Exhibit 10.1
MASTER SECURITY
AGREEMENT
dated as of June 28,
2005 ( “Agreement” )
THIS AGREEMENT
is between Oxford Finance
Corporation (together with its successors and assigns, if any,
“Secured Party” ) and Nitromed, Inc.
( “Debtor” ). Secured Party has an office
at 133 N. Fairfax Street, Alexandria, VA 22314. Debtor is a
corporation organized and existing under the laws of the state of
Delaware (“the State”). Debtor’s mailing
address and chief place of business is 125 Spring Street,
Lexington, Massachusetts, 02421.
1.
CREATION OF SECURITY
INTEREST.
Debtor grants to Secured Party, its
successors and assigns, a security interest in and against all
property listed on the collateral schedule now or in the
future annexed to or made a part of this Agreement (
“Collateral Schedule” ), and in and against all
additions, attachments, accessories and accessions to such
property, all substitutions, replacements or exchanges therefor,
and all insurance and/or other proceeds thereof (all such property
is individually and collectively called the
“Collateral” ). 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 arising under the Debt Documents (as defined below)
including but not limited to the payment and performance of the
Promissory Note and Collateral Schedule No. 001 (
“Note” ), and any renewals, extensions and
modifications of such debts, obligations and liabilities (such
Note, debts, obligations and liabilities are called the
“Indebtedness” ).
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
the Note that:
(a)
Debtor’s exact legal name is
as set forth in the preamble of this Agreement and Debtor is, and
will remain, 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, except where the failure to qualify would not have a
material adverse effect on Debtor;
(b)
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)
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;
(d)
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)
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 and liens in favor of General Electric Capital
Corporation (“GECC”) under that certain Master Security
Agreement dated as of June 28, 2005 between GECC and Debtor
(the “GECC Loan”)) pursuant to any indenture, mortgage,
deed of trust, bank loan, credit agreement, or other agreement or
instrument to which Debtor is a party;
(f)
There are no suits or proceedings
pending in court or before any commission, board or other
administrative agency against or affecting Debtor which would, 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)
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;
(h)
The Collateral is not, and will not
be, used by Debtor for personal, family or household
purposes;
(i)
The Collateral is, and will remain,
in good condition and repair (ordinary wear and tear excepted) and
Debtor will not be negligent in its care and use;
(j)
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;
(k)
The Collateral is, and will remain,
free and clear of all liens, claims and encumbrances of any kind
whatsoever, except for (i) liens in favor of Secured Party and
GECC under the GECC Loan, (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
materialmen’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 on
New Property (as such term is defined in the attached Collateral
Schedule) acquired with purchase-money debt or non-cash equity, and
(v) capital leases and purchase money security interests in
connection with the acquisition of machinery, equipment and similar
capital assets not to exceed $1,000,000 in the aggregate over the
term of the Note (all of such liens are called “Permitted
Liens” ). Secured Party agrees to release its lien and
permit the grant of third-party liens on Debtor’s Accounts
Receivable and Inventory under the conditions and terms outlined in
the Financial Covenants Addendum No. 001 dated as of
June 28, 2005 and such liens shall also constitute Permitted
Liens;
(l)
Debtor is and will remain in full
compliance with all laws and regulations applicable to it
including, without limitation, (i) ensuring that no person who
owns a controlling interest in or otherwise controls Debtor is or
shall be (Y) listed on the Specially Designated Nationals and
Blocked Person List maintained by the Office of Foreign Assets
Control (“ OFAC ”), Department of the Treasury,
and/or any other similar lists maintained by OFAC pursuant to any
authorizing statute, Executive Order or regulation or (Z) a person
designated under Section 1(b), (c) or (d) of
Executive Order No. 13224 (September 23, 2001), any
related enabling legislation or any other similar Executive Orders,
and (ii) compliance with all applicable Bank Secrecy Act
(“ BSA ”) laws, regulations and government
guidance on BSA compliance and on the prevention and detection of
money laundering violations; and
(m).
Debtor shall not sell, transfer,
assign, mortgage, pledge, lease, grant a security interest in, or
encumber (except for Permitted Liens as defined in
subsection (k) of this Section) any of its Intellectual
Property as defined in Section 7 below, or enter into any
agreement, document, instrument or other arrangement (except with
or in favor of Secured Party and General Electric Capital
Corporation) 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
exclusive or non-exclusive licenses with respect to components of
Debtor’s Intellectual Property, whether in connection with
joint ventures or corporate collaborations or otherwise, in the
ordinary course of business.
3.
COLLATERAL.
(a)
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. If Secured Party asks, Debtor will promptly notify
Secured Party in writing of the location of any
Collateral.
(b)
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)
Secured Party does not authorize and
Debtor agrees it shall not (i) part with possession of any of
the Collateral (except to Secured Party or for maintenance and
repair), (ii) remove any of the Collateral from the
continental United States, or (iii) sell, rent, lease,
mortgage, license, grant a security interest in or otherwise
transfer or encumber (except for Permitted Liens) any of the
Collateral.
