Sample Business Contracts

Security Agreement - Curon Medical Inc. and John Gaiser

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                               SECURITY AGREEMENT

     This Security Agreement is made as of September 21, 2001 between Curon
Medical, Inc., a Delaware corporation ("Pledgee"), and John Gaiser ("Pledgor").

     1. Note Issuance. Pledgee has agreed to lend Pledgor $75,000 pursuant to a
promissory note (the "Note"). The Note and the obligations thereunder are as set
forth in Exhibit A to this Security Agreement.

     2. Creation and Description of Security Interest. Pledgor, pursuant to the
California Commercial Code, hereby pledges sixty thousand (60,000) shares of the
Common Stock of Curon Medical, Inc., a Delaware corporation (herein sometimes
referred to as the "Collateral" or the "Pledged Stock") and shall deliver said
certificate to the Secretary of Pledgee ("Pledgeholder") within 30 days hereof,
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.

     The pledged stock (together with an executed blank stock assignment
attached hereto as Exhibit B for use in transferring all or a portion of the
Shares to Pledgee if, as and when required pursuant to this Security Agreement)
shall be held by the Pledgeholder as security for the repayment of the Note, and
any extensions or renewals thereof, and the Pledgeholder shall not encumber or
dispose of such Shares except in accordance with the provisions of this Security

     3. Pledgor's Representations and Covenants. To induce Pledgee to enter into
this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:

   Payment of Indebtedness. Pledgor will pay the principal sum of the Note
secured hereby, together with interest thereon, at the time and in the manner
provided in the Note.

   Encumbrances. The Shares are free of all other encumbrances, defenses and
liens, and Pledgor will not further encumber the Shares without the prior
written consent of Pledgee.

   Margin Regulations. In the event that Pledgee's Common Stock is now or later
becomes margin-listed by the Federal Reserve Board and Pledgee is classified as
a "lender" within the meaning of the regulations under Part 207 of Title 12 of
the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate
with Pledgee in making any amendments to the Note or providing any additional
collateral as may be necessary to comply with such regulations.

     4. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged

     5. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such


securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such
documents as are reasonable so as to provide for the substitution of such
Collateral and, upon such substitution, references to "Shares" in this Security
Agreement shall include the substituted shares of capital stock of Pledgor as a
result thereof.

     6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event that payment of principal or interest on
the Note shall be delinquent for a period of 30 days or more. In the case of
default, Pledgee shall have the right to accelerate payment of the Note upon
notice to Pledgor, and Pledgee shall thereafter be entitled to pursue its
remedies under the California Commercial Code.

     7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the Pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the Pledged Shares which shall be released shall be that
number of full shares which bears the same proportion to the initial number of
shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.

     8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.

     9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.

     10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.

     11. Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.

     12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the
enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.

     13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.

     14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

PLEDGOR                          /s/ John Gaiser
                               John Gaiser

                               Address:  373 Paul Avenue
                                         Mountain View, CA  94041

PLEDGEE                        CURON MEDICAL, INC.
                               a Delaware corporation

                                 s/ John W. Morgan
                               John W. Morgan, President and CEO

PLEDGEHOLDER                     /s/ David J. Saul
                               David J. Saul

                               Address:  Wilson Sonsini Goodrich & Rosati
                                         650 Page Mill Road
                                         Palo Alto, CA  94304


                                    EXHIBIT A


$75,000.00                                                 Sunnyvale, California
                                                              September 21, 2001

     FOR VALUE RECEIVED, John Gaiser, promises to pay to Curon Medical, Inc., a
Delaware corporation (the "Company"), or order, the principal sum of
Seventy-five Thousand dollars ($75,000), together with interest on the unpaid
principal hereof from the date hereof at the rate of three point nine percent
(3.9 %) per annum, compounded semi-annually.

     Principal and interest shall be due and payable on June 21, 2002. Payment
of principal and interest shall be made in lawful money of the United States of

     The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.

     This Note is secured in part by a pledge of sixty thousand (60,000) shares
of the Common Stock of Curon Medical, Inc. that have a total value as of the
date of this note of at least One Hundred and Sixty-five Thousand dollars
($165,000) under the terms of a Security Agreement of even date herewith and is
subject to all the provisions thereof.

     The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the above collateral securing this
Note in the event of default.

     In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be immediately due and payable.

Should any action be instituted for the collection of this Note, the reasonable
costs and attorneys' fees therein of the holder shall be paid by the

                                            /s/ John Gaiser
                                        John Gaiser


                                    EXHIBIT B


FOR VALUE RECEIVED I, John Gaiser ("Pledgor"), hereby sell, assign and transfer
unto Curon Medical, Inc. ("Pledgee") sixty thousand (60,000) shares of the
Common Stock of Curon Medical, Inc. standing in my name of the books of said
corporation represented by Certificate(s) No(s). __________________ herewith and
do hereby irrevocably constitute and appoint __________________________________
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises. This Stock Assignment may be used
only in accordance with the Security Agreement between Curon Medical, Inc. and
the undersigned dated September 21, 2001.

Dated: _______________, ____

                                      Signature:        /s/ John Gaiser