<PAGE> 1
As filed with the Securities and Exchange Commission on February 18, 2000.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from ________ to __________
COMMISSION FILE NUMBER 1-9579
ECOGEN INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2487948
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 W. CABOT BOULEVARD, #170 19047-1811
LANGHORNE, PENNSYLVANIA (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (215) 757-1590
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
[X] YES [ ] NO
THE APPROXIMATE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT IS $15,594,428 AS OF JANUARY 31, 2000. (A)
10,509,623
(NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF JANUARY 28, 2000)
------
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement with respect to the Annual Meeting of
Stockholders scheduled to be held on April 6, 2000 to be filed by Ecogen Inc.
with the Commission (hereinafter the "Proxy Statement") is incorporated by
reference into Part III of this Form 10-K.
(A) Excludes 3,578,406 shares of common stock held of record by directors,
officers and stockholders known to the registrant to hold more than five percent
of the common stock outstanding as of January 31, 2000. Exclusion of shares held
by any person should not be construed to indicate that such person possesses the
power, direct or indirect, to direct or cause the direction of the management or
policies of the registrant, or that such person is controlled by or under common
control with the registrant.
<PAGE> 2
(AMENDMENT NO. 1)
FORM 10-K/A.
The purpose of this Form 10-K/A is to file Exhibits 3.6, 4.3, 4.4, 4.5,
10.149, 10.150, 10.151, 10.152, 21, 24 and 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(3) Exhibits
<TABLE>
<C> <S>
Exhibit No. Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of Ecogen Inc.
(Form 10-K for fiscal quarter ended January 31, 1996)*
3.2 Bylaws of Ecogen Inc., as amended. (Form S-1 Registration
Statement)*
3.3 Certificate of Designations, Preferences and Rights of
Series 1998-A Convertible Preferred Stock (Form 10-Q for
fiscal quarter ended April 30, 1998)*
3.4 Certificate of Designations, Preferences and Rights of
Series 1998-C Convertible Preferred Stock (Form 9-K dated
September 2, 1998)*
3.5 Corrected Certificate of Designations, Preferences and
Rights of Series 1999-A Convertible Preferred Stock
(Form 10-Q for fiscal quarter ended April 30, 1999)*
3.6 Certificate of Designations, Preferences and Rights of
Series 2000-A Convertible Preferred Stock.
4.3 Ecogen Inc. Stock Option Plan, as amended.
4.4 Ecogen Inc. 1998 Stock Option Plan, as amended.
4.5 Ecogen Inc. 1999 Stock Option Plan, as amended.
10.14 Form of Confidentiality Agreement between Ecogen Inc. and all
Ecogen Inc. employees. (Form S-1 Registration Statement)*
10.30 Lease Agreement, dated June 4, 1985, between Linpro Bucks
County II, Limited and Ecogen Inc. (Form S-1 Registration
Statement)*
10.67 Bt Gene License Agreement, dated April 11, 1991, between Ecogen
Inc. and Pioneer Hi-Bred International, Inc. (Form S-1
Registration Statement filed on May 1, 1991, as amended)*
10.88 Form of Technology License Agreement between Ecogen-Bio Inc. and
certain Program Subsidiaries. (Form 10-K for fiscal year ended
December 31, 1992)*
10.89 Form of Research and Development Agreement between Ecogen Inc.
and certain Program Subsidiaries. (Form 10-K for fiscal year
ended December 31, 1992)*
10.90 Form of Marketing Option Agreement between Ecogen Inc. and
certain Program Subsidiaries. (Form 10-K for fiscal year ended
December 31, 1992)*
10.119 Form of Incentive Stock Option Agreement, as amended. (Form 10-K
for fiscal year ended October 31, 1994)*
- --------------------
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 1-9579,
File No. 33-14119 in the case of the Form S-1 Registration Statement and
File No. 33-40319 in the case of the Form S-1 Registration Statement filed
on May 1, 1991, as amended) and are made part of this report.
</TABLE>
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<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.122 Investment Agreement, dated as of January 24, 1996,
between the Company and Monsanto Company. (Form 10-Q
for fiscal quarter ended January 31, 1996)*
10.123 Technology Assignment Agreement, dated as of January 24,
1996, between the Company, Ecogen-Bio Inc. and Monsanto
Company. (Form 10-Q for fiscal quarter ended January 31,
1996)*
10.125 Form of Indemnification Agreement for Directors and Officers
(Form 10-Q for fiscal quarter ended January 31, 1997)*
10.127 Amendment No. 1 to Technology Assignment by and between
Monsanto Company and Ecogen Inc. dated September 15, 1997.
(Form 10-K for fiscal year ended October 31, 1997)*
10.128 Convertible Note Purchase Agreement by and among Ecogen
Inc., Ecogen Investment Inc., Ecogen-Bio Inc. and United
Equities (Commodities) Company dated October 31, 1997. (Form
10-K for fiscal year ended October 31, 1997)*
10.129 8% Convertible Note due October 31, 2002 issued to United
Equities (Commodities) Company dated October 31, 1997. (Form
10-K for fiscal year ended October 31, 1997)*
10.130 Security Agreement by and among Ecogen Inc., Ecogen
Investment Inc., Ecogen-Bio Inc. and United Equities
(Commodities) Company dated October 31, 1997. (Form 10-K for
fiscal year ended October 31, 1997)*
10.132 Amended and Restated Research and Development Agreement dated
January 30, 1998 by and between Monsanto Company and Ecogen
Inc. (Form 10-Q for fiscal quarter ended January 31, 1998)*
10.133 Asset Purchase and Sale Agreement among Ecogen Inc.,
Ecogen-Bio Inc. and Scentry Biologicals Inc. dated April 28,
1998. (Form 10-Q for fiscal quarter ended April 30, 1998)*
10.134 Convertible Preferred Stock Purchase Agreement between United
Equities (Commodities) Company and Ecogen Inc. dated August
20, 1998. (Form 8-K filed on September 2, 1998)*
10.135 Registration Rights Agreement between United Equities
(Commodities) Company and Ecogen Inc., dated August 20, 1998.
(Form 8-K filed on September 2, 1998)*
10.136 Loan and Security Agreement between Congress Financial
Corporation and Ecogen Inc., dated August 20, 1998. (Form 8-K
filed on September 2, 1998)*
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</TABLE>
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 1-9579,
File No. 33-14119 in the case of the Form S-1 Registration Statement and
File No. 33-40319 in the case of the Form S-1 Registration Statement filed
on May 1, 1991, as amended) and are made part of this Report.
<PAGE> 4
Exhibit No. Description
- ----------- -----------
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. (Form 8-K filed on September 2, 1998)*
10.138 Pledge and Security Agreement by Ecogen Inc. in favor of Congress
Financial Corporation, dated August 20, 1998. (Form 8-K filed on
September 2, 1998)*
10.139 Pledge and Security Agreement by Ecogen Technologies I Incorporated
in favor of Congress Financial Corporation dated August 20, 1998.
(Form 8-K filed on September 2, 1998)*
10.140 Amended and Restated Convertible Preferred Stock Purchase Agreement
between Ecogen Inc. and KA Investments LDC dated as of June 5, 1998.
(Form S-3 Registration Statement filed on September 14, 1998)*
10.141 Warrant Agreement between Ecogen Inc. and KA Investments LDC dated
June 5, 1998. (Form S-3 Registration Statement filed on September
14, 1998)*
10.142 Amended and Restated Registration Rights Agreement between Ecogen
Inc. and KA Investments LDC dated as of June 5, 1998. (Form S-3
Registration Statement filed on September 14, 1998)*
10.143 Stock Award Agreement between Ecogen Inc. and James P. Reilly, Jr.
dated September 23, 1998.*
10.145 Amended and Restated Stock Award Agreement between Ecogen Inc. and
James P. Reilly, Jr. dated as of April 9, 1999 (Form 10-Q for fiscal
quarter ended April 30, 1999)*
10.146 Warrant Agreement between Ecogen Inc. and KA Investments LDC dated
May 12, 1999 (Form 10-Q for fiscal quarter ended April 30, 1999)*
10.147 Convertible Preferred Stock Purchase Agreement between Ecogen Inc.
and KA Investments LDC dated May 12, 1999 (Form 10-Q for fiscal
quarter ended April 30, 1999)*
10.148 Registration Rights Agreement between Ecogen Inc. and KA Investments
LDC dated May 12, 1999 (Form 10-Q for fiscal quarter ended April 30,
1999)*
10.149 Restated Severance Compensation Agreement, dated December 9, 1999,
between Ecogen Inc, a Delaware corporation and James P. Reilly, Jr.
10.150 Term Loan and Security Agreement, dated as of December 23, 1999,
between Ecogen Inc. and The Berkshire Bank.