(d)
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 unless contested in
good faith, subject to maintaining appropriate reserves. At
its option, if Debtor fails to do so, Secured Party may discharge
taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral (except for Permitted Liens) 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)
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.
4.
INSURANCE.
(a)
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)
Debtor agrees to keep the Collateral
insured against loss or damage by fire and extended coverage
perils, theft, burglary, and for any or all Collateral which are
vehicles, for risk of loss by collision, and if requested by
Secured Party, against such other risks as Secured Party may
reasonably require. The insurance coverage shall be in an amount no
less than the full replacement value of the Collateral, and
deductible amounts, insurers and policies shall be 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, 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.
So long as Debtor is not in default, proceeds of insurance shall be
applied, at the option of Debtor, to repair or replace the
Collateral or to reduce any of the Indebtedness. In the event
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)
Debtor shall promptly notify Secured
Party of (i) any change in the name of Debtor, (ii) any
change in the state of its incorporation, organization or
registration, (iii) any relocation of its chief executive
offices, (iv) any relocation of any of the Collateral,
(v) any of the Collateral being lost, stolen, missing,
destroyed, materially damaged or worn out, or (vi) any lien,
claim or encumbrance other than Permitted Liens attaching to or
being made against any of the Collateral.
(b)
Debtor will deliver to Secured Party
financial statements as follows. If Debtor is a publicly held
company, then Debtor agrees to provide quarterly unaudited
statements and annual audited statements, certified by a recognized
firm of certified public accountants, within 10 days after the
statements are provided to the Securities and Exchange Commission
(“ SEC ”). All such statements are to be
prepared using generally accepted accounting principles (“
GAAP ”) and, if Debtor is a publicly held company, are
to be in compliance with SEC requirements.
6.
FURTHER
ASSURANCES.
(a)
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
subject to the rights of GECC, and shall obtain and furnish to
Secured Party any landlord waivers and similar documents as may be
from time to time requested by, and in form and substance
satisfactory to, Secured Party.
(b)
Debtor authorizes Secured Party to
file a financing statement and amendments thereto describing the
Collateral and containing any other information required by the
applicable Uniform Commercial Code. Debtor irrevocably grants
to Secured Party the power to sign Debtor’s name and
generally to act on behalf of Debtor to execute and file
applications for title, transfers of title, financing statements,
notices of lien and other documents pertaining to any or all of the
Collateral; this power is coupled with Secured Party’s
interest in the Collateral. Debtor shall, if any certificate
of title be required or permitted by law for any of the Collateral,
obtain and promptly deliver to Secured Party such certificate
showing the lien of this Agreement with respect to the
Collateral. Debtor ratifies its prior authorization for
Secured Party to file financing statements and amendments thereto
describing the Collateral and containing any other information
required by the Uniform Commercial Code if filed prior to the date
hereof.
(c)
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
reasonable attorneys’ fees) of any kind whatsoever arising,
directly or indirectly, in connection with any of the
Collateral.
7.
DEFAULT AND
REMEDIES.
(a)
Debtor shall be in default under
this Agreement and each of the other Debt Documents if:
(i)
Debtor breaches its obligation to
pay when due any installment or other amount due or coming due
under any of the Debt Documents and fails to cure the breach within
ten (10) days;
(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 (except for Permitted Liens) any of the
Collateral, except as permitted by Section 3(c), the Financial
Covenants Addendum No. 001 or the Collateral Schedule 001
of even date herewith;
(iii)
Debtor breaches any of its insurance
obligations under Section 4 and fails to cure such breach
within ten (10) days;
(iv)
Debtor breaches any of its other
obligations under any of the Debt Documents and fails to cure that
breach within thirty (30) days after written notice from Secured
Party;
(v)
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 when made;
(vi)
Any material portion of the
Collateral is subjected to attachment, execution, levy, seizure or
confiscation in any legal proceeding or otherwise, and no bond is
posted or protective order obtained to remove such risk of
attachment, execution, levy, seizure or confiscation;
(vii)
Debtor breaches or is in default
under any other agreement between Debtor and Secured Party after
expiration of the applicable grace or cure period;
(viii)
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;
(ix)
A receiver is appointed for all or
of any material part of the property of Debtor or any Guarantor, or
Debtor or any Guarantor makes any assignment for the benefit of
creditors;
(x)
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;
(xi)
Debtor’s improper filing of an
amendment or termination statement relating to a filed financing
statement describing the Collateral;
(xii)
There is a material adverse change
in the Debtor’s financial condition such that Secured Party
reasonably determines that the Debtor’s ability to repay any
Indebtedness (whether then due or scheduled to become due) in
accordance with its terms under the Agreement has been materially
impaired;
(xiii)
Debtor defaults under any other
material obligation in excess of $500,000 for (A) borrowed
money, (B) the deferred purchase price of property or
(C) payments due under any lease agreement;
(xiv)
At any time during the term of this
Agreement Debtor experiences a chang
