Venture Loan And Security Agreement

VENTURE LOAN AND SECURITY AGREEMENT


Dated as of September 27, 2001


by and among


GATX VENTURES, INC.
and
VENTURE LENDING & LEASING III, INC.


as Lenders


and
ACUSPHERE, INC.
a Delaware corporation
38 Sidney Street
Cambridge, Massachusetts 02139
as Borrower


and
ACUSPHERE SECURITIES CORPORATION
a Massachusetts corporation
38 Sidney Street
Cambridge, Massachusetts 02139
as Guarantor


CREDIT AMOUNT: $5,000,000
Commitment Amounts: Commitment Percentage:
------------------ ---------------------

GATX Ventures, Inc.: $2,500,000 50%
Venture Lending & Leasing III, Inc. $2,500,000 50%


Repayment Period: 30 months


Loan Rate: 15%


Commitment Termination Date: September 30, 2001


The defined terms and information set forth on this cover page are a part of the Venture Loan and Security Agreement, dated as of the date first written above (this "Agreement"), entered into by and among GATX VENTURES, INC., and VENTURE LENDING & LEASING III, INC. (each individually a "Lender" and collectively, "Lenders"), and the borrower ("Borrower") set forth above. The terms and conditions of this Agreement agreed to between Lenders and Borrower are as follows:
ARTICLE I
INTERPRETATION


1.01. Certain Definitions. Unless otherwise indicated in this Agreement or any other Operative Document, the following terms, when used in this Agreement or any other Operative Document, shall have the following respective meanings:


"Affiliate" means any Person that owns or controls directly or indirectly ten percent or more of the stock of another entity, any Person that controls or is controlled by or is under common control with such Persons or any Affiliate of such Persons or each of such Person's officers, directors, joint venturers or partners.


"Agreement" shall mean this Venture Loan and Security Agreement, as the same may from time to time be amended or supplemented.


"Borrower" shall have the meaning set forth on the cover page hereof.


"Business Day" means any day that is not a Saturday, Sunday, or other day on which banking institutions are authorized or required to close in California or Massachusetts.


"Claim" has the meaning given to that term in Section 10.03.


"Code" means the Uniform Commercial Code as adopted and in effect in the State of California, as amended from time to time.


"Collateral" has the meaning given to that term in Section 5.01.


"Comdisco Indebtedness" shall mean the Indebtedness of Borrower to Comdisco, Inc. pursuant to a certain Subordinated Loan and Security Agreement, dated as of October 16, 1998, as amended by Amendment Number One to Subordinated Loan and Security Agreement, dated as of August 9, 1999.


"Commitment" means, with respect to each Lender, the amount set forth on the cover page of this Agreement under the column titled "Commitment Amount" and "Commitments" means all such amounts collectively.


"Commitment Percentage" means with respect to each Lender, the percentage set forth on the cover page of this Agreement under the column titled "Commitment Percentage."


"Commitment Termination Date" shall mean the date specified on the cover page of this Agreement.


"Credit Amount" shall mean the maximum aggregate amount of the Loans under this Agreement (if the conditions specified in Schedule 3 are satisfied), which amount is set forth following such term on the cover page of this Agreement.


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"Default" shall mean any event which with the passing of time or the giving of notice or both would become an Event of Default hereunder.


"Default Rate" means the per annum rate of interest equal to 5% over the Loan Rate, but such rate shall in no event be more than the highest rate permitted by applicable law to be charged on commercial loans.


"Disclosure Schedule" shall mean Schedule 2 of this Agreement.


"Elan Indebtedness" shall mean any and all Indebtedness now existing or hereafter incurred pursuant to that certain 6% Convertible Subordinated Promissory Note due June 30, 2006 in the aggregate principal amount of $8,010,000 originally issued to Elan International Services Ltd, as amended and in effect from time to time.


"Elan Joint Venture" shall mean Acusphere Newco Ltd., an exempted liability company incorporated under the laws of Bermuda, including any successor or assign.


