise
defined herein.
Defined Terms. As used in this Agreement, the following terms shall have the
following meanings, unless the context otherwise requires:
"ACCOUNT COLLATERAL" has the meaning given such capitalized term in
Section 1.
"ACCOUNT DEBTOR" shall mean the Account Debtor or any customer of the
Debtor who is obligated or indebted to the Debtor with respect to any
of the Receivables and/or the prospective purchaser with respect to
any contract right, and/or any party or organization who enters into
or proposes to enter into any contract or other arrangement with the
Debtor pursuant to which the Debtor is to deliver any personal
property or perform any service.
"ADDITIONAL INDEBTEDNESS" means, with respect to Debtor or any of its
subsidiaries, the aggregate amount of, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade payables aged
less than one hundred eighty (180) days), (d) all capital lease
obligations of such Person, (e) all obligations or liabilities of
others secured by a Lien on any asset of such Person, whether or not
such obligation or liability is assumed, (f) all obligations or
liabilities of others guaranteed by such Person, and (g) any other
obligations or liabilities which are required by GAAP to be shown as
debt on the balance sheet of such Person. Unless otherwise indicated,
the term "ADDITIONAL INDEBTEDNESS" shall include all Indebtedness of
Debtor and all of its subsidiaries.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or
is under common control with the Person, and each of that Person's
senior executive officers, directors, partners and, for any Person
that is a limited liability company, that Person's managers and
members.
A/R FACILITY" has the meaning given such capitalized term in Section
1.
"CASH EQUIVALENTS" means the sum outstanding, at any one time, of (i)
all cash (in United States dollars) owned by Debtor at such time plus
(ii) the fair market value of all cash equivalents and short term
investments (as those terms are defined by GAAP) owned by Debtor at
such time.
"CODE" means the Virginia Uniform Commercial Code (including revised
Article 9 thereof).
"COLLATERAL" shall mean all personal property and fixtures of the
Debtor, including, but not limited to all of the Receivables,
Payments, accounts, the Deposit Account or accounts holding
securities, contract rights, instruments, documents, chattel paper
(including tangible and electronic chattel paper), payment
intangibles, commercial tort claims, health-care-insurance
receivables, instruments, investment property, supporting obligations
and general intangibles now owned or hereafter acquired by the Debtor
and all goods, equipment, general intangibles and property of the
Debtor described below which is now owned or hereafter acquired by the
Debtor, wherever located (including items of Collateral located
outside the
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continental United States); all deposit accounts (including all
signature cards, account agreements and other documents relating to
deposit accounts) and other obligations or indebtedness owed to the
Debtor from whatever source arising; letter of credit rights; all
rights of the Debtor to receive any payment in money or kind; all
Inventory; all Equipment; all of the Debtor's rights as an unpaid
seller, including stoppage in transit, detinue and reclamation; all
guarantees, or other agreements or property securing or relating to
any of the items referred to above, or acquired for the purpose of
securing and enforcing any of such items; all books of account and
documents related thereto; all customer lists and other documents
containing the names, addresses and other information regarding the
Debtor's customers, subscribers or those to whom the Debtor provides
any services; computer tapes, programs, discs and other material,
media or documents relating to the recording, billing or analyzing of
any of the above; all computers, word processors, printers, switches,
interfaces, source codes, mask works, software, web servers, website
service contracts, internet connection contract or line lease, website
hosting service contract, website license agreements, back-up copies
of website content, contracts with website advertisers, scripts, codes
or Active-X controls, technology escrow agreements, website content
development agreements, all rights, of whatever form, in and to domain
names, instructional material, and connectors and all parts,
accessories, additions, substitutions, or options together with all
property or equipment used in connection with any of the above or
which are used to operate or cause to operate any features, special
applications, format controls, options or software of any or all of
the above-mentioned items; whether now owned or existing or hereafter
acquired or arising, all income, royalties and other proceeds;
contractual rights, literary rights, all amounts received as an award
in or settlement of a suit in damages, proceeds of loans, interests in
joint ventures or general or limited partnerships, the sale by the
Debtor of any of the foregoing and all proceeds (cash and non-cash) of
the foregoing; proceeds of property received wholly or partly in trade
or exchange for the Collateral and all rents, revenues, issues,
profits and proceeds in any form, including cash, insurance proceeds,
distributions on stock, negotiable instruments and other evidences of
indebtedness, chattel paper, security agreements and other documents
arising from the sale, lease, license, encumbrance, collection of, or
any other temporary or permanent disposition of, the Collateral or any
interest therein. Notwithstanding the foregoing, the term Collateral
shall not include any Intellectual Property; provided, however, the
Collateral shall include all accounts, license and royalty fees and
other revenues, proceeds, or income arising out of or relating to the
Intellectual Property (the "EXCLUDED PROPERTY"). The Debtor
acknowledges and agrees that, in applying the law of any jurisdiction
that at any time enacts all or substantially all of the uniform
provisions of Revised Article 9 of the Uniform Commercial Code (1999
Official Text), the foregoing Collateral description covers all assets
of the Debtor other than the Excluded Property. The Secured Party may
at any time and from time to time file, pursuant to the provisions of
this Agreement, financing and continuation statements and amendments
thereto reflecting the same. Notwithstanding the foregoing, the
Collateral shall not include an escrow deposit for ▇▇▇▇▇▇▇▇ Beheer
B.V. in the approximate amount of 6,000 Euros, which amount may be
increased annually, but shall in no event exceed 10,000 Euros
"CONSIGNEE" has the meaning given such capitalized term in Section
3(k).
