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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 20, 1998
ECOGEN INC.
(Exact name of registrant as specified in its charter)
Delaware 1-9579 22-2487948
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
2005 Cabot Boulevard West, Langhorne, Pennsylvania 19047
(Address of Principal Executive Offices)
(215) 757-1590
(Registrant's telephone number, including area code)
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Item 5. Other Events
On August 20, 1998, Ecogen Inc., a Delaware corporation (the "Company")
obtained a secured, revolving loan valued at up to $5,000,000 (the "Credit
Line") from Congress Financial Corporation, an affiliate of CoreStates
("Congress"), for use as working capital, pursuant a Loan and Security Agreement
(the "Loan Agreement") described below. At the closing of the Loan Agreement,
the Company also exchanged an 8% secured convertible note due October 31, 2002
in the amount of $3,235,400, held by United Equities (Commodities) Company
("United Equities") for 32,354 shares of newly issued 8% Series 1998-C
Convertible Preferred Stock (the "Preferred Stock"), with a stated value of
$100.00 per share.
The working capital line of credit runs for a minimum of two years
(subject to termination upon certain events of default), bears interest at prime
plus 1.25% and is fully collateralized by the Company's assets other than its
intellectual property rights. The lending formula is based on eligible accounts
receivable and finished goods inventory.
The exchange by United Equities of its convertible note for convertible
preferred stock released liens on the Company's assets, which were then
available to secure the working line of credit. Dividends on the Preferred Stock
are payable semi-annually in cash or additional shares of Preferred Stock. The
Preferred Stock has no voting rights except with respect to certain matters
affecting the Preferred Stock. At the election of the holder, the Preferred
Stock may be converted into Common Stock of the Company at any time and from
time to time beginning on August 20, 1999, at a conversion price equal to the
lesser of (i) $2.125 per share and (ii) the average market price, as defined in
the agreement, over a five day period at the time of conversion. The Company, at
its option, may require conversion of the Preferred Stock if the average market
value of the Common Stock over a ten day period is greater than $4.00 per share
and certain other conditions are met. The Company, at its option, may redeem the
Preferred Stock at 125% of the stated value.
If the Company is unable to issue sufficient shares of Common Stock
within a specified period of time after the holder has requested conversion, or
the Common Stock has a market value of less than $1.00 for thirty consecutive
days, the dividend rate may increase and the Company could be required to pay
any such dividends in cash. In such event, if the cumulative amount of such cash
dividends exceeds $37,500 for a period of 30 days and at least 5,000 shares of
Preferred Stock are outstanding, then the Company will be required to appoint
two designees of the holders of a majority of the outstanding Preferred Stock to
the Company's Board of Directors.
In certain circumstances, all of which are in the control of the
Company, the Company may be required to redeem the shares of Preferred Stock at
various premiums over stated value.
The terms of the Preferred Stock also contain certain provisions for
anti-dilution protection.
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In connection with the issuance of the Preferred Stock, the Company
also agreed to file a registration statement, under the Securities Act of 1933,
as amended (the "Securities Act"), for the registration of the resale of the
shares of Common Stock into which the Preferred Stock is convertible, on or
before June 20, 1999.
The shares of Preferred Stock were issued by the Company in reliance
upon the exemption afforded by Section 3(a)(9) of, and Rule 506 under Regulation
D under, the Securities Act.
Item 7. Exhibits
Exhibit No. Description
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3.10 Certificate of Designations, Preferences and Rights of
Series 1998-C Convertible Preferred Stock
10.134 Convertible Preferred Stock Purchase Agreement between
United Equities (Commodities) Company and Ecogen,
Inc., dated August 20, 1998
10.135 Registration Rights Agreement between United Equities
(Commodities) Company and Ecogen Inc., dated August
20, 1998
10.136 Loan and Security Agreement between Congress Financial
Corporation and Ecogen Inc., dated August 20, 1998
10.137 Guarantee by Ecogen Investments Inc., Ecogen
Technologies I Incorporated, Ecogen-Bio Inc., Ecoresearch
Mildew I Inc., Ecoresearch Harvest Rot II Inc.,
Ecoresearch Corn Borer III Inc., Ecoresearch Nematodes
IV Inc., Ecoresearch Rootworm V Inc. and Ecoresearch
Turf VI Inc. to Congress Financial Corporation, dated
August 20, 1998
10.138 Pledge and Security Agreement by Ecogen Inc. in favor of
Congress Financial Corporation, dated August 20, 1998
10.139 Pledge and Security Agreement by Ecogen Technologies I
Incorporated in favor of Congress Financial Corporation,
dated August 20, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ECOGEN INC.
By: /s/ James P. Reilly, Jr.
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Name: James P. Reilly, Jr.
Title: Chairman and Chief Executive Officer
Date: September 2, 1998
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Exhibit 3.10
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES 1998-C CONVERTIBLE PREFERRED STOCK
OF
ECOGEN INC.
***
Ecogen Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation (as amended) of said corporation, and pursuant to
the provisions of Section 151 of Title 8 of the Delaware Code of 1953, said
Board of Directors, adopted a resolution, which resolution is as follows:
RESOLVED, that a series of the Corporation's Preferred Stock
consisting of 50,000 shares of Preferred Stock, be and hereby is,
designated as "Series 1998- C Convertible Preferred Stock", par value $.01
per share (the "Series C Preferred Stock"), and that the Series C
Preferred Stock shall have the designations, powers, preferences, rights
and qualifications, limitations and restrictions as set forth in the
Certificate of Designations, Preferences and Rights of Series 1998-C
Convertible Preferred Stock (the "Series C Certificate") attached as
Exhibit A.
That said Series C Certificate states that the Board of Directors does
hereby fix and herein state and express such designations, powers, preferences
and relative and other special rights and qualifications, limitations and
restrictions thereof as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein).
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as Series 1998-C Convertible Preferred Stock
(the "Preferred Stock") and the number of shares so designated shall be 50,000
(which shall not be subject to increase without the consent of the holders of
the Preferred Stock (each,
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a "Holder" and collectively, the "Holders")). Each share of Preferred Stock
shall have a par value of $.01 and a stated value of $100.00 (the "Stated
Value"). Of the designated shares of Preferred Stock, 32,354 shares of Preferred
Stock are being issued initially, and up to 17,646 shares of Preferred Stock are
being authorized for payment of dividends in shares of Preferred Stock when, as
and if, declared by the Board of Directors.
Section 2. Dividends.
(a) Holders of Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) equal to 8% per annum (the
"Dividend Rate"), payable on a semi-annual basis on June 30 and December 31 of
each year during the term hereof (each a "Dividend Payment Date"), commencing on
December 31, 1998, in cash or shares of Preferred Stock (the "Preferred
Dividend"), provided, that in connection with a conversion of the Preferred
Stock, the Company shall be entitled to pay dividends in the form of Common
Stock, subject to the terms and conditions set forth herein, at the option of
the Company. Dividends on the Preferred Stock shall be calculated on the basis
of a 360-day year, shall accrue daily commencing on the Original Issue Date (as
defined in Section 8), and shall be deemed to accrue from such date whether or
not earned or declared and whether or not there are profits, surplus or other
funds of the Company legally available for the payment of dividends. Any
dividends not paid on any Dividend Payment Date shall continue to accrue and
shall be due and payable upon conversion of the Preferred Stock. A party that
holds shares of Preferred Stock on a Dividend Payment Date will be entitled to
receive such dividend payment and any other accrued and unpaid dividends which
accrued prior to such Dividend Payment Date, without regard to any sale or
disposition of such Preferred Stock subsequent to the applicable record date.
Except as otherwise provided herein, if at any time the Company pays less than
the total amount of dividends then accrued on account of Preferred Stock, such
payment shall be distributed ratably among the Holders based upon the number of
shares held by each Holder. The Company shall provide the Holders notice of its
intention to pay dividends in cash or shares of Preferred Stock not less than
ten (10) Business Days prior to any Dividend Payment Date for as long as shares
of Preferred Stock are outstanding. If dividends are paid in the form of
Preferred Stock, the number of shares of Preferred Stock issuable on account of
such dividend shall equal the cash amount of such dividend on such Dividend
Payment Date divided by the Stated Value. If dividends are paid in shares of
Common Stock, the number of shares of Common Stock issuable on account of such
dividend shall equal the cash amount of such dividend on such Dividend Payment
Date divided by the Conversion Price (as defined below) on such date. The
Company shall not be required to issue stock certificates representing fractions
of shares of Preferred Stock and shall make a cash payment in respect of any
final fraction of a share based on the product of such fractional share and the
Stated Value.
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(b) Notwithstanding anything to the contrary contained herein, the
Company may not pay dividends in the form of Preferred Dividends or in shares of
Common Stock and must deliver cash in respect thereof if on the Dividend Payment
Date:
(i) (A) the number of shares of Preferred Stock at the time
authorized for issuance for the payment of Preferred Dividends on such Dividend
Payment Date, together with the number of shares held as treasury stock, is
insufficient to satisfy the Company's then existing obligations to issue shares
of Preferred Stock for the payment of such Preferred Dividends on such Dividend
Payment Date, or (B) the sum of (i) the number of shares of Common Stock at the
time reserved for issuance upon conversion of (x) the shares of Preferred Stock
outstanding on such Dividend Payment Date, and (y) the Preferred Dividends on
such Dividend Payment Date, (ii) the number of authorized but unissued shares of
Common stock not reserved for any purpose, and (iii) the number of shares held
as treasury stock, is insufficient to satisfy the Company's then existing
conversion and other obligations to issue shares of Common Stock for all
purposes;
(ii) the Common Stock is not then listed on the Nasdaq
National Market ("NASDAQ"), the NASDAQ SmallCap Market or other national
securities exchange; or
(iii) the Company has failed to timely satisfy its conversion
obligations hereunder.
(c) So long as any Preferred Stock shall remain outstanding, neither
the Company nor any subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities (as defined in Section 8),
nor shall the Company directly or indirectly pay or declare any dividend or make
any distribution upon, nor shall any distribution be made in respect of, any
Junior Securities, nor shall any moneys be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities, except for repurchases effected by the Company on the open market,
pursuant to a direct stock purchase plan or in connection with the Company's
401(k) plan.
Section 3. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not and shall cause its subsidiaries not to, without the affirmative vote
of the Holders of all of the shares of the Preferred Stock then outstanding, (a)
alter or change adversely the powers, preferences or rights given to the
Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
authorize or create any class of stock ranking as to dividends or
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distribution of assets upon a Liquidation (as defined in Section 4) senior to
the Preferred Stock, (d) increase the authorized number of shares of Preferred
Stock or (e) enter into any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the Holders shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value plus all accrued but unpaid dividends per
share, whether declared or not, before any distribution or payment shall be made
to the holders of any Junior Securities, and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders of Preferred Stock shall be distributed among the
Holders of Preferred Stock ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than forty-five (45) days prior
to the payment date stated therein, to each record Holder of Preferred Stock.
Any payments made to the Holders of Preferred Stock pursuant to this Section 4
shall be made on a pari passu basis with payments made to the holders of the 8%
Series 1998-A Convertible Preferred Stock and the holders of the 8% Series
1998-B Convertible Preferred Stock, if any.
Section 5. Conversion.
(a) Conversion at the Option of the Holder. At the option of the
Holder, each share of Preferred Stock shall be convertible into shares of Common
Stock (subject to limitation and/or reduction pursuant to Section 5(c) hereof),
at the Conversion Ratio (as defined in Section 8), at any time and from time to
time, from and after the date that is the one year anniversary date of the
Original Issue Date. Holders shall effect conversions by surrendering the
certificate or certificates representing the shares of Preferred Stock to be
converted to the Company, together with the form of conversion notice attached
hereto as Annex I (a "Conversion Notice"). Each Conversion Notice shall specify
the number of shares of Preferred Stock to be converted and the date on which
such conversion is to be effected, which date may not be prior to the date the
Holder delivers such Conversion Notice to the Company by facsimile (the
"Conversion Date"). If no Conversion Date is specified in a Conversion Notice,
the Conversion Date shall be the date that the Conversion Notice is deemed
delivered to the Company hereunder. If the Holder is converting less than all
shares of Preferred Stock represented by the certificate or
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certificates tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(d)) a certificate for such number of shares as have not been
converted. A conversion effected pursuant to this Section 5(a) is referred to as
an "Optional Conversion".
(b) Mandatory Conversion at the Option of the Company. At the option
of the Company, all or a portion of the shares of Preferred Stock shall be
convertible into shares of Common Stock (subject to limitation and/or reduction
pursuant to Section 5(c) hereof) at the Conversion Ratio, on any date so long as
on the date the applicable Conversion Notice is delivered as described below (i)
the Underlying Securities Registration Statement (as defined in Section 8) has
been declared effective (and remains in effect) by the Securities and Exchange
Commission (the "Commission") and (ii) the Per Share Market Value for the ten
(10) consecutive Trading Days immediately preceding such date shall be greater
than $4.00. The Company shall effect conversions by delivering to the applicable
Holder a Conversion Notice which shall specify the number of shares of Preferred
Stock to be converted. The Conversion Date in respect of such conversion shall
be deemed to be the date of the Conversion Notice. On such Conversion Date, the
Holder will surrender to the Company the certificate or certificates
representing the shares of Preferred Stock to be converted. If the Company
requests the Holder to convert less than all shares of Preferred Stock
represented by the certificate or certificates tendered by the Holder, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(d)) a certificate for such number of shares as have not been
converted.
(c) Subject to the remaining provisions of this Section 5(c), at no
time while the Common Stock is listed for trading on the NASDAQ, the Nasdaq
SmallCap Market or any other national securities exchange or market, shall the
Company issue on conversions of Preferred Stock an aggregate number of shares of
Common Stock that would equal or exceed 19.9% of the number of shares of Common
Stock issued and outstanding on the Original Issue Date (such maximum number of
shares of Common Stock issuable hereunder being hereinafter referred to as the
"Issuable Maximum") unless the Company shall have theretofore (A) obtained the
approval of its shareholders ("Shareholder Approval"), as may be required by the
rules and regulations of NASDAQ (or successor thereto) applicable to approve the
issuance of Common Stock in excess of the Issuable Maximum in a private
placement whereby shares of Common Stock are deemed to have been issued at a
price that is less than the greater of book or fair market value of the Common
Stock, or (B) obtained an exemption from the requirement for Shareholder
Approval from NASDAQ (a "Nasdaq Exemption"). Notwithstanding the foregoing, in
the event that on any date (the "Trigger Date") (i) the Per Share Market Value
is less than $1.00 for thirty (30) consecutive Trading Days or (ii) as a result
of
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conversions hereunder, the Issuable Maximum is actually reached and the Company
has not theretofore obtained Shareholder Approval or a Nasdaq Exemption, then
the Company will at such time either, in its sole discretion, (x) redeem the
Preferred Stock pursuant to Section 6, or (y) use its reasonable best efforts to
obtain a Nasdaq Exemption. If such Nasdaq Exemption is not obtained within sixty
(60) days after the Trigger Date (such date being hereinafter referred to as the
"Second Trigger Date") and the Company has not redeemed the Preferred Stock at
such time, the Company will thereupon use its reasonable best efforts to obtain
the Shareholder Approval (i) by placing such matter on the agenda of the next
annual shareholders meeting or (ii) in the event that such annual meeting is
scheduled to occur later than 120 days after the Second Trigger Date, by calling
a special shareholders' meeting, to be held not later than 120 days after the
Second Trigger Date, to address such matter and any other matters at such time.
If the Issuable Maximum is actually reached as a result of conversions hereunder
and the Company has not theretofore obtained Shareholder Approval or a Nasdaq
Exemption, from and after the related Trigger Date and until the earlier of (i)
the date on which such Nasdaq Exemption is obtained or (ii) the date on which
such Shareholder Approval is obtained, the Preferred Stock shall pay cumulative
cash dividends equal to 15% of the Stated Value per annum. If the Per Share
Market Value is less than $1.00 for thirty (30) consecutive Trading Days, from
and after the related Trigger Date and until the earliest of (i) the date on
which the Per Share Market Value has been greater than $1.00 for thirty (30)
consecutive Trading Days, (ii) the date on which a Nasdaq Exemption is obtained,
or (iii) the date on which Shareholder Approval is obtained, the Preferred Stock
shall pay cumulative cash dividends equal to 15% of the Stated Value per annum.
In the event that (i) the cumulative amount of such dividends exceeds $37,500
for a period of thirty (30) days after any Dividend Payment Date, and (ii) at
such time at least 5,000 shares of Preferred Stock shall be outstanding, then
the Company will promptly appoint two (2) designees of the Holders of a majority
of the outstanding Preferred Stock to the Company's Board of Directors and use
its reasonable best efforts to cause the election of such designees to the
Company's Board of Directors.
(d) (i) Not later than three (3) Business Days after any Delivery
Date (as hereinafter defined), the Company will deliver to the Holder (i) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of shares of Preferred Stock (subject to limitation
pursuant to Section 5(c)), and (ii) one or more certificates representing the
number of shares of Preferred Stock not converted. The Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon conversion of any shares of Preferred Stock until certificates evidencing
such shares of Preferred Stock are either delivered for conversion to the
Company or any transfer agent for the Preferred Stock or Common Stock, or the
Holder of such Preferred Stock notifies the Company that such certificates have
been lost, stolen or destroyed and
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provides a bond (or other adequate security) reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith, and the Company shall not be required to deliver certificates
evidencing the shares of Common Stock to an address outside the United States.
The date such certificates or affidavit are delivered is referred to as the
"Delivery Date." In the case of an Optional Conversion, if the Delivery Date has
not occurred on or prior to the tenth (10th) Business Day following the
Conversion Date, then the Company may, on notice to the Holder, rescind the
conversion. The Company shall, upon request of the Holder, use its reasonable
best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions, if available. If in the case of any Conversion Notice delivered
pursuant to an Optional Conversion, such certificate or certificates, including
for purposes hereof any shares of Common Stock to be issued on the Conversion
Date on account of accrued but unpaid dividends hereunder, are not delivered to
or as directed by the applicable Holder by the fifth (5th) Trading Day after the
Delivery Date, the Holder shall be entitled by written notice to the Company at
any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred Stock
tendered for conversion.
(ii) If the Company fails to deliver to the Holder such certificate
or certificates pursuant to Section 5(d)(i), including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued
but unpaid dividends hereunder, prior to the fifth (5th) Trading Day after the
Delivery Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, $5,000 for each day after such fifth (5th) Trading
Day until such certificates are delivered. Nothing herein shall limit a Holder's
right to pursue actual damages for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law. Further, if the Company shall not have
delivered any cash due in respect of conversions of Preferred Stock or as
payment of dividends thereon by the fifth (5th) Trading Day after the Conversion
Date, the Holder may, subject to Section 5(c), by notice to the Company, require
the Company to issue Underlying Shares pursuant to Section 5(e), except that for
such purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of
such Holder demand. Any such Underlying Shares will be subject to the provision
of this Section.
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(iii) In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(d)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, prior to the fifth (5th) Trading Day after the Delivery
Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder
anticipated receiving upon such conversion (a "Buy-In"), then the Company shall
pay in cash to the Holder (in addition to any remedies available to or elected
by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the aggregate stated value of the shares of Preferred
Stock for which such conversion was not timely honored. For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate
stated value of the shares of Preferred Stock, the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
(iv) The provisions of clauses (ii) and (iii) of this Section 5(d)
shall not apply if the Company is not required to honor a Conversion Notice
other than by reason of a breach by the Company of the terms hereof, of the
Purchase Agreement or of the Registration Rights Agreement.
(e) (i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of (a)
$2.125, as may be adjusted from time to time (the "Stated Conversion Price") and
(b) the average of the Per Share Market Values for the five (5) consecutive
Trading Days immediately preceding the applicable Conversion Date; provided,
however, that such five (5) Trading Day period shall be extended for the number
of Trading Days during such period in which (A) trading in the Common Stock was
suspended from the NASDAQ or such other national securities exchange or market
on which the Common Stock is then listed, or (B) after the date of
effectiveness, the Underlying Securities Registration Statement ceases to be
effective, or (C) after the date of effectiveness, the Prospectus included in
the Underlying Securities Registration Statement may not be used by the Holder
for the resale of Underlying Shares.
(ii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall (a) pay a stock dividend or otherwise make a distribution
or distributions on shares of its Junior Securities or pari passu securities
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of capital
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stock of the Company, the then current Stated Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 5(e)(ii) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of subdivision, combination or
reclassification.
(iii) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights, warrants or options to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Per Share Market Value at the record date
mentioned below, the then current Stated Conversion Price shall be multiplied by
a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, warrants or
options, plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right, warrant or option to purchase shares of Common Stock
the issuance of which resulted in an adjustment in the then current Stated
Conversion Price pursuant to this Section 5(e)(iii), if any such right, warrant
or option shall expire and shall not have been exercised, the Stated Conversion
Price, immediately upon such expiration, shall be recomputed and effective
immediately upon such expiration shall be increased to the price which it would
have been (but reflecting any other adjustments in the then current Stated
Conversion Price made pursuant to the provisions of this Section 5 upon the
issuance of other rights, warrants or options) had the adjustment of the then
current Stated Conversion Price made upon the issuance of such rights, warrants,
or options been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights, warrants or options actually exercised.
(iv) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while any
shares of Preferred Stock are outstanding, shall issue shares of Common Stock or
rights, warrants, options, or other securities or debt that is convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents")
entitling any Person to acquire shares of Common Stock at a price per share less
than the then current Stated Conversion Price, then the then current Stated
Conversion Price shall be multiplied by a fraction, the
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numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of shares of Common Stock or such Common Stock
Equivalents plus the number of shares of Common Stock which the offering price
for such shares of Common Stock or Common Stock Equivalents would purchase at
the then current Stated Conversion Price, and the denominator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
such issuance plus the number of shares of Common Stock so issued or issuable,
provided, that for purposes hereof, all shares of Common Stock that are issuable
upon exercise or exchange of Common Stock Equivalents shall be deemed
outstanding immediately after the issuance of such Common Stock Equivalents.
Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued.
(v) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to Holders
of Preferred Stock) evidences of its indebtedness or assets (including, without
limitation, cash payable other than out of earnings or earned surplus) or rights
or warrants to subscribe for or purchase any security (excluding those referred
to in Sections 5(e)(ii)-(iv) above), then in each such case the Stated
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Stated Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of Common Stock determined as of
the record date mentioned above, and of which the numerator shall be such Per
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith; provided, however, that
in the event of a distribution exceeding ten percent (10%) of the net assets of
the Company, if the Holders of a majority in interest of the Preferred Stock
dispute such valuation, such fair market value shall be determined by a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") selected in good faith by the Holders of a majority in interest of
the shares of Preferred Stock then outstanding; and provided, further, that the
Company, after receipt of the determination by such Appraiser shall have the
right to select an additional Appraiser, in good faith, in which case the fair
market value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement,
provided to the Holders of Preferred Stock, of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
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<PAGE> 11
(vi) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Conversion Price is adjusted pursuant to Section
5(e)(ii), (iii), (iv), or (v) the Company shall promptly mail to each Holder, a
notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(viii) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than compulsory share exchanges which
constitute Change of Control Transactions), the Holders of the Preferred Stock
then outstanding shall have the right thereafter and while the Preferred Stock
is outstanding to convert such shares only into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange.
(ix) If (a) the Company shall declare a dividend (or any other
distribution) on its Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock, (c) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights, (d) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property, or (e) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then the Company shall cause to be filed at each office or
agency maintained for the purpose of conversion of Preferred Stock, and shall
cause to be mailed to the Holders of Preferred Stock at their last addresses as
they shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such
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<PAGE> 12
notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
(x) If any consolidation or merger of the Company with another
corporation shall be effected, then, as a condition of such consolidation or
merger, lawful and adequate provision shall be made whereby the Holder shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of the Preferred Stock,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares equal to the number
of shares of Common Stock immediately theretofore so receivable by such Holder
had such consolidation or merger not taken place, and in any such cash
appropriate provision shall be made with respect to the rights and interests of
such Holder to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stated Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights. The Company shall not consummate any such consolidation or
merger unless prior to or simultaneously with the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument the obligation to deliver to such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to receive. Except as expressly set forth in this
Section 5(e)(x), however, nothing contained herein will be deemed to restrict
the Company from entering into a consolidation or merger.
(xi) No adjustment in the Conversion Price under Sections 5(e)(ii),
(iii), (iv) or (v) shall be required to be made if such adjustment would result
in a change of less than $.10 in the Conversion Price, but any adjustments not
made by reason of this clause (x) shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment(s) which, together
with any adjustment(s) so carried forward, shall require an increase or decrease
of at least $.10 in the Conversion Price then in effect.
(f) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock and Preferred Dividends (assuming
payment of all dividends in the form of Preferred Dividends in accordance with
the terms hereof), each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holders of
Preferred Stock, not less than such number of shares of Common Stock as shall be
issuable (taking into account the adjustments and restrictions of Section 5(c)
and Section 5(e)) upon the conversion of all outstanding shares of Preferred
Stock and payment of dividends hereunder (assuming payment of all dividends in
shares of Preferred Stock in accordance with the terms
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<PAGE> 13
hereof). The Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and freely tradeable, subject to the legend requirements of
Section 3.1(b) of the Purchase Agreement.
(g) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(h) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(i) Shares of Preferred Stock converted into Common Stock shall be
canceled. The Company may not reissue any shares of Preferred Stock.
(j) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Executive Officer of the Company at the
facsimile telephone number or address of the principal place of business of the
Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to each Holder of Preferred Stock at the facsimile telephone
number or address of such Holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via confirmed
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (Eastern Standard Time), (ii) the date after the
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<PAGE> 14
date of transmission, if such notice or communication is delivered via confirmed
facsimile at the facsimile telephone number specified in this Section later than
8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m.
(Eastern Standard Time) on such date, (iii) upon receipt, if sent by a
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
Section 6. Optional Redemption.
(a) The Company shall have the right, exercisable at any time upon
not less than ten (10) Trading Days notice (an "Optional Redemption Notice") to
the Holders of the Preferred Stock given at any time after the Original Issue
Date, to redeem all or any portion of the shares of Preferred Stock which have
not previously been converted or redeemed, at a price equal to the Optional
Redemption Price (as defined below), provided, that the Company shall not be
entitled to deliver an Optional Redemption Notice to the Holders (i) if the Per
Share Market Value is less than $4.00 per share or (ii) if the shares of Common
Stock issuable upon conversion of shares of Preferred Stock then outstanding (x)
are not registered for resale pursuant to an effective registration statement
that names the Holders as selling stockholders thereunder or (y) may not be sold
without volume restrictions pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended, as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
in the form and substance acceptable to the Holders and such transfer agent. The
entire Optional Redemption Price shall be paid in cash. Holders of Preferred
Stock may convert (and the Company shall honor such conversions in accordance
with the terms hereof) any shares of Preferred Stock, including shares subject
to an Optional Redemption Notice, during the period from the date thereof
through the 10th Trading Day after the receipt of an Optional Redemption Notice.
(b) If any portion of the Optional Redemption Price shall not be
paid by the Company within ten (10) Business Days after the tenth (10th) Trading
Day after the delivery of an Optional Redemption Notice, interest shall accrue
thereon at the rate of 12% per annum until the Optional Redemption Price plus
all such interest is paid in full. In addition, if any portion of the Optional
Redemption Price remains unpaid for more than ten (10) Business Days after the
date due, the Holder of the Preferred Stock subject to such redemption may
elect, by written notice to the Company given at any time thereafter, to either
(i) demand conversion of all or any portion of the shares of Preferred Stock for
which such Optional Redemption Price, plus accrued liquidated damages, has not
been paid in full (the "Unpaid Redemption Shares"), in which event the
Conversion Price for such shares shall be the lower of the Conversion Price
calculated on the date the Optional Redemption Price was originally due and the
Conversion Price as of the Holder's written demand for conversion, or (ii)
invalidate ab initio such redemption,
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<PAGE> 15
notwithstanding anything herein contained to the contrary. If the Holder elects
option (i) above, the Company shall within three (3) Trading Days of its receipt
of such election deliver to the Holder the shares of Common Stock issuable upon
conversion of the Unpaid Redemption Shares subject to such Holder conversion
demand and otherwise perform its obligations hereunder with respect thereto; or,
if the Holder elects option (ii) above, the Company shall promptly, and in any
event not later than three (3) Trading Days from receipt of Holder's notice of
such election, return to the Holder all of the Unpaid Redemption Shares.
(c) The "Optional Redemption Price" shall equal the sum of (i) 125%
of the Stated Value of the shares of Preferred Stock subject to redemption
hereunder and all accrued but unpaid dividends per share of Preferred Stock
subject to redemption hereunder, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such shares of Preferred Stock.
Section 7. Triggering Events.
(a) Upon the occurrence of a Triggering Event, each Holder shall (in
addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Company to purchase all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Payment
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the Holder and (B) the Per
Share Market Value on the date such purchase is demanded or the date the
redemption price hereunder is paid in full, whichever is greater. If the Company
fails to pay the redemption price hereunder in full pursuant to this Section
within ten (10) Business Days after the date of a demand therefor, the Company
will pay interest thereon at a rate of 15% per annum, accruing daily from such
tenth day until the redemption price, plus all such interest thereon, is paid in
full. For purposes of this Section, a share of Preferred Stock is outstanding
until such date as the Holder shall have received Underlying Shares upon a
conversion (or attempted conversion) thereof.
(b) A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgement, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body);
(i) the failure of the Company to use its best efforts to cause an
Underlying Securities Registration Statement to be declared effective by the
Commission on or prior to the one year anniversary date of the Original Issue
Date and such failure is not cured within five (5) days after notice from a
Holder;
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<PAGE> 16
(ii) if, during the Effectiveness Period, the effectiveness of the
Underlying Securities Registration Statement lapses for any reason for more than
ten (10) consecutive Business Days or more than fifteen (15) Business Days in
any 12-month period, or the Holder shall have been advised by the Company that
it is not permitted to resell Registrable Securities under the Underlying
Securities Registration Statement for more than ten (10) consecutive Business
Days or more than fifteen (15) Business Days in any 12-month period, in each
case other than (A) as a result of a stop order or similar order issued by the
Commission not at the request of the Company; or (B) solely as a result of
actions taken by the Holder.
(iii) the Company shall fail for any reason to deliver certificates
representing Underlying Shares issuable upon a conversion hereunder that comply
with the provisions hereof prior to the 20th day after the Delivery Date or the
Company shall provide notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of any Preferred Stock in accordance with the terms hereof;
(iv) the Company shall be a party to any Change of Control
Transaction which has been approved by the Board of Directors of the Company,
and a Holder shall have given notice to the Company of its intention that such
Change of Control transaction be a Triggering Event;
(v) the Company shall fail to make any payments required to be made
under Sections 5(d)(ii), 5(d)(iii) [or 5(e)(i)] within thirty (30) days after
the same are due and such failure is not cured within five (5) days after notice
from a Holder;
(vi) the Company shall fail for any reason to pay all amounts
required pursuant to a Buy-In within seven (7) days after notice is deemed
delivered hereunder and such failure is not cured within five (5) days after
notice from a Holder; or
(vii) the Company shall fail to have available a sufficient number
of authorized and unreserved shares of Common Stock to issue to such Holder upon
a conversion hereunder.
Section 8. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day
which shall be a Federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
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<PAGE> 17
"Change of Control Transaction" means the occurrence of any of: (i)
an acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 50% of the voting securities of the Company, (ii) a sale or other
disposition via a single transaction or series of related transactions by the
Company or any of its subsidiaries of all or substantially all of the assets of
the Company and its subsidiaries, taken as a whole, other than a sale to a
wholly owned subsidiary of the Company; (iii) the merger or consolidation of the
Company with or into another entity, if the stockholders of the Company
immediately before such merger or consolidation do not own, directly or
indirectly, immediately following such merger or consolidation, more than 50% of
the combined voting power of the resulting outstanding voting securities in
substantially the same proportion as their pre-merger or pre-consolidation
ownership, or sale of all or substantially all of the assets of the Company in
one or a series of related transactions or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (i), (ii) or (iii).
"Common Stock" means the Company's common stock, $.01 par value, and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued and unpaid dividends but only to the
extent not theretofore paid in shares of Preferred Stock in accordance with the
terms hereof, and of which the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights to dividends or liquidation
preference to the Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Payment Amount" for each share of Preferred Stock means the sum of
(i) the greater of (A) 130% of the Stated Value and all accrued dividends with
respect to such share, and (B) the product of (a) the Per Share Market Value on
the Trading Day immediately preceding (x) the date of the Triggering Event or
the Conversion Date, as the case may be, or (y) the date of payment in full by
the Company of the applicable redemption price, whichever is greater, and (b)
the Conversion Ratio calculated on the date of the Triggering Event, or the
Conversion Date, as the case may be, and (ii) all other
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<PAGE> 18
amounts, costs, expenses and liquidated damages due in the respect of such
shares of Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the NASDAQ or
the Nasdaq SmallCap Market, as the case may be, or any other stock exchange or
quotation system on which the Common Stock is then listed, or if there is no
such price on such date, then the closing bid price on such exchange or
quotation system on which the Common Stock is listed for trading on the date
nearest preceding such date, or (b) if the Common Stock is not listed then on
the NASDAQ or the Nasdaq SmallCap Market or any stock exchange or quotation
system, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Holders of a majority
in interest of the shares of the Preferred Stock and approved by the Company.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holder of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holder of the Preferred Stock.
"Trading Day" means (a) day on which the Common Stock is traded on
the NASDAQ or the Nasdaq SmallCap Market as the case may be, or other securities
market or exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the NASDAQ or the Nasdaq SmallCap Market or on any
exchange or market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar
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<PAGE> 19
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted as set
forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.
"Underlying Securities Registration Statement" means a registration
statement that meets the requirement of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the recipient thereof, who
shall be named as a "selling stockholder" thereunder.
"Underlying Shares" means, collectively, the shares of Common Stock
into which the shares of Preferred Stock are convertible in accordance with the
terms hereof.
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<PAGE> 20
IN WITNESS WHEREOF, said Ecogen Inc. has caused this Certificate to
be signed by Mary E. Paetzold, as Vice President and Chief Financial Officer,
and attested by Richard A. Deak, as Secretary, this 19th day of August, 1998.
ECOGEN INC.
By: /s/ Mary E. Paetzold
-----------------------------------
Name: Mary E. Paetzold
Title: Vice President and
Chief Financial Officer
ATTEST:
/s/ Richard A. Deak
- -----------------------------------
Name: Richard A. Deak
Title: Secretary
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<PAGE> 21
ANNEX I
NOTICE OF CONVERSION
[The Holder written below hereby elects](1) [The Company hereby elects to
require the Holder written below](2) to convert the number of shares of 8%
Series 1998-C Convertible Preferred Stock indicated below, into shares of Common
Stock, $.01 par value (the "Common Stock"), of Ecogen Inc. (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than the name of the Holder written
below such Holder will pay all transfer taxes payable with respect thereto and
is delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
___________________________________________________
Number of shares of Preferred Stock to be Converted
___________________________________________________
Number of shares of Common Stock to be Issued
___________________________________________________
Applicable Conversion Price
___________________________________________________
Name of Holder
___________________________________________________
Address
- --------
1/ Insert in the case of a conversion effected pursuant to Section 5(a).
2/ Insert in the case of a conversion effected pursuant to Section 5(b).
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<PAGE> 1
Exhibit 10.134
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
ECOGEN INC.
and
UNITED EQUITIES (COMMODITIES) COMPANY
Dated as of August 20, 1998
<PAGE> 2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated
as of August 20, 1998, between Ecogen Inc., a Delaware corporation (the
"Company"), and United Equities (Commodities) Company, a New York general
partnership (the "Purchaser").
WHEREAS, the Company and the Purchaser are parties to (i) a Convertible
Note Purchase Agreement (the "Note Purchase Agreement"), dated October 31, 1997
and (ii) an 8% Convertible Note due October 31, 2002 (the "Convertible Note");
WHEREAS, the Convertible Note (including accrued but unpaid interest)
currently has an outstanding balance of $3,233,747.56; and
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to purchase from the Company, shares of the Company's 8% Series 1998-C
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and the Purchaser intends to tender the Convertible Note in consideration of the
purchase price for the Preferred Stock.
IN CONSIDERATION of the mutual covenants contained in this Agreement the
receipt and sufficiency of which are hereby acknowledged by the parties, the
Company and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase and Sale. (a) Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company 32,338 shares of the Preferred Stock (the
"Shares") at a purchase price per share of $100.00, payable by the surrender of
the Convertible Note for cancellation by the Company.
(b) The Preferred Stock shall have the respective rights,
preferences and privileges set forth in the form of Certificate of Designations,
Preferences and Rights of 8% Series 1998-C Convertible Preferred Stock attached
hereto as Exhibit A (the "Certificate of Designations"), which Certificate of
Designations, appropriately completed, shall be filed prior to the time of the
Closing (as defined below) by the Company with the Secretary of State of
Delaware.
1.2 The Closing. (a) The closing of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Paul, Hastings, Janofsky &
Walker LLP, 1055 Washington Boulevard, Stamford, CT 06901, immediately following
the execution hereof
<PAGE> 3
or such later date as the parties shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
(b) At the Closing, the Company shall deliver to the Purchaser a
stock certificate representing 32,338 Shares registered in the name of the
Purchaser against delivery by the Purchaser of the Convertible Note to be
canceled.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Ecogen Investments Inc., a Delaware corporation ("E-Investments"),
Ecogen-Bio Inc., a Delaware corporation ("E-Bio") and Ecogen Technologies I
Incorporated, a Delaware corporation ("ETech" and, together with E-Investments
and E-Bio, the "Subsidiaries"), comprise all of the entities which would be
deemed "significant subsidiaries" of the Company, as such term is defined in
Rule 1-02(w) of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company is the owner of all of the
issued and outstanding capital stock of E-Investments and E-Bio, and is the
owner of no less than 70% of the issued and outstanding common stock of ETech,
free and clear of any and all liens, claims, charges or encumbrances or rights
of first refusal of any nature whatsoever (collectively, "Liens").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of this Agreement, the Certificate of Designations and the
Registration Rights Agreement, dated the date hereof, between the Company and
the Purchaser (together, the "Transaction Documents") and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the Company
and, when delivered (or filed, as the case may be) in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, by-laws or other charter documents.
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(c) Capitalization. The number of authorized, issued and outstanding
shares of capital stock of the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents, except as set forth in Schedule 2.1(c). Except as
disclosed in Schedule 2.1(c), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or, except as a result of the purchase and sale of the Shares,
securities, rights or obligations convertible into or exchangeable for, or
giving any Person (as defined in the Certificate of Designations) any right to
subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible into, or exchangeable for, shares of Common Stock.
(d) Issuance of the Shares. The Shares are duly authorized, and,
when issued and paid for in accordance with the terms hereof, shall have been
validly issued, fully paid and nonassessable, free and clear of all Liens. The
Company has on the date hereof and will, at the Closing Date and at all times
while the Shares are outstanding, maintain an adequate reserve of duly reserved
shares of Common Stock, reserved for issuance to the holders of the Shares to
enable it to perform its conversion and other obligations under this Agreement
and the Certificate of Designations, including the issuance of Common Stock upon
conversion of additional Shares issued as payment of dividends on the Shares
(such additional Shares, the "Dividend Shares"). The shares of Common Stock
issuable upon conversion of the Shares and Dividend Shares are collectively
referred to herein as the "Underlying Shares." The Shares, the Dividend Shares
and the Underlying Shares are collectively referred to as the "Securities." When
issued in accordance with the terms of the Certificate of Designations, the
Underlying Shares shall have been duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the consents referred to in Section 2.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, credit facility,
indenture or instrument (evidencing a Company debt or otherwise) to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including Federal and state securities laws and regulations), or by
which
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any property or asset of the Company is bound or affected, except in the case of
each of clauses (ii) and (iii), as is not reasonably likely to, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Securities or any of the Transaction Documents, (y) have or result in a
material adverse effect on the business, operations, property, assets,
liabilities or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), being a "Material Adverse Effect"). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except as set forth in
Schedule 2.1(e) and for violations which, individually or in the aggregate, are
not reasonably likely to have or result in a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other Federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filings of the Certificate of Designation with the Secretary of State of
Delaware, (ii) the filing of the Registration Statement (the "Underlying
Securities Registration Statement") with the Securities and Exchange Commission
(the "Commission") pursuant to the Registration Rights Agreement, (iii) the
application(s) to the Nasdaq National Market ("NASDAQ") for the listing of the
Underlying Shares with the NASDAQ (and with any other national securities
exchange or market on which the Common Stock is then listed), (iv) the filing of
a Form D with the Commission, and (v) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration is not reasonably likely to have or result in,
individually or in the aggregate, a Material Adverse Effect (together with the
consents, waivers, authorizations, orders, notices and filings referred to in
Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
SEC Documents (as defined below) or as set forth in Schedule 2.1(g), there is no
action, suit, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties before or by any
court, governmental or administrative agency or regulatory authority (Federal,
state, county, local or foreign) which is reasonably likely, individually or in
the aggregate, to have or result in a Material Adverse Effect.
(h) SEC Documents; Financial Statements. The Company has previously
furnished the Purchaser with true and correct copies of the following documents
which have been filed by the Company with the Commission pursuant to the
Exchange Act: (i) its annual report on Form 10-K for the fiscal year ended
October 31, 1997, as amended; (ii) its proxy statement with respect to the
Company's annual meeting of stockholders held on May 7,
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1998, (iii) its quarterly reports on Form 10-Q for the fiscal quarters ended
January 31, 1998 and April 30, 1998; and (iv) all currents reports filed on Form
8-K filed by the Company with the Commission during the period from and after
October 31, 1997 (all of which filings are herein called the "SEC Documents"
and, together with the Schedules to this Agreement, the "Disclosure Materials").
The SEC Documents constitute all reports the Company was required to file under
the Exchange Act since October 31, 1997. At the time of filing with the
Commission, the SEC Documents were prepared in all material respects in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations thereunder, did not contain any untrue statement of a material
fact, and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited and unaudited consolidated
financial statements contained in the SEC Documents are true and correct in all
material respects and present fairly in all material respects the consolidated
financial condition and results of operations and changes in stockholders'
equity and cash flows of the Company and its consolidated subsidiaries as of the
dates and for the periods indicated, in each case in accordance with generally
accepted accounting principles consistently applied during the periods
presented, except as may otherwise be stated in such financial statements. For
purposes of this Agreement, all financial statements of the Company shall be
deemed to include the notes to such financial statements. None of the Company or
any Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a consolidated balance sheet of the
Company or in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied except for (A) liabilities or
obligations that were reserved on or reflected in the consolidated balance sheet
of the Company at October 31, 1997 (and notes thereto) included in the SEC
Documents, (B) liabilities or obligations arising in the ordinary course of
business since October 31, 1997, (C) liabilities or obligations which are not,
individually or in the aggregate, material to the Company and its Subsidiaries
taken as a whole, or (D) liabilities and obligations described in the SEC
Documents.
(i) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this
Agreement.
(j) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except, with
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respect to each of (i), (ii) and (iii), as set forth in Schedule 2.1(j) and as
is not reasonably likely, individually or in the aggregate, to have or result in
a Material Adverse Effect.
