Exhibit 10.2

 

MASTER SECURITY AGREEMENT

dated as of June 28, 2005 (“Agreement”)

 

THIS AGREEMENT is between General Electric Capital Corporation (together with
its successors and assigns, if any, “Secured Party”) and Nitromed, Inc.
(“Debtor”).  Secured Party has an office at 83 Wooster Heights Road, Danbury, CT
06810.  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 Oxford Finance Corporation (“Oxford”) under that certain
Master Security Agreement dated as of June 28, 2005 between Oxford and Debtor
(the “Oxford 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;

 

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(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 Oxford under the Oxford 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 Oxford Finance 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.

 

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(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

 

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rights of Oxford, 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;

 

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(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 change of control such that any person or entity acquires
either more than 50% of the voting stock of Debtor or all or substantially all
of Debtor’s assets, in either case, without Secured Party’s prior written
consent;

 

(xv)                            Debtor sells, transfers, assigns, mortgages,
pledges, leases, grants a security interest in or encumbers any or all of
Debtor’s Intellectual Property, now existing or hereafter acquired, in violation
of Section 2(m).  Intellectual Property is defined in Collateral
Schedule No. 001 and shall exclude New Property (as defined in Collateral
Schedule No. 001).  For purposes of this paragraph xv, licenses or sublicenses
by the Debtor of its Intellectual Property as part of a research and development
or similar arrangement shall be excluded.  Debtor shall provide Lessor with a
listing of licenses and sublicenses granted to third parties within
ten (10) days of receipt of written request; or

 

(b)                                 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.  The
accelerated obligations and liabilities shall bear interest (both before and
after any judgment) until paid in full at the lower of eighteen percent (18%)
per annum or the maximum rate not prohibited by applicable law.

 

(c)                                  If Debtor is in default, 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.

 

(d)                                 After default, 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, 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, to the extent
permitted by law, have the right to bid and purchase at said sale, or (iv) lease
or otherwise dispose of all or part of the Collateral, applying proceeds from
such disposition to the obligations then in default.  If 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.  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 ten (10) days prior to such action.

 

(e)                                  Proceeds from any sale or lease or other
disposition shall be applied: first, to all costs of repossession, storage, and
disposition including without limitation attorneys’, appraisers’, and
auctioneers’ fees; second, to discharge the obligations then in default; third,
to discharge any other Indebtedness of Debtor to Secured Party, whether as
obligor, endorser, guarantor, surety or indemnitor; fourth, to expenses incurred
in paying or settling liens and claims against the Collateral; and lastly, to
Debtor, if there exists any surplus.  Debtor shall remain fully liable for any
deficiency.

 

(f)                                    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.

 

(g)                                 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

 

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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.

 

(h)                                 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)                                  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 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)                                 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)                                  Secured Party may correct patent errors and
fill in all blanks in this Agreement or in the Collateral Schedule consistent
with the agreement of the parties.

 

(d)                                 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)                                  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.

 

(f)                                    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.  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).

 

(g)                                 Debtor authorizes Secured Party to use its
name, logo and/or trademark with notice to and consent by Debtor, in connection
with certain promotional materials that Secured Party may disseminate to the
public.  The promotional materials may include, but are not limited to,
brochures, video tape, internet website, press releases, advertising in
newspaper and/or other periodicals, lucites, and any other materials relating
the fact that Secured Party has a financing relationship with Debtor and such
materials may be developed, disseminated and used with Debtor’s review.  Nothing
herein obligates Secured Party to use Debtor’s name, logo and/or trademark, in
any promotional materials of Secured Party.

 

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(h)                                 THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT
(WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF
THE COLLATERAL.

 

 

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:

 

 

 

 

GENERAL ELECTRIC CAPITAL CORPORATION

NITROMED, INC.

 

 

 

 

By:

/s/ John Edel

 

By:

/s/ Lawrence E. Bloch

 

 

 

 

 

 

 

Name:

John Edel

 

Name:

Lawrence E. Bloch

 

 

 

 

 

 

Title:

Senior Vice President

 

Title:

Chief Financial Officer and Chief

 

 

 

 

Business Officer

 

 

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COLLATERAL SCHEDULE NO. 001

 

Part of Master Security Agreement dated as of June 28, 2005 as amended from time
to time
(the “Contract”) between General Electric Capital Corporation (the “Secured
Party”) and
Nitromed, Inc. (the “Debtor”).