"Elan Joint Venture Agreements" shall mean and include (i) the Securities Purchase Agreement by and between Borrower and Elan International Services Ltd. ("Elan") dated as of June 30, 2001 (the "Elan Securities Agreement"), (ii) the 6% Convertible Subordinated Promissory Note due June 30, 2006 in the aggregate principal amount of $8,010,000 (the "Elan Note"), (iii) the Exchange Agreement by and between Borrower and Elan dated as of June 30, 2001, (iv) the Subscription, Joint Development and Operating Agreement by and among Elan, Elan Corporation, plc, Elan Pharma International Limited, Borrower and Acusphere Newco Ltd. dated as of June 30, 2001 (the "JDOA"), (v) the License Agreement by and between Borrower and Acusphere Newco Ltd. dated as of June 30, 2001, and (vi) any amendments, extensions, renewals or extensions to any of the foregoing, other than amendments, extensions, renewals or extensions which could reasonably be expected to have a Material Adverse Effect.


"Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from Property, whether or not owned by Borrower, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.


"Environmental Laws" means all foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters, including the


-3- Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act and the Emergency Planning and Community Right-to-Know Act.


"Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing.


"Existing Equipment Indebtedness" shall mean Indebtedness now or hereafter owed by Borrower with respect to the lease obligations outstanding on the date hereof and arising under the Master Lease Agreement by and between Borrower and Comdisco, Inc., dated as of May 1, 1995.


"Event of Default" has the meaning given to that term in Section 9.01.


"Funding Date" shall mean a date on which a Loan is made to or on account of Borrower under this Agreement, provided, however, the Funding Date shall in all cases be a Business Day.


"GAAP" shall mean generally accepted accounting principles and practices as in effect in the United States of America from time to time and recognized as such by the American Institute of Certified Public Accountants, consistently applied. Each accounting term used but not otherwise expressly defined herein shall have the meaning given to it by GAAP.


"Guarantor" means Acusphere Securities Corporation.


"Guarantor Collateral" means the personal property of Guarantor in which Guarantor granted or pledged Lenders a security interest.


"Guarantor Security Agreement" means that certain Security Agreement executed on or about the date hereof executed in favor of Lenders whereby Guarantor granted a security interest in all of its personal property in favor of Lenders to secure its obligations under the Guaranty.


"Guaranty" means that certain Guaranty executed by Guarantor in favor of Lenders on or about the date hereof whereby the Guarantor guaranteed the payment and performance of all obligations of Borrower to Lenders.


"GV" means GATX Ventures, Inc., and its successors and/or assigns.


"Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste.


"Indebtedness" shall mean, with respect to Borrower or any Subsidiary, the aggregate amount of, without duplication,


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(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 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 or to which reference is made by footnotes thereto.


Unless otherwise indicated, the term "Indebtedness" shall include all Indebtedness of Borrower and the Subsidiaries.


"Intellectual Property" shall mean all of Borrower's right, title and interest in and to patents, patent rights (and applications and registrations therefor), trademarks and service marks (and applications and registrations therefor, other than "Intent to Use" trademark applications), inventions, copyrights, mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs, 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 Borrower and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media.


"Investment" shall mean the purchase or acquisition of any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or the extension of any advance, loan, extension of credit or capital contribution to, or any other investment in, any Person.


"Lien" shall mean any voluntary or involuntary security interest, pledge, bailment, lease, mortgage, hypothecation, conditional sales and title retention agreements, charge, claim, encumbrance or other lien with respect to the Property in favor of any Person.


"Loan" means the Loan advanced by a Lender to Borrower under this Agreement according to the Commitment of such Lender.


"Loan Rate" shall mean the per annum rate of interest (based on a year of twelve 30-day months) set forth on the cover page of this Agreement.


"MAC Occurrence" shall have the meaning set forth in Section 2.02(d) of this Agreement.


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"Material Adverse Effect" shall have the meaning set forth in Section 3.01(a) of this Agreement.


"Note" shall mean one of the secured promissory notes of Borrower substantially in the form of Exhibit A.


"Obligations" has the meaning given to that term in Section 5.01.


"Operative Documents" shall mean this Agreement, the Notes, the Guaranty, the Guarantor Security Agreement and the Warrants and all other documents, instruments and agreements executed and delivered in connection herewith or therewith or in respect of the closing of the transactions contemplated hereby or thereby.


"Payment Date" has the meaning given to that term in the applicable Note.