(k) Form S-3 Eligibility. The Company is, and at the Closing Date
will be, eligible to register securities for resale with the Commission under
Form S-3 promulgated under the Securities Act.
(l) Seniority. Except as set forth in Schedule 2.1(l), no class of
equity securities of the Company is senior to the Shares in right of payment,
whether upon liquidation or dissolution, or otherwise.
(m) Patents and Trademarks. The Company has, or has rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which the Company reasonably believes are
necessary for use in connection with its business, and which the failure to so
have would have a Material Adverse Effect. To the best knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights that
is reasonably likely to have a Material Adverse Effect.
(n) Listing and Maintenance Requirements Compliance. Except as set
forth in Schedule 2.1(n), the Company has not in the two years preceding the
date hereof received notice (written or oral) from NASDAQ or any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with respect to the Common Stock with the listing or maintenance
requirements of such exchange or market. The Company is in compliance with all
such maintenance requirements.
(o) Registration Rights; Rights of Participation. Except as set
forth in Schedule 2.1(o), (i) the Company has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (ii) no Person, has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents.
(p) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect.
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(q) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) ) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
2.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Organization: Authority. The Purchaser is a company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite organizational power and
authority, to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
purchase by the Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement and
the Registration Rights Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. The Purchaser is acquiring the Securities for
its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser was offered the
Shares, it was, and at the date hereof, it is, and at the Closing Date, it will
be, an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary
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of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks
of investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(g) General Solicitation. The Purchaser is not purchasing the Shares
as a result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar.
(h) Reliance. The Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and the Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed by the
Purchaser or a subsequent transferee of the Securities pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from or in a transaction not subject to the registration
requirements of the Securities Act. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably satisfactory to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by the Purchaser to an
Affiliate
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(as defined in Rule 405 under the Securities Act) of the Purchaser, provided
that transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes. Any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting of the following legend
on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT, DATED AS OF AUGUST 20, 1998, BETWEEN ECOGEN INC. (THE
"COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
Underlying Shares shall not contain the legend set forth above nor
any other legend if the conversion of Shares and Dividend Shares or other
issuances of Underlying Shares as contemplated hereby or by the Certificate of
Designations occurs at any time while an Underlying Securities Registration
Statement is effective under the Securities Act or in the event there is not an
effective Underlying Securities Registration Statement at such time, if in the
opinion of counsel to the Company such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall cause
its counsel to issue the Transfer Agent instructions attached hereto as Exhibit
D to the Company's transfer agent on the day that the Underlying Securities
Registration Statement is declared effective by the Commission. The Company
agrees that it will provide the Purchaser, upon request, with a certificate or
certificates representing Underlying Shares, free from such legend at such time
as such legend is no longer required hereunder. The Company may not make any
notation
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on its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section.
(c) Notwithstanding anything contained in this Section 3.1 to the
contrary, the Purchaser agrees that (i) for a period of one year from the date
hereof, it shall not transfer or otherwise dispose of any Shares, Dividend
Shares or Underlying Shares, to any Person (other than an Affiliate), and (ii)
thereafter, any transfer or other disposition of Shares and/or Dividend Shares
otherwise permitted hereunder shall be in an aggregate amount of no less than
200,000 such shares (or, if less, the aggregate amount of the Shares and
Dividend Shares then held by the Purchaser).
3.2 Furnishing of Information. As long as the Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchaser owns Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchaser and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section l3(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the reasonable request of any such Person, the
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
3.3 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify or exempt the issuance and sale of the Underlying
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchaser may reasonably request and shall continue such qualification or
exemption at all times until the Purchaser notifies the Company in writing that
it no longer owns Securities; provided, however, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified or to take any action
that would subject the Company to general service of process in any such
jurisdiction where it is not then required to be so subject or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.
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3.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser.
3.5 Listing and Reservation of Underlying Shares. The Company shall
maintain a reserve of Common Stock for issuance upon conversion of the Shares
and Dividend Shares, in accordance with their terms, in such amount as may be
required to perform its obligations in full under the Transaction Documents and
shall file additional listing applications with respect to such Shares and
Dividend Shares as required under applicable rules of NASDAQ or other applicable
securities exchanges.
3.6 Right of First Refusal; Subsequent Registrations. (a) Subject to the
rights of Monsanto Company and the holders of the Company's Series 1998-A
Convertible Preferred Stock, and the Series 1998-B Convertible Preferred Stock,
if any, and except as provided for in Schedule 3.6, the Company shall not,
directly or indirectly, without the prior written consent of the Purchaser,
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition) any of
its or its Affiliates' equity or equity equivalent securities in a transaction
intended to be exempt or not subject to registration under the Securities Act (a
"Subsequent Placement") for a period of 180 days after the Closing Date, except
(i) the granting of options or warrants to employees, officers and directors,
and the issuance of shares upon exercise of options granted, under any stock
option plan heretofore or hereinafter duly adopted by the Company, (ii) shares
issued upon exercise of any currently outstanding warrants and upon conversion
of any currently outstanding convertible security in each case disclosed in
Schedule 2.1(c), (iii) shares of Common Stock issued upon conversion of the
Shares and Dividend Shares in accordance with the Certificate of Designations,
(iv) shares of Common Stock issued in connection with a Strategic Transaction
(as defined below); unless (A) the Company delivers to the Purchaser a written
notice (the "Subsequent Placement Notice") of its intention to effect such
Subsequent Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Placement shall be effected, the date on which the Company reasonably expects
such Subsequent Placement to close and attached to which shall be a term sheet
or similar document relating thereto and (B) the Purchaser shall not have
notified the Company by 5:00 p.m. (New York City time) on the fifth (5th)
Business Day after its receipt of the Subsequent Placement Notice of its
willingness to cause the Purchaser to provide (or to cause its sole designee,
which must be an affiliate of the Purchaser, to provide), subject to completion
of mutually acceptable documentation, financing to the Company on substantially
the terms set forth in the Subsequent Placement Notice. If the Purchaser shall
fail to notify the Company of its intention to enter into such negotiations
within such time period, the Company may effect
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the Subsequent Placement substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Placement Notice;
provided, that the Company shall provide the Purchaser with a second Subsequent
Placement Notice, and the Purchaser shall again have the right of first refusal
set forth above in this paragraph (a), if the Subsequent Placement subject to
the initial Subsequent Placement Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Placement Notice within sixty
(60) Business Days after the date of the initial Subsequent Placement Notice
with the Person (or an Affiliate of such Person) identified in the Subsequent
Placement Notice. If the Purchaser exercises its right of first refusal, the
closing shall take place at the time contemplated in the Subsequent Placement
Notice, subject to completion of mutually acceptable documentation, which the
parties shall negotiate in good faith. For purposes of this Section 3.6, a
"Strategic Transaction" shall mean a transaction or relationship in which the
Company issues equity securities to an entity which is, itself or through its
subsidiaries, an operating company in a business related to the business of the
Company and in which the Company receives material benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital.
(b) Except for (w) Underlying Shares, (x) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, (y) the
securities listed on Schedule 2.1(o), and (z) Company securities to be
registered for resale in connection with actions permitted pursuant to paragraph
(a)(i) through (iv) of this Section 3.6, the Company shall not, without the
prior written consent of the Purchaser (i) issue or sell any of its or any of
its Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any securities
of the Company, for a period of not less than 90 calendar days after the date
that an Underlying Securities Registration Statement is declared effective by
the Commission. Any days that the Purchaser is unable to sell Underlying Shares
under an Underlying Securities Registration Statement shall be added to such 90
day period.
3.7 Bank Agreements. The Company shall not enter into any agreements which
would prohibit the Company from performing its obligations hereunder.
3.8 Exclusivity. The Company shall not issue and sell any Shares to any
Person other than the Purchaser except with the specific prior written consent
of the Purchaser.
3.9 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations, or other actions by, or giving any notices
to, or making any filings with, any Person) as may be reasonably required or
desirable to carry out or to perform its obligations under this Agreement.
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3.10 Reimbursement. If the Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated hereby, the Company will reimburse
the Purchaser for its reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which the Purchaser is a named party, the Company will pay the Purchaser the
charges, as reasonably determined by the Purchaser, for the time of any officers
or employees of the Purchaser devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearings, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchaser and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchaser and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchaser nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or to any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the transactions contemplated hereby except
to the extent that any losses, claims, damages, liabilities or expenses incurred
by the Company result from the gross negligence or willful misconduct of the
Purchaser or entity in connection with the transactions contemplated by this
Agreement. Notwithstanding the foregoing, the Company shall only be responsible
for reimbursement obligations pursuant to this Section 3.10 to the extent that
they arise solely from this Agreement, exclusive of Purchaser's beneficial
ownership of other securities of the Company, the role of any partner of
Purchaser on the Company's Board of Directors and the role of any of Purchaser's
designees on the Company's Board of Directors.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The Purchaser's obligation to purchase the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Purchaser:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2.1 hereof shall be true and correct
in all material respects
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<PAGE> 15
when made and on the Closing Date with the same force and effect as if they had
been made on and as of said date.
4.2 Covenants. All covenants and agreements contained in this Agreement to
be performed or complied with by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
4.3 Registration Rights Agreement. The Company shall have executed and
delivered to the Purchaser the Registration Rights Agreement substantially in
the form of Exhibit B attached hereto (the "Registration Rights Agreement").
4.4 Transfer Agent Instructions. The Company shall have executed and
delivered to the Purchaser Irrevocable Transfer Agent Instructions, dated the
Closing Date, acknowledged by the Company's transfer agent, in the form of
Exhibit C attached hereto (the "Transfer Agent Instructions").
4.5 Bank Financing. The Company shall have closed a working capital line
of credit in the aggregate amount of up to $5,000,000.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligation to issue the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Company:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Purchaser in Section 2.2 hereof shall be true and correct
in all material respects when made and on the Closing Date with the same force
and effect as if they had been made on and as of said date.
5.2 Covenants. All covenants and agreements contained in this Agreement to
be performed or complied with by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 Registration Rights Agreement. The Purchaser shall have executed and
delivered to the Company the Registration Rights Agreement.
5.4 Convertible Note. The Purchaser shall have delivered to the Company
the original Convertible Note to be canceled by the Company.
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<PAGE> 16
5.5 Termination and Release Agreement. The Purchaser shall have executed
and delivered to the Company the Termination and Release Agreement substantially
in the form of Exhibit D attached hereto, providing that (x) all of the
obligations of the Company to the Purchaser under the Note Purchase Agreement
(including in any event all obligations under the Convertible Note) are deemed
to be performed and paid in full and (y) the Purchaser shall have terminated and
released all security interests and Liens (as defined in Section 2.1(a)) on the
assets owned or to be owned by the Company or any of its Subsidiaries granted in
connection with the Note Purchase Agreement.
5.6 Release of Liens. The Purchaser shall have delivered to the Company
such releases of security interests and Liens on the assets owned or to be owned
by the Company as may be reasonably requested by, and satisfactory to, the
Company and including, in any event (x) proper termination statements (Form
UCC-3 or the appropriate equivalent) for filing under the Uniform Commercial
Code of each jurisdiction where a financing statement (Form UCC-1 or the
appropriate equivalent) was filed with respect to the Company or any of its
Subsidiaries in connection with the security interests created by the Note
Purchase Agreement, (y) terminations or assignment of any security in,
assignment of, or Lien on, any patents trademarks, copyrights or similar
interests of the Company or any of its Subsidiaries, on which filings have been
made and (z) terminations of all mortgages, leaseholder mortgages and deeds of
trust created with respect to property of the Company or any of its Subsidiaries
to secure obligations under the Note Purchase Agreement.
5.7 Bank Financing. The Company shall have closed a working capital line
of credit in the aggregate amount of up to $5,000,000.
ARTICLE VI
MISCELLANEOUS
6.1 Termination of Agreement. This Agreement may be terminated, and the
transactions contemplated abandoned, by either the Company or the Purchaser by
written notice to the other if the Closing does not occur on or before October
31, 1998.
6.2 Fees and Expenses. Except as otherwise set forth in the Registration
Rights Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. Notwithstanding the foregoing, the Company shall
pay the reasonable fees and expenses of Purchaser's legal counsel in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement.
6.3 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificate of Designations and
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<PAGE> 17
the Termination and Release Agreement contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
6.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via confirmed facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time) on a Business Day (as such term is defined in the Certificate of
Designations), (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via confirmed facsimile at the facsimile
telephone number specified below later than 8:00 p.m. (New York City time) on
any date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
the Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:
If to the Company: Ecogen Inc.
2005 Cabot Boulevard West
Langhorne, PA 19047
Facsimile No.: (215) 757-3339
Attn: Chief Financial Officer
With copies to: Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Facsimile No.: (203) 359-3031
Attn: Elizabeth A. Brower, Esq.
If to the Purchaser: United Equities (Commodities) Company
160 Broadway
New York, NY 10038
Facsimile No.: (212) 227-3208
Attn: Mr. Philippe D. Katz
With copies to: Tenzer Greenblatt LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174-0208
Facsimile No.: (212) 885-5001
Attn: Harold L. Schneider, Esq.
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<PAGE> 18
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchaser; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
6.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Except as set forth in
Section 3.1(a), the Purchaser may not assign this Agreement or any of the rights
or obligations hereunder without the consent of the Company. This provision
shall not limit the Purchaser's right to transfer securities or transfer or
assign rights hereunder or under the Registration Rights Agreement, each in
accordance with the terms of this Agreement.
6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.9 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion of
the Shares and the Dividend Shares.
6.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same Agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create
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<PAGE> 19
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
6.12 Publicity. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement.
6.13 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchaser agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
ECOGEN INC.
By: /s/ Mary E. Paetzold
------------------------------------------
Name: Mary E. Paetzold
Title: Vice President and
Chief Financial Officer
UNITED EQUITIES (COMMODITIES)
COMPANY
By: /s/ Philippe Katz
------------------------------------------
Name: Philippe Katz
Title: Partner
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<PAGE> 1
Exhibit 10.135
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 20, 1998, between Ecogen Inc., a Delaware corporation
(the "Company"), and United Equities (Commodities) Company, a New York general
partnership (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof between the Company and the
Purchaser (the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or is under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par value.
<PAGE> 2
"Effectiveness Period" shall have the meaning set forth in Section
2(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the date which is the ten month anniversary date
of the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" means the Company's shares of 8% Series 1998-C
Preferred Stock, $.01 par value, to be issued to the Purchaser pursuant to the
Purchase Agreement (including any shares of Preferred Stock issued in payment of
dividends on the Preferred Stock).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Common Stock issuable
upon conversion in full of the Preferred Stock, provided, that in order to
account for the fact that the number of shares of Common Stock that is issuable
upon conversion of the Preferred Stock is determined in part upon the market
price of the Common Stock at the time of conversion, Registrable Securities
shall include (but not be limited to) a number of shares of Common Stock equal
to no less than 150% of the number of shares of Common Stock into which the
shares of Preferred Stock (including shares of Preferred Stock issuable as
dividends) are convertible,
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<PAGE> 3
assuming a Conversion Price (as defined in the Certificate of Designations,
Preferences and Rights of the Series 1998-C Convertible Preferred Stock) equal
to the lower of (x) the Stated Conversion Price (as defined in the Certificate
of Designations, Preferences and Rights of the Series 1998-C Convertible
Preferred Stock) or (y) the Conversion Price on the date occurring five (5) days
prior to the Filing Date and assuming all dividends for a two year period are
paid in shares of Preferred Stock and that all such shares of Preferred Stock
are outstanding. Notwithstanding anything herein contained to the contrary, if
the actual number of shares of Common Stock into which the shares of Preferred
Stock are convertible exceeds twice the number of shares of Common Stock into
which the shares of Preferred Stock are convertible based upon a computation at
the Closing Date, the term "Registrable Securities" shall be deemed to include
such additional shares of Common Stock. With respect to the Registration
Statement filed with respect to the Registrable Securities issuable upon
conversion of the Preferred Stock, the Company shall be required to file
additional Registration Statements to the extent the actual number of shares of
Common Stock into which the Preferred Stock is convertible exceeds the number of
shares of Common Stock registered in the initial Registration Statement
hereunder. The Company shall have ten (10) Business Days to file such additional
Registration Statements after notice of the requirement thereof, which the
Holders may give at such time when the number of shares of Common Stock as are
issuable upon conversion of Preferred Stock, exceed 85% of the number of shares
of Common Stock registered in the initial Registration Statement hereunder.
"Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
2. Shelf Registrations
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering all
Registrable Securities required to be included herein in such Registration
Statement for an offering to be made on a continuous basis
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<PAGE> 4
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith). Each Registration Statement shall
state, to the extent permitted by Rule 416 under the Securities Act, that it
also covers such indeterminate number of shares of Common Stock as may be
required to effect conversion of the Preferred Stock to prevent dilution
resulting from stock splits, stock dividends or similar events, or by reason of
changes in the Conversion Price in accordance with the terms of the Certificate
of Designations (as defined in the Purchase Agreement).
(b) The Company shall use its reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, and shall use its reasonable best
efforts to keep such Registration Statement continuously effective under the
Securities Act until the date which is two years after the date that such
Registration Statement is declared effective by the Commission or such earlier
date when all Registrable Securities covered by such Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent (the
"Effectiveness Period").
3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 in accordance with Section 2(a) and
the method or methods of distribution thereof as specified by the Holders
(except if otherwise directed by the Holders), and cause the Registration
Statement to become effective and remain effective as provided herein; provided,
however, that not less than seven (7) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall, (i) furnish to the Holders and their Special Counsel
copies of all such documents proposed to be filed, which documents (other than
those incorporated or deemed to be incorporated by reference) will be subject to
the review of such Holders and their Special Counsel, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders, to conduct a reasonable investigation within
the meaning of the Securities Act. The Holders or their Special Counsel will
provide the Company with their comments on the proposed Registration Statement
within five (5) Business Days of their receipt thereof (the "Review Period") and
if the Holders and their Special Counsel provide their comments to the Company
after the end of the Review Period, the Filing Date shall be extended by the
number of Business Days after the Review Period before which such comments were
provided.
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<PAGE> 5
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
and (iii) respond as promptly as reasonably possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement.
(c) Notify the Holders of Registrable Securities to be sold and
their Special Counsel as promptly as reasonably possible (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement; and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (v) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder and their Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously
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<PAGE> 6
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(f) Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(g) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
their Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(h) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by applicable law, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as Holders may request at least two Business Days prior
to any sale of Registrable Securities.
(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market (the "NASDAQ") and any other securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which similar securities
issued by the Company are then listed.
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<PAGE> 7
(k) Make available for inspection by the selling Holders, any
representative of such Holders, and any attorney or accountant retained by such
selling Holders, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors, agents and employees of the Company and its subsidiaries to supply
all information in each case reasonably requested by any such Holder,
representative, attorney or accountant in connection with the Registration
Statement; provided, however, that any information that is determined in good
faith by the Company in writing to be of a confidential nature at the time of
delivery of such information shall be kept confidential by such Persons, unless
(i) disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities; (ii)
disclosure of such information, in the opinion of counsel to such Person, is
required by law; (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by such
Person; or (iv) such information becomes available to such Person from a source
other than the Company and such source is not known by such Person to be bound
by a confidentiality agreement with the Company. In the event that any Person is
requested or required to disclose any such information as described in clause
(i) or (ii) of the immediately preceding sentence, such Person shall provide the
Company with prompt prior notice so that the Company may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions of this
Agreement. If such protective order or other remedy is not obtained, or if the
Company waives compliance with the provisions of this Agreement, such Person
shall furnish only that portion of such confidential information that is advised
by such Person's counsel is legally required and shall exercise its best efforts
to obtain a protective order or other reliable assurance that confidential
treatment will be accorded to such confidential information.
(l) Comply with all applicable rules and regulations of the
Commission in connection with the Registration Statement.
(m) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who fails to furnish such information within a reasonable time after
receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
-7-
<PAGE> 8
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(i) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), or 3(c)(v), such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder's receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement contemplated
by Section 3(i), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company, shall be borne
by the Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the NASDAQ or each other securities exchange or market
on which Registrable Securities are required hereunder to be listed and (B) in
compliance with state securities or Blue Sky laws, (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and Special Counsel for the Holders (in the case of Special Counsel for the
Holders, such fees and disbursements shall not exceed $5,000), (v) Securities
Act liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.
5. Indemnification
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<PAGE> 9
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including, without
limitation, brokers who offer and sell Registrable Securities as principal, in
connection with a block trade or as a result of a pledge or any failure to
perform under a margin call of Common Stock) and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use therein or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information regarding such Holder so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus, or in any amendment or supplement
thereto. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable
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<PAGE> 10
Securities giving rise to such indemnification obligation. Each Holders's
indemnity set forth in this Section 5(b) shall survive the transfer of any
securities by such Holder.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that such failure shall have adversely
prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount
-10-
<PAGE> 11
paid or payable by such Indemnified Party as a result of such Losses, (i) in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses or (ii) if the allocation
provided in clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Indemnified Party and the Indemnifying Party hereunder. The relative fault
of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms. In addition, no Person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such Person's consent, which consent shall
not be unreasonably withheld.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this
-11-
<PAGE> 12
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as and to the extent specified in Schedule 6(b) hereto, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering all of the Registrable Securities and
the Underlying Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others (other than in connection with the registration of
shares of Common Stock in accordance with the terms of the Registration Rights
Agreement between the Company and KA Investments LDC, dated June 5, 1998) under
the Securities Act of any of its equity securities, other than on Form S-4 or
Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 6(d)
that are eligible for sale pursuant to Rule 144(k) under the Securities Act.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable
-12-
<PAGE> 13
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of certain Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via confirmed
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (New York City time) on a Business Day, (ii) the Business Day after
the date of transmission, if such notice or communication is delivered via
confirmed facsimile at the facsimile telephone number specified in the Purchase
Agreement later than 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:
If to the Company: Ecogen Inc.