- ------------------------
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 1-9579,
File No. 33-14119 in the case of the Form S-1 Registration Statement and
File No. 33-40319 in the case of the Form S-1 Registration Statement filed
on May 1, 1991, as amended) and are made part of this Report. 10.151.
<PAGE> 5
Exhibit No. Description
- ----------- -----------
10.151 Warrant Agreement between Ecogen Inc. and Momar Corporation dated
December 23, 1999
10.152 Amendment No. 2 to Lease Agreement, dated December 17, 1999 by
and between Brandywine Realy and Ecogen Inc.
21. List of Subsidiaries
24. Consent of KPMG LLP
25. Powers of attorney executed by certain officers of the Company
and the individual members of the Board of Directors authorizing
certain officers of the Company to file amendments to the
Company's annual report on Form 10-K are located on the signature
page to such Form 10-K.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on August 11, 1999 with
respect to the sale of 500,000 shares of common stock to an
accredited investor at a purchase price of $3.09 per share.
- -----------------------------
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 1-9579,
File No. 33-14119 in the case of the Form S-1 Registration Statement and File
No. 33-40319 in the case of the Form S-1 Registration Statement filed on May 1,
1991, as amended) and are made part of this Report.
<PAGE> 6
SIGNATURE
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ECOGEN INC.
By:/s/ James P. Reilly, Jr.
-------------------------------------
James P. Reilly, Jr.
Chairman and Chief Executive Officer
Date: February 18, 2000
The Exhibits that have been filed herewith this Form 10-K/A are summarized
as follows:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.6 Certificate of Designations, Preferences and Rights of Series 2000-A Convertible
Preferred Stock.
4.3 Ecogen Inc. Stock Option Plan, as amended.
4.4 Ecogen Inc. 1998 Stock Option Plan, as amended.
4.5 Ecogen Inc. 1999 Stock Option Plan, as amended.
10.149 Restated Severance Compensation Agreement, dated December 9, 1999,
between Ecogen Inc, a Delaware corporation and James P. Reilly, Jr.
10.150 Term Loan and Security Agreement, dated as of December 23, 1999, between
Ecogen Inc. and The Berkshire Bank
10.151 Warrant Agreement between Ecogen Inc. and Momar Corporation dated
December 23, 1999
10.152 Amendment No. 2 to Lease Agreement, dated December 17, 1999 by and
between Brandywine Realy and Ecogen Inc.
21. List of Subsidiaries
24. Consent of KPMG LLP
27. Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES 2000-A 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 Company's Preferred Stock consisting of
30,000 shares of Preferred Stock, be and hereby is, designated as "7%
Series 2000-A Convertible Preferred Stock", par value $.01 per share
(the "Series A Preferred Stock"), and that the Series A 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 2000-A
Convertible Preferred Stock (the "Series A Certificate") attached as
Exhibit A.
That said Series A 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 7% Series 2000-A Convertible Preferred
Stock (the "Preferred Stock") and the number of shares so designated shall be
30,000 (which shall not be subject to increase without the consent of the
holders of the Preferred Stock (each, 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, 15,000 shares of Preferred Stock are being issued initially,
and up to 15,000 shares
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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 7% per annum (the
"Dividend Rate"), payable on a quarterly basis on March 31, June 30, September
30 and December 31 of each year during the term hereof (each a "Dividend Payment
Date"), commencing on March 31, 2000, 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.
(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:
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(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
Designations, (c) authorize or create any class of stock ranking as to dividends
or distribution of assets upon a Liquidation (as defined in Section 4) senior to
the Preferred Stock, except for any series of Preferred Stock issued and sold in
accordance with the Purchase Agreement, (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
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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.
Section 5. Conversion.
(a) (i) Each share of Preferred Stock shall be convertible
into shares of Common Stock (subject to limitation or reduction pursuant to
Sections 5(a)(ii) and (a)(iii) hereof) at the Conversion Ratio (as defined in
Section 8) at the option of the Holder, at any time and from time to time, from
and after the date (the "Initial Conversion Date") which is the earlier of (i)
the date the Underlying Securities Registration Statement (as defined in Section
8) is declared effective by the Commission, or (ii) the 120th day following the
Original Issue Date; provided, that, (A) on and after the Initial Conversion
Date, the Holders shall only be entitled to convert up to (i) 25% of the number
of shares of Preferred Stock originally issued on the Original Issue Date, and
(ii) any Preferred Dividends issued on such shares of Preferred Stock, (B) on
and after the first month anniversary of the Initial Conversion Date, the
Holders shall only be entitled to convert up to (i) 50% of the number of shares
of Preferred Stock originally issued on the Original Issue Date, and (ii) any
Preferred Dividends issued on such shares of Preferred Stock, (C) on and after
the second month anniversary of the Initial Conversion Date, the Holders shall
only be entitled to covert up to (i) 75% of the number of shares of Preferred
Stock, originally issued on the Original Issue Date, and (ii) any Preferred
Dividends issued on such shares of Preferred Stock, and (D) on and after the
third month anniversary of the Initial Conversion Date, the Holders shall be
entitled to convert all of the shares of Preferred Stock originally issued on
the Original Issue Date, together with all Preferred Dividends issued on such
shares of Preferred Stock. 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
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<PAGE> 5
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 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(b)) a certificate for such number of shares as have
not been converted.
(ii)(1) A Holder may not convert shares of Preferred
Stock (including, without limitation, shares of Preferred Stock issued as
payment of dividends hereunder) or receive shares of Common Stock in payment of
dividends hereunder to the extent such conversion or receipt would result in the
Holder, together with any affiliate thereof, beneficially owning (as determined
in accordance with Section 13(d) of the Exchange Act (as hereinafter defined)
and the rules thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock. The Holder shall have the sole authority and obligation
to determine whether the restriction contained in this Section applies and to
the extent that the Holder determines that the limitation contained in this
Section applies, the determination of which shares of Preferred Stock are
convertible shall be in the sole discretion of the Holder, and the Company shall
have no obligation to verify or confirm the accuracy of any such determination.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 75 days prior notice to the
Company, and the provisions of this Section shall continue to apply until such
75th day (or later, if stated in the notice of waiver). Other Holders shall be
unaffected by any such waiver.
(2) A Holder may not convert shares of Preferred
Stock (including, without limitation, shares of Preferred Stock as payment of
dividends hereunder) or receive shares of Common Stock in payment of dividends
hereunder to the extent such conversion or receipt would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock. The
Holder shall have the sole authority and obligation to determine whether the
restriction contained in this Section applies and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which shares of Preferred Stock are convertible shall be in the
sole discretion of the Holder and the Company shall have no obligation to verify
or confirm the accuracy of any such determination. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 75 days prior notice to the Company (or later, if
stated in the notice of waiver). Other Holders shall be unaffected by any such
waiver.