"DEBT DOCUMENTS" has the meaning given such capitalized term in
Section 2(b).
"DEFAULT RATE" is the lower of eighteen percent (18%) per annum or the
maximum rate not prohibited by applicable law.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook, or similar
account maintained with a bank.
"EQUIPMENT" shall mean (a) all goods and equipment of the Debtor of
every type and description, now owned and hereafter acquired and
wherever located, including, without limitation, all imbedded
software, machinery, motor vehicles and other rolling stock,
furniture, furnishings, tools, dies, fittings, accessories, all
substitutions therefor, leasehold improvements, fixtures, and
materials and supplies relating to any of the foregoing; (b) all
present and future documents of title and trust receipts relating to
any of the foregoing; (c) all present and future rights, claims and
causes of action of Debtor in connection with purchases of (or
contracts for the purchase of), or warranties relating to, or damages
to, goods held or to be held by the Debtor as equipment; (d) all
present and future warranties, manuals and other written materials
(and packaging thereof or relating thereto) relating to any of the
foregoing; and (e) all present and future general intangibles of the
Debtor in any way relating to any of the foregoing.
"GOVERNMENT ACCOUNTS" shall mean all accounts arising out of any
Government Contract.
"GOVERNMENT CONTRACT" shall mean any contract between the Debtor and
the United States Government, any state or local government or any
agency thereof, and all amendments thereto.
"INDEBTEDNESS" has the meaning given such capitalized term in Section
1.
"INTELLECTUAL PROPERTY" shall mean (a) all of the Debtor's right,
title and interest, whether now owned or existing or hereafter
acquired or arising, in and to all domestic and foreign copyrights,
copyright registrations and copyright applications, whether or not
registered or filed with any governmental authority, together with (i)
all renewals thereof, (ii) all present and future rights of the Debtor
under all present and future license agreements relating thereto,
whether the Debtor is licensee or licensor thereunder, (iii) all
income, royalties, damages and payments now or hereafter due and/or
payable to the Debtor thereunder or with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (iv) all of the Debtor's present and future
claims, causes of action and rights to ▇▇▇ for past, present or future
infringements thereof, and (v) all rights corresponding thereto
throughout the world (collectively "COPYRIGHT RIGHTS"); (b) all of the
Debtor's right, title and interest, whether now owned or existing or
hereafter acquired or arising, in and to all United States and foreign
patents, and pending and abandoned United States and foreign patent
applications, including, without limitation, the inventions and
improvements described or claimed therein, together with(i) any
reissues, divisions, continuations, certificates of re-examination,
extensions and continuations-in-part thereof, (ii) all present and
future rights of the Debtor under all present and future license
agreements relating thereto, whether the Debtor is licensee or
licensor thereunder, (iii) all income, royalties, damages and payments
now or hereafter due and/or payable to the Debtor thereunder or with
respect thereto, including, without limitation, damages and payments
for past, present or future infringements thereof, (iv) all of the
Debtor's present and future claims, causes of action and rights to ▇▇▇
for past, present or future infringements thereof, and (v) all rights
corresponding thereto throughout the world (collectively "PATENT
RIGHTS"); (c) all of the Debtor's right, title and interest, whether
now owned or existing or hereafter acquired or arising, in and to all
domestic and foreign trademarks, trademark registrations, trademark
applications and trade names, whether or not registered or filed with
any governmental authority, together with (i) all renewals thereof,
(ii) all present and future rights of the Debtor under all present and
future license agreements relating thereto, whether the Debtor is
licensee or licensor thereunder, (iii) all income, royalties, damages