2005 Cabot Boulevard West
Langhorne PA 19047
Facsimile No.:(215) 757-3339
Attn: Chief Financial Officer
With copies to: Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Facsimile No.: (203) 359-3031
Attn: Elizabeth A. Brower, Esq.
If to the Purchaser: United Equities (Commodities) Company
160 Broadway
New York, NY 10038
Facsimile No.: (212) 227-3208
Attn: Mr. Philippe D. Katz
With copies to: Tenzer Greenblatt LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174-0208
Facsimile No.: (212) 885-5001
Attn: Harold L. Schneider, Esq.
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<PAGE> 14
If to any other Person
who is then the registered
Holder: To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. Subject to the immediately
succeeding sentence, the rights of each Holder hereunder, including the right to
have the Company register for resale Registrable Securities in accordance with
the terms of this Agreement, shall be automatically assignable by each Holder to
any Affiliate of such Holder, any other Holder or Affiliate of any other Holder
and up to six other assignees of all or a portion of the shares of Preferred
Stock or the Registrable Securities if: (i) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement, and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law. Each party hereto hereby submits to
the jurisdiction of the United States District Court and of any state court
sitting in the State of New York (and of the appropriate appellate courts) for
the purposes of all legal proceedings arising out of or relating to this
Agreement and
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<PAGE> 15
irrevocably waives, to the fullest extent permitted by applicable law, any
objection to venue laid therein. Process in any such proceeding may be served on
such party, and any judgment thereon may be enforced against such party,
anywhere in the world, whether within or without the State of New York.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
ECOGEN INC.
By: /s/ Mary E. Paetzold
--------------------------------------------------
Name: Mary E. Paetzold
Title: Vice President and Chief Financial Officer
UNITED EQUITIES (COMMODITIES) COMPANY
By: /s/ Philippe Katz
--------------------------------------------------
Name: Philippe Kazt
Title: Partner
-16-
<PAGE> 1
Exhibit 10.136
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
ECOGEN INC.
as Borrower
Dated: August 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS.................................................................................... 1
SECTION 2. CREDIT FACILITIES.............................................................................. 8
2.1 Revolving Loans................................................................................ 8
2.2 Letter of Credit Accommodations................................................................ 9
2.3 Availability Reserves..........................................................................11
SECTION 3. INTEREST AND FEES..............................................................................11
3.1 Interest.......................................................................................11
3.2 Closing Fee....................................................................................12
3.3 Servicing Fee..................................................................................12
3.4 Unused Line Fee................................................................................12
3.5 Facility Fee...................................................................................12
SECTION 4. CONDITIONS PRECEDENT...........................................................................12
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations......................12
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations..........................14
SECTION 5. GRANT OF SECURITY INTEREST.....................................................................14
SECTION 6. COLLECTION AND ADMINISTRATION..................................................................15
6.1 Borrower's Loan Account........................................................................15
6.2 Statements.....................................................................................15
6.3 Collection of Accounts.........................................................................15
6.4 Payments.......................................................................................16
6.5 Authorization to Make Loans....................................................................17
6.6 Use of Proceeds................................................................................17
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................................................17
7.1 Collateral Reporting...........................................................................17
7.2 Accounts Covenants.............................................................................17
7.3 Inventory Covenants............................................................................19
7.4 Equipment Covenants............................................................................19
7.5 Power of Attorney..............................................................................20
7.6 Right to Cure..................................................................................20
7.7 Access to Premises.............................................................................20
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................21
8.1 Corporate Existence, Power and Authority; Subsidiaries.........................................21
8.2 Financial Statements; No Material Adverse Change...............................................21
8.3 Chief Executive Office; Collateral Locations...................................................21
8.4 Priority of Liens; Title to Properties.........................................................22
8.5 Tax Returns....................................................................................22
8.6 Litigation.....................................................................................22
8.7 Compliance with Other Agreements and Applicable Laws...........................................22
8.8 Bank Accounts..................................................................................22
8.9 Employee Benefits..............................................................................22
8.10 Environmental Compliance.......................................................................23
8.11 Accuracy and Completeness of Information.......................................................24
8.12 Survival of Warranties; Cumulative.............................................................24
9.1 Maintenance of Existence.......................................................................24
9.2 New Collateral Locations.......................................................................25
9.3 Compliance with Laws, Regulations, Etc.........................................................25
9.4 Payment of Taxes and Claims....................................................................26
9.5 Insurance......................................................................................26
9.6 Financial Statements and Other Information.....................................................27
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc........................................27
9.8 Encumbrances...................................................................................28
9.9 Indebtedness...................................................................................28
9.10 Loans, Investments, Guarantees, Etc............................................................29
9.11 Dividends and Redemptions......................................................................29
9.12 Transactions with Affiliates...................................................................30
9.13 Additional Bank Accounts.......................................................................30
9.14 Working Capital................................................................................30
9.15 Adjusted Net Worth.............................................................................30
9.16 Compliance with ERISA..........................................................................30
9.17 Costs and Expenses.............................................................................31
9.18 Further Assurances.............................................................................31
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................................32
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
10.1 Events of Default...............................................................................32
10.2 Remedies........................................................................................33
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver...........................34
11.2 Waiver of Notices...............................................................................35
11.3 Amendments and Waivers..........................................................................35
11.4 Waiver of Counterclaims.........................................................................35
11.5 Indemnification.................................................................................35
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS................................................................36
12.1 Term............................................................................................36
12.2 Notices.........................................................................................37
12.3 Partial Invalidity..............................................................................37
12.4 Successors......................................................................................37
12.5 Entire Agreement................................................................................37
</TABLE>
iii
<PAGE> 5
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 8.10 Environmental Matters
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
Schedule 9.12 Transactions with Affiliates
iv
<PAGE> 6
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated August 20, 1998 is entered into
by and between CONGRESS FINANCIAL CORPORATION, a Delaware corporation
("Lender"),and ECOGEN INC., a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code as in effect in the State of New York shall have the
meanings given therein unless otherwise defined in this Agreement. All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural unless the context otherwise requires. All references
to Borrower and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. The word "including" when used in this
Agreement shall mean "including, without limitation". An Event of Default shall
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 11.3 or is cured in a manner satisfactory to Lender. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on an average cost basis, after deducting from such
book values all appropriate reserves in accordance with
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GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the indebtedness
and other liabilities of such Person and its subsidiaries (including tax and
other proper accruals) plus (b) indebtedness of such Person and its subsidiaries
which is subordinated in right of payment to the full and final payment of all
of the Obligations on terms and conditions reasonably acceptable to Lender.
1.3 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in accordance
with its credit judgment exercised in good faith reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender in good faith, do or may adversely affect either (i) the Collateral or
any other property which is security for the Obligations or its value, (ii) the
assets, business or prospects of Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding
Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in
respect of any state of facts which Lender determines in good faith constitutes
an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default.
1.4 "Blocked Account Event" shall mean the occurrence of any of the
following events: (a) an Event of Default, or (b) Borrower has Loans outstanding
at any one time in excess of $2,000,000, or (c) the aggregate amount of Excess
Availability plus any of Borrower's cash on hand shall equal less than
$1,500,000.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Change of Control" shall mean (a) any merger or consolidation of
Borrower with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of
Borrower in one transaction or a series of related transactions, if, immediately
after giving effect to such transaction, any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), whether or not applicable), is or
becomes the "beneficial owner" (as such term is used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable), directly or
indirectly, of more than 35% of the total voting power in the aggregate normally
entitled to vote in the election of directors, managers, or trustees, as
applicable, of the transferee or surviving entity, (ii) any "person" or "group"
is or becomes the "beneficial owner", directly or indirectly, of more than 35%
of the total voting power in the aggregate of all classes of capital stock of
Borrower then outstanding normally entitled to vote in elections of directors,
or (iii) during any period of 12 consecutive months after the date hereof,
individuals who at the beginning of any such 12-month period constituted the
board of directors of Borrower (together, in each case, with any new directors
whose election to such board or whose nomination for election by the
shareholders of Borrower was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the board of directors of Borrower
then in office.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5 hereof.
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1.9 "Convertible Note" shall mean Borrower's 8% Convertible Note due
October 31, 2002.
1.10 "Cotton Market Products" shall mean Condor XL bioinsecticide, each
product that replaces or constitutes a new version of Condor XL bioinsecticide,
and any other product sold by Borrower to the cotton growing market as
complementary to Condor XL and such replacements or new versions.
1.11 "Eligible Accounts" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them (or one-hundred twenty (120) days in the
case of Accounts representing sales to the cotton growing market of Borrower's
Cotton Market Products) or more than sixty (60) days after the due date
therefor;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts, other than Accounts arising from Cotton Market
Products, do not arise from sales on consignment, guaranteed sale, sale and
return, sale on approval, or other terms under which payment by the account
debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or, at Lender's
option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender
and, if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, license
royalties, research and development contract payments, bill and hold invoices or
retainage invoices, except as to bill and hold invoices, if Lender shall have
received an agreement in writing from the account debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the amount
at any time and from time to time owed by Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or delay payment
thereunder or reduce the amount
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payable (but the portion of the Accounts in excess of the amount of any such
reduction that is capable of being quantified to Lender's satisfaction may be
deemed Eligible Accounts);
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than thirty-five (35%) percent of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage may
be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
ineligible pursuant to subsection (b) of this Section which constitute more than
fifty (50%) percent of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time in accordance with its
credit judgment exercised in good faith out of Borrower has been notified (but
the portion of the Accounts not in excess of such credit limit may be deemed
Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender in accordance with its credit
judgment exercised in good faith.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in accordance with its credit judgment exercised in good
faith. Any Accounts which are not Eligible Accounts shall nevertheless be part
of the Collateral.
1.12 "Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of Borrower which are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) raw materials (including, without limitation,
technical powders) or work-in-process; (b) components which are not part of
finished goods; (c) spare parts for equipment; (d) packaging and shipping
materials; (e) supplies used or consumed in Borrower's business; (f) Inventory
at premises other than those owned and controlled by Borrower, except if Lender
shall have received an agreement in writing from the person in possession of
such Inventory and/or the owner or operator of such premises in form and
substance satisfactory to Lender acknowledging Lender's first priority security
interest in the Inventory, waiving security interests and claims by such person
against the Inventory and permitting Lender access to, and the right to remain
on,
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the premises so as to exercise Lender's rights and remedies and otherwise deal
with the Collateral; (g) Inventory subject to a security interest or lien in
favor of any person other than Lender except those permitted in this Agreement;
(h) bill and hold goods; (i) unserviceable, obsolete or slow moving Inventory;
(j) Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (k) returned, damaged and/or defective Inventory,
except for Cotton Market Products, in unopened, original packaging, returned by
customers in the cotton growing market which is in saleable condition; and (l)
Inventory purchased or sold on consignment. General criteria for Eligible
Inventory may be established and revised from time to time by Lender in
accordance with its credit judgment exercised in good faith. Any Inventory which
is not Eligible Inventory shall nevertheless be part of the Collateral.
1.13 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
governmental authority: (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirement
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.14 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.15 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.16 "ERISA Affiliate" shall mean any person required to be aggregated with
Borrower or any of its Subsidiaries under Section 414(b), 414(c) 414(m) or
414(o) of the Code.
1.17 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.18 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the amount of the
Revolving Loans available to Borrower as of such time based on the applicable
lending formulas multiplied by the Net Amount of Eligible Accounts and the Value
of Eligible Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves in effect at such time and (ii) the Maximum Credit, minus
(b) the sum of (i) the amount of all
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then outstanding and unpaid Obligations, plus (ii) the aggregate amount of all
trade payable of Borrower which are more than sixty (60) days past due as of
such time plus (iii) the amount of checks issued by Borrower to pay trade
payables, but not yet sent and the book overdraft of Borrower.
1.19 "Existing Lender" shall mean United Equities (Commodities) Company.
1.20 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.21 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.22 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous contituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials, or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.23 "Inactive Subsidiaries" shall mean Ecogen-Jerusalem Inc., Ecogen
Israel International Inc., Ecogen Biotechnologies Israel Inc., and Ecogen
BioGermany Gmbh.
1.24 "Information Certificate" shall mean, collectively, the Information
Certificates of Borrower and its subsidiaries constituting Exhibit A hereto
containing material information with respect to Borrower and its subsidiaries
and their business and assets provided by or on behalf of Borrower to Lender in
connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.25 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.26 "KA Stock Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of June 5, 1998, between the Borrower and KA
Investments LDC.
1.27 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer.
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1.28 "Loans" shall mean the Revolving Loans.
1.29 "Material Adverse Effect" shall mean (a) a material adverse effect on
the assets, business, properties, condition (financial or otherwise), prospects,
or results of operations of Borrower and its subsidiaries taken as a whole, (b)
a material impairment of the ability of Borrower and its subsidiaries taken as a
whole, to perform any of its obligations under any Financing Agreement, or (c)
an impairment of the validity or enforceability of, or the material rights,
remedies, or benefits available to Lender under, any Financing Agreement.
1.30 "Maximum Credit" shall mean the amount of $5,000,000.
1.31 "Monsanto Royalty" shall mean all Gene Success Fees and
Commercialization Success Fees payable at any time to Borrower or any of its
subsidiaries by Monsanto Company pursuant to the Technology Assignment Agreement
dated as of January 24, 1996, as amended, by and among Monsanto Company,
Borrower, and Ecogen-Bio, Inc.
1.32 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.33 "Obligations" shall mean any and all Revolving Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise, each
as arising under this Agreement or any Financing Agreement, whether now existing
or hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
1.34 "Obligor" shall mean any guarantor of, or other person liable on or
with respect to, the Obligations or any person who is the owner of any property
which is security for the Obligations, other than Borrower.
1.35 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.36 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Internal Revenue Code of 1986, as amended), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.37 "Permitted Activity" shall mean any transfer, transaction or activity
between or among one or more Obligors, or between or among Borrower and one or
more Obligors (i) pursuant to or in connection with any agreement or arrangement
in effect on the date hereof, (ii) consistent with past practice or conduct of
Borrower or any Obligor, including, but not limited to Borrower's cash
management procedures or the research, development, holding, license, transfer
or commercialization of,
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technology, or (iii) to which Lender has consented, such consent not to be
unreasonably withheld or delayed.
1.38 "Preferred Stock" means, collectively, the Borrower's Series 1998-A
Convertible Preferred Stock, Series 1998-B Convertible Preferred Stock, and
Series 1998-C Convertible Preferred Stock.
1.39 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.40 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.41 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.42 "United Equities Stock Purchase Agreement" means the Convertible
Preferred Stock Purchase Agreement, dated as of August 20, 1998, between the
Borrower and United Equities (Commodities) Company.
1.43 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on an average cost basis in
accordance with GAAP or (b) market value.
1.44 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on an average cost basis, and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP), provided, that, as to Borrower, for purposes of Section 9.14, the
liabilities of Borrower and its subsidiaries to Lender under this Agreement
shall not be considered current liabilities (whether or not classified as
current liabilities in accordance with GAAP).
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the sum of:
(i) the sum of: (A) eighty-five (85%) percent of the Net
Amount of Eligible Accounts (other than Eligible Accounts representing
sales of Cotton Market Products to account debtors in the cotton
growing market that are subject to right of return ) and (B) with
respect to Eligible Accounts representing sales of Cotton Market
Products to account debtors in the cotton
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growing market that are subject to right of return, fifty (50%) percent
of the Value of such Cotton Market Products, to the extent that they
would constitute Eligible Inventory if returned to Borrower, plus
(ii) the lesser of: (A) the lesser of fifty (50%) percent of
the Value of Eligible Inventory or eighty percent (80%) of the orderly
liquidation value (as determined by Lender from appraisals performed by
appraisers acceptable to Lender) of Eligible Inventory or (B)
$2,750,000 during January February, March, and December of each year
during the term of this Agreement and $2,250,000 at all other times
less
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Borrower, (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Lender determines in accordance
with its credit judgment exercised in good faith that: (A) the dilution with
respect to the Accounts for any period (based on the ratio of (1) the aggregate
amount of reductions in Accounts other than as a result of payments in cash to
(2) the aggregate amount of total sales) has increased in any material respect
or may be reasonably anticipated to increase in any material respect above
historical levels, or (B) the general creditworthiness of account debtors has
declined or (ii) reduce the lending formula(s) with respect to Eligible
Inventory to the extent that Lender determines in accordance with its
credit judgment exercised in good faith that: (A) the number of days of the
turnover of the Inventory for any period has changed in any material respect or
(B) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased, or (C) the nature and quality of the Inventory has deteriorated.
In determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In the event that the outstanding amount of any component of
the Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(d) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
(d) For purposes only of applying the sublimit on Revolving Loans
based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may treat
the then undrawn amounts of outstanding Letter of Credit Accommodations for the
purpose of purchasing Eligible Inventory as Revolving Loans to the extent Lender
is in effect basing the issuance of the Letter of Credit Accommodations on the
Value of the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Revolving Loans and Availability Reserves shall be attributed first to any
components of the lending formulas in Section 2.1(a) that are not subject to
such sublimit, before being attributed to the components of the lending formulas
subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at
the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of
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Borrower containing terms and conditions acceptable to Lender and the issuer
thereof. Any payments made by Lender to any issuer thereof and/or related
parties in connection with the Letter of Credit Accommodations shall constitute
additional Revolving Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to two (2%) percent per
annum on the daily outstanding balance of the Letter of Credit Accommodations
for the immediately preceding month (or part thereof), payable in arrears as of
the first day of each succeeding month, except that Borrower shall pay to Lender
such letter of credit fee, at Lender's option, without notice, at a rate equal
to four (4%) percent per annum on such daily outstanding balance for: (i) the
period from and after the date of termination or non-renewal hereof until Lender
has received full and final payment of all Obligations (notwithstanding entry of
a judgment against Borrower) and (ii) the period from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the Value of
such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which
Lender estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of Borrower's locations for Eligible Inventory within the
United States of America and (ii) if the proposed Letter of Credit Accommodation
is for any other purpose, an amount equal to one hundred (100%) percent of the
face amount thereof and all other commitments and obligations made or incurred
by Lender with respect thereto. Effective on the issuance of each Letter of
Credit Accommodation, an Availability Reserve shall be established in the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$1,000,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation; provided that Borrower shall not be required to indemnify
Lender and hold Lender harmless for losses, claims, damages, liabilities, costs
and expenses determined by a final and non-appealable judgment or court order
binding on Lender to be directly attributable to Lender's gross negligence or
willful misconduct. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts
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or acceptances thereunder. Borrower hereby releases and holds Lender harmless
from and against any acts, waivers, errors, delays or omissions, whether caused
by Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation (other than acts, waivers,
errors, delays, or omissions determined by a final and non-appealable judgment
or court order binding on Lender to have been caused directly by Lender's gross
negligence or willful misconduct. The provisions of this Section 2.2(e) shall
survive the payment of Obligations and the termination or non-renewal of this
Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Availability Reserves. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding principal
amount of the non-contingent Obligations (which exclude the undrawn amount of
the Letter of Credit Accommodations) at the rate of one and one-quarter (1-1/4%)
percent per annum in excess of the Prime Rate, provided that, at Lender's
option, without notice, Borrower shall pay to Lender interest at the rate of
three and one-quarter (3-1/4%) percent per annum in excess of the Prime Rate:
(i) on the non-contingent Obligations for (A) the period from and after the date
of termination or non-renewal hereof until such time as Lender has received full
and final payment of all such Obligations (notwithstanding entry of any judgment
against Borrower), and (B) the period from and after the date of the occurrence
of an Event of Default for so long
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as such Event of Default is continuing and (ii) on the Revolving Loans at any
time outstanding in excess of the amounts available to Borrower under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
(b) Interest shall be payable by Borrower to Lender monthly in arrears
not later than the first day of each calendar month and shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. The
interest rate shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced. The increase or decrease shall be based
on the Prime Rate in effect on the last day of the month in which any such
change occurs. All interest accruing hereunder on and after an Event of Default
or termination or non-renewal hereof shall be payable on demand. In no event
shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any part or provision of this Agreement is in contravention of any such law
or regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount
of $50,000, which shall be fully earned as of and payable on the date hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee in
an amount equal to $1,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to one-quarter of one (1/4%) percent per annum calculated
upon the amount by which $5,000,000 exceeds the greater of $1,750,000 or the
average daily principal balance of the outstanding Revolving Loans and Letter of
Credit Accommodations during the immediately preceding month (or part thereof)
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of each
month in arrears.