(iii) At no time while the Common Stock is listed for
trading on the NASDAQ or the Nasdaq SmallCap Market shall the Company issue on
conversions of Preferred Stock an aggregate number of shares of Common Stock
that, when added to the number of shares underlying the Trigger Warrants (as
hereinafter defined) if the same were to be issued at such time, would equal or
exceed 20% of the number of shares of Common
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Stock issued and outstanding on the Original Issue Date unless the Company shall
have theretofore (A) obtained the vote of shareholders ("Shareholder Approval"),
if any, as may be required by the rules and regulations of the Nasdaq Stock
Market (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 The Nasdaq Stock
Market (a "Nasdaq Exemption"). The maximum number of shares of Common Stock that
can be issued on conversions of Preferred Stock under this Section 5(a)(iii) is
referred to as the "Issuable Maximum." At such time as the Company has issued,
on conversions of Preferred Stock, a number of shares of Common Stock equal to
the Issuable Maximum and has not theretofore obtained Shareholder Approval or a
Nasdaq Exemption (the "Trigger Date"), the Company shall either (i) redeem all
outstanding shares of Preferred Stock and Preferred Dividends at a price equal
to the Optional Redemption Price (as defined in Section 6(c) hereof) pursuant to
the terms and conditions of Section 6(c) hereof (the "Initial Optional
Redemption"), provided, that the conditions listed in Section 6(a)(i)-(iii)
shall not apply to the Initial Optional Redemption, or (ii) within a period of
75 days from the Trigger Date (the "Trigger Period") obtain Shareholder Approval
or a Nasdaq Exemption. On the Trigger Date, if the Company has not exercised its
right to effect the Initial Optional Redemption, the Company shall issue to the
Holders (and distribute pro rata among the Holders based on the relative number
of shares of Preferred Stock held) warrants (the "Trigger Warrants") to purchase
a number of shares of Common Stock equal to 15% of the quotient obtained by
dividing (x) the Stated Value of the Excess Preferred Stock (as defined below)
by (y) the lower of the Per Share Market Value on the Trigger Date or on the
date such warrants are actually distributed to the Holders (the Trigger Date or
such other date, as applicable, is referred to as the "Measurement Date"). Such
warrants shall be substantially in the form attached as Exhibit B to the
Purchase Agreement and shall entitle the holders thereof to purchase shares of
Common Stock at any time during the five year period following the date on which
such warrants are actually distributed to the Holders at an exercise price per
share equal to 101% of the Per Share Market Value on the Measurement Date. From
and after the Trigger Date until the earlier of (I) the date on which a
Shareholder Approval or a Nasdaq Exemption has been obtained, and (II) the
expiration of the Trigger Period, the Dividend Rate shall be increased to 16%
per annum. From and after the expiration of the Trigger Period, if the Company
shall not have theretofore obtained either the Shareholder Approval or a Nasdaq
Exemption, and until such date, if any, as the Company obtains Shareholder
Approval or a Nasdaq Exemption, the Dividend Rate shall be increased to 20% per
annum and the Optional Redemption Price (as defined in Section 6(c)) with
respect to any redemption taking place thereafter shall be equal to the
Redemption Amount (as defined in Section 8). Unless the Company shall have
theretofore obtained Shareholder Approval or a Nasdaq Exemption, (I) if any
Holder delivers a Conversion Notice as a result of which such Holder would be
entitled to a number of shares of Common Stock that would result in the issuance
of a number of shares of Common Stock in excess of the Issuable Maximum, then
the Company shall issue in connection with such conversion such number of shares
of
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<PAGE> 7
Common Stock as would not result in the aggregate issuances exceeding the
Issuable Maximum; (II) if more than one Holder has delivered a Conversion Notice
at the same time as a result of which such Holders would be entitled to a number
of shares of Common Stock that would result in the issuance of a number of
shares of Common Stock in excess of the Issuable Maximum, then the Company shall
issue the maximum number of shares of Common Stock permissible to such Holders
pro rata in accordance with the number of shares of Preferred Stock submitted
for conversion; and (III) if at any time the Conversion Price is such that if
all then outstanding and unconverted shares of Preferred Stock were converted
into Common Stock the number of shares of Common Stock that would be issued
would equal or exceed 85% of the Issuable Maximum, the Company shall give prompt
notice thereof to all Holders. For purposes of Shareholder Approval, the Company
shall not count any vote of the Holders with respect to shares of Common Stock
issued in connection with a conversion of the Preferred Stock and held by the
Holders.
(iv) Notwithstanding anything herein to the contrary
set forth herein, unless the Company shall have previously either (A) received
the shareholder approval as may be required under Rule 4310(H)(i)(b) of the
NASDAQ Stock Market or (B) obtained an exemption from the requirement from the
NASDAQ Stock Market for such shareholder approval, a Holder shall not convert
shares of Preferred Stock (including, without limitation, shares of Preferred
Stock issued as payment of dividends hereunder) to the extent such conversion
would result in such Holder holding in excess of 25% of the number of shares of
Common Stock outstanding on the Original Issue Date.
(b) (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
and reduction pursuant to Sections 5(a)(ii) and (a)(iii)), 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 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." 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, if available, use its
reasonable best efforts to deliver any certificate or certificates required to
be delivered by the
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<PAGE> 8
Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. If in the case of any Conversion Notice 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(b)(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 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 Sections
5(a)(ii) and (a)(iii), by notice to the Company, require the Company to issue
Underlying Shares pursuant to Section 5(c), 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.
(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(b)(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
(A) 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 product of (1) the
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<PAGE> 9
aggregate number of shares of Common Stock that such Holder was entitled to
receive from the conversion at issue multiplied by (2) the market price of the
Common Stock at the time of the sale giving rise to such purchase obligation and
(B) at the option of the Holder, either return the shares of Preferred Stock for
which such conversion was not honored or deliver to such Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its conversion and delivery obligations under Section 5(b)(i). 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 which the market price of the
Underlying Shares on the date of conversion totaled $10,000, under clause (A) of
the immediately preceding sentence, 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. Notwithstanding
anything contained herein to the contrary, if a Holder requires the Company to
make payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such payment, the
Company shall not be required to pay such Holder liquidated damages under
section 5(b)(ii) in respect of the certificates resulting in such Buy-In.
(iv) The provisions of clauses (ii) and (iii) of this
Section 5(b) 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.
(c) (i) The conversion price for each share of
Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall
be the lesser of (1) 120% of the average of the Per Share Market Values for the
ten (10) Trading Days immediately preceding the Original Issue Date (the
"Initial Conversion Price"), and (b) 95% of the average of the three (3) lowest
Per Share Market Values during the twenty (20) consecutive Trading Day period
immediately preceding the applicable Conversion Date; provided, however, that
such twenty (20) 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. If: (a) the Underlying Securities Registration Statement
is not filed on or prior to the Filing Date (as defined in the Registration
Rights Agreement (if the Company files such Underlying Securities Registration
Statement without affording the Holder the opportunity to review and comment on
the same as required by Section 3(a) of the Registration Rights Agreement, the
Company shall be in violation of this clause (a)), or (b) the Company fails to
file with the Commission a request for acceleration in accordance with Rule
12d1-2 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration
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<PAGE> 10
Statement will not be "reviewed," or will not be subject to further review, or
(c) the Underlying Securities Registration Statement is not declared effective
by the Commission on or prior to the 120th day after the Original Issue Date, or
(d) such Underlying Securities Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities (as such term is defined in the Registration Rights
Agreement) at any time prior to the expiration of the "Effectiveness Period" (as
such term is defined in the Registration Rights Agreement), without being
succeeded within ten (10) Business Days by a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission, (e)
trading in the Common Stock shall be suspended from the NASDAQ (other than
temporary suspensions of less than one day pending release of material
information by the Company), or (f) if the conversion rights of the Holders are
suspended for any reason (any such failure or breach being referred to as an
"Event," and for purpose of clauses (a), (c), (e) and (f) the date on which such
Event occurs, or for purposes of clause (b) the date on which such five (5) day
period is exceeded, or for purposes of clause (d) the date which such 10 Trading
Day-period is exceeded, being referred to as "Event Date"), the Company shall,
on the Event Date and on the first day of each monthly anniversary of the Event
Date until such time as the applicable Event is cured, pay to the Holder 2.5% of
the aggregate Stated Value of the shares of Preferred Stock then held by such
Holder, in cash, as liquidated damages and not as a penalty. The provisions of
this Section are not exclusive and shall in no way limit the Company's
obligations under the Registration Rights Agreement.
(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 stock of the
Company, the Initial 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(c)(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, then the Initial 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
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<PAGE> 11
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 Conversion Price pursuant
to this Section 5(c)(iii), if any such right, warrant or option shall expire and
shall not have been exercised, the Conversion Price shall 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 Conversion Price made pursuant to the provisions of
this Section 5 upon the issuance of other rights or warrants) had the adjustment
of the 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 Conversion Price, then the 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 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 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
or rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 5(c)(ii)-(iv) above), then in each such case the Initial
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Initial Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled
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<PAGE> 12
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.
(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(c)(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 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, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of the Common Stock of the Company
into which such shares of Preferred Stock could have been converted immediately
prior to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.
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(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 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. Holders are entitled to convert shares of Preferred Stock during
the 20 day period commencing the date of such notice to the effective date of
the event triggering such notice.
(x) No adjustment in the Conversion Price under
Sections 5(c)(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.
(d) 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 (subject to any additional requirements of the Company
as to reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into
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account the adjustments and restrictions of Section 5(a) and Section 5(c)) 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 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.
(e) 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.
(f) 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.
(g) Shares of Preferred Stock converted into Common Stock
shall be canceled. The Company may not reissue any shares of Preferred Stock.
(h) 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 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
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specified in this Section prior to 8:00 p.m. (Eastern Standard Time), (ii) the
date after the 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
if: (i) the number of shares of Common Stock at the time authorized, unissued
and unreserved for all purposes is insufficient to satisfy the Company's
conversion obligations of all shares of Preferred Stock then outstanding, or
(ii) 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, or (iii) the Common Stock is not then listed on the NASDAQ.
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 seven (7) calendar days after the tenth (10th)
Trading Day after the delivery of an Optional Redemption Notice, interest shall
accrue thereon at the rate of 15% 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 seven (7) calendar 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, notwithstanding anything herein
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<PAGE> 16
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, except as provided
in Section 5(a)(iii), 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 seven (7) 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 seventh
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 180th day after the Original
Issue Date and such failure is not cured within five (5) days after notice from
a Holder;
(ii) if, during the Effectiveness Period, the
effectiveness of the Underlying Securities Registration Statement lapses for any
reason for more than ten (10)
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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 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(b)(ii), 5(b)(iii) or 5(c)(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.