 

As security for the full and faithful performance by the Debtor of all of the
terms and conditions upon the Debtor’s part to be performed under the Contract
and any other obligation of the Debtor to the Secured Party now or hereafter in
existence, the Debtor does hereby grant to the Secured Party a security interest
in the property listed below (all hereinafter collectively called the
“Collateral”). Capitalized terms used but not defined in this Schedule have the
meanings provide to them by the Uniform Commercial Code (“UCC”) as adopted in
the State of Connecticut.

 

All of Debtor’s personal property and Fixtures now owned or hereafter acquired
and wherever located including but not limited to the following:

 

1.                                       All Goods (including Inventory,
Equipment and Fixtures), now owned or hereafter acquired and wherever located,
complete with any and all attachments, accessions, additions, replacements,
improvements, modifications and substitutions thereto and therefor and all
proceeds including insurance proceeds and products thereof and therefrom.

 

2.                                       All Accounts, Deposit Accounts,
Documents, Investment Property, Instruments, General Intangibles (including
contract rights, but excluding “Intellectual Property” as defined below) and
Chattel Paper, now owned or hereafter acquired and wherever located, and all
proceeds thereof and therefrom.

 

Notwithstanding the above, the Collateral shall not include, any Intellectual
Property or products (or interests in any Intellectual Property or products
(including any royalties)) acquired, whether by purchase, license or otherwise,
on or after the execution of the Contract (collectively, “New Property”) nor
shall the Contract limit any indebtedness secured by any New Property provided
that debt or non-cash equity (e.g. stock) is used to acquire New Property. In
the event that the Debtor uses cash to purchase New Property, Secured Party’s
existing lien will extend to such New Property. Secured Party also agrees not to
unreasonably refuse the release its lien in such New Property if Debtor decides
to pursue debt or equity financing with respect to such assets at a later date.
Any debt used to acquire New Property would be secured solely by a lien on such
New Property.

 

“Intellectual Property” means all of Debtor’s right, title and interest in and
to patents, patent rights (and applications and registrations therefore),
trademarks and service marks (and applications and registrations therefore),
inventions, copyrights, mask works (and applications and registrations
therefore), trade names, trade styles, software and computer programs, source

 

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code, object code, trade secrets, methods, processes, know how, drawings,
specifications, descriptions, and all memoranda, notes, and records with respect
to any research and development, all whether now owned or subsequently acquired
or developed by Debtor and whether in tangible or intangible form or contained
on magnetic media readable by machine together with all such magnetic media.

 

In the event of a default by the Debtor with respect to any of the conditions,
terms, covenants and provisions under the Contract or other agreement, Secured
Party shall have the rights and remedies of a secured party under both the UCC
and the Contract, with respect to the Collateral.

 

This Agreement shall run to the benefit of the Secured Party’s successors and
assigns.

 

Dated:

June 28, 2005

 

 

 

 

 

 

GENERAL ELECTRIC CAPITAL

 

NITROMED, INC.

 

 

 

 

Corporation

 

 

 

 

 

 

 

 

By:

/s/ John Edel

 

 

By:

/s/ Lawrence E. Bloch

 

 

 

 

 

 

 

Title:

Senior Vice President

 

 

Title:

Chief Financial Officer and Chief

 

 

 

 

 

 

Business Officer

 

 

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FINANCIAL COVENANTS

 

ADDENDUM NO. 001

 

TO MASTER SECURITY AGREEMENT

 

DATED AS OF JUNE 28, 2005

 

THIS ADDENDUM NO. 001 (this “Addendum No. 001”) is made as of the 28th day of
June, 2005, amends and supplements the above referenced agreement (the
“Agreement”), between General Electric Capital Corporation (together with its
successors and assigns, if any, “Secured Party”) and Nitromed, Inc. (“Debtor”)
and is hereby incorporated into the Agreement as though fully set forth
therein.  Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Lease.