3.5 Facility Fee. Borrower shall pay Lender monthly a fee at a rate equal
to one and one-quarter (1-1/4%) percent per annum (or three and one-quarter
(3-1/4%) percent per annum under any of the circumstances set forth in the
proviso in Section 3.1(a)) calculated upon the amount by which $1,750,000
exceeds the average daily principal balance of the Revolving Loans and Letter of
Credit Accommodations during the immediately preceding month (or part thereof)
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of each
month in arrears.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements; without limiting the generality of
the foregoing, Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
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reasonably request to evidence and effectuate the termination by the Existing
Lender of its financing arrangements with Borrower and the termination and
release by it of any interest in and to any assets and properties of Borrower
and each Obligor, duly authorized, executed and delivered by it, including, but
not limited to, (i) UCC termination statements for all UCC financing statement
previously filed by the Existing Lender, as secured party and Borrower or any
Obligors, as debtor and (ii) satisfactions and discharges of any mortgages,
deeds of trust or deeds to secure debt by Borrower or any Obligor in favor of
the Existing Lender, in form acceptable for recording in the appropriate
government office;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrower and its subsidiaries taken as a whole since
the date of Lender's latest field examination and no change or event shall have
occurred which would impair the ability of Borrower or any Obligor to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce the Obligations or realize upon the
Collateral;
(d) Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
(e) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including acknowledgements by lessors, mortgagees and warehousemen
of Lender's security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request;
(h) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $500,000, after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(i) Lender shall have received evidence in form and substance
satisfactory to it that the Convertible Note has been converted into or
exchanged for capital stock of Borrower on terms acceptable to Lender in its
sole discretion;
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(j) Lender shall have received unconditional guaranties of the
Obligations, in form and substance satisfactory to Lender, from each of
Borrower's subsidiaries other than the Inactive Subsidiaries; and
(k) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto, except for any
representations and warranties which expressly relate only to an earlier date;
and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of Borrower, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 all present and future contract rights for the payment of money (other
than the Monsanto Royalty), general intangibles (including, but not limited to,
customer lists, tax and duty refunds, choses in action and other claims, and
existing and future leasehold interests in equipment, real estate and fixtures,
but, notwithstanding anything to the contrary contained herein, excluding the
Monsanto Royalty, all registered and unregistered patents, trademarks, service
marks, trade names (including, but not limited to common law rights therein),
copyrights and/or copyrightable material , and applications for the foregoing,
trade secrets, processes, drawings, blueprints, and licenses, whether as
licensor or licensee), chattel paper, documents, instruments, securities and
other investment property, letters of credit, bankers' acceptances and
guaranties;
5.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including (a)
rights and remedies under or relating to guaranties, contracts of suretyship,
letters of credit and credit and other insurance related to the Collateral, (b)
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, (c) goods
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described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the Blocked
Accounts are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether on the Accounts or as proceeds of Inventory or other Collateral
or otherwise shall be the property of Lender (except with respect to deposits in
the Blocked Accounts remitted directly to Borrower pursuant to an
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unrevoked direction of Lender). Notwithstanding the foregoing until such time as
a Blocked Account Event has occurred, Borrower shall be entitled to receive
directly from the banks where the Blocked Accounts are established the proceeds
of Collateral deposited into such Blocked Accounts. Lender shall promptly
instruct the banks where the Blocked Accounts are established to remit such
deposits directly to Borrower or as otherwise instructed by Borrower until
otherwise instructed by Lender. Upon or at any time after the occurrence and
during the continuance of a Blocked Account Event, Lender shall have the right
to instruct the banks where the Blocked Accounts are established to remit
deposits received in such Blocked Accounts directly to the Payment Account.
(b) For purposes of calculating the amount of the Loans available to
Borrower, such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
account on such day, and if not, then on the next business day. For the purposes
of calculating interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) to the Obligations
one (1) business day following the date of receipt of immediately available
funds by Lender in the Payment Account provided such payments or other funds and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next business day.
In addition, with respect to all proceeds of Collateral deposited in the Blocked
Accounts, which are not remitted to the Payment Account, Borrower shall pay to
Lender a collection fee on the first day of each month in an amount equal to
interest at the rate then currently being charged by Lender for Revolving Loans
hereunder calculated upon the amounts deposited in or transferred to the Blocked
Accounts during the immediately preceding month. Such collection fee calculated
at such rate shall accrue for the period commencing on the business day on which
such funds so deposited or transferred first become immediately available funds.
(c) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender. In no event
shall the same be commingled with Borrower's own funds. Borrower agrees to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3 shall
survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrower or for the
account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall
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be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans and
provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a business day) and the amount of the requested Loan. Requests received after
11:00 a.m. New York City time on any day shall be deemed to have been made as of
the opening of business on the immediately following business day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the Loans and Letter of Credit
Accommodations provided by Lender to Borrower hereunder only for: (a) costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing Agreements; and (b) working
capital and other general corporate purposes of Borrower and its subsidiaries
not otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the following
documents in a form satisfactory to Lender: (a) on a regular basis as required
by Lender, a schedule of sales made, credits issued and cash received; (b) on a
monthly basis or more frequently as Lender may request, (i) perpetual inventory
reports, (ii) inventory reports by category and (iii) agings of accounts
payable, (c) upon Lender's request, (i) copies of customer statements and credit
memos, remittance advices and reports, and copies of deposit slips and bank
statements, (ii) copies of shipping and delivery documents, and (iii) copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by Borrower; (d) agings of accounts receivable on a monthly basis or
more frequently as Lender may request; (e) on a weekly basis or more frequently
as Lender may request, cash balance reports; and (f) such other reports as to
the Collateral as Lender shall reasonably request from time to time. If any of
Borrower's records or reports of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
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(a) Borrower shall notify Lender promptly of: (i) any material delay
in Borrower's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information known to Borrower
relating to the financial condition of any account debtor and (iii) any event or
circumstance which, to Borrower's knowledge would cause Lender to consider any
then existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the ordinary
course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default exists
or has occurred and is continuing, Borrower shall be entitled to settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any other
information to Lender, Borrower shall promptly report to Lender any return of
Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $50,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, and (v) none of the transactions giving rise
thereto will violate any applicable State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(d) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify in accordance with its
customary credit policies the validity, amount or any other matter relating to
any Account or other Collateral, by mail, telephone, facsimile transmission or
otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except (i) instruments evidencing
loans and advances to employees permitted under Section 9.10 and (ii) as Lender
may otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and
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that Lender has a security interest therein and Lender may direct any or all
accounts debtors to make payment of Accounts directly to Lender, (ii) extend the
time of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all Accounts
or other obligations included in the Collateral and thereby discharge or release
the account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request when an Event of Default has occurred and is
continuing, and promptly following such physical inventory shall supply Lender
with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Lender's request, Borrower shall, at its expense, no more than once in any
twelve (12) month period, but at any time or times as Lender may request when an
Event of Default has occurred and is continuing, deliver or cause to be
delivered to Lender written reports or appraisals as to the Inventory in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender or upon which Lender is expressly permitted to rely;
(e) Borrower shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory, except sales of Cotton
Market Products to customers in the cotton growing market; (h) Borrower shall
keep the Inventory in good and marketable condition; and (i) Borrower shall not,
without prior written notice to Lender, acquire or accept any Inventory on
consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
request, Borrower shall, at its expense, at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrower shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrower shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrower's business and not for personal,
family, household or farming use; (e) Borrower shall not remove any Equipment
from the locations set forth or permitted herein, except (i) in connection with
sales and other dispositions permitted by Section 9.7, (ii) to the extent
necessary to have any
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Equipment repaired or maintained in the ordinary course of the business of
Borrower, (iii) to move Equipment directly from one location set forth or
permitted herein to another such location, and (iv) for the movement of motor
vehicles used by or for the benefit of Borrower in the ordinary course of
business; (f) except as disclosed in writing to Lender on or prior to the date
hereof, the Equipment is now and shall remain personal property and Borrower
shall not permit any of the Equipment to be or become a part of or affixed to
real property, except real property leased by Borrower under a lease which
entitles Borrower to remove such Equipment; and (g) Borrower assumes all
responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts or other proceeds of Inventory or other Collateral,
(ii) enforce payment of Accounts by legal proceedings or otherwise, (iii)
exercise all of Borrower's rights and remedies to collect any Account or other
Collateral, (iv) sell or assign any Account upon such terms, for such amount and
at such time or times as the Lender deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor, (viii) notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and open and dispose of all mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender's good
faith determination, to fulfill Borrower's obligations under this Agreement and
the other Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment or proceeds thereof, (ii) have access to any
lockbox or postal box into which Borrower's mail is deposited, (iii) endorse
Borrower's name upon any items of payment or proceeds thereof and deposit the
same in the Lender's account for application to the Obligations, (iv) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral, (v) sign Borrower's name on any verification of
Accounts and notices thereof to account debtors and (vi) execute in Borrower's
name and file any UCC financing statements or amendments thereto. Borrower
hereby releases Lender and its officers, employees and designees from any
liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral, other than taxes and encumbrances for claims that Borrower is
contesting in good faith in accordance with the terms of this Agreement, subject
to Lender's right to establish Availability Reserves with respect thereto, and
(c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge Borrower's account therefor,
such amounts to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an
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Event of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower and
each of its subsidiaries (other than the Inactive Subsidiaries) is a corporation
duly organized and in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not
reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within Borrower's
corporate powers, have been duly authorized and are not in contravention of law
or the terms of Borrower's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower or its property are bound. This
Agreement and the other Financing Agreements to which Borrower or any Obligor is
a party constitute legal, valid and binding obligations of Borrower or such
Obligor enforceable in accordance with their respective terms, except as
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to creditors rights. Borrower does not
have any subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower and its subsidiaries which have been or may
hereafter be delivered by Borrower to Lender have been prepared in accordance
with GAAP (except, with respect to unaudited financial statements, for the
absence of footnotes and normal year-end audit adjustments) and fairly present
the financial condition and the results of operation of Borrower and its
consolidated subsidiaries as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrower to
Lender prior to the date of this Agreement, there has been no material adverse
change in the assets, liabilities, properties and condition, financial or
otherwise, of Borrower and its subsidiaries, since the date of the most recent
audited financial statements furnished by Borrower to Lender prior to the date
of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below its signature line hereto and its only other
places of business and the only other locations of Collateral, if any, are the
addresses set forth in the Information Certificate, subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by Borrower and sets forth the owners and/or operators thereof and to the
best of Borrower's knowledge, the holders of any mortgages on such locations.
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8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral (to the extent such liens and security interests can be
perfected under Article 9 of the Uniform Commercial Code) subject only to the
liens indicated on Schedule 8.4 hereto and the other liens permitted under
Section 9.8 hereof. Each of Borrower and each of its subsidiaries has good and
marketable title to all of the Collateral subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Lender and such others as are specifically listed on Schedule 8.4
hereto or permitted under Section 9.8 hereof. Borrower and its subsidiaries own
or have valid and subsisting licenses for all patents, inventions, technology,
and know-how necessary in order to engage in the business of Borrower and its
subsidiaries. Borrower and its subsidiaries are not bound by any license,
agreement, or other restriction which would limit in any way Lender's right or
ability to sell Inventory for use in the jurisdictions of the United States in
which the products are now being sold by Borrower upon enforcement of Lender's
security interest therein, except licenses, agreements, and restrictions (a)
existing on the date hereof and disclosed in Schedule 8.4 or (b) arising after
the date hereof and of which Borrower has given Lender written notice not less
than twenty (20) days prior to the effective date thereof.
8.5 Tax Returns. Borrower and its subsidiaries have filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by them (without requests for extension except as disclosed
to Lender by prior written notice). All information in such tax returns, reports
and declarations is complete and accurate in all material respects. Borrower and
its subsidiaries have paid or caused to be paid all taxes due and payable or
claimed due and payable in any assessment received by them, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower or the applicable subsidiary and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of Borrower's knowledge threatened, against or affecting Borrower or any
subsidiary, their respective assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower's
knowledge threatened, against Borrower or any subsidiary or their respective
assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which if adversely determined against Borrower or any subsidiary
would reasonably be expected to result in any Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws. Neither Borrower
nor any of its subsidiaries is in default in any respect under, or in violation
in any respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and each of Borrower and each of its subsidiaries is in
compliance in all respects with all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders of any foreign, Federal,
State or local governmental authority, except for any such default, violation,
or noncompliance which would not reasonably be expected to have a Material
Adverse Effect.
8.8 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.9 Employee Benefits.
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(a) Borrower and its subsidiaries have not engaged in any transaction
in connection with which Borrower or any of its ERISA Affiliates could be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, including any accumulated funding
deficiency described in Section 8.9(c) hereof and any deficiency with respect to
vested accrued benefits described in Section 8.9(d) hereof, except for any such
penalty or tax which would not have a Material Adverse Effect.
(b) No liability to the Pension Benefit Guaranty Corporation which
would have a Material Adverse Effect has been or is expected by Borrower to be
incurred with respect to any employee benefit plan of Borrower or any of its
ERISA Affiliates. There has been no reportable event (within the meaning of
Section 4043(b) of ERISA) other than an event for which the reporting
requirement has been waived by applicable regulation or any other event or
condition with respect to any employee pension benefit plan of Borrower or any
of its ERISA Affiliates which presents a risk of termination of any such plan by
the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or any of
its ERISA Affiliates is required under Section 302 of ERISA and Section 412 of
the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof (except for any amount the nonpayment
of which would not have a Material Adverse Effect), and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any employee benefit plan,
including any penalty or tax described in Section 8.9(a) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.9(d)
hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrower or any of its subsidiaries that
are subject to Title IV of ERISA does not exceed the current value of the assets
of such plans allocable to such vested accrued benefits, including any penalty
or tax described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has ever
been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10 Environmental Compliance.
(a) Except as set forth on Schedule 8.10 hereto, Borrower and its
subsidiaries have not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates, in any manner which could have a Material Adverse Effect, any
applicable Environmental Law or any license, permit, certificate, approval or
similar authorization thereunder, and the operations of Borrower and its
subsidiaries comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorization thereunder.
(b) Except as set forth on Schedule 8.10 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower or any or its subsidiaries or the release, spill or discharge,
threatened or actual, of any Hazardous Material or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter, which
affects Borrower or its
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business, operations or assets or any properties at which Borrower or any of its
subsidiaries has transported, stored or disposed of any Hazardous Materials.
(c) To Borrower's knowledge, Borrower and its subsidiaries have no
liability (contingent or otherwise) which could have a Material Adverse Effect
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrower and its subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower and its subsidiaries under
any Environmental Law (except for any the absence of which would not have a
Material Adverse Effect) and all of such licenses, permits, certificates,
approvals or similar authorizations are valid and in full force and effect.
8.11 Accuracy and Completeness of Information. All information furnished by
or on behalf of Borrower in writing to Lender in connection with this Agreement
or any of the other Financing Agreements or any transaction contemplated hereby
or thereby, including all information on the Information Certificate is true and
correct in all material respects on the date as of which such information is
dated or certified and does not omit any material fact necessary in order to
make such information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a material adverse affect
on the business, assets or prospects of Borrower, which has not been fully and
accurately disclosed to Lender in writing.
8.12 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each of Borrower and each of its subsidiaries
shall at all times preserve, renew and keep in full, force and effect its
corporate existence and rights and franchises with respect thereto and maintain
in full force and effect all permits, licenses, trademarks, tradenames,
approvals, authorizations, leases and contracts necessary to carry on the
business as presently or proposed to be conducted. Borrower shall give Lender
thirty (30) days prior written notice of any proposed change in its or any
subsidiary's corporate name, which notice shall set forth the new name and
Borrower shall deliver to Lender a copy of the amendment to the Certificate of
Incorporation of Borrower or the applicable subsidiary providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
of Borrower or such subsidiary as soon as it is available. Borrower shall not
permit any Inactive Subsidiary to engage in any business or to own any assets
other than those engaged in or owned, as the case may be, on the date hereof.
Borrower shall not cause or permit any subsidiary in addition to the Inactive
Subsidiaries to (i) engage in any business other than research and development,
holding and licensing intellectual property and, in the case of Ecogen
Investments Inc., investing in assets of the type described in Section 9.10(b)
or (ii) own any assets other than intellectual property or, in the case of
Ecogen Investments Inc., assets of the type described in Section 9.10(b).
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9.2 New Collateral Locations. Borrower may open any new location within the
continental United States provided Borrower (a) gives Lender thirty (30) days
prior written notice of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower and its subsidiaries shall, at all times, comply in all
material respects with all laws, rules, regulations, licenses, permits,
approvals and orders applicable to it and duly observe all requirements of any
Federal, State or local governmental authority, including the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Health
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statues, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws, except to the extent that noncompliance or nonobservance
would not have a Material Adverse Effect.
(b) Borrower shall establish and maintain, at its expense, a system to
assure and monitor its and its subsidiaries' continued compliance with all
Environmental Laws in all of its operations, which system shall include annual
reviews of such compliance by employees or agents of Borrower who are familiar
with the requirements of the Environmental Laws. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrower to Lender. Borrower and its subsidiaries shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event that could reasonably be
expected to have a Material Adverse Effect involving the release, spill or
discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any material non-compliance with or violation of any
Environmental law by Borrower or any of its subsidiaries or (B) the release,
spill or discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials that could reasonably be
expected to have a Material Adverse Effect or (D) any other environmental,
health or safety matter that could reasonably be expected to have a Material
Adverse Effect which affects Borrower or any of its subsidiaries or their
respective businesses, operations or assets or any properties at which Borrower
transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower or any of its subsidiaries in
order to avoid any material non-compliance, with any Environmental Law that
could reasonably be expected to have a Material Adverse Effect, Borrower shall,
at Lender's request and Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where Borrower's or such subsidiary's non-compliance and prepare and deliver to
Lender a report as to such non-compliance setting forth the results of such
tests, a proposed plan for responding to any environmental problems described
therein, and an estimate of the costs thereof and (ii) provide to Lender a
supplemental report of such engineer whenever the scope of such non-compliance,
or Borrower's response thereto or the estimated costs thereof, shall change in
any material respect.
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(e) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including reasonable attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrower or its subsidiaries and the preparation and implementation of any
closure, remedial or other required plans, except that Borrower shall not be
required to indemnify Lender or hold Lender harmless for losses, damages,
liabilities, costs, and expenses determined by a final and non-appealable
judgment or court order binding on Lender to be directly attributable to
Lender's gross negligence or willful misconduct. All representations,
warranties, covenants and indemnifications in this Section 9.3 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower and each of its subsidiaries
shall duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or the applicable
subsidiary and with respect to which adequate reserves have been set aside on
its books. Borrower shall be liable for any tax or penalties imposed on Lender
as a result of the financing arrangements provided for herein and Borrower
agrees to indemnify and hold Lender harmless with respect to the foregoing, and
to repay to Lender on demand the amount thereof, and until paid by Borrower such
amount shall be added and deemed part of the Loans, provided, that, nothing
contained herein shall be construed to require Borrower to pay any income or
franchise taxes attributable to the income of Lender from any amounts charged or
paid hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. In
the case of casualty to Equipment, at Borrower's request, Lender shall apply any
insurance proceeds received by Lender at any time to the cost of repairs or
replacement by Borrower of such Equipment, subject to presentation of such
documentation as Lender may reasonable request evidencing such repair or
replacement and its cost. As to casualty to all other Collateral, and as to
insurance proceeds relating to Equipment that Borrower has not requested be
applied to repair or replacement, Lender shall apply any insurance proceeds
received by Lender to payment of the Obligations, whether or not then due, in
any order and in such manner as Lender may determine or, at Lender's option,
Lender may hold such proceeds as cash collateral for the Obligations.
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9.6 Financial Statements and Other Information.
(a) Borrower and its subsidiaries shall keep proper books and records
in which true and complete entries shall be made of all dealings or transactions
of or in relation to the Collateral and the business of Borrower and its
subsidiaries in accordance with GAAP and Borrower shall furnish or cause to be
furnished to Lender: (i) within thirty (30) days after the end of each fiscal
month, monthly unaudited consolidated financial statements (consisting of
balance sheets and statements of income and loss), all in reasonable detail,
fairly presenting the financial position and the results of the operations of
Borrower and its subsidiaries as of the end of and through such fiscal month,
(ii) within fifty (50) days after the end of each fiscal quarter, quarterly
unaudited consolidated and consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholder's equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal quarter, and (iii) within one
hundred five (105) days after the end of each fiscal year, audited consolidated
and consolidating financial statements of Borrower and its subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of KPMG Peat Marwick LLP or other independent certified
public accountants selected by Borrower and reasonably acceptable to Lender,
that such financial statements have been prepared in accordance with GAAP, and
present fairly the results of operations and financial condition of Borrower and
its subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim relating
to the Collateral or any other property which is security for the Obligations or
which would result in any material adverse change in Borrower's or any
subsidiary's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower and its subsidiaries, as Lender may, from time to
time, reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower and its subsidiaries to any court or other government agency or to any
participant or assignee or prospective participant or assignee. Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrower's expense, copies of the financial statements of Borrower
and its subsidiaries and any reports or management letters prepared by such
accountants or auditors on behalf of Borrower or any of its subsidiaries and to
disclose to Lender such information as they may have regarding the business of
Borrower and its subsidiaries. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Except for
Permitted Activity, each of Borrower and each of its subsidiaries shall not,
directly or indirectly, (a) merge into or with or consolidate with any other
Person or permit any other Person to merge into or with or consolidate with it,
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or (b) sell, assign, lease, transfer, abandon or otherwise dispose of any stock
owned by such Person or indebtedness to any other Person or any of its assets to
any other Person (except for (i) sales of Inventory in the ordinary course of
business, (ii) transfers of the Borrower's stock that would not cause a Change
of Control to occur and (iii) the disposition of worn-out or obsolete Equipment
or Equipment no longer used in the business of Borrower so long as (A) if an
Event of Default exists or has occurred and is continuing, any proceeds are paid
to Lender and (B) such sales do not involve Equipment having an aggregate fair
market value in excess of $75,000 for all such Equipment disposed of in any
fiscal year of Borrower); or (c) form or acquire any subsidiaries, or (d) wind
up, liquidate or dissolve (other than with respect to the Inactive Subsidiaries)
or (e) agree to do any of the foregoing provided, that, nothing in this Section
9.7 shall prohibit a merger of (A) any subsidiary of Borrower with Borrower or
another subsidiary of Borrower, so long as in any such merger with Borrower,
Borrower is the surviving corporation or (B) any Person with a subsidiary of
Borrower so long as such subsidiary is the surviving corporation and, after
giving effect thereto, no Event of Default, or event which with notice or the
passage of time or both would constitute an Event of Default, would exist.