"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
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<PAGE> 18
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 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
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<PAGE> 19
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 February 10, 2000, among the Company and the
original Holder of the Preferred Stock, as amended, modified or supplemented
from time to time.
"Redemption Amount" for each share of Preferred Stock means
the greater of (A) the Optional Redemption Amount, or (B) the sum of (i) 116%
(the "Percentage") of the Stated Value and all accrued dividends with respect to
such share, and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such share of Preferred Stock, provided, that, if any
redemption pursuant to Section 5(a)(iii) occurs after the first anniversary of
the Original Issue Date but prior to the second anniversary of the Original
Issue Date, the Percentage shall increase to 132% for any such redemption
occurring during such period, thereafter, on each subsequent yearly anniversary
of the Original Issue Date, the Percentage shall be increased by an additional
16% for any such redemption occurring during such yearly period (e.g., the
Percentage shall be 148% for such redemption occurring after the second
anniversary of the Original Issue Date and prior to the third anniversary of the
Original Issue Date).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the February 10, 2000, by and among the Company and the
original Holder of the Preferred Stock, as amended, modified or supplemented
from time to time.
"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
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<PAGE> 20
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 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> 21
IN WITNESS WHEREOF, said Ecogen Inc. has caused this certificate to be
signed by James P. Reilly, Jr., as Chairman and Chief Executive Officer, and
attested by Mary E. Paetzold, as Secretary, this 10th day of February, 2000.
ECOGEN INC.
By:
--------------------------------
Name: James P. Reilly, Jr.
Title: Chairman and Chief Executive
Officer
ATTEST:
- --------------------------
Name: Mary E. Paetzold
Title: Secretary
21
<PAGE> 22
ANNEX I
NOTICE OF CONVERSION
[To be Executed by the Registered Holder in order to Convert shares of Preferred
Stock]
The Holder written below hereby elects to convert the number of shares of 7%
Series 2000-A 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
Signature
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<PAGE> 1
Exhibit 4.3
ECOGEN INC.
STOCK OPTION PLAN
October, 1987
1. Purpose.
The purpose of this plan (the "Plan") is to secure for ECOGEN INC.
(the "Company") and its stockholders the benefits arising from capital stock
ownership by directors and key employees of the Company and its parent and
subsidiary corporation, if any, who are expected to contribute to the Company's
future growth and success.
2. Types of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code") or non-statutory options
which are not intended to meet the requirements of Code Section 422A.
(b) Administration. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. Except as provided in
subsection 2(c) below, the Board of Directors may in its sole discretion grant
options to purchase shares of such options as provided in the Plan. The Board
shall have authority, subject to the express provisions of the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, to advance the lapse of any waiting or installment
periods and exercise dates, and to make all other determinations in the judgment
of the Board of Directors necessary or desirable for the administration of the
Plan. The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any option agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole final judge of such expediency. No director shall be liable
for any action or determination taken or made under or with respect to the Plan
or any option in good faith. The Board of Directors may, to the full extent
permitted by law, delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the Plan
shall mean and relate to such Committee.
(c) Grant of Options to Directors. Options may be granted to directors of
the Company, and the terms and provisions of such options may be determined,
only by the Committee and only if the Committee consists entirely of persons who
have not been eligible to participate in the Plan at any time within one year
prior to their appointment to the Committee.
<PAGE> 2
3. Eligibility.
Options shall be granted only to persons who are, at the time of
grant, officers, employees or directors (provided, in the case of Incentive
Stock Options, such directors or officers are then also employees) of the
Company or of any Parent Corporation or Subsidiary (as defined in Section 18
hereof). Directors who are members of the Committee or who have waived their
right to receive options shall be ineligible to receive options under this Plan.
No person shall be granted any Incentive Stock Option under the plan who, at the
time such option is granted, owns, directly or indirectly, Common Stock of the
Company possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any Parent Corporation or Subsidiary,
unless the requirements of paragraph (b) of Section 11 are satisfied. A person
who has been granted an option may, if he or she is otherwise eligible, be
granted an additional option or options if the Board of Director shall so
determine.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 14 and 15 below, the
maximum number of shares of Commons Stock of the Company which may be issued and
sold under the Plan is 750,000 shares. Such shares may be authorized and
unissued shares or may be shares issued and thereafter acquired by the Company.
If an option granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject to such
option shall again be available for subsequent option grants under the Plan.
Stock issuable upon exercise of an option granted under the Plan may be subject
to such restrictions on transfer, repurchase rights or other restrictions as
shall be determined by the Board of Directors.
5. Forms of Options Agreements.
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement, substantially in the
form of Exhibit A to the Plan (in the case of Incentive Stock Options) or
Exhibit B to the Plan (in the case of non-statutory options) or in such other
form not inconsistent with the Plan as shall be specified by the Board of
Directors at the time such option is authorized to be granted.
6. Purchase Price
The purchase price per share of stock deliverable upon the exercise
of an option shall be determined by the Board of Directors on the date such
option is authorized to be granted, provided, however, that in the case of an
Incentive Stock Option, the exercise price shall not be less than 100% of the
fair market value of such stock, as determined by the Board of Directors, at the
grant of such option, or less than 110% of such fair market value in the case of
options described in paragraph (b) of Section 11. Payment of the exercise price
of an option shall be in cash or, in the sole discretion of the Board of
Directors, in capital stock of the Company, by purchase money
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<PAGE> 3
note bearing interest at a rate and coming due in installments determined by the
Board of Directors at the time the option is granted, or by any other lawful
means.
7. Option Period.
Each option and all rights thereunder shall be expressed to expire
on such date as the Board of Directors shall determine on the date such option
is authorized to be granted, but in no event after the expiration of ten years
from the day on which the option is granted (or five years in the case of
options described in paragraph (b) of Section 11), and shall be subject to
earlier termination as provided in the Plan.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in
full or in installments at such time or times and during such period as shall be
set forth in the agreement evidencing such option; provided, however, that no
option granted under the Plan shall have a term in excess of ten years from the
date of grant (or five years in the case of options described in paragraph (b)
of Section 11).
9. Nontransferability of Options.
No option granted under the Plan shall be assignable or transferable
by the person to whom it is granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution. During the life of the
recipient, the option shall be exercisable only by or on behalf of such person.
10. Effect of Termination of Employment.
No option may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of his or her
option, employed by one or more of the Company, a Parent Corporation or a
Subsidiary, except that if and to the extent the option agreement or instrument
so provides:
(a) the option may be exercised within the period of three months after
the date the optionee ceases to be an employee of any of the foregoing entities
(or within such lesser period as may be specified in the option agreement or
instrument);
(b) if the optionee dies while in the employ of the Company, a Parent
Corporation or a Subsidiary or within three months after the optionee ceases to
be such an employee, the option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the period of
one year after the date of death (or within such lesser period as may be
specified in the option agreement or instrument); and
3
<PAGE> 4
(c) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code) while in the employ of the Company, a Parent Corporation
or a Subsidiary, the option may be exercised within the period of one year after
the date the optionee ceases to be an employee of any of the foregoing entities
because of such disability (or within such lesser period as may be specified in
the option agreement or instrument); provided, however, that in no event may any
option be exercised after the expiration date of the option. For all purposes of
the Plan and any option granted hereunder, "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h) of the Income Tax
Regulations (or any successor regulations).
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive
Stock Options shall be specifically designated as Incentive Stock Options and
shall be subject to the following additional terms and conditions:
(a) Dollar Limitation.
(i) The aggregate fair market value (determined as of the respective
date or dates of grant) of the Common Stock with respect to which Incentive
Stock Options granted to any employee under the Plan (and under any other
incentive stock option plans of the Company, and any Parent Corporation and
Subsidiary) are exercisable for the first time shall not exceed $100,000 in any
one calendar year.
(ii) In the event that Section 422A of the Code is amended to alter
the limitation set forth therein so that following such amendment such
limitation shall differ from the limitation set forth in this paragraph (a), the
limitation of this paragraph (a) shall be automatically adjusted accordingly.
(b) 10% Stockholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is at the time of the grant of such option the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or of any Parent Corporation or any
Subsidiary, then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value of
one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
Except as modified by the preceding provisions of this Section 11,
all the provisions of the Plan shall be applicable to Incentive Stock Options
granted hereunder.