and payments now or hereafter due and/or payable to the Debtor
thereunder or with respect thereto, including, without limitation,
damages and payments for past, present or future infringements
thereof, (iv) all of the Debtor's present and future claims, causes of
action and rights to ▇▇▇ for past, present or future infringements
thereof, and (v) all rights corresponding thereto throughout the world
(collectively "TRADEMARK RIGHTS"); (d) all present and future licenses
and license agreements of the Debtor, and all rights of the Debtor
under or in connection therewith, whether the Debtor is licensee or
licensor thereunder, including, without limitation, any present or
future franchise agreements under which the Debtor is franchisee or
franchisor, together with (i) all renewals thereof, (ii) all income,
royalties, damages and payments now or hereafter due and/or payable to
the Debtor thereunder or with
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respect thereto, including, without limitation, damages and payments
for past, present or future infringements thereof, (iii) all claims,
causes of action and rights to ▇▇▇ for past, present or future
infringements thereof, and (iv) all rights corresponding thereto
throughout the world (collectively "LICENSE RIGHTS"); (e) all present
and future trade secrets of the Debtor; and (f) all other present and
future intellectual property of the Debtor.
"INVENTORY" shall mean and include (a) all goods now owned or
hereafter acquired by the Debtor, which are held for sale or lease by
the Debtor or are furnished or to be furnished by the Debtor under
contracts of service, (b) all raw materials, work in process, finished
goods, packaging materials, and other materials and supplies of every
kind used or consumed in connection with the manufacture, production,
packing, shipping, advertising or sale of such goods, (c) all proceeds
and products from the sale or other disposition of such goods,
including all goods returned, repossessed, or acquired by the Debtor
by way of substitution or replacement, and all additions and
accessions thereto, and all documents and instruments (as those terms
are defined in the Uniform Commercial Code) covering such goods; (d)
all the Debtor's rights as an unpaid seller, including stoppage in
transit, detinue and reclamation; and (e) all of the above owned by
the Debtor or in which the Debtor now has or in which the Debtor may
hereafter acquire an interest, whether in transit or in the Debtor's
constructive or actual possession or held by the Debtor or others for
the Debtor's account (including any of the above held on consignment),
including, without limitation, all of the above which may be located
on the Debtor's premises or upon the premises of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents,
finishers, converters or other third parties who may have possession,
temporary or otherwise, thereof.
"LIEN(S)" shall mean any voluntary or involuntary mortgage, pledge,
deed of trust, assignment, security interest, encumbrance,
hypothecation, lien, or charge of any kind (including any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"LOAN" means an advance of credit by Secured Party to Debtor.
"NOTE" has the meaning given such capitalized term in Section 1.
"PAYMENT" or "PAYMENTS" shall mean any check, draft, cash or any other
remittance or credit in payment or on account of any or all of the
Receivables and the cash proceeds of any returned, rejected or
repossessed goods, the sale or lease of which gave rise to a
Receivable.
"PERMITTED INDEBTEDNESS" means and includes: (i) Indebtedness of
Debtor to Secured Party, (ii) Additional Indebtedness arising from the
endorsement of instruments in the ordinary course of business, (iii)
Additional Indebtedness existing on the date hereof and set forth in
Schedule B, (iv) Subordinated Indebtedness, and (v) Additional
Indebtedness in the form of the A/R Facility under the terms as set
forth in Section 1 and which is secured solely by Debtor's Account
Collateral, up to $500,000 cumulative aggregate Indebtedness in the
first 24 months and up to $600,000 cumulative aggregate Indebtedness
thereafter for Debtor to incur debt from third parties to purchase
equipment or other goods that is secured only by the equipment or
other goods.