9.8 Encumbrances. Neither Borrower nor any of its subsidiaries shall
create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of its
assets or properties, including the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or the
applicable subsidiary and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's or
the subsidiary's business to the extent: (i) such liens secure indebtedness
which is not overdue or (ii) such liens secure indebtedness relating to claims
or liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or the
applicable subsidiary, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have been
set aside on its books; (d) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of real property which do not interfere
in any material respect with the use of such real property or ordinary conduct
of the business of Borrower and its subsidiaries as presently conducted thereon
or materially impair the value of the real property which may be subject
thereto; (e) purchase money security interests in Equipment (including capital
leases) and purchase money mortgages on real estate not to exceed $300,000 in
the aggregate at any time outstanding so long as such security interests and
mortgages do not apply to any property of Borrower or any of its subsidiaries
other than the Equipment or real estate so acquired, and the indebtedness
secured thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be; (f) the security interests and liens set forth on
Schedule 8.4 hereto; and (g) liens on assets that are not Collateral to secure
debt permitted by Section 9.9(e); and (h) encumbrances on assets that are not
Collateral and are not granted to secure any indebtedness of Borrower.
9.9 Indebtedness. Neither Borrower nor any of its subsidiaries shall incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, any or indebtedness or other obligations for borrowed money, except: (a)
the Obligations; (b) trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with respect to which the
Borrower or the applicable subsidiary is contesting in good faith the amount or
validity thereof by appropriate proceedings diligently pursued and available to
Borrower or the applicable subsidiary, and with respect to which adequate
reserves have been set aside on its books; (c) purchase money indebtedness
(including capital leases) to the extent not incurred or secured by liens
(including capital leases) in violation of any other provision of this
Agreement; (d) debt existing on the date hereof and set forth on Schedule 9.9,
provided, that, (i) Borrower or the applicable subsidiary may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the applicable instruments
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and agreements as in effect on the date hereof, (ii) Borrower or the applicable
subsidiary shall not, directly or indirectly, (A) amend, modify, alter or change
the material terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof in any manner that is
unfavorable to Borrower and its subsidiaries or Lender, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall
furnish to Lender all notices or demands in connection with such indebtedness
either received by Borrower or the applicable subsidiary or on its behalf,
promptly after the receipt thereof, or sent by Borrower or the applicable
subsidiary or on its behalf, concurrently with the sending thereof, as the case
may be; (e) additional debt incurred after the date hereof in an aggregate
outstanding principal amount of any time not to exceed $200,000; and (f)
indebtedness incurred by and between Borrower and the Obligors to the extent
permitted in Section 9.12 hereof.
9.10 Loans, Investments, Guarantees, Etc. Neither Borrower nor any of its
subsidiaries shall directly or indirectly, make any loans or advance money or
property to any person, or invest in (by capital contribution, dividend or
otherwise) or purchase or repurchase the stock or indebtedness or all or a
substantial part of the assets or property of any person, or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
indebtedness, performance, obligations or dividends of any Person or agree to do
any of the foregoing, except: (a) the endorsement of instruments for collection
or deposit in the ordinary course of business; (b) investments in: (i)
short-term direct obligations of the United States Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender, payable to
the order of the Borrower or a subsidiary or to bearer and delivered to Lender,
and (iii) commercial paper rated A1 or P1; provided, that, as to any of the
foregoing owned by Borrower, unless waived in writing by Lender, Borrower shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments; (c) the loans, advances and guarantees
set forth on Schedule 9.10 hereto; provided, that, as to such loans, advances
and guarantees, (i) Borrower or the applicable subsidiary shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such loans, advances
or guarantees or any agreement, document or instrument related thereto, or (B)
as to such guarantees, redeem, retire, defease, purchase or otherwise acquire
the obligations arising pursuant to such guarantees, or set aside or otherwise
deposit or invest any sums for such purpose, and (ii) Borrower shall furnish to
Lender all notices or demands in connection with such loans, advances or
guarantees or other indebtedness subject to such guarantees either received by
Borrower or the applicable subsidiary or on its behalf, promptly after the
receipt thereof, or sent by Borrower or the applicable subsidiary or on its
behalf, concurrently with the sending thereof, as the case may be; and (d) loans
and advances to employees in the ordinary course of business in an unpaid
principal amount not exceeding $50,000 individually or $100,000 in the aggregate
at any time.
9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of class of capital stock
of Borrower now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or warrants to purchase common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing,
except that if Borrower is required to (a) pay cash dividends on its Preferred
Stock pursuant to (i) Section 2(b) or 5(c) of Exhibit A to the United Equities
Stock Purchase Agreement, (ii) Section 2(b) of Exhibit A to the KA Stock
Purchase Agreement, or (iii) substantially similar provisions in respect of
payment of cash dividends contained in the Certificate of Designations,
Preferences and Rights of the Series 1998-B Convertible Preferred Stock, if any
(the "Series B Certificate"), or (b) redeem its Preferred Stock pursuant to (i)
Section 7 of Exhibit A to the United Equities Stock Purchase Agreement, (ii)
Section 7 of Exhibit A to the KA Stock Purchase Agreement, or (iii)
substantially similar provisions in respect of mandatory redemptions as
contained in the Series B Certificate, if any, then Borrower may redeem such
stock or pay such cash dividends in cash,
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at the rates and on the dates set forth in the terms of such preferred stock as
in effect on the date hereof if, at the time of such redemption or payment and
after giving effect thereto, (a) no Event of Default, or event which with notice
of the passage or both would constitute an Event of Default, shall exist, and
(b) Borrower has Excess of Availability of not less than $500,000 and would have
had Excess Availability of not less than $500,000 on each day of the preceding
thirty (30) day period if such payment had been made on the first day of such
period.
9.12 Transactions with Affiliates. Except as set forth on Schedule 9.12,
Borrower and its subsidiaries shall not, directly or indirectly, (a) purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
any officer, director, agent or other person affiliated with Borrower or any
subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or the subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such subsidiary than
Borrower or such subsidiary would obtain in a comparable arm's length
transaction with an unaffiliated person or (b) make any payments of management,
consulting or other fees for management or similar services, or of any
indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Borrower or any subsidiary except reasonable compensation
to officers, employees and directors for services rendered to Borrower or such
subsidiary in the ordinary course of business.
9.13 Additional Bank Accounts. Borrower and its subsidiaries shall not,
directly or indirectly, open, establish or maintain any deposit account,
investment account or any other account with any bank or other financial
institution, other than the Blocked Accounts and the accounts set forth in
Schedule 8.8 hereto, except: (a) as to any new or additional Blocked Accounts
and other such new or additional accounts which contain any Collateral or
proceeds thereof, with the prior written consent of Lender and subject to such
conditions thereto as Lender may establish and (b) as to any accounts used by
Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender.
9.14 Working Capital. Borrower and its subsidiaries shall, at all times,
maintain Working Capital of not less than $4,750,000.
9.15 Adjusted Net Worth. Borrower and its subsidiaries shall, at all times,
maintain Adjusted Net Worth of not less than $4,750,000.
9.16 Compliance with ERISA.
(a) Borrower and its subsidiaries shall not with respect to any
"employee benefit plans" maintained by Borrower or any of its ERISA Affiliates:
(i) terminate any such employee benefit plans so as to incur any liability to
the Pension Benefit Guaranty Corporation established pursuant to ERISA that
would have a Material Adverse Effect, (ii) allow or suffer to exist any
prohibited transaction involving any of such employee benefit plans or any trust
created thereunder which would subject Borrower, any of its subsidiaries, or
such ERISA Affiliate to a tax or penalty or other liability on prohibited
transactions imposed under Section 4975 of the Code or ERISA that would have a
Material Adverse Effect, (iii) fail to pay to any such employee benefit plan any
contribution which it is obligated to pay under Section 302 of ERISA, Section
412 of the Code or the terms of such plan, except to the extent of any
nonpayment that would not have a Material Adverse Effect, (iv) allow or suffer
to exist any accumulated funding deficiency, whether or not waived, with respect
to any such employee benefit plan, (v) allow or suffer to exist any occurrence
of a reportable event, other than a reportable event for which the reporting
requirement has been waived by applicable regulation, or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee benefit plan that is a single employer
plan, which termination could result in any liability to the Pension Benefit
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Guaranty Corporation that would have a Material Adverse Effect, or (vi) incur
any withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 9.16, the terms "employee benefit plans",
"accumulated funding deficiency" and "reportable event"' shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.17 Costs and Expenses. Borrower shall pay to Lender on demand all costs,
reasonable expenses, filing fees and taxes paid or payable in connection with
the preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and
fees for insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees; (c) costs
and expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters), except in connection with claims
determined by a final and non-appealable judgment or court order binding on
Lender to be directly attributable to Lender's gross negligence or willful
misconduct; (g) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a per diem charge
at the rate of $650 per person per day for Lender's examiners in the field and
office; and (h) the reasonable fees and disbursements of counsel (including
legal assistants) to Lender in connection with any of the foregoing.
9.18 Further Assurances. At the request of Lender at any time and from time
to time, Borrower shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
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SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay when due any of the Obligations or (ii)
Borrower or any Obligor fails to perform any of the covenants contained in
Sections 9.1 (except as to its corporate existence), 9.2(a), 9.3, 9.5, 9.6(d),
9.17, and 9.18 of this Agreement and such failure shall continue for ten (10)
days; provided, that, such ten (10) day period shall not apply in the case of:
(A) any failure to observe any such covenant which is not capable of being cured
at all or within such ten (10) day period or which has been the subject of a
prior failure within a six (6) month period or (B) an intentional breach of
Borrower or any Obligor of any such covenant or (iii) Borrower fails to perform
any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements other than those described in
Sections 10.1(a)(i) and 10.1(a)(ii) above
(b) any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
(c) any Obligor with total assets or gross profit in excess of
$100,000 as at the end of or for its most recently ended fiscal year revokes,
terminates or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d) any judgment for the payment of money is rendered against Borrower
or any Obligor in excess of $50,000 in any one case or in excess of $150,000 in
the aggregate and shall remain undischarged or unvacated for a period in excess
of thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or any of
their assets;
(e) Borrower or any Obligor dissolves or suspends or discontinues
doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
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(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $100,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any agreement related to the Monsanto Royalty or any
material license, which default, pursuant to the terms of such agreement or
license, permits any other party thereto to terminate such agreement or license
and which continues for more than the applicable cure period, if any, with
respect thereto;
(j) any Change of Control;
(k) the indictment or threatened indictment of Borrower or any Obligor
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against Borrower or any Obligor, pursuant to which
statute or proceedings the penalties or remedies sought or available include
forfeiture of any of the property of Borrower or such Obligor;
(l) there shall have occurred any event or there shall exist any
circumstance that has a Material Adverse Effect; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase
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<PAGE> 39
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of Borrower, which
right or equity of redemption is hereby expressly waived and released by
Borrower and/or (vii) terminate this Agreement. If any of the Collateral is sold
or leased by Lender upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by Lender. If notice of disposition of Collateral is required by law,
ten (10) days prior notice by Lender to Borrower designating the time and place
of any public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received
by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York (without giving
effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York for New
York County and the United States District Court for the Southern District of
New York and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
34
<PAGE> 40
(5) days after the same shall have been so deposited in the U.S. mails, or, at
Lender's option, by service upon Borrower in any other manner provided under the
rules of any such courts.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation,
35
<PAGE> 41
execution, delivery, enforcement, performance or administration of this
Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the reasonable fees and expenses of counsel, except
for losses, claims, damages, liabilities, costs or expenses determined by a
final and non-appealable judgment or court order binding on Lender to have been
the result of acts or omissions of Lender constituting gross negligence or
willful misconduct. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date two (2) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof; provided, that, Lender may, at
its option, extend the Renewal Date to the date three (3) years from the date
hereof by giving Borrower notice at least sixty (60) days prior to the first
anniversary of this Agreement. Lender or Borrower (it being understood that
Lender has the right to extend the Renewal Date as provided above) may terminate
this Agreement and the other Financing Agreements effective on the Renewal Date
or on the anniversary of the Renewal Date in any year by giving to the other
party at least sixty (60) days prior written notice; provided, that, this
Agreement and all other Financing Agreements must be terminated simultaneously.
Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including reasonable attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, New York City
time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
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<PAGE> 42
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C> <C>
(i) 3% of Maximum Credit From the date hereof to and including August
20, 1999
(ii) 2% of Maximum Credit From August 20, 1999 to and including August
20, 2000 or if the term of this Agreement is
extended for an additional year as provided
above, then to and including August 20, 2001
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the
37
<PAGE> 43
subject matter hereof, whether oral or written. In the event of any
inconsistency between the terms of this Agreement and any schedule or exhibit
hereto, the terms of this Agreement shall govern.
(Signatures Follow)
38
<PAGE> 44
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWER
- ------ --------
CONGRESS FINANCIAL CORPORATION ECOGEN INC.
By: /s/ Daniel Cott By: /s/ Mary E. Paetzold
- ------------------------------ -----------------------------------------
Title: Vice President Title: Vice President and Chief Financial
Officer
Address: Chief Executive Office:
1133 Avenue of the Americas 2005 Cabot Boulevard West
New York, New York 10036 Langhorne, Pennsylvania 19047
-1-
<PAGE> 1
Exhibit 10.137
GUARANTEE
August 20, 1998
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Re: Ecogen Inc. ("Borrower")
Gentlemen:
Congress Financial Corporation ("Lender") and Borrower have entered
into certain financing arrangements pursuant to which Lender may make loans and
advances and provide other financial accommodations to Borrower as set forth in
the Loan and Security Agreement, dated August 20, 1998, by and between Borrower
and Lender (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement"),
and other agreements, documents and instruments referred to therein or at any
time executed and/or delivered in connection therewith or related thereto,
including, but not limited to, this Guarantee (all of the foregoing, together
with the Loan Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between Borrower
and each and all of the undersigned (individually and collectively,
"Guarantors"), in consideration of the benefits which will accrue to Guarantors
and as an inducement for and in consideration of Lender making loans and
advances and providing other financial accommodations to Borrower pursuant to
the Loan Agreement and the other Financing Agreements, each of Guarantors hereby
jointly and severally agrees in favor of Lender as follows:
1. Guarantee.
(a) Each of Guarantors absolutely and unconditionally, jointly
and severally, guarantees and agrees to be liable for the full and indefeasible
payment and performance when due of the following (all of which are collectively
referred to herein as the "Guaranteed Obligations"): (i) all obligations,
liabilities and indebtedness of any kind, nature and description of Borrower to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise,
-1-
<PAGE> 2
each as arising under the Loan Agreement or the other Financing Agreements,
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of the Loan Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts, which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in any such case and including loans, interest,
fees, charges and expenses related thereto and all other obligations of Borrower
or its successors to Lender arising after the commencement of such case),
whether direct or indirect, absolute or contingent, joint or several, due or not
due, primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender, and further including, without duplication, all
expenses (including, without limitation, attorneys' fees and legal expenses)
incurred by Lender in connection with the preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
Borrower's obligations, liabilities and indebtedness as aforesaid to Lender, the
rights of Lender in any collateral or under all Financing Agreements or in any
way involving claims by or against Lender directly or indirectly arising out of
or related to the relationships between Borrower and Lender, whether such
expenses are incurred before, during or after the initial or any renewal term of
the Loan Agreement and the other Financing Agreements or after the commencement
of any case with respect to Borrower under the United States Bankruptcy Code or
any similar statute and (ii) all expenses (including, without, attorney's fees
and legal expenses) incurred by Lender in connection with the collection,
enforcement and defense of any Guarantor's obligations, liabilities and
indebtedness to Lender and the rights of Lender under this Guarantee or in any
way involving claims by or against Lender directly or indirectly arising out of
or related to the relationships between any of Guarantors and Lender, whether
such expenses are incurred before, during, or after the initial or any renewal
term of the Loan Agreement and the other Financing Agreements or after the
commencement of any case with respect to any of Guarantors under the United
States Bankruptcy Code or any similar statute.
(b) This Guarantee is a guaranty of payment and not of
collection. Each of Guarantors agrees that Lender need not attempt to collect
any Guaranteed Obligations from Borrower, any one of Guarantors or any other
Obligor or to realize upon any collateral, but may require any one of Guarantors
to make immediate payment of all of the Guaranteed Obligations to Lender when
due, whether by maturity, acceleration or otherwise, or at any time thereafter.
Lender may apply any amounts received in respect of the Guaranteed Obligations
to any of the Guaranteed Obligations, in whole or in part (including attorneys'
fees and legal expenses incurred by Lender with respect thereto or otherwise
chargeable to Borrower or Guarantors) and in such order as Lender may elect.
(c) Payment by Guarantors shall be made to Lender at the
office of Lender from time to time on demand as Guaranteed Obligations become
due. Guarantors shall make all payments to Lender on the Guaranteed Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. One or more
successive or concurrent actions may be brought hereon against any of Guarantors
either in the same action in which Borrower or any of the other Guarantors or
any other Obligor is sued or in separate actions. In the event any claim or
action, or action on any judgment, based on this Guarantee is
<PAGE> 3
brought against any of Guarantors, each of Guarantors agrees not to deduct,
set-off, or seek any counterclaim for or recoup any amounts which are or may be
owed by Lender to any of Guarantors.
2. Waivers and Consents.
(a) Notice of acceptance of this Guarantee, the making of
loans and advances and providing other financial accommodations to Borrower and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which Borrower or any of Guarantors are entitled are
hereby waived by each of Guarantors. Each of Guarantors also waives notice of
and hereby consents to, (i) any amendment, modification, supplement, extension,
renewal, or restatement of the Loan Agreement and any of the other Financing
Agreements, including, without limitation, extensions of time of payment of or
increase or decrease in the amount of any of the Guaranteed Obligations, the
interest rate, fees, other charges, or any collateral, and the guarantee made
herein shall apply to the Loan Agreement and the other Financing Agreements and
the Guaranteed Obligations as so amended, modified, supplemented, renewed,
restated or extended, increased or decreased, (ii) the taking, exchange,
surrender and releasing of collateral or guarantees now or at any time held by
or available to Lender for the obligations of Borrower or any other party at any
time liable on or in respect of the Guaranteed Obligations or who is the owner
of any property which is security for the Guaranteed Obligations (individually,
an "Obligor" and collectively, the "Obligors"), including, without limitation,
the surrender or release by Lender of any one of Guarantors hereunder, (iii) the
exercise of, or refraining from the exercise of any rights against Borrower, any
of Guarantors or any other Obligor or any collateral, (iv) the settlement,
compromise or release of, or the waiver of any default with respect to, any of
the Guaranteed Obligations and (v) any financing by Lender of Borrower under
Section 364 of the United States Bankruptcy Code or consent to the use of cash
collateral by Lender under Section 363 of the United States Bankruptcy Code.
Each of Guarantors agrees that the amount of the Guaranteed Obligations shall
not be diminished and the liability of Guarantors hereunder shall not be
otherwise impaired or affected by any of the foregoing.
(b) No invalidity, irregularity or unenforceability of all or
any part of the Guaranteed Obligations shall affect, impair or be a defense to
this Guarantee, nor shall any other circumstance which might otherwise
constitute a defense available to or legal or equitable discharge of Borrower in
respect of any of the Guaranteed Obligations, or any one of Guarantors in
respect of this Guarantee, affect, impair or be a defense to this Guarantee.
Without limitation of the foregoing, the liability of Guarantors hereunder shall
not be discharged or impaired in any respect by reason of any failure by Lender
to perfect or continue perfection of any lien or security interest in any
collateral or any delay by Lender in perfecting any such lien or security
interest. As to interest, fees and expenses, whether arising before or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, Guarantors shall be liable therefor,
even if Borrower's liability for such amounts does not, or ceases to, exist by
operation of law. Each of Guarantors acknowledges that Lender has not made any
representations to any of Guarantors with respect to Borrower, any other Obligor
or otherwise in connection with the execution and delivery by Guarantors of this
Guarantee and
<PAGE> 4
Guarantors are not in any respect relying upon Lender or any statements by
Lender in connection with this Guarantee.
(c) Until such time as all Guaranteed Obligations have been
indefeasibly paid in full, each of Guarantors hereby irrevocably and
unconditionally waives and relinquishes all statutory, contractual, common law,
equitable and all other claims against Borrower, any collateral for the
Guaranteed Obligations or other assets of Borrower or any other Obligor, for
subrogation, reimbursement, exoneration, contribution, indemnification, setoff
or other recourse in respect to sums paid or payable to Lender by each of
Guarantors hereunder and each of Guarantors hereby further irrevocably and
unconditionally waives and relinquishes any and all other benefits which
Guarantors might otherwise directly or indirectly receive or be entitled to
receive by reason of any amounts paid by or collected or due from Guarantors,
Borrower or any other Obligor upon the Guaranteed Obligations or realized from
their property.
3. Subordination. Payment of all amounts now or hereafter owed to
Guarantors by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full to Lender of the Guaranteed
Obligations and all such amounts and any security and guarantees therefor are
hereby assigned to Lender as security for the Guaranteed Obligations.
4. Acceleration. Notwithstanding anything to the contrary contained
herein or any of the terms of any of the other Financing Agreements, the
liability of Guarantors for the entire Guaranteed Obligations shall mature and
become immediately due and payable, even if the liability of Borrower or any
other Obligor therefor does not, upon the occurrence of any act, condition or
event which constitutes an Event of Default as such term is defined in the Loan
Agreement.
5. Account Stated. The books and records of Lender showing the account
between Lender and Borrower shall be admissible in evidence in any action or
proceeding against or involving Guarantors as prima facie proof of the items
therein set forth, and the monthly statements of Lender rendered to Borrower, to
the extent to which no written objection is made within thirty (30) days from
the date of sending thereof to Borrower, shall be deemed conclusively correct
and constitute an account stated between Lender and Borrower and be binding on
Guarantors.