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<PAGE> 5
12. General Restrictions.
(a) Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the shares subject to such option upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition of,
or in connection with, the issuance or purchase of shares thereunder, such
option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
13. Rights as Stockholder.
The holders of an option shall have no rights as a stockholder with
respect to any shares covered by the option for such shares. Except as otherwise
expressly provided in the Plan, no adjustments shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
14. Recapitalization.
In the event that the outstanding shares of Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, stock dividend, combination or subdivision,
appropriate adjustment shall be made in the number and kind of shares available
under the Plan and under any options granted under the Plan. Such adjustment to
outstanding options shall be made without change in the total price applicable
to the unexercised portion of such options, and a corresponding adjustment in
the applicable option price per share shall be made. No such adjustment shall be
made which would, within the meaning of any applicable provisions of the Code,
constitute a modification, extension or renewal of any option or a grant or
additional benefits to the holder of an option.
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<PAGE> 6
15. Reorganization or Change in Control of the Company.
(a) Reorganization. In case (i) the Company is merged or
consolidated with another corporation and the Company is not the surviving
corporation, (ii) all or substantially all of the assets or more than 50% of the
outstanding voting stock of the Company is acquired by any other corporation or
(iii) of a reorganization or liquidation of the Company, the Board of Directors
of the Company, or the board of directors of any corporation assuming the
obligations of the Company, shall, as to outstanding options, either (x) make
appropriate provision for the protection of any such outstanding options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect of the shares of Common Stock of the Company, provided that
no additional benefits shall be conferred upon optionees as a result of such
substitution, and the excess of the aggregate fair market value of the shares
subject to the options immediately after such substitution over the purchase
price thereof is not more than the excess of the aggregate fair market value of
the shares subject to the option immediately before such substitution over the
purchase price thereof, or (y) upon written notice to the optionees, provide
that all unexercised options must be exercised within a specified number of days
of the date of such notice or they will be terminated. In any such case, the
Board of Directors may, in its discretion, accelerate the exercise dates of
outstanding options; provided, however, that paragraph (b) below shall govern
acceleration of options with respect to the events described in clauses (i),
(ii) and (iii) of such paragraph.
(b) Change in Control. In case of (i) any merger or consolidation
(an "Event") involving the Company, if the shareholders of the Company
immediately before such Event do not own, directly or indirectly, immediately
following such Event, more than fifty percent (50%) of the combined voting power
of the outstanding voting securities of the corporation resulting from such
Event in substantially the same proportion as their ownership of the shares of
Common Stock immediately before such Event; (ii) any sale, lease, license,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the business and/or assets of the
Company or assets representing over 50% of the operating revenue of the Company;
or (iii) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who was not, on December 2, 1998, a "controlling person" (as
defined in Rule 405 under the Securities Act of 1933, as amended) (a
"Controlling Person") of the Company shall become (x) the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of over 50% of the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally or (y) a Controlling Person of the Company, all
outstanding Options, regardless of the date of such Options, shall immediately
become exercisable with respect to 100% of the Common Stock subject to such
Options.
16. No Special Employment Rights.
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<PAGE> 7
Nothing contained in the Plan or in any option granted under the
Plan shall confer upon any option holder any right with respect to the
continuation of his or her employment by the Company (or any Parent Corporation
or Subsidiary) or interfere in any way with the right of the Company (or any
Parent Corporation or Subsidiary), subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the option holder from the rate
in existence at the time of the grant of an option. Whether an authorized leave
of absence, or absence in military or government service, shall constitute
termination or cessation of employment for purposes of this Plan shall be
determined by the Board of Directors.
17. Other Employee Benefits.
The amount of any taxable income deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute "earnings" with respect to which any
other employee benefits of such employee are determined, including without
limitation benefits under any pension, profit sharing, life insurance or salary
continuation plan.
18. Definition of Subsidiary and Parent Corporation.
(a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean any
corporation in an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(b) Parent Corporation. The term "Parent Corporation" as used in the Plan
shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company owns stock possessing 50% or more of the combined voting power of all
classes of stock in one or the other corporations in such chain.
19. Amendment of the Plan.
The Board of Directors may at any time and from time to time modify
or amend the Plan in any respect, except that without the approval of the
stockholders of the Company, the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan, (b)
materially increase the maximum number of shares which may be issued under the
Plan (except for permissible adjustments provided in the Plan), or (c)
materially modify the requirements as to eligibility for participation in the
Plan. The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or
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<PAGE> 8
modify the terms and provisions of the Plan and of any outstanding Incentive
Stock Options granted under the Plan to the extent necessary to qualify any or
all such options for such favorable federal income tax treatment (including
deferral of taxation upon exercise) as may be afforded incentive stock options
under Section 422A of the Code.
20. Withholding.
The Company's obligation to deliver shares upon the exercise of any
option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
21. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, any Incentive
Stock Options previously granted under the Plan shall terminate and no further
Incentive Stock Options shall be granted. Subject to this limitation, options
may be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.
(b) Termination. The Plan shall terminate upon the earlier of (i) the
close of business on the day next preceding the tenth anniversary of the date of
its adoption by the Board of Directors, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
Adopted by the Board of Directors on
October 7, 1987; and hereby, as amended on
December 9, 1999 (no shareholder action
required).
8
<PAGE> 1
ECOGEN INC.
1998 STOCK OPTION PLAN
(NON-STATUTORY)
1. Purpose.
The purpose of this plan (the "Plan") is to secure for ECOGEN
INC. (the "Company") and its stockholders the benefits arising from capital
stock ownership by employees of the Company (and its parent and subsidiary
corporations) who are expected to contribute to the Company's future growth and
success.
2. Authorization and Administration.
(a) Authorization. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee,
as defined in Section 2(b) below, designated by the Board of Directors).
(b) Administration. Except as provided in Section 2(c) below, the Plan
will be administered by the Board of Directors of the Company, whose
construction and interpretation of the terms and provisions of the Plan shall be
final and conclusive. The Board of Directors may in its sole discretion grant
options to purchase shares of the Company's Common Stock, par value .01 per
share ("Common Stock") and authorize the Company to issue shares upon exercise
of such options as provided in the Plan. The Board of Directors shall have
authority, subject to the express provisions of the Plan, to construe the
respective option agreements and the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
the respective option agreements, which need not be identical, to advance the
lapse of any waiting or installment periods and exercise dates, and to make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any option agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect and it shall be the sole and final judge of such
expediency. No director shall be liable for any action or determination taken or
made under or with respect to the Plan or any option in good faith. The Board of
Directors may, to the full extent permitted by law, delegate any or all of its
powers under the Plan to a committee (the "Committee") of two or more directors
each of whom is a Non-Employee Director (as hereinafter defined) appointed by
the Board of Directors, and if the Committee is so appointed all references to
the Board of Directors in the Plan as may pertain to the powers so delegated
shall mean and relate to the Committee. For the purposes of the Plan, a director
or member of such Committee shall be deemed to be a "Non-Employee Director" only
if such person qualifies as a "Non-Employee Director" within the meaning of
paragraph (b)(3) of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (or any successor rule).
(c) Non-Officer Employee Administration. Notwithstanding paragraph (b)
of this Section 2, the Chief Executive Officer ("CEO") may, in his sole
discretion, grant options to purchase
<PAGE> 2
shares of Common Stock under the Plan to non-officer employees. The CEO will
have authority, subject to the express provisions of the Plan, (i) to determine
which non-officer employees of the Company will receive such stock options, (ii)
to determine the number of shares of Common Stock issuable upon the exercise of
any such stock options, and (iii) to determine the terms and provisions of each
stock option grant.
3. Eligibility.
Options shall be granted only to persons who are, at the time of grant,
officers, directors, employees of, or consultants or advisors to the Company or
of any Parent Corporation or Subsidiary (as defined in Section 17 hereof).
4. Stock Subject to Plan.
Subject to adjustment as provided in Sections 15 and 16 below, the
maximum number of shares of Common Stock of the Company which may be issued and
sold under the Plan is 1,500,000 shares. Such shares may be authorized and
unissued shares or may be shares issued and thereafter acquired by the Company.
If an option granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject to such
option shall again be available for subsequent option grants under the Plan.
Stock issuable upon exercise of an option granted under the Plan may be subject
to such restrictions on transfer, repurchase rights or other restrictions as
shall be determined by the Board of Directors.
5. Option Agreements.
As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement not inconsistent with the Plan as
the Board of Directors shall determine at the time such option is authorized to
be granted. Such agreements need not be identical but shall comply with, and be
subject to, the terms and conditions set forth herein.
6. Purchase Price.
The purchase price per share of stock deliverable upon the exercise of
an option shall be determined by the Board of Directors on the date such option
is authorized to be granted. Payment of the exercise price of an option shall be
in cash or, in the sole discretion of the Board of Directors, in capital stock
of the Company, by the surrender of other options to purchase capital stock of
the Company, by purchase money note bearing interest at a rate and coming due in
installments determined by the Board of Directors at the time the option is
granted, or by any other lawful means.