 

The Agreement is hereby amended by adding the following:

 

FINANCIAL COVENANTS.

 

Debtor shall, at all times during the term of the Agreement, comply with the
following:

 

(a)                                                           Secured Party
agrees to release its lien and permit the grant of third-party liens on Debtor’s
Accounts Receivable and Inventory at any time after the date of the Agreement if
one of the following conditions is met:

 

1.               Debtor’s Cash Runway (as defined below), in months, is greater
than the remaining term (in months) of this Agreement; or

 

2.               Debtor agrees to the following Cash Runway Covenant:  Debtor
will maintain a Cash Runway of one year at all times.  If Debtor’s Cash Runway
drops below this amount, then Debtor agrees to provide for the benefit of
Secured Party, within ten (10) business days, a Letter of Credit (in form and
substance satisfactory to Secured Party) equal to 75% of the then outstanding
loan balance and execute any documentation requested by Secured Party related to
the Letter of Credit.

 

Cash Runway is defined as the number of months of cash Debtor has left,
calculated by using its current cash balance and its past quarter’s Cash Burn
rate (as defined below), excluding non-recurring extraordinary charges.

 

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Cash Burn shall be defined as net income (loss) for the immediate preceding
fiscal quarter, plus non-cash charges, plus 1/4 of current maturities of long
term debt as of the quarter’s end.

 

(b)                                                          COMPLIANCE
REPORTS.  Debtor’s Authorized Representative shall certify periodically that
Debtor is in compliance with the requirements of subsection (a) above.  Such
notification and certification shall be provided within forty-five (45) days
after the end of each fiscal quarter (the “Compliance Date”), reflecting such
information as of the end of such fiscal quarter.  If Debtor fails timely to
provide such notification and compliance certificates, within fifteen (15) days
after the Compliance Date, such failure shall be deemed a default under the
Agreement if not cured within two (2) business days after notice from Secured
Party.  The reports required under this section are in addition to and not a
substitute for the reports required under the REPORTS Section of the Agreement.

 

All financial items in the preceding paragraphs shall be derived in accordance
with generally accepted accounting principles in the United States of America
(“GAAP”).

 

Except as expressly modified hereby, all terms and provisions of the Agreement
shall remain in full force and effect.  This Addendum No.001 is not binding or
effective with respect to the Agreement until by authorized representatives of
Secured Party and Debtor.

 

IN WITNESS WHEREOF, Debtor and Secured Party have caused this Addendum No. 001
to be executed by their duly authorized representatives as of the date first
above written.

 

 

Secured Party:

 

Debtor:

 

 

 

 

 

 

 

General Electric Capital Corporation

Nitromed, Inc.

 

 

 

 

 

 

 

By:

/s/ John Edel

 

By:

/s/ Lawrence E. Bloch

 

 

 

 

 

 

 

 

Name:

John Edel

 

Name:

Lawrence E. Bloch

 

 

 

 

 

 

 

Title: 

Senior Vice President

 

Title:

Chief Financial Officer and Chief Business

 

 

 

 

 

 

Officer

 

 

 

 

 

 

 

Attest

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

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PROMISSORY NOTE

 

June 28, 2005

(Date)

 

FOR VALUE RECEIVED, Nitromed, Inc.  a Delaware corporation located at the
address stated below (“Maker”) promises, jointly and severally if more than one,
to pay to the order of General Electric Capital Corporation or any subsequent
holder hereof (each, a “Payee”) at its office located at 83 Wooster Heights
Road, Danbury, CT 06810 or at such other place as Payee or the holder hereof may
designate, the principal sum of Ten Million and 00/100 Dollars ($10,000,000),
with interest on the unpaid principal balance, from the date hereof through and
including the dates of payment, at a fixed interest rate of Nine and Ninety-Five
Hundredths percent (9.95%) per annum, to be paid in lawful money of the United
States, in Thirty-Six (36) consecutive monthly installments of principal and
interest as follows:

 

Periodic

 

 

 

Installment

 

Amount

 

 

 

 

 

Thirty-five (35)

 

$

319,785.62

 

 

each (“Periodic Installment”) and a final installment which shall be in the
amount of the total outstanding principal and interest.  The first Periodic
Installment shall be due and payable on July 1, 2005 and the following Periodic
Installments and the final installment shall be due and payable on the same day
of each succeeding month (each, a “Payment Date”).  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.