6. Termination. This Guarantee is continuing, unlimited, absolute and
unconditional. All Guaranteed Obligations shall be conclusively presumed to have
been created in reliance on this Guarantee. Each of Guarantors shall continue to
be liable hereunder until one of Lender's officers actually receives a written
termination notice from a Guarantor sent to Lender at its address set forth
above by certified mail, return receipt requested and thereafter as set forth
below. Such notice received by Lender from any one of Guarantors shall not
constitute a revocation or termination of this Guarantee as to any of the other
Guarantors. Revocation or termination hereof by any of Guarantors shall not
affect, in any manner, the rights of Lender or any obligations or duties of any
of Guarantors (including the Guarantor which may have sent such notice) under
this Guarantee with respect to (a) Guaranteed Obligations which have been
created, contracted, assumed or incurred prior to the receipt by Lender of such
written notice of
<PAGE> 5
revocation or termination as provided herein, including, without limitation, (i)
all amendments, extensions, renewals and modifications of such Guaranteed
Obligations (whether or not evidenced by new or additional agreements, documents
or instruments executed on or after such notice of revocation or termination),
(ii) all interest, fees and similar charges accruing or due on and after
revocation or termination, and (iii) all attorneys' fees and legal expenses,
costs and other expenses paid or incurred on or after such notice of revocation
or termination in attempting to collect or enforce any of the Guaranteed
Obligations against Borrower, Guarantors or any other Obligor (whether or not
suit be brought), or (b) Guaranteed Obligations which have been created,
contracted, assumed or incurred after the receipt by Lender of such written
notice of revocation or termination as provided herein pursuant to any contract
entered into by Lender prior to receipt of such notice. The sole effect of such
revocation or termination by any of Guarantors shall be to exclude from this
Guarantee the liability of such Guarantor for those Guaranteed Obligations
arising after the date of receipt by Lender of such written notice which are
unrelated to Guaranteed Obligations arising or transactions entered into prior
to such date. Without limiting the foregoing, this Guarantee may not be
terminated and shall continue so long as the Loan Agreement shall be in effect
(whether during its original term or any renewal, substitution or extension
thereof).
7. Reinstatement. If after receipt of any payment of, or proceeds of
collateral applied to the payment of, any of the Guaranteed Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guarantee shall
continue in full force and effect as if such payment or proceeds had not been
received by Lender. Each of Guarantors shall be liable to pay to Lender, and
does indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 7 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 7 shall survive the termination or
revocation of this Guarantee.
8. Amendments and Waivers. Neither this Guarantee nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender and each Guarantor. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or waiver
of any such right, power and/or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
9. Corporate Existence, Power and Authority. Each of Guarantors is a
corporation duly organized and in good standing under the laws of its state or
other jurisdiction of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or businesses of any of Guarantors or the rights
of Lender hereunder or under any of the other
<PAGE> 6
Financing Agreements. The execution, delivery and performance of this Guarantee
is within the corporate powers of each of Guarantors, have been duly authorized
and are not in contravention of law or the terms of the certificates of
incorporation, by-laws, or other organizational documentation of each of
Guarantors, or any indenture, agreement or undertaking to which any of
Guarantors is a party or by which any of Guarantors or its property are bound.
This Guarantee constitutes the legal, valid and binding obligation of each of
Guarantors enforceable in accordance with its terms. Any one of Guarantors
signing this Guarantee shall be bound hereby whether or not any of the other
Guarantors or any other person signs this Guarantee at any time.
10. Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Guarantee and any dispute arising out of the relationship between any of
Guarantors and Lender, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York (without giving effect to
principles of conflicts of law).
(b) Each of Guarantors hereby irrevocably consents and submits
to the non-exclusive jurisdiction of the Supreme Court of the State of New York
for New York County and the United States District Court for the Southern
District of New York and waives any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Guarantee or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of any of Guarantors and Lender in
respect of this Guarantee or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising and whether in contract, tort, equity or otherwise, and agrees
that any dispute arising out of the relationship between any of Guarantors or
Borrower and Lender or the conduct of any such persons in connection with this
Guarantee, the other Financing Agreements or otherwise shall be heard only in
the courts described above (except that Lender shall have the right to bring any
action or proceeding against any of Guarantors or its property in the courts of
any other jurisdiction which Lender deems necessary or appropriate in order to
realize on collateral at any time granted by Borrower or any of Guarantors to
Lender or to otherwise enforce its rights against any of Guarantors or its
property).
(c) Each of Guarantors hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Lender's option, by service upon any of Guarantors in any other
manner provided under the rules of any such courts.
(d) EACH OF GUARANTORS HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF ANY OF GUARANTORS AND LENDER IN
RESPECT OF THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW
<PAGE> 7
EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. EACH OF GUARANTORS HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY OF GUARANTORS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY
OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
GUARANTORS AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Guarantors (whether
in tort, contract, equity or otherwise) for losses suffered by Guarantors in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Guarantee, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct.
11. Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth above and to each of
Guarantors at its chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
12. Partial Invalidity. If any provision of this Guarantee is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Guarantee as a whole, but this Guarantee shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13. Entire Agreement. This Guarantee represents the entire agreement
and understanding of this parties concerning the subject matter hereof, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.
14. Successors and Assigns. This Guarantee shall be binding upon
Guarantors and their respective successors and assigns and shall inure to the
benefit of Lender and its successors, endorsees, transferees and assigns. The
liquidation, dissolution or termination of any of Guarantors shall not terminate
this Guarantee as to such entity or as to any of the other Guarantors.
15. Construction. All references to the term "Guarantors" wherever used
herein shall mean each and all of Guarantors and their respective successors and
assigns, individually and collectively, jointly and severally (including,
without limitation, any receiver, trustee or custodian for any of Guarantors or
any of their respective assets or any of Guarantors in its
<PAGE> 8
capacity as debtor or debtor-in-possession under the United States Bankruptcy
Code). All references to the term "Lender" wherever used herein shall mean
Lender and its successors and assigns and all references to the term "Borrower"
wherever used herein shall mean Borrower and its successors and assigns
(including, without limitation, any receiver, trustee or custodian for Borrower
or any of its assets or Borrower in its capacity as debtor or
debtor-in-possession under the United States Bankruptcy Code). All references to
the term "Person" or "person" wherever used herein shall mean any individual,
sole proprietorship, partnership, corporation (including, without limitation,
any corporation which elects subchapter S status under the Internal Revenue Code
of 1986, as amended), limited liability company, limited liability partnership,
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
of political subdivision thereof. All references to the plural shall also mean
the singular and to the singular shall also mean the plural.
(Signatures Follow)
<PAGE> 9
IN WITNESS WHEREOF, each of Guarantors has executed and delivered this
Guarantee as of the day and year first above written.
ATTEST: ECOGEN INVESTMENTS INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ---------------------- ------------------------------
Title: Vice President
[CORPORATE SEAL]
Chief Executive Office
222 Delaware Ave., Wilmington, DE 19889
ATTEST: ECOGEN TECHNOLOGIES I
INCORPORATED
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ---------------------- ------------------------------
Title: Vice President and Chief Financial
Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
ATTEST:
ECOGEN-BIO INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ---------------------- ------------------------------
Title: Vice President
[CORPORATE SEAL]
Chief Executive Office
222 Delaware Ave., Wilmington, DE 19889
[GUARANTEE 1/3]
<PAGE> 10
ATTEST:
ECORESEARCH MILDEW I INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ----------------------- ------------------------------
Title: Vice President and Chief
Financial Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
ATTEST:
ECORESEARCH HARVEST ROT II INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ----------------------- ------------------------------
Title: Vice President and Chief
Financial Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
ATTEST:
ECORESEARCH CORN BORER III INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ----------------------- ------------------------------
Title: Vice President and Chief
Financial Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
[GUARANTEE 2/3]
<PAGE> 11
ATTEST:
ECORESEARCH NEMATODES IV INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ----------------------- ----------------------
Title: Vice President and Chief Financial
Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
ATTEST:
ECORESEARCH ROOTWORM V INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ----------------------- ----------------------
Title: Vice President and Chief Financial
Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
ATTEST:
ECORESEARCH TURF VI INC.
/s/ Richard A. Deak By: /s/ Mary E. Paetzold
- ----------------------- ----------------------
Title: Vice President and Chief Financial
Officer
[CORPORATE SEAL]
Chief Executive Office
2005 Cabot Boulevard West
Langhorne, PA 19047
[GUARANTEE 3/3]
<PAGE> 1
Exhibit 10.138
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated August 20,
1998, by ECOGEN INC., a Delaware corporation ("Pledgor"), with its chief
executive office at 2005 Cabot Boulevard West, Langhorne, Pennsylvania 19047, in
favor of CONGRESS FINANCIAL CORPORATION, a Delaware corporation ("Pledgee"),
having an office at 1133 Avenue of the Americas, New York 10036.
W I T N E S S E T H:
WHEREAS, Pledgor is now the direct and beneficial owner of the shares
of common stock of its direct subsidiaries (each, an "Issuer"), as described on
Exhibit A hereto and made a part hereof (the "Pledged Securities); and
WHEREAS, Pledgee and Pledgor have entered into financing arrangements
pursuant to which Pledgee may make loans and advances and provide other
financial accommodations to Pledgor as set forth in the Loan and Security
Agreement, dated August 20, 1998, by and between Pledgee and Pledgor (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the "Loan Agreement") and other agreements,
documents and instruments referred to therein or at any time executed and/or
delivered in connection therewith or related thereto, including, but not limited
to, this Pledge Agreement (all of the foregoing, together with the Loan
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreements"); and
WHEREAS, in order to induce Pledgee to make loans and advances
and provide other financial accommodations to Pledgor pursuant to the Financing
Agreements, Pledgor has agreed to secure the payment and performance of the
Obligations (as hereinafter defined) to Pledgee and to accomplish same by (i)
executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to
Pledgee the Pledged Securities which are registered in the name of Pledgor,
together with appropriate powers duly executed in blank by Pledgor, and (iii)
delivering to Pledgee any and all other documents which Pledgee deems necessary
to protect Pledgee's interests hereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to
Pledgee and grants to Pledgee a security interest in and
-1-
<PAGE> 2
lien upon (a) the Pledged Securities, together with all cash dividends, stock
dividends, interests, profits, redemptions, warrants, subscription rights,
stock, securities options, substitutions, exchanges and other distributions now
or hereafter distributed by any Issuer on or after the date hereof or which may
hereafter be delivered to the possession of Pledgor or Pledgee with respect
thereto, (b) Pledgor's records with respect to the foregoing, and (c) the
proceeds of all of the foregoing (all of the foregoing being collectively
referred to herein as the "Pledged Property"). Pledgor is delivering herewith
physical possession of the Pledged Securities to Pledgee, accompanied by
appropriate instruments of transfer executed in blank, and Pledgee herewith
acknowledges receipt of the Pledged Securities.
2. OBLIGATIONS SECURED
The security interest, lien and other interests granted to Pledgee
pursuant to this Pledge Agreement shall secure the prompt performance and
payment in full of any and all Obligations, as such term is defined in the Loan
Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
Pledgor hereby represents, warrants and covenants with and to Pledgee
the following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) The Pledged Securities are duly authorized, validly issued, fully
paid and non-assessable capital stock of the applicable Issuer and constitute
Pledgor's entire interest in each Issuer and are not registered, nor has Pledgor
authorized the registration thereof, in the name of any person or entity other
than Pledgor or Pledgee.
(b) The Pledged Property is directly, legally and beneficially owned by
Pledgor, free and clear of all claims, liens, pledges and encumbrances of any
kind, nature or description, except for the pledge and security interest in
favor of Pledgee.
(c) The Pledged Property is not subject to any restrictions, other than
pursuant to the Securities Act of 1933, as amended (the "Act"), relative to the
transfer thereof and Pledgor has the right to transfer and hypothecate the
Pledged Property free and clear of any liens, encumbrances or restrictions.
(d) The Pledged Property is duly and validly pledged to Pledgee and no
consent or approval of any governmental or regulatory authority or of any
securities exchange or the like, nor any consent or approval of any other third
party, was or is necessary to the validity and enforceability of this Pledge
Agreement.
(e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the
Pledged Property, (ii) perform any and all other acts which Pledgee in good
faith deems reasonable and/or necessary for the protection and preservation of
the Pledged Property or its value or Pledgee's security interest therein,
including, without limitation, so long as an Event of default is existence
transferring, registering or arranging for the transfer or registration of the
Pledged Property to or
<PAGE> 3
in Pledgee's own name and receiving the income therefrom as additional security
for the Obligations and (iii) pay any charges or expenses which Pledgee deems
necessary for the foregoing purpose, but without any obligation to do so. Any
obligation of Pledgee for reasonable care for the Pledged Property in Pledgee's
possession shall be limited to the same degree of care which Pledgee uses for
similar property pledged to Pledgee by other persons.
(f) If Pledgor shall become entitled to receive or acquire, or shall
receive any stock certificate, or option or right with respect to or in exchange
for the stock of any Issuer (including without limitation, any certificate
representing a dividend or a distribution or exchange of or in connection with
reclassification of the Pledged Securities) whether as an addition to, in
substitution of, or in exchange for any of the Pledged Property or otherwise,
Pledgor agrees to accept same as Pledgee's agent, to hold same in trust for
Pledgee and to deliver same forthwith to Pledgee or Pledgee's agent or bailee in
the form received, with the endorsement(s) of Pledgor where necessary and/or
appropriate powers and/or assignments duly executed to be held by Pledgee or
Pledgee's agent or bailee subject to the terms hereof, as further security for
the Obligations.
(g) Pledgor shall not, without the prior consent of Pledgee, directly
or indirectly, sell, assign, transfer, or otherwise dispose of, or grant any
option with respect to the Pledged Property, nor shall Pledgor create, incur or
permit any further pledge, hypothecation, encumbrance, lien, mortgage or
security interest with respect to the Pledged Property.
(h) So long as no Event of Default (as hereinafter defined) has
occurred and is continuing, Pledgor shall have the right to vote and exercise
all corporate rights with respect to the Pledged Securities, except as expressly
prohibited herein, and to receive any cash dividends payable in respect of the
Pledged Securities.
(i) Pledgor shall pay all charges and assessments of any nature against
the Pledged Property or with respect thereto prior to said charges and/or
assessments being delinquent.
(j) Pledgor shall promptly reimburse Pledgee on demand, together with
interest at the rate then applicable to the Obligations as set forth in the Loan
Agreement, for any charges, assessments or expenses paid or incurred by Pledgee
in its discretion for the protection, preservation and maintenance of the
Pledged Property and the enforcement of Pledgee's rights hereunder, including,
without limitation, attorneys' fees and legal expenses incurred by Pledgee in
seeking to protect, collect or enforce its rights in the Pledged Property or
otherwise hereunder.
(k) Pledgor shall furnish, or cause to be furnished, to Pledgee such
information concerning Issuers and the Pledged Property as Pledgee may from time
to time reasonably request in good faith, including, without limitation, current
financial statements.
(l) Pledgee may notify each Issuer or the appropriate transfer agent of
the Pledged Securities to register the security interest and pledge granted
herein and honor the rights of Pledgee with respect thereto.
<PAGE> 4
(m) Pledgor waives: (i) all rights to require Pledgee to proceed
against any other person, entity or collateral or to exercise any remedy, (ii)
the defense of the statute of limitations in any action upon any of the
Obligations, (iii) any right of subrogation or interest in the Obligations or
Pledged Property until all Obligations have been paid in full, (iv) any rights
to notice of any kind or nature whatsoever, unless specifically required in this
Pledge Agreement or non-waivable under any applicable law, and (v) to the extent
permissible, its rights under Section 9-112 and 9-207 of the New York Uniform
Commercial Code. Pledgor agrees that the Pledged Property, other collateral, or
any other guarantor or endorser may be released, substituted or added with
respect to the Obligations, in whole or in part, without releasing or otherwise
affecting the liability of Pledgor, the pledge and security interests granted
hereunder, or this Pledge Agreement. Pledgee is entitled to all of the benefits
of a secured party set forth in Section 9-207 of the New York Uniform Commercial
Code.
4. EVENTS OF DEFAULT
All Obligations shall become immediately due and payable, without
notice or demand, at the option of Pledgee, upon the occurrence of any Event of
Default, as such term is defined in the Loan Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
At any time an Event of Default exists or has occurred and is
continuing, in addition to all other rights and remedies of Pledgee, whether
provided under this Pledge Agreement, the Loan Agreement, the other Financing
Agreements, applicable law or otherwise, Pledgee shall have the following rights
and remedies which, to the extent not prohibited by applicable law, may be
exercised without notice to, or consent by, Pledgor except as such notice or
consent is expressly provided for hereunder:
(a) Pledgee, at its option, shall be empowered to exercise its
continuing right to instruct the applicable Issuer or Issuers (or the
appropriate transfer agent of the Pledged Securities) to register any or all of
the Pledged Securities in the name of Pledgee or in the name of Pledgee's
nominee and Pledgee may complete, in any manner Pledgee may deem expedient, any
and all stock powers, assignments or other documents heretofore or hereafter
executed in blank by Pledgor and delivered to Pledgee. After said instruction,
and without further notice, Pledgee shall have the exclusive right to exercise
all voting and corporate rights with respect to the Pledged Securities and other
Pledged Property, and exercise any and all rights of conversion, redemption,
exchange, subscription or any other rights, privileges, or options pertaining to
any shares of the Pledged Securities or other Pledged Property as if Pledgee
were the absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Securities and other
Pledged Property upon any merger, consolidation, reorganization,
recapitalization or other readjustment with respect thereto. Upon the exercise
of any such rights, privileges or options by Pledgee, Pledgee shall have the
right to deposit and deliver any and all of the Pledged Securities and other
Pledged Property to any committee, depository, transfer agent, registrar or
other designated agency upon such terms and conditions as Pledgee may determine,
all without liability, except to account for property actually received by
Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid
rights, privileges or options
<PAGE> 5
(all of which are exercisable in the sole discretion of Pledgee) and shall not
be responsible for any failure to do so or delay in doing so.
(b) In addition to all the rights and remedies of a secured party under
the Uniform Commercial Code or other applicable law, Pledgee shall have the
right, at any time and without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Pledgor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived to the extent permitted by applicable law), to proceed forthwith to
collect, redeem, recover, receive, appropriate, realize, sell, or otherwise
dispose of and deliver said Pledged Property or any part thereof in one or more
lots at public or private sale or sales at any exchange, broker's board or at
any of Pledgee's offices or elsewhere at such prices and on such terms as
Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit
or for future delivery without assumption of any credit risk, with Pledgee
having the right to purchase all or any part of said Pledged Property so sold at
any such sale or sales, public or private, free of any right or equity of
redemption in Pledgor, which right or equity is hereby expressly waived or
released by Pledgor. The proceeds of any such collection, redemption, recovery,
receipt, appropriation, realization, sale or other disposition, after deducting
all costs and expenses of every kind incurred relative thereto or incidental to
the care, safekeeping or otherwise of any and all Pledged Property or in any way
relating to the rights of Pledgee hereunder, including attorneys' fees and legal
expenses, shall be applied first to the satisfaction of the Obligations (in such
order as Pledgee may elect and whether or not due) and then to the payment of
any other amounts required by applicable law, including Section 9-504(1)(c) of
the New York Uniform Commercial Code, with Pledgor to be and remain liable for
any deficiency. Pledgor shall be liable to Pledgee for the payment on demand of
all such costs and expenses, together with interest at the then applicable rate
set forth in the Loan Agreements, and any reasonable attorneys' fees and
reasonable legal expenses. Pledgor agrees that ten (10) days prior written
notice by Pledgee designating the place and time of any public sale or of the
time after which any private sale or other intended disposition of any or all of
the Pledged Property is to be made, is reasonable notification of such matters.
(c) Pledgor recognizes that Pledgee may be unable to effect a public
sale of all or part of the Pledged Property by reason of certain prohibitions
contained in the Act, as now or hereafter in effect or in applicable Blue Sky or
other state securities law, as now or hereafter in effect, but may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such Pledged Property
for their own account for investment and not with a view to the distribution or
resale thereof. If at the time of any sale of the Pledged Property or any part
thereof, the same shall not, for any reason whatsoever, be effectively
registered (if required) under the Act (or other applicable state securities
law), as then in effect, Pledgee in its sole and absolute discretion is
authorized to sell such Pledged Property or such part thereof by private sale in
such manner and under such circumstances as Pledgee or its counsel may deem
necessary or advisable in order that such sale may legally be effected without
registration. Pledgor agrees that private sales so made may be at prices and
other terms less favorable to the seller than if such Pledged Property were sold
at public sale, and that Pledgee has no obligation to delay the sale of any such
Pledged Property for the period of time necessary to permit an Issuer, even if
such Issuer would agree, to register such
<PAGE> 6
Pledged Property for public sale under such applicable securities laws. Pledgor
agrees that any private sales made under the foregoing circumstances shall be
deemed to have been in a commercially reasonable manner.
(d) All of the Pledgee's rights and remedies, including, but not
limited to, the foregoing and those otherwise arising under this Pledge
Agreement, the Loan Agreements and the other Financing Agreements, the
instruments comprising the Pledged Property, applicable law or otherwise, shall
be cumulative and not exclusive and shall be enforceable alternatively,
successively or concurrently as Pledgee may deem expedient. No failure or delay
on the part of Pledgee in exercising any of its options, powers or rights or
partial or single exercise thereof, shall constitute a waiver of such option,
power or right.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
(a) The validity, interpretation and enforcement of this Pledge
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Pledgor irrevocably consents and submits to the non-exclusive
jurisdiction of the Supreme Court of the State of New York for New York County
and the United States District Court for the Southern District of New York and
waives any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Pledge Agreement or any of the
other Financing Agreements or in any way connected with or related or incidental
to the dealings of the parties hereto in respect of this Pledge Agreement or any
of the other Financing Agreements or the transactions related hereto or thereto,
in each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agrees that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Pledgee
shall have the right to bring any action or proceeding against Pledgor or its
property in the courts of any other jurisdiction which Pledgee deems necessary
or appropriate in order to realize on the Pledged Property or to otherwise
enforce its rights against Pledgor or its property).