7. Option Period.
Each option and all rights thereunder shall be expressed to expire on
such date as the Board of Directors shall determine on the date such option is
authorized to be granted, but in no event after the expiration of ten years from
the day on which the option is granted and shall be
<PAGE> 3
subject to earlier termination as provided in the Plan. Notwithstanding the
foregoing, if at any time during the last six (6) months of the term of any
option granted under the Plan, the holder thereof is precluded from selling
shares of Common Stock underlying such option solely by reason of the
application to such optionee of the Company's policy regarding "Material Insider
Information and Insider Trading" (or similar successor policy), the term of such
option shall be deemed automatically extended by a period equal to six (6)
months beginning with the first day during which such optionee shall no longer
be so precluded.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option; provided, however, that, subject
to Section 7, (i) no option granted under the Plan shall have a term in excess
of ten years from the date of grant, and (ii) the periods of time following the
optionee's cessation of employment with the Company or service as an Outside
Director (as hereinafter defined) of or consultant or advisor to the Company, or
the optionee's death or disability, during which an option may be exercised, as
provided in paragraphs (a), (b) and (c) of Section 10, shall not be included for
purposes of determining the number of shares of Common Stock with respect to
which an option granted under the Plan may be exercised. An Outside Director is
a director who is not an employee of the Company or of any Parent Corporation or
Subsidiary.
9. Nontransferability of Options.
Except as otherwise approved by the Board of Directors, no option
granted under the Plan shall be assignable or transferable by the person to whom
it is granted, either voluntarily or by operation of law, except by will or the
laws of descent and distribution. Subject to the preceding sentence, during the
life of the recipient, the option shall be exercisable only by or on behalf of
such person.
10. Effect of Termination of Employment or Cessation of Services.
Notwithstanding anything contained in this Plan to the contrary, no
option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by or serving as an Outside Director of one or more of the Company, a Parent
Corporation or a Subsidiary, except that if and to the extent the option
agreement or instrument so provides:
(a) if the optionee ceases to be employed by or serve as an Outside
Director of or consultant or advisor to any of the foregoing entities for any
reason other than death or disability, the right to exercise the option shall
terminate three months after such cessation (or at such earlier date as may be
specified in the option agreement or instrument);
(b) if the optionee dies while in the employ of or while serving as an
outside Director of or consultant or advisor to any of the foregoing entities or
within three months after the optionee
<PAGE> 4
ceases to be such an employee or director, the option may be exercised by the
person to whom it is transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within such lesser
period as may be specified in the option agreement or instrument); and
(c) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code) while in the employ of or while serving as an Outside
Director of or consultant or advisor to any of the foregoing entities, the
option may be exercised within the period of one year after the date the
optionee ceases to be such an employee, Outside Director, consultant or advisor
because of such disability (or within such lesser period as may be specified in
the option agreement or instrument); provided, however, that in no event may any
option be exercised after the expiration date of the option. For all purposes of
the Plan and any option granted hereunder, "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h) of the Income Tax
Regulations (or any successor regulations).
11. General Restrictions.
(a) Investment Representations. The Company may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Compliance With Securities Laws. Each option shall be subject to
the requirement that, if at any time counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder, such
option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
12. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder with
respect to any shares covered by the option until the date of issue of a stock
certificate to him or her for such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock certificate is issued.
13. Recapitalization.
In the event that the outstanding shares of Common Stock of the Company
are changed
<PAGE> 5
into or exchanged for a different number or kind of shares or other securities
of the Company by reason of any recapitalization, reclassification, stock split,
stock dividend, combination or subdivision, appropriate adjustment shall be made
in the number and kind of shares available under the Plan and under any options
granted under the Plan. Such adjustment to outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options, and a corresponding adjustment in the applicable option price per share
shall be made. No such adjustment shall be made which would, within the meaning
of any applicable provisions of the Code, constitute a modification, extension
or renewal of any option or a grant of additional benefits to the holder of an
option.
14. Reorganization or Change in Control of the Company.
(a) Reorganization. In case (i) the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, (ii) all
or substantially all of the assets or more than 50% of the outstanding voting
stock of the Company is acquired by any other corporation or (iii) of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, as to outstanding options, either (x) make appropriate
provision for the protection of any such outstanding options by the substitution
on an equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect of the shares of Common Stock of the Company, provided that no
additional benefits shall be conferred upon optionees as a result of such
substitution, and the excess of the aggregate fair market value of the shares
subject to the options immediately after such substitution over the purchase
price thereof is not more than the excess of the aggregate fair market value of
the shares subject to the option immediately before such substitution over the
purchase price thereof, or (y) upon written notice to the optionees, provide
that all unexercised options must be exercised within a specified number of days
of the date of such notice or they will be terminated. In any such case, the
Board of Directors may, in its discretion, accelerate the exercise dates of
outstanding options; provided, however, that paragraph (b) below shall govern
acceleration of options with respect to the events described in clauses (i),
(ii) and (iii) of such paragraph.
(b) Change in Control. In case of (i) any merger or consolidation (an "Event")
involving the Company, if the shareholders of the Company immediately before
such Event do not own, directly or indirectly, immediately following such Event,
more than fifty percent (50%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such Event in substantially
the same proportion as their ownership of the shares of Common Stock immediately
before such Event; (ii) any sale, lease, license, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the business and/or assets of the Company or assets representing over
50% of the operating revenue of the Company; or (iii) any person (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) who was not, on
December 2, 1998, a "controlling person" (as defined in Rule 405 under the
Securities Act of 1933, as amended) (a "Controlling Person") of the Company
shall become (x) the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of over 50% of the combined voting power of the Company's then
outstanding voting securities entitled
<PAGE> 6
to vote generally or (y) a Controlling Person of the Company, all outstanding
Options, regardless of the date of such Options, shall immediately become
exercisable with respect to 100% of the Common Stock subject to such Options."
15. No Special Employment Rights.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any Parent Corporation or
Subsidiary) or interfere in any way with the right of the Company (or any Parent
Corporation or Subsidiary), subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the option holder from the rate in
existence at the time of the grant of an option. Whether an authorized leave of
absence, or absence in military or government service, shall constitute
termination or cessation of employment for purposes of this Plan shall be
determined by the Board of Directors.
16. Other Employee Benefits.
The amount of any taxable income deemed to be received by an employee
as a result of the exercise of an option or the sale of shares received upon
such exercise will not constitute "earnings" with respect to which any other
employee benefits of such employee are determined, including without limitation
benefits under any pension, profit sharing, life insurance or salary
continuation plan.
17. Definition of Subsidiary and Parent Corporation.
(a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean
any corporation in an unbroken chain of corporations beginning with the
Company if each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(b) Parent Corporation. The term "Parent Corporation" as used in the
Plan shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company owns stock possessing 50% or more of the combined voting power of all
classes of stock in one of the other corporations in such chain.
18. Amendment of the Plan.
The Board of Directors may at any time and from time to time modify,
amend or terminate the Plan in any respect, except to the extent stockholder
approval is required by law. The termination or any modification or amendment of
the Plan shall not, without the consent of an optionee, affect his or her rights
under an option previously granted to him or her. With the consent of the
optionee affected, the Board of Directors may amend outstanding option
<PAGE> 7
agreements in a manner not inconsistent with the Plan.
19. Withholding.
The Company's obligation to deliver shares upon the exercise of
any option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
20. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors.
(b) Termination. Unless earlier terminated by the Board of Directors,
the Plan shall terminate upon the earlier of (i) the close of business on the
day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors, or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise or cancellation
of options granted under the Plan. If the date of termination is determined
under (i) above, then options outstanding on such date shall continue to have
force and effect in accordance with the provisions of the instruments evidencing
such options.
<PAGE> 1
Exhibit 4.5
Ecogen Inc.
1999 STOCK OPTION PLAN
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Ecogen Inc. (the
"Company") and its stockholders the benefits arising from capital stock
ownership by employees, advisors, consultants, and members of the Board of
Directors of the Company and its parent and subsidiary corporations, if any, who
are expected to contribute to the Company's future growth and success.
2. Types of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-statutory options
which are not intended to meet the requirements of Code Section 422.
(b) Administration.
(i) Board of Directors. The Plan will be administered by the
Board of Directors of the Company, whose construction and interpretation of the
terms and provisions of the Plan shall be final and conclusive. The Board of
Directors may in its sole discretion grant options to purchase shares of the
Company's Common Stock, par value $.01 per share ("Common Stock"), and authorize
the Company to issue shares upon exercise of such options as provided in the
Plan. The Board shall have the authority, subject to the express provisions of
the Plan, to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, to advance the lapse of any waiting or installment
periods and exercise dates, and to make all other determinations in the judgment
of the Board of Directors necessary or desirable for the administration of the
Plan. The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any option agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. No director shall be
liable for any action or determination taken or made under or with respect to
the Plan or to the grant of any option in good faith.