"PERMITTED LIENS" means: (i) liens in favor of Secured Party, (ii)
liens for taxes not yet due or for taxes being contested in good faith
and which do not involve, in the judgment of Secured Party, any risk
of the sale, forfeiture or loss of any of the Collateral, (iii)
inchoate material men's, mechanic's, repairmen's and similar liens
arising by operation of law in the normal course of business for
amounts which are not delinquent, (iv) Liens existing on the date
hereof and set forth in Schedule B, and (v) Liens on Account
Collateral to secure the A/R Facility under the terms set forth in
Section 1.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust,
unincorporated organization, association, corporation, institution,
public benefit corporation, firm, joint stock company, estate, entity
or government agency.
"PMSI COLLATERAL" has the meaning given such capitalized term in
Section 1.
"PMSI INDEBTEDNESS" has the meaning given such capitalized term in
Section 1.
"PRIMARY OPERATING ACCOUNT" has the meaning given such capitalized
term in Section 2(u).
"RECEIVABLES" shall mean in addition to the definition of account as
contained in the Uniform Commercial Code (a) all of the Debtor's
present and future accounts, contract rights, receivables, promissory
notes and other instruments, chattel paper (including tangible and
electronic chattel paper), tax refunds, general intangibles (excluding
the Intellectual Property) and all rights to receive the payment of
money or other consideration under present or future contracts
including, without limitation, all of the Debtor's rights under each
Government Contract and all related Government Accounts now owned or
hereafter acquired by the Debtor; (b) all present and future cash of
the Debtor; (c) all present and future judgments, orders, awards and
decrees in favor of the Debtor and causes of action in favor of the
Debtor; (d) all present and future contingent and noncontingent rights
of the Debtor to the payment of money for any reason whatsoever,
whether arising in contract, tort or otherwise including, without
limitation, all rights to receive payments under presently existing or
hereafter acquired or created letters of credit; (e) all present and
future claims, rights of indemnification and other rights of the
Debtor under or in connection with any contracts or agreements to
which the Debtor is or becomes a party or third party beneficiary; (f)
all goods previously or hereafter returned, repossessed or stopped in
transit, the sale, lease or other disposition of which contributed to
the creation of any account, instrument or chattel paper of the
Debtor; (g) all present and future rights of the Debtor as an unpaid
seller of goods, including rights of stoppage in transit, detinue and
reclamation; (h) all rights which the Debtor may now or at any time
hereafter have, by law or agreement, against any Account Debtor or
other obligor of the Debtor, and all rights, liens and security
interests which the Debtor may now or at any time hereafter have, by
law or agreement, against any property of any Account Debtor or other
obligor of the Debtor; (i) all invoices and shipping documents; and
(j) all present and future interests and rights of the Debtor,
including rights to the payment of money, under or in connection with
all present and future leases and subleases of real or personal
property to which the Debtor is a party, as lessor, sublessor, lessee
or sublessee.
"SECURED PARTY'S EXPENSES" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, documentation,
administration and funding of the Debt Documents; and Secured Party's
reasonable attorneys' fees, costs and expenses incurred in amending,
modifying, enforcing or defending the Debt Documents (including fees
and expenses of appeal or review), including the exercise of any
rights or remedies afforded hereunder or under applicable law, whether
or not suit is brought, whether before or after bankruptcy or
insolvency, including without limitation all fees and costs incurred
by Secured Party in connection with Secured Party's enforcement of its
rights in a bankruptcy or insolvency proceeding filed by or against
Debtor or its property.
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"SUBORDINATED INDEBTEDNESS" means Additional Indebtedness subordinated
to the Indebtedness of Debtor to Secured Party on terms and conditions
acceptable to Secured Party in its sole discretion.
"SUBSEQUENT FINANCING" has the meaning given such capitalized term in
Section 2(v).
"THIRD PARTY INSTITUTION" has the meaning given such capitalized term
in Section 3(v).
IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally bound
hereby, have duly executed this Agreement in one or more counterparts, each of
which shall be deemed to be an original, as of the day and year first aforesaid.