(c) Pledgor hereby waives personal service of any and all process upon
it and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed ten (10) days after the same shall have
been so deposited in the U.S. mails, or, at Pledgee's option, by service upon
Pledgor in any other manner provided under the rules of any such courts.
(d) PLEDGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY
OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE IN RESPECT OF THIS PLEDGE
AGREEMENT OR ANY OF
<PAGE> 7
THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. PLEDGOR HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT PLEDGOR OR PLEDGEE MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Pledgee shall not have any liability to Pledgor (whether in tort,
contract, equity or otherwise) for losses suffered by Pledgor in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Pledge Agreement, or any act, omission or event occurring
in connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Pledgee, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct.
7. MISCELLANEOUS
(a) Pledgor agrees that at any time and from time to time upon the
written request of Pledgee, Pledgor shall execute and deliver such further
documents, including, but not limited to, irrevocable proxies or stock powers,
in form satisfactory to counsel for Pledgee, and will take or cause to be taken
such further acts as Pledgee may request in order to effect the purposes of this
Pledge Agreement and perfect or continue the perfection of the security interest
in the Pledged Property granted to Pledgee hereunder.
(b) Beyond the exercise of reasonable care to assure the safe custody
of the Pledged Property (whether such custody is exercised by Pledgee, or
Pledgee's nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee
shall have no duty or liability to protect or preserve any rights pertaining
thereto and shall be relieved of all responsibility for the Pledged Property
upon surrendering it to Pledgor or foreclosure with respect thereto.
(c) All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed to have been duly given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
registered or certified mail, return receipt requested, five (5) days after
mailing. All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):
<PAGE> 8
If to Pledgor: Ecogen Inc.
2005 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: President
If to Pledgee: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Andrew Robin
(d) This Pledge Agreement is and is intended to be a continuing Pledge
Agreement and shall remain in full force and effect until all of the Obligations
have been finally paid and the Loan Agreement has been terminated. Upon the
termination of this Pledge Agreement in accordance with the foregoing, the
Pledged Property shall be released from the security interest granted in favor
of Pledgee hereunder.
(e) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural. All references to Pledgor,
Pledgee and Issuer pursuant to the definitions set forth in the recitals hereto,
or to any other person herein, shall include their respective successors and
assigns. The words "hereof," "herein," "hereunder," "this Pledge Agreement" and
words of similar import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not any particular provision of this Pledge
Agreement and as this Pledge Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 7(h) hereof. All references to the term
"Person" or "Persons" herein shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability corporation, limited liability participation, business trust,
unincorporated association, joint stock company, trust, joint venture or other
entity or any government or any agency, instrumentality or political subdivision
thereof.
(f) This Pledge Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon Pledgor and its
successors and assigns and inure to the benefit of and be enforceable by Pledgee
and its successors and assigns.
(g) If any provision of this Pledge Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Pledge Agreement as a whole, but this Pledge Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
(h) Neither this Pledge Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but only
by a written agreement signed by
<PAGE> 9
an authorized officer of Pledgee and the Pledgor. Pledgee shall not, by any act,
delay, omission or otherwise be deemed to have expressly or impliedly waived any
of its rights, powers and/or remedies unless such waiver shall be in writing and
signed by an authorized officer of Pledgee. Any such waiver shall be enforceable
only to the extent specifically set forth therein. A waiver by Pledgee of any
right, power and/or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right, power and/or remedy which Pledgee would
otherwise have on any future occasion, whether similar in kind or otherwise.
(Signature Follows)
<PAGE> 10
IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of
the day and year first above written.
ECOGEN INC.
/s/ Mary E. Paetzold
--------------------------------
Name: Mary E. Paetzold
Title: Vice President and
Chief Financial Officer
[PLEDGE AND SECURITY AGREEMENT - ECOGEN]
<PAGE> 1
Exhibit 10.139
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated August 20,
1998, by ECOGEN TECHNOLOGIES I INCORPORATED, a Delaware corporation ("Pledgor"),
with its chief executive office at 2005 Cabot Boulevard West, Langhorne,
Pennsylvania 19047, in favor of CONGRESS FINANCIAL CORPORATION, a Delaware
corporation ("Pledgee"), having an office at 1133 Avenue of the Americas, New
York 10036.
W I T N E S S E T H:
WHEREAS, Pledgor is now the direct and beneficial owner of the shares
of common stock of its direct subsidiaries (each, an "Issuer"), as described on
Exhibit A hereto and made a part hereof (the "Pledged Securities"); and
WHEREAS, Pledgee and Ecogen Inc. (the "Borrower") have entered into
financing arrangements pursuant to which Pledgee may make loans and advances and
provide other financial accommodations to Borrower as set forth in the Loan and
Security Agreement, dated August 20, 1998, by and between Pledgee and Borrower
(as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement") and other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto, including,
but not limited to, the Guarantee (as defined below), and this Pledge Agreement
(all of the foregoing, together with the Loan Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced, being collectively referred to herein as the "Financing
Agreements");
WHEREAS, Pledgor has absolutely and unconditionally guaranteed the
payment and performance of all now existing and hereafter arising obligations,
liabilities and indebtedness of Borrower to Pledgee as set forth in the
Subsidiary Guarantee, dated August 20, 1998, by Pledgor in favor of Pledgee (as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Guarantee");
WHEREAS, in order to induce Pledgee to make loans and advances
and provide other financial accommodations to Borrower pursuant to the Financing
Agreements, Pledgor has agreed to secure the payment and performance of the
Obligations (as hereinafter defined) to Pledgee and to accomplish same by (i)
executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to
Pledgee the Pledged Securities which are registered in the name of Pledgor,
together with appropriate powers duly executed in blank by Pledgor, (iii)
executing and delivering to Pledgee the Guarantee, and (iv) delivering to
Pledgee any and all other documents which Pledgee deems necessary to protect
Pledgee's interests hereunder;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to
Pledgee and grants to Pledgee a security interest in and lien upon (a) the
Pledged Securities, together with all cash dividends, stock dividends,
interests, profits, redemptions, warrants, subscription rights, stock,
securities options, substitutions, exchanges and other distributions now or
hereafter distributed by any Issuer on or after the date hereof or which may
hereafter be delivered to the possession of Pledgor or Pledgee with respect
thereto, (b) Pledgor's records with respect to the foregoing, and (c) the
proceeds of all of the foregoing (all of the foregoing being collectively
referred to herein as the "Pledged Property"). Pledgor is delivering herewith
physical possession of the Pledged Securities to Pledgee, accompanied by
appropriate instruments of transfer executed in blank, and Pledgee herewith
acknowledges receipt of the Pledged Securities.
2. OBLIGATIONS SECURED
The security interest, lien and other interests granted to Pledgee
pursuant to this Pledge Agreement shall secure the prompt performance and
payment in full of any and all Obligations, as such term is defined in the Loan
Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
Pledgor hereby represents, warrants and covenants with and to Pledgee
the following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) The Pledged Securities are duly authorized, validly issued, fully
paid and non-assessable capital stock of the applicable Issuer and constitute
Pledgor's entire interest in each Issuer and are not registered, nor has Pledgor
authorized the registration thereof, in the name of any person or entity other
than Pledgor or Pledgee.
(b) The Pledged Property is directly, legally and beneficially owned by
Pledgor, free and clear of all claims, liens, pledges and encumbrances of any
kind, nature or description, except for the pledge and security interest in
favor of Pledgee.
(c) The Pledged Property is not subject to any restrictions, other than
pursuant to the Securities Act of 1933, as amended (the "Act"), relative to the
transfer thereof and Pledgor has the right to transfer and hypothecate the
Pledged Property free and clear of any liens, encumbrances or restrictions.
<PAGE> 3
(d) The Pledged Property is duly and validly pledged to Pledgee and no
consent or approval of any governmental or regulatory authority or of any
securities exchange or the like, nor any consent or approval of any other third
party, was or is necessary to the validity and enforceability of this Pledge
Agreement.
(e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the
Pledged Property, (ii) perform any and all other acts which Pledgee in good
faith deems reasonable and/or necessary for the protection and preservation of
the Pledged Property or its value or Pledgee's security interest therein,
including, without limitation, so long as an Event of Default is in existence
transferring, registering or arranging for the transfer or registration of the
Pledged Property to or in Pledgee's own name and receiving the income therefrom
as additional security for the Obligations and (iii) pay any charges or expenses
which Pledgee deems necessary for the foregoing purpose, but without any
obligation to do so. Any obligation of Pledgee for reasonable care for the
Pledged Property in Pledgee's possession shall be limited to the same degree of
care which Pledgee uses for similar property pledged to Pledgee by other
persons.
(f) If Pledgor shall become entitled to receive or acquire, or shall
receive any stock certificate, or option or right with respect to or in exchange
for the stock of any Issuer (including without limitation, any certificate
representing a dividend or a distribution or exchange of or in connection with
reclassification of the Pledged Securities) whether as an addition to, in
substitution of, or in exchange for any of the Pledged Property or otherwise,
Pledgor agrees to accept same as Pledgee's agent, to hold same in trust for
Pledgee and to deliver same forthwith to Pledgee or Pledgee's agent or bailee in
the form received, with the endorsement(s) of Pledgor where necessary and/or
appropriate powers and/or assignments duly executed to be held by Pledgee or
Pledgee's agent or bailee subject to the terms hereof, as further security for
the Obligations.
(g) Pledgor shall not, without the prior consent of Pledgee, directly
or indirectly, sell, assign, transfer, or otherwise dispose of, or grant any
option with respect to the Pledged Property, nor shall Pledgor create, incur or
permit any further pledge, hypothecation, encumbrance, lien, mortgage or
security interest with respect to the Pledged Property.
(h) So long as no Event of Default (as hereinafter defined) has
occurred and is continuing, Pledgor shall have the right to vote and exercise
all corporate rights with respect to the Pledged Securities, except as expressly
prohibited herein, and to receive any cash dividends payable in respect of the
Pledged Securities.
(i) Pledgor shall pay all charges and assessments of any nature against
the Pledged Property or with respect thereto prior to said charges and/or
assessments being delinquent.
(j) Pledgor shall promptly reimburse Pledgee on demand, together with
interest at the rate then applicable to the Obligations as set forth in the Loan
Agreement, for any charges, assessments or expenses paid or incurred by Pledgee
in its discretion for the protection, preservation and maintenance of the
Pledged Property and the enforcement of Pledgee's rights hereunder, including,
without limitation, attorneys' fees and legal expenses incurred by Pledgee in
seeking to protect, collect or enforce its rights in the Pledged Property or
otherwise hereunder.
<PAGE> 4
(k) Pledgor shall furnish, or cause to be furnished, to Pledgee such
information concerning Issuers and the Pledged Property as Pledgee may from time
to time reasonably request in good faith, including, without limitation, current
financial statements.
(l) Pledgee may notify each Issuer or the appropriate transfer agent of
the Pledged Securities to register the security interest and pledge granted
herein and honor the rights of Pledgee with respect thereto.
(m) Pledgor waives: (i) all rights to require Pledgee to proceed
against any other person, entity or collateral or to exercise any remedy, (ii)
the defense of the statute of limitations in any action upon any of the
Obligations, (iii) any right of subrogation or interest in the Obligations or
Pledged Property until all Obligations have been paid in full, (iv) any rights
to notice of any kind or nature whatsoever, unless specifically required in this
Pledge Agreement or non-waivable under any applicable law, and (v) to the extent
permissible, its rights under Section 9-112 and 9-207 of the New York Uniform
Commercial Code. Pledgor agrees that the Pledged Property, other collateral, or
any other guarantor or endorser may be released, substituted or added with
respect to the Obligations, in whole or in part, without releasing or otherwise
affecting the liability of Pledgor, the pledge and security interests granted
hereunder, or this Pledge Agreement. Pledgee is entitled to all of the benefits
of a secured party set forth in Section 9-207 of the New York Uniform Commercial
Code.
4. EVENTS OF DEFAULT
All Obligations shall become immediately due and payable, without
notice or demand, at the option of Pledgee, upon the occurrence of any Event of
Default, as such term is defined in the Loan Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
At any time an Event of Default exists or has occurred and is
continuing, in addition to all other rights and remedies of Pledgee, whether
provided under this Pledge Agreement, the Loan Agreement, the other Financing
Agreements, applicable law or otherwise, Pledgee shall have the following rights
and remedies which, to the extent not prohibited by applicable law, may be
exercised without notice to, or consent by, Pledgor except as such notice or
consent is expressly provided for hereunder:
(a) Pledgee, at its option, shall be empowered to exercise its
continuing right to instruct the applicable Issuer or Issuers (or the
appropriate transfer agent of the Pledged Securities) to register any or all of
the Pledged Securities in the name of Pledgee or in the name of Pledgee's
nominee and Pledgee may complete, in any manner Pledgee may deem expedient, any
and all stock powers, assignments or other documents heretofore or hereafter
executed in blank by Pledgor and delivered to Pledgee. After said instruction,
and without further notice, Pledgee shall have the exclusive right to exercise
all voting and corporate rights with respect to the Pledged Securities and other
Pledged Property, and exercise any and all rights of conversion, redemption,
exchange, subscription or any other rights, privileges, or options pertaining to
any
<PAGE> 5
shares of the Pledged Securities or other Pledged Property as if Pledgee were
the absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Securities and other
Pledged Property upon any merger, consolidation, reorganization,
recapitalization or other readjustment with respect thereto. Upon the exercise
of any such rights, privileges or options by Pledgee, Pledgee shall have the
right to deposit and deliver any and all of the Pledged Securities and other
Pledged Property to any committee, depository, transfer agent, registrar or
other designated agency upon such terms and conditions as Pledgee may determine,
all without liability, except to account for property actually received by
Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid
rights, privileges or options (all of which are exercisable in the sole
discretion of Pledgee) and shall not be responsible for any failure to do so or
delay in doing so.
(b) In addition to all the rights and remedies of a secured party under
the Uniform Commercial Code or other applicable law, Pledgee shall have the
right, at any time and without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Pledgor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived to the extent permitted by applicable law), to proceed forthwith to
collect, redeem, recover, receive, appropriate, realize, sell, or otherwise
dispose of and deliver said Pledged Property or any part thereof in one or more
lots at public or private sale or sales at any exchange, broker's board or at
any of Pledgee's offices or elsewhere at such prices and on such terms as
Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit
or for future delivery without assumption of any credit risk, with Pledgee
having the right to purchase all or any part of said Pledged Property so sold at
any such sale or sales, public or private, free of any right or equity of
redemption in Pledgor, which right or equity is hereby expressly waived or
released by Pledgor. The proceeds of any such collection, redemption, recovery,
receipt, appropriation, realization, sale or other disposition, after deducting
all costs and expenses of every kind incurred relative thereto or incidental to
the care, safekeeping or otherwise of any and all Pledged Property or in any way
relating to the rights of Pledgee hereunder, including attorneys' fees and legal
expenses, shall be applied first to the satisfaction of the Obligations (in such
order as Pledgee may elect and whether or not due) and then to the payment of
any other amounts required by applicable law, including Section 9-504(1)(c) of
the New York Uniform Commercial Code, with Pledgor to be and remain liable for
any deficiency. Pledgor shall be liable to Pledgee for the payment on demand of
all such costs and expenses, together with interest at the then applicable rate
set forth in the Loan Agreements, and any reasonable attorneys' fees and
reasonable legal expenses. Pledgor agrees that ten (10) days prior written
notice by Pledgee designating the place and time of any public sale or of the
time after which any private sale or other intended disposition of any or all of
the Pledged Property is to be made, is reasonable notification of such matters.
(c) Pledgor recognizes that Pledgee may be unable to effect a public
sale of all or part of the Pledged Property by reason of certain prohibitions
contained in the Act, as now or hereafter in effect or in applicable Blue Sky or
other state securities law, as now or hereafter in effect, but may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such Pledged Property
for their own account for investment and not with a view to the distribution or
resale thereof. If at the time of
<PAGE> 6
any sale of the Pledged Property or any part thereof, the same shall not, for
any reason whatsoever, be effectively registered (if required) under the Act (or
other applicable state securities law), as then in effect, Pledgee in its sole
and absolute discretion is authorized to sell such Pledged Property or such part
thereof by private sale in such manner and under such circumstances as Pledgee
or its counsel may deem necessary or advisable in order that such sale may
legally be effected without registration. Pledgor agrees that private sales so
made may be at prices and other terms less favorable to the seller than if such
Pledged Property were sold at public sale, and that Pledgee has no obligation to
delay the sale of any such Pledged Property for the period of time necessary to
permit an Issuer, even if such Issuer would agree, to register such Pledged
Property for public sale under such applicable securities laws. Pledgor agrees
that any private sales made under the foregoing circumstances shall be deemed to
have been in a commercially reasonable manner.
(d) All of the Pledgee's rights and remedies, including, but not
limited to, the foregoing and those otherwise arising under this Pledge
Agreement, the Loan Agreements and the other Financing Agreements, the
instruments comprising the Pledged Property, applicable law or otherwise, shall
be cumulative and not exclusive and shall be enforceable alternatively,
successively or concurrently as Pledgee may deem expedient. No failure or delay
on the part of Pledgee in exercising any of its options, powers or rights or
partial or single exercise thereof, shall constitute a waiver of such option,
power or right.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
(a) The validity, interpretation and enforcement of this Pledge
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Pledgor irrevocably consents and submits to the non-exclusive
jurisdiction of the Supreme Court of the State of New York for New York County
and the United States District Court for the Southern District of New York and
waives any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Pledge Agreement or any of the
other Financing Agreements or in any way connected with or related or incidental
to the dealings of the parties hereto in respect of this Pledge Agreement or any
of the other Financing Agreements or the transactions related hereto or thereto,
in each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agrees that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Pledgee
shall have the right to bring any action or proceeding against Pledgor or its
property in the courts of any other jurisdiction which Pledgee deems necessary
or appropriate in order to realize on the Pledged Property or to otherwise
enforce its rights against Pledgor or its property).
(c) Pledgor hereby waives personal service of any and all process upon
it and consents that all such service of process may be made by certified mail
(return receipt requested) directed
<PAGE> 7
to its address set forth herein and service so made shall be deemed to be
completed ten (10) days after the same shall have been so deposited in the U.S.
mails, or, at Pledgee's option, by service upon Pledgor in any other manner
provided under the rules of any such courts.
(d) PLEDGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY
OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE IN RESPECT OF THIS PLEDGE
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. PLEDGOR HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT PLEDGOR OR PLEDGEE MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Pledgee shall not have any liability to Pledgor (whether in tort,
contract, equity or otherwise) for losses suffered by Pledgor in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Pledge Agreement, or any act, omission or event occurring
in connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Pledgee, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct.
7. MISCELLANEOUS
(a) Pledgor agrees that at any time and from time to time upon the
written request of Pledgee, Pledgor shall execute and deliver such further
documents, including, but not limited to, irrevocable proxies or stock powers,
in form satisfactory to counsel for Pledgee, and will take or cause to be taken
such further acts as Pledgee may request in order to effect the purposes of this
Pledge Agreement and perfect or continue the perfection of the security interest
in the Pledged Property granted to Pledgee hereunder.
(b) Beyond the exercise of reasonable care to assure the safe custody
of the Pledged Property (whether such custody is exercised by Pledgee, or
Pledgee's nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee
shall have no duty or liability to protect or preserve any rights pertaining
thereto and shall be relieved of all responsibility for the Pledged Property
upon surrendering it to Pledgor or foreclosure with respect thereto.
(c) All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed to have been duly given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
<PAGE> 8
registered or certified mail, return receipt requested, five (5) days after
mailing. All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):
If to Pledgor: Ecogen Technologies I Incorporated
2005 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: President
If to Pledgee: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Andrew Robin
(d) This Pledge Agreement is and is intended to be a continuing Pledge
Agreement and shall remain in full force and effect until all of the Obligations
have been finally paid and the Loan Agreement has been terminated. Upon the
termination of this Pledge Agreement in accordance with the foregoing, the
Pledged Property shall be released from the security interest granted in favor
of Pledgee hereunder.
(e) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural. All references to Pledgor,
Pledgee and Issuer pursuant to the definitions set forth in the recitals hereto,
or to any other person herein, shall include their respective successors and
assigns. The words "hereof," "herein," "hereunder," "this Pledge Agreement" and
words of similar import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not any particular provision of this Pledge
Agreement and as this Pledge Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 7(h) hereof. All references to the term
"Person" or "Persons" herein shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability corporation, limited liability participation, business trust,
unincorporated association, joint stock company, trust, joint venture or other
entity or any government or any agency, instrumentality or political subdivision
thereof.
(f) This Pledge Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon Pledgor and its
successors and assigns and inure to the benefit of and be enforceable by Pledgee
and its successors and assigns.
(g) If any provision of this Pledge Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Pledge Agreement as a whole, but this Pledge Agreement shall be construed as
though it did not contain the particular provision held to
<PAGE> 9
be invalid or unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be permitted by
applicable law.
(h) Neither this Pledge Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but only
by a written agreement signed by an authorized officer of Pledgee and the
Pledgor. Pledgee shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Pledgee. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Pledgee of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Pledgee would otherwise have on any future occasion,
whether similar in kind or otherwise.
(Signatures Follow)
<PAGE> 10
IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of
the day and year first above written.
ECOGEN TECHNOLOGIES I INCORPORATED
By: /s/ Mary E. Paetzold
----------------------------
Name: Mary E. Paetzold
Title: Vice President and
Chief Financial Officer
[PLEDGE AND SECURITY AGREEMENT - ECOGEN TECHNOLOGIES I]