"Permitted Indebtedness" shall mean and include:


(a) Indebtedness of Borrower to Lenders;


(b) Indebtedness of Borrower secured by Liens permitted under
clause (e) of the definition of Permitted Liens up to an
aggregate principal amount or aggregate original acquisition
value of $3,000,000 (excluding the Transamerica Indebtedness
and the Existing Equipment Indebtedness);


(c) Indebtedness arising from the endorsement of instruments in
the ordinary course of business;


(d) Indebtedness existing on the date hereof and set forth on the
disclosure schedule attached hereto on the Disclosure
Schedule;


(e) The Existing Equipment Indebtedness, provided the aggregate
principal amount or aggregate original acquisition value of
such Indebtedness does not exceed $2,200,000;


(f) The Comdisco Indebtedness, provided the aggregate principal
amount of such Indebtedness shall not exceed $1,800,000 and
such Indebtedness shall be repaid on or before November 15,
2001;


(g) The Transamerica Indebtedness, provided that the aggregate
principal amount or aggregate original acquisition value of
such Indebtedness shall not exceed $3,000,000;


(h) The Elan Indebtedness, provided the terms of such Indebtedness
do not require the repayment of any such Indebtedness prior to
the final Payment Date of the Loan; and


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(i) Subordinated Indebtedness.


"Permitted Investments" shall mean and include:


(a) Deposits with commercial banks organized under the laws of the
United States or a state thereof to the extent such deposits
are fully insured by the Federal Deposit Insurance
Corporation;


(b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more than one
(1) year from the date of issuance;


(c) Investments in open market commercial paper rated at least
"A1" or "P1" or higher by a national credit rating agency and
maturing not more than one (1) year from the creation thereof;


(d) Investments pursuant to or arising under currency agreements
or interest rate agreements entered into in the ordinary
course of business;


(e) Investments consisting of deposit accounts of Borrower in
which Lenders have a perfected security interest;


(f) Investments in the Elan Joint Venture in accordance with the
Elan Joint Venture Agreements; and


(g) Other Investments aggregating not in excess of Two Hundred
Fifty Thousand Dollars ($250,000) at any time.


"Permitted Liens" shall mean:


(a) the Lien created by this Agreement,


(b) Liens for fees, taxes, levies, imposts, duties or other governmental charges of any kind which are not yet delinquent or which are being contested in good faith by appropriate proceedings which suspend the collection thereof (provided, however, that such proceedings do not involve any substantial danger of the sale, forfeiture or loss of any item of equipment and that Borrower has adequately bonded such Lien or reserves sufficient to discharge such Lien have been provided on the books of Borrower),


(c) Liens identified on the Disclosure Schedule,


(d) Liens to secure payment of worker's compensation, employment insurance, old age pensions or other social security obligations of Borrower in the ordinary course of business of Borrower,


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(e) Liens upon any equipment or other personal property acquired by Borrower after the date hereof to secure (i) the purchase price of such equipment or other personal property or (ii) lease obligations or indebtedness incurred solely for the purpose of financing the acquisition of such equipment or other personal property; provided that (A) such Liens are confined solely to the equipment or other personal property so acquired and the original amount secured does not exceed the acquisition price thereof, and (B) no such Lien shall be created, incurred, assumed or suffered to exist in favor of Borrower's officers, directors or shareholders holding five percent (5%) or more of Borrower's Equity Securities,


(f) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings;


(g) non-exclusive licenses of Intellectual Property entered into in the ordinary course of business and licenses existing on the date hereof with Acusphere Newco Ltd. and non-exclusive licenses and exclusive licenses (provided such exclusive licenses concern no more than four (4) Compounds (as defined in the JDOA)) in favor of Acusphere Newco Ltd.;


(h) Liens securing the Comdisco Indebtedness, provided such Liens are released on or before November 15, 2001; and


(i) Liens securing the Transamerica Indebtedness and Existing Equipment Indebtedness, provided such Liens shall only attach to the specific equipment financed with the Transamerica Indebtedness and Existing Equipment Indebtedness, respectively.


"Person" shall mean and include an individual, a partnership, a corporation, a business trust, a joint stock company, a limited liability company, an unincorporated association or other entity and any domestic or foreign national, state or local government, any political subdivision thereof, and any department, agency, authority or bureau of any of the foregoing.


"Property" means any interest in any kind of property or asset, whether real, personal or mixed, whether tangible or intangible.


"Subordinated Indebtedness" shall mean Indebtedness subordinated to the Obligations on terms and conditions acceptable to Lenders including, without limiting the generality of the foregoing, subordination of such Indebtedness in right of payment to the prior payment in full of the Obligations, the subordination of the priority of any Lien at any time securing such Indebtedness to the Lien of Lender in the collateral covered thereby, and the subordination of the rights of the holder of such Indebtedness to enforce its junior Lien following an Event of Default hereunder.