(ii) Committee. The Board of Directors may, to the full extent
permitted by law, delegate any or all of its powers under the Plan to a
committee (the "Committee") of two or more directors each of whom is a
Non-Employee Director (as hereinafter defined), and if the Committee is so
appointed all references to the Board of Directors
<PAGE> 2
in the Plan shall mean and relate to such Committee. For the purposes of the
Plan, a director or member of such Committee shall be deemed to be a
"Non-Employee Director" only if such person qualifies as a "Non-Employee
Director" within the meaning of paragraph (b)(3) of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (or any successor rule).
(iii) Chief Executive Officer. Notwithstanding anything
contained in this Section 2 to the contrary, the Board of Directors may, to the
full extent permitted by law, delegate the power under the Plan to grant options
to persons who are, at the time of grant, non-officer employees, advisors and
consultants of the Company or of any Parent Corporation or Subsidiary (provided,
however, that no such person at the time of grant is subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") in
accordance with Rule 16a-2 promulgated under the Exchange Act), to the Chief
Executive Officer, and if the Chief Executive Officer is so appointed, to the
extent necessary to give effect to such appointment, all references to the Board
of Directors in the Plan shall mean and relate to such Chief Executive Officer.
3. Eligibility.
Options shall be granted only to persons who are, at the time of grant,
employees, advisors, consultants, or directors (provided, in the case of
Incentive Stock Options, such directors are then also employees) of the Company
or of any Parent Corporation or Subsidiary (as defined in Section 19 hereof). A
person who has been granted an option may, if he or she is otherwise eligible,
be granted an additional option or options if the Board of Directors shall so
determine.
4. Stock Subject to Plan.
Subject to adjustment as provided in Sections 15 and 16 below, the maximum
number of shares of Common Stock of the Company which may be issued and sold
pursuant to options granted under the Plan is 1,500,000 shares. Such shares may
be authorized and unissued shares or may be shares issued and thereafter
acquired by the Company. If an option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for subsequent option
grants under the Plan. Stock issuable upon exercise of an option granted under
the Plan may be subject to transfer restrictions, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
5. Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement not inconsistent with the Plan in
such form as the Board of Directors shall determine at the time such option is
authorized to be granted. Such agreements need not be identical but shall comply
with, and be subject to, the terms and conditions set forth herein.
<PAGE> 3
6. Purchase Price.
(a) The purchase price per share of Common Stock deliverable upon
the exercise of an option shall be not less than the fair market value of the
Common Stock as determined by the Board of Directors on the date such option is
authorized to be granted.
(b) Payment of the exercise price of an option shall be in cash or,
in the sole discretion of the Board of Directors, in capital stock of the
Company, by the surrender of other options to purchase capital stock of the
Company or by any other lawful means.
7. Option Term.
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine on the date such option is authorized to be
granted, but in no event after the expiration of ten years from the day on which
the option is granted (or five years in the case of options described in
paragraph (b) of Section 11), and shall be subject to earlier termination as
provided in the Plan. Notwithstanding the foregoing, except as provided under or
pursuant to the Code with respect to Incentive Stock Options, if at any time
during the last six (6) months of the term of any option granted under the Plan,
the holder thereof is precluded from selling shares of Common Stock underlying
such option solely by reason of the application to such optionee of the
Company's "Material Inside Information and Insider Trading Policy" (or similar
successor policy), the term of such option shall be deemed automatically
extended by a period equal to six (6) months beginning with the first day during
which such optionee shall no longer be so precluded.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or in
installments at such time or times during such period as shall be set forth in
the agreement evidencing such option; provided, however, that, subject to
Section 7, (i) no option granted under the Plan shall have a term in excess of
ten years from the date of grant (or five years in the case of options described
in paragraph (b) of Section 11) and (ii) the periods of time following the
optionee's cessation of employment with the Company or service as an advisor,
consultant, or Outside Director of the Company, or the optionee's death or
disability, during which an option may be exercised, as provided in paragraphs
(a), (b) and (c) of Section 10, shall not be included for purposes of
determining the number of shares of Common Stock with respect to which an option
granted under the Plan may be exercised.
9. Transfer Restrictions.
Except as otherwise approved by the Board of Directors, no option granted
under the Plan shall be assignable or transferable by the person to whom it is
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution. Except as otherwise approved by the Board of
Directors and subject to the preceding sentence, during the life of the
recipient, the option shall be exercisable only by or on behalf of such person.
<PAGE> 4
10. Effect of Termination of Employment.
Notwithstanding anything contained in this Plan to the contrary, no option
may be exercised unless, at the time of such exercise, the optionee is, and has
been continuously since the date of grant of his or her option, employed by one
or more of the Company, a Parent Corporation or a Subsidiary, except that if and
to the extent the option agreement or instrument so provides:
(a) the option may be exercised within the period of three months
after the date the optionee ceases to be employed by or to serve as an advisor,
consultant, or Outside Director of the Company, a Parent Corporation or a
Subsidiary(or within such lesser period as may be specified in the option
agreement or instrument) for any reason other than death or disability;
(b) if the optionee dies while in the employ of or serving as an
advisor, consultant, or Outside Director of the Company, a Parent Corporation or
a Subsidiary or within three months after the optionee ceases to be such an
employee, advisor, consultant, or director, the option may be exercised by the
person to whom it is transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within such lesser
period as may be specified in the option agreement or instrument); and
(c) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code) while in the employ of or while serving as an advisor,
consultant, or Outside Director of the Company, a Parent Corporation or a
Subsidiary, the option may be exercised within the period of one year after the
date the optionee ceases to be an employee, advisor, consultant, or director of
any of the foregoing entities because of such disability (or within such lesser
period as may be specified in the option agreement or instrument); provided,
however, that in no event may any option be exercised after the expiration date
of the option. For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be specifically designated as Incentive Stock Options and shall be
subject to the following additional terms and conditions:
(a) Dollar Limitation. The aggregate fair market value (determined
as of the respective date or dates of the grant) of the Common Stock with
respect to which Incentive Stock Options granted to any employee under the Plan
(and under any other incentive stock option plans of the Company, and any Parent
Corporation and Subsidiary) are exercisable for the first time shall not exceed
$100,000 in any one calendar year. In the event that Section 422 of the Code is
amended to alter the limitation set forth therein so that following such
amendment such
<PAGE> 5
limitation shall differ from the limitation set forth in this paragraph (a), the
limitation of this paragraph (a) shall be automatically adjusted accordingly.
(b) 10% Stockholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is at the time of the grant of such
option the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Parent Corporation or any
Subsidiary, then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the fair market
value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years
from the date of grant.
Except as modified by the preceding provisions of this Section 11, all the
provisions of the Plan shall be applicable to Incentive Stock Options granted
hereunder.
12. Annual Automatic Grants of Options to Outside Directors.
(a) Annual Automatic Grants of Options to Outside Directors. Each
director of the Company who is not an employee of the Company or of any Parent
Corporation or Subsidiary (each, an "Outside Director") shall be granted under
the Plan (i) on the date of his or her first election to the Board of Directors
of the Company, non-statutory options to purchase up to 10,000 shares of Common
Stock and (ii) on the date of each annual meeting of the Company's stockholders
(beginning with the Company's Annual Meeting of Stockholders in 2000) at which
such Outside Director is re-elected to the Board of Directors, non-statutory
options to purchase up to 10,000 shares of Common Stock.
(b) Terms and Conditions of Options. Any option granted to an
Outside Director pursuant to this Section 12 shall be exercisable over a two
year period, one half on each of the first two anniversaries of the date of
grant, in each case at a purchase price equal to the fair market value of such
Common Stock, as defined in Section 6 above, on the date of grant. Each such
option shall expire ten years after the date of grant and shall be subject to
earlier termination as provided in the Plan. Notwithstanding the foregoing, if
at any time during the last six (6) months of the term of any option granted
pursuant to this Section 12, the holder thereof is precluded from selling shares
of Common Stock underlying such option solely by reason of the application to
such Outside Director of the Company's "Material Inside Information and Insider
Trading Policy" (or any similar successor policy), the term of such option shall
be deemed automatically extended by a period equal to six (6) months beginning
with the first day during which such Outside Director shall no longer be so
precluded.
(c) Plan Applicable. Except as set forth in this Section 12, all the
provisions of the Plan shall be applicable to options granted to Outside
Directors hereunder.