 

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 is secured by a Master Security Agreement dated as of June 28, 2005,
(“Security Agreement”).

 

Time is of the essence hereof.  If any installment or any other sum due under
this Note or the Security Agreement is not received within five (5) days after
its due date, 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 within ten
(10) days after the same becomes due and payable; or (ii) Maker is in default
under, or fails to perform under any term or condition contained in the Security
Agreement beyond any applicable grace or cure period, then the entire principal
sum remaining unpaid, together with all accrued interest thereon and any other
sum payable under this Note or the 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).

 

The Maker may prepay in full, but not in part, and only after the first annual
anniversary date of this Note, its entire indebtedness hereunder upon 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:

 

Following the first annual anniversary date of this Note and prior to the second
annual anniversary date of this Note: three percent (3%)

 

Thereafter and prior to the third annual anniversary date of this Note: one
percent (1%) and zero percent (0%) thereafter, plus all other sums due hereunder
or under any Security Agreement.

 

It is the intention of the parties hereto to comply with the applicable usury
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note or any Security Agreement, in no event shall this Note or
any Security Agreement require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law.  If any such excess
interest is contracted for, charged or

 

--------------------------------------------------------------------------------

 

received under this Note or any Security Agreement, or if all of the principal
balance shall be prepaid, so that under any of such circumstances the amount of
interest contracted for, charged or received under this Note or any Security
Agreement on the principal balance shall exceed the maximum amount of interest
permitted by applicable law, then in such event (a) the provisions of this
paragraph shall govern and control, (b) neither Maker nor any other person or
entity now or hereafter liable for the payment hereof shall be obligated to pay
the amount of such interest to the extent that it is in excess of the maximum
amount of interest permitted by applicable law, (c) any such excess which may
have been collected shall be either applied as a credit against the then unpaid
principal balance or refunded to Maker, at the option of the Payee, and (d) the
effective rate of interest shall be automatically reduced to the maximum lawful
contract rate allowed under applicable law as now or hereafter construed by the
courts having jurisdiction thereof.  It is further agreed that without
limitation of the foregoing, all calculations of the rate of interest contracted
for, charged or received under this Note or any Security Agreement which are
made for the purpose of determining whether such rate exceeds the maximum lawful
contract rate, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of the indebtedness evidenced hereby, all interest at
any time contracted for, charged or received from Maker or otherwise by Payee in
connection with such indebtedness; provided, however, that if any applicable
state law is amended or the law of the United States of America preempts any
applicable state law, so that it becomes lawful for the Payee to receive a
greater interest per annum rate than is presently allowed, the Maker agrees
that, on the effective date of such amendment or preemption, as the case may be,
the lawful maximum hereunder shall be increased to the maximum interest per
annum rate allowed by the amended state law or the law of the United States of
America, but not to exceed the contract rate.

 

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,
excluding notices provided in the Security Agreement or required by applicable
law, 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
permitted by law) all expenses incurred in collection, including Payee’s actual
reasonable attorneys’ fees.

 

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.

 

This Note and other Debt Documents, as defined in Section 2(b) of the 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 of the other Debt Documents which is in
conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.

 

 

 

 

Nitromed, Inc.

 

 

 

 

 

/s/ James G Ham, III

 

By:

/s/ Lawrence E. Bloch

 

 

(Witness)

 

 

 

 

James G. Ham, III

 

Name:

Lawrence E. Bloch

 

 

(Print name)

 

 

 

 

125 Spring Street

 

 

 

 

Lexington, MA 02421

 

Title:

Chief Financial Officer and Chief Business Officer

 

 

(Address)

 

 

 

 

 

Federal Tax ID #: 22-3159793

 

 

 

 

 

 

 

Address: 125 Spring Street, Lexington, MA 02421

 

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