"Subsidiary" shall mean any corporation of which a majority of the outstanding capital stock entitled to vote for the election of directors (otherwise than as the result of a default) is owned by Borrower directly or indirectly through Subsidiaries.


"Term" shall mean the period from and after the date hereof until the payment or satisfaction in full of all Obligations under this Agreement and the other Operative Documents.


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"Transamerica Indebtedness" means the Indebtedness owed by Borrower to Transamerica Business Credit Corporation pursuant to a Master Lease Agreement by and among Borrower, Guarantor, and Transamerica Business Credit Corporation, dated as of February 21, 2001.


"VLL" means Venture Lending & Leasing III, Inc.


"Warrants" shall mean separate warrants to be issued at the direction of the Lenders to purchase securities of Borrower substantially in the form of Exhibit B.


1.02. Headings. Headings in this Agreement and each of the other Operative Documents are for convenience of reference only and are not part of the substance hereof or thereof.


1.03. Plural Terms. All terms defined in this Agreement or any other Operative Document in the singular form shall have comparable meanings when used in the plural form and vice versa.


1.04. Construction. This Agreement is the result of negotiations among, and has been reviewed by, Borrower and Lenders and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lenders.


1.05. Entire Agreement. This Agreement, together with the terms set forth in each of the other Operative Documents, taken together, constitute and, contain the entire agreement of Borrower and Lenders and, with regard to their respective subject matters, supersede any and all prior agreements, term sheets, negotiations, correspondence, understandings and communications among the parties, whether written or oral, with respect to their respective subject matters. Borrower acknowledges that it is not relying on any representation or agreement made by any Lender or any employee, agent or attorney of any Lender, other than the specific agreements set forth in this Agreement and the Operative Documents.


1.06. Other Interpretive Provisions. References in this Agreement to "Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to articles, sections, exhibits, schedules and annexes herein and hereto unless otherwise indicated. References in this Agreement and each of the other Operative Documents to any document, instrument or agreement shall include (a) all exhibits, schedules, annexes and other attachments thereto, (b) all documents, instruments or agreements issued or executed in replacement thereof, and (c) such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any other Operative Document shall refer to this Agreement or such other Operative Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Operative Document, as the case may be. The words "include" and "including" and words of similar import when used in this Agreement or any other Operative Document shall not be construed to be limiting or exclusive. Unless otherwise indicated in this Agreement or any other Operative Document, all accounting terms used in this Agreement or any other Operative Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP.


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ARTICLE II
THE CREDIT


2.01. Credit Facility.


(a) The Commitment Amount. Subject to the terms and conditions of this Agreement and relying upon the representations and warranties herein set forth as and when made or deemed to be made, each Lender severally agrees to lend to Borrower one Loan in the aggregate amount of such Lender's Commitment. The Loans made on the Funding Date shall be made pro rata in accordance with each Lender's Commitment and Commitment Percentage and shall be in an aggregate amount of not more than Five Million Dollars ($5,000,000). No Lender shall be required to make a Loan in an aggregate amount in excess of its Commitment. The Loans may not be prepaid, except in accordance with Section 2.03(d) and Section 7.01(f) hereof.


(b) Interest Rates. Borrower shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until such Loan is paid in full, at a per annum rate of interest equal to the Loan Rate for such Loan determined in accordance with the definition of Loan Rate. The Loan Rate applicable to a Loan shall not be subject to change in the absence of manifest error. All computations of interest on a Loan shall be based on a year of twelve 30-day months. If Borrower pays interest on a Loan which is determined to be in excess of the then legal maximum rate, then that portion of each interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of expenses or principal and applied first, to the payment of principal outstanding under the Loan; then to any expenses owed by Borrower to Lender under the terms hereof, with the excess (if any) to be timely refunded to Borrower.


(c) Payments of Principal and Interest. Commencing on the first Payment Date under each Lender's Loan, Borrower shall make six (6) monthly payments of accrued interest only on each Payment Date as set forth in such Lender's Note. Commencing on the seventh Payment Date of each Loan Borrower shall make twenty-four (24) equal monthly payments of principal in the amount of 4.167% of the Loan Amount plus accrued interest on the outstanding principal amount of such Lender's Loan on each subsequent Payment Date as set forth in such Lender's Note. If the Funding Date is not the first day of the month, Borrower shall pay interim in ...