SECURED PARTY: DEBTOR:
OXFORD FINANCE CORPORATION ALSIUS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------- ------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------- ----------------------------------
Title: Chief Financial Officer Title: President & CEO
------------------------------ ---------------------------------
Page 15 of 15
[Logo]
May 31, 2005
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President and Chief Executive Officer
Alsius Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇:
This letter sets forth additional terms related to that certain credit
arrangement whereby Oxford Finance Corporation (the "Lender") has agreed to loan
Five Million Dollars ($5,000,000.00) to Alsius Corporation (the "Borrower")
pursuant to the terms contained in the Debt Documents [as such term is defined
in that certain Master Security Agreement (the "Loan Agreement"), between Lender
and Borrower, dated May 31, 2005], and has agreed to negotiate lending an
additional amount (the "Additional Advance") to the Borrower as provided in that
certain term sheet dated as of March 25, 2005 received by the Borrower from the
Lender. The Borrower shall have the option to the Additional Advance during 2006
in an amount equal to the principal paid down at that time on the original
$5,000,000.00. The Additional Advance will be on the same terms as in the Loan
Agreement for the original $5,000,000.00 amount, including the collateral,
interest rate, term, covenants and additional warrants (which will be calculated
based on 7% of the Additional Advance and which will cover the most recent
preferred stock then issued by the Borrower). However, in no event will the
Lender be obligated to allow the Borrower to draw down the Additional Advance,
and such Additional Advance shall be subject to approval by Lender's Credit
Committee at such time.
[remainder of the page intentionally left blank]
[signatures only appear on next page]
OXFORD FINANCE CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Sincerely,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
OXFORD FINANCE CORPORATION
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
ACKNOWLEDGED AND AGREED:
Alsius Corporation
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Its: President & CEO
--------------------------------
PROMISSORY NOTE
TO MASTER SECURITY AGREEMENT NO. 5051091
May 31, 2005
------------
(DATE)
FOR VALUE RECEIVED, Alsius Corporation, a California corporation, located at the
address stated below ("MAKER") promises, jointly and severally if more than one,
to pay to the order of OXFORD FINANCE CORPORATION or any subsequent holder
hereof (each, a "PAYEE") at its office located at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such other place as Payee or the holder hereof may
designate, the principal sum of FIVE MILLION DOLLARS ($5,000,000.00), with
interest on the unpaid principal balance, from the date hereof through and
including the dates of payment, at a fixed interest rate of ten and sixty-five
one-hundredths percent (10.65%) per annum. Beginning on July 1, 2005, and
continuing on the first day of August and September, 2005 (each, a "Payment
Date"), Maker shall make three (3) consecutive monthly payments of interest only
as follows:
Periodic
Installment Amount
----------- ---------------
1-3 $44,375.00 each
Thereafter, commencing on October 1, 2005, and continuing on the first day of
each succeeding month thereafter (each, a "Payment Date"), maker shall make
payments of principal and interest in thirty-six (36) consecutive monthly
installments of principal and interest as follows:
Periodic
Installment Amount
----------- ----------------
4-39 $162,866.09 each
(each payment of interest only and principal and interest being a "PERIODIC
INSTALLMENT"), with the final installment which shall be in the amount of the
total outstanding principal and interest, if any. Such installments have been
calculated on the basis of a 360-day year of twelve 30-day months. Each payment
may, at the option of the Payee, be calculated and applied on an assumption that
such payment would be made on its due date. Maker agrees to pay any initial
partial month interest payment from the date of this Note to the first day of
the following month ("Interim Interest").
The acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time.
The Maker hereby expressly authorizes the Payee to insert the date value is
actually given in the blank space on the face hereof and on all related
documents pertaining hereto.
This Note may be secured by a security agreement, chattel mortgage, pledge
agreement or like instrument (each of which is hereinafter called a "SECURITY
AGREEMENT" AND ANY SECURITY AGREEMENT, THIS NOTE AND ANY OTHER DOCUMENT
EVIDENCING OR SECURING THIS LOAN IS HEREINAFTER CALLED A "DEBT DOCUMENT").
Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received when due, the Maker agrees
to pay, in addition to the amount of each such installment or other sum, a late
payment charge of five percent (5%) of the amount of said installment or other
sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of
any amount due hereunder; or (ii) Maker is in default under, or fails to perform
under any term or condition contained in any Security Agreement, then the entire
principal sum remaining unpaid, together with all accrued interest thereon and
any other sum payable under this Note or any Security Agreement, at the election
of Payee, shall immediately become due and payable, with interest thereon at the
lesser of eighteen percent (18%) per annum or the highest rate not prohibited by
applicable law from the date of such accelerated maturity until paid (both
before and after any judgment).
Notwithstanding anything to the contrary contained herein or in the Security
Agreement, Maker may prepay in full, but not in part, and only after the first
annual anniversary date of this Note, its entire Indebtedness hereunder, as of
the date of prepayment, by payment of the entire Indebtedness plus an additional
sum as a premium equal to the following percentages of the remaining principal
balance for the indicated period:
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
PAGE 1 OF 4
After the first annual anniversary date of this Note, and prior to the
second annual anniversary date of this Note: Four percent (4%)
After the second annual anniversary date of this Note, and prior to the
third annual anniversary date of this Note: Three percent (3%)
The Maker and all sureties, endorsers, guarantors or any others (each such
person, other than the Maker, an "OBLIGOR") who may at any time become liable
for the payment hereof jointly and severally consent hereby to any and all
extensions of time, renewals, waivers or modifications of, and all substitutions
or releases of, security or of any party primarily or secondarily liable on this
Note or any Security Agreement or any term and provision of either, which may be
made, granted or consented to by Payee, and agree that suit may be brought and
maintained against any one or more of them, at the election of Payee without
joinder of any other as a party thereto, and that Payee shall not be required
first to foreclose, proceed against, or exhaust any security hereof in order to
enforce payment of this Note. The Maker and each Obligor hereby waives
presentment, demand for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, and all other notices in connection herewith, as
well as filing of suit (if permitted by law) and diligence in collecting this
Note or enforcing any of the security hereof, and agrees to pay (if and to the
extent permitted by law) all expenses incurred in collection, including Payee's
actual attorneys' fees. Maker and each Obligor agrees that fees not in excess of
ten percent (10%) of the amount then due shall be deemed reasonable.
Maker and Payee intend to strictly comply with all applicable federal and
▇▇▇▇▇▇▇▇ ▇▇▇▇, including applicable usury laws (or the usury laws of any
jurisdiction whose usury laws are deemed to apply to the Note or any other Debt
Document despite the intention and desire of the parties to apply the usury laws
of the Commonwealth of Virginia). Accordingly, the provisions of this paragraph
shall govern and control over every other provision of this Note or any other
Debt Document which conflicts or is inconsistent with this Section, even if such
provision declares that it controls. As used in this paragraph, the term
"INTEREST" includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law, provided that, to
the maximum extent permitted by applicable law, (a) any non-principal payment
shall be characterized as an expense or as compensation for something other than
the use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the obligations. In no event shall Maker or any other person be obligated to
pay, or Payee have any right or privilege to reserve, receive or retain, (a) any
interest in excess of the maximum amount of non-usurious interest permitted
under the laws of the Commonwealth of Virginia or the applicable laws (if any)
of the United States or of any other state, or (b) total interest in excess of
the amount which Payee could lawfully have contracted for, reserved, received,
retained or charged had the interest been calculated for the full term of the
obligations. On each day, if any, that the interest rate (the "Stated Rate")
called for under this Note or any other Debt Document exceeds the maximum
non-usurious rate, the rate at which interest shall accrue shall automatically
be fixed by operation of this sentence at the maximum non-usurious rate for that
day. Thereafter, interest shall accrue at the Stated Rate unless and until the
Stated Rate again exceeds the maximum non-usurious rate, in which case, the
provisions of the immediately preceding sentence shall again automatically
operate to limit the interest accrual rate to the maximum non-usurious rate. The
daily interest rates to be used in calculating interest at the maximum
non-usurious rate shall be determined by dividing the applicable maximum
non-usurious rate by the number of days in the calendar year for which such
calculation is being made. None of the terms and provisions contained in this
Note or in any other Debt Document which directly or indirectly relate to
interest shall ever be construed without reference to this paragraph, or be
construed to create a contract to pay for the use, forbearance or detention of
money at an interest rate in excess of the maximum non-usurious rate. If the
term of any obligation is shortened by reason of acceleration of maturity as a
result of any Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason Payee at any time,
including but not limited to, the stated maturity, is owed or receives (and/or
has received) interest in excess of interest calculated at the maximum
non-usurious rate, then and in any such event all of any such excess interest
shall be canceled automatically as of the date of such acceleration, prepayment
or other event which produces the excess, and, if such excess interest has been
paid to Payee, it shall be credited pro tanto against the then-outstanding
principal balance of Maker's obligations to Payee, effective as of the date or
dates when the event occurs which causes it to be excess interest, until such
excess is exhausted or all of such principal has been fully paid and satisfied,
whichever occurs first, and any remaining balance of such excess shall be
promptly refunded to its payor.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.) THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
PAGE 2 OF 4
This Note and any Security Agreement constitute the entire agreement of the
Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.
No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
Any provision in this Note or any Security Agreement which is in conflict with
any statute, law or applicable rule shall be deemed omitted, modified or altered
to conform thereto.
Upon receipt of an affidavit of an officer of Payee as to the loss, theft,
destruction or mutilation of this Note or any Debt Document which is not of
public record, and, in the case of any such loss, theft, destruction or
mutilation, upon surrender and cancellation of such Note or other Debt Document,
Maker will issue, in lieu thereof, a replacement Note or other Debt Document in
the same principal amount thereof and otherwise of like tenor.
It is understood and agreed that this Note and all of the Debt Documents were
negotiated and have been or will be delivered to Payee in the Commonwealth of
Virginia, which State the parties agree has a substantial relationship to the
parties and to the underlying transactions embodied by this Note and the Debt
Documents. Maker agrees to furnish to Payee at Payee's office in Alexandria, VA,
all further instruments, certifications and documents to be furnished hereunder.
The parties also agree that if collateral is pledged to secure the debt
evidenced by this Note, that the state or states in which such collateral is
located each have a substantial relationship to the parties and to the
underlying transaction embodied by this Note and the Debt Documents.
MAKER AGREES THAT THE PAYEE OF THIS NOTE SHALL HAVE THE OPTION BY WHICH STATE
LAWS THIS NOTE SHALL BE GOVERNED AND CONSTRUED: (A) THE LAWS OF THE COMMONWEALTH
OF VIRGINIA; OR (B) IF COLLATERAL HAS BEEN PLEDGED TO SECURE THE DEBT EVIDENCED
BY THIS NOTE, THEN BY THE LAWS OF THE STATE OR STATES WHERE THE COLLATERAL IS
LOCATED, AT PAYEE'S OPTION. THIS CHOICE OF STATE LAWS IS EXCLUSIVE TO THE PAYEE
OF THIS NOTE. MAKER SHALL NOT HAVE ANY OPTION TO CHOOSE THE LAWS BY WHICH THIS
NOTE SHALL BE GOVERNED. MAKER AND GUARANTORS HEREBY CONSENT TO THE EXERCISE OF
JURISDICTION OVER IT BY ANY FEDERAL COURT SITTING IN VIRGINIA OR ANY VIRGINIA
COURT SELECTED BY PAYEE, FOR THE PURPOSES OF ANY AND ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THE NOTE, THE LOAN AGREEMENT AND ALL OTHER
DOCUMENTS. MAKER AND GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT, ANY CLAIM BASED ON
THE CONSOLIDATION OF PROCEEDINGS IN SUCH COURTS IN WHICH PROPER VENUE MAY LIE IN
DIVERGENT JURISDICTIONS, AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. MAKER AND GUARANTORS
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS NOTE, THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Confession of Judgment. In the event that this Note or any installment under
this Note is not paid when due, whether by maturity or acceleration, Maker
hereby appoints and constitutes ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, either of whom
may act (a Virginia attorney) Maker's duly constituted attorney-in-fact to
confess judgment pursuant to the provisions of Section 8.01-431 et seq. of the
Code of Virginia of 1950, as amended, against Maker for all principal and
interest due and payable under this Note, together with attorneys' fees and
collection fees as provided in this Note (to the extent permitted by law), which
judgment shall be confessed in the Clerk's Office of the Circuit Court of the
City of Alexandria and/or Fairfax and/or Arlington Counties, Virginia. Maker
shall, upon Payee's request, name such additional or alternative persons
designated by Payee as Maker's duly constituted attorney-in-fact to confess
judgment against Maker pursuant to the above Section. Upon request of Payee,
Maker also shall agree to the designation of any additional circuit courts in
the Commonwealth of Virginia in which judgment may be confessed against Maker.
No single exercise of the power to confess judgment shall be deemed to exhaust
the power and no judgment against fewer than all the persons constituting Maker
shall bar any subsequent action or judgment against any one or more of such
persons against whom judgment has not been obtained on this Note.
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
PAGE 3 OF 4
ALSIUS CORPORATION
/s/ ▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------- ------------------------------------
(Witness)
▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------- ----------------------------------
(Print name)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ Title: President & CEO
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ---------------------------------
-------------------------------------
(Address)
Federal Tax ID #:▇▇-▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
PAGE 4 OF 4