<PAGE> 6
13. General Restrictions.
(a) Investment Representations. The Company may require any person
to whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Compliance With Securities Laws. Each option shall be subject to
the requirement that, if at any time counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder, such
option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
14. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder with respect to
any shares covered by the option until the date of issue of a stock certificate
to him or her for such shares. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
15. Recapitalization.
In the event that the outstanding shares of Common Stock of the Company
are changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split, stock dividend, combination or subdivision, appropriate adjustment
shall be made in the number and kind of shares available under the Plan and
under any options granted under the Plan. Such adjustment to outstanding options
shall be made without change in the total price applicable to the unexercised
portion of such options, and a corresponding adjustment in the applicable option
price per share shall be made. No such adjustment shall be made which would,
within the meaning of any applicable provisions of the Code, constitute a
modification, extension or renewal of any option or a grant of additional
benefits to the holder of an option.
16. Reorganization or Change in Control of the Company.
(a) Reorganization. In case (i) the Company is merged or
consolidated with another corporation and the Company is not the surviving
corporation, (ii) all or substantially all of the assets or more than 50% of the
outstanding voting stock of the Company is acquired by any other corporation or
(iii) of a reorganization or liquidation of the Company, the Board of Directors
of the Company, or the board of directors of any corporation assuming the
obligations
<PAGE> 7
of the Company, shall, as to outstanding options, either (x) make appropriate
provision for the protection of any such outstanding options by the substitution
on an equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect of the shares of Common Stock of the Company, provided that no
additional benefits shall be conferred upon optionees as a result of such
substitution, and the excess of the aggregate fair market value of the shares
subject to the options immediately after such substitution over the purchase
price thereof is not more than the excess of the aggregate fair market value of
the shares subject to the option immediately before such substitution over the
purchase price thereof, or (y) upon written notice to the optionees, provide
that all unexercised options must be exercised within a specified number of days
of the date of such notice or they will be terminated. In any such case, the
Board of Directors may, in its discretion, accelerate the exercise dates of
outstanding options; provided, however, that paragraph (b) below shall govern
acceleration of options with respect to the events described in clauses (i),
(ii) and (iii) of such paragraph.
(b) Change in Control. In case of (i) any merger or consolidation
(an "Event") involving the Company, if the shareholders of the Company
immediately before such Event do not own, directly or indirectly, immediately
following such Event, more than fifty percent (50%) of the combined voting power
of the outstanding voting securities of the corporation resulting from such
Event in substantially the same proportion as their ownership of the shares of
Common Stock immediately before such Event; (ii) any sale, lease, license,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the business and/or assets of the
Company or assets representing over 50% of the operating revenue of the Company;
or (iii) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who was not, on December 2, 1998, a "controlling person" (as
defined in Rule 405 under the Securities Act of 1933, as amended) (a
"Controlling Person") of the Company shall become (x) the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of over 50% of the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally or (y) a Controlling Person of the Company, all
outstanding Options, regardless of the date of such Options, shall immediately
become exercisable with respect to 100% of the Common Stock subject to such
Options.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any Parent Corporation or
Subsidiary) or interfere in any way with the right of the Company (or any Parent
Corporation or Subsidiary), subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the option holder from the rate in
existence at the time of the grant of an option. Whether an authorized leave of
absence, or absence in military or government service, shall constitute
termination or cessation of employment for purposes of this Plan shall be
determined by the Board of Directors.
18. Other Employee Benefits.
<PAGE> 8
The amount of any compensation deemed to be received by an employee as a
result of the exercise of an option or the sale of shares received upon such
exercise will not constitute "earnings" with respect to which any other employee
benefits of such employee are determined, including without limitation benefits
under any pension, profit sharing, life insurance or salary continuation plan.
19. Definition of Subsidiary and Parent Corporation.
(a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean
any corporation in an unbroken chain of corporations beginning with the Company
if each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain. For
purposes of grants of non-statutory stock options only, the term "Subsidiary"
shall also mean any partnerships or limited partnerships for which the Company
or any Subsidiary controls 50% or more of the voting power of such partnership
or limited partnership, or any corporation in an unbroken chain of Subsidiaries
if each of the Subsidiaries other than the last Subsidiary in the unbroken chain
either owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations or controls 50% or more of
the voting power of any such partnership or limited partnership in such chain.
(b) Parent Corporation. The term "Parent Corporation" as used in the
Plan shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company owns stock possessing 50% or more of the combined voting power of all
classes of stock in one of the other corporations in such chain.
20. Amendment of the Plan.
The Board of Directors may at any time and from time to time modify, amend or
terminate the Plan in any respect, except to the extent stockholder approval is
required by law. The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or modify the terms and provisions of the Plan and of any
outstanding Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code.
21. Withholding.
The Company's obligation to deliver shares upon the exercise of any option
granted under the Plan shall be subject to the optionee's satisfaction of all
applicable federal, state and local income and employment tax withholding
requirements.
<PAGE> 9
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by
the Board of Directors and approved by the Company's stockholders and shall not
be effective unless and until so adopted and approved. Upon the effectiveness of
the Plan, additional grants of options may not be made under the Company's 1998
Stock Option Plan.
(b) Termination. Unless earlier terminated by the Board of
Directors, the Plan shall terminate upon the earlier of (i) the close of
business on March 10, 2009 or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the exercise or
cancellation of options granted under the Plan. If the date of termination is
determined under (i) above, then options outstanding on such date shall continue
to have force and effect in accordance with the provisions of the instruments
evidencing such options.
Adopted on December 2, 1998 by the Board of
Directors of Ecogen Inc.; amended on June
22, 1999 (no shareholder action required);
and further amended on December 9, 1999 (no
shareholder action required).
<PAGE> 1
AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEMENT
AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEMENT (the
"Agreement"), dated December 9, 1999, between ECOGEN INC., a Delaware
corporation (the "Company") and JAMES P. REILLY, JR. (the "Executive").
The Company's Board of Directors has determined that it is important to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties.
Therefore, the Company is providing the Executive the benefits set forth in this
Agreement in the event the Executive's employment with the Company is terminated
in certain circumstances.
1. Termination. (a) If the Executive's employment with the Company is
terminated by the Company or by the Executive at any time, the Company shall pay
the Executive the compensation set forth in Section 2, unless such termination
is a result of (i) the Executive's death, (ii) the Executive's Disability (as
defined below), (iii) the Executive's Retirement (as defined below), (iv) Cause
(as defined below) or (v) the Executive's termination of the Executive's
employment other than for Good Reason (as defined below) within six months of
the event constituting Good Reason.
(b) "Disability" means the Executive's incapacity due to physical or
mental illness, as evidenced by the Executive being absent from the Executive's
duties with the Company for a period of six months within any 12-month period
and, within 30 days after written notice of termination is thereafter given by
the Company, not returning immediately to the performance of the Executive's
duties. For the purposes of this Agreement, the Executive's "absence" shall
include the inability of the Executive to perform the Executive's duties
substantially on a full-time basis.
(c) "Retirement" means termination by the Company or the Executive of
the Executive's employment on account of the Executive's having reached age 65
or such other age as shall have been fixed in any retirement arrangement
established with the Executive's consent with respect to the Executive.
(d) "Cause" means (i) any felony conviction or admission of guilt of a
felony, (ii) any breach or nonobservance by Employee of the Company's employee
policies, (iii) any willful, intentional or deliberate disobedience or neglect
by Employee of the lawful and reasonable orders or directions of the Board of
Directors; provided that the Board of Directors has given Employee written
notice of such disobedience or neglect and Employee has failed to cure such
disobedience or neglect within a period reasonable under the circumstances, or
(iv) any willful neglect or deliberate misconduct by Employee that is materially
injurious to the Company.
<PAGE> 2
(e) "Good Reason" means (without the Executive's prior express written
consent):
(i) responsibilities or status with the Company or any removal
of the Executive from, or any failure to reelect the Executive to, any
position consistent with the Executive's duties, responsibilities and
status except in connection with the termination of the Executive's
employment (x) for Disability, Retirement or Cause, (y) as a result of
the Executive's death or (z) by the Executive other than for Good
Reason; or
(ii) a reduction by the Company in the Executive's salary; or
(iii) any failure by the Company to permit the Executive to
participate in any benefit plan or arrangement which is generally
available to employees of the Company (hereinafter, "Benefit Plans");
or
(iv) any change in any incentive, bonus or compensation plan
or other arrangement which is likely to materially reduce, in the
aggregate, the total compensation payable to the Executive; or
(v) a relocation of the Company's principal executive offices
to a location which is greater than twenty-five miles from the
Company's current place of business or the Company's relocation of the
Executive to a place other than the Company's principal executive
offices; or
(vi) any material breach by the Company of this Agreement or
violation of law in respect of the executive's employment; or
(vii) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(viii) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 1(f); or
(ix) any Change in Control (as defined below).
2
<PAGE> 3
(f) "Change in Control" means:
(i) any consolidation or merger involving the Company if the
shareholders of the Company immediately before such merger or
consolidation do not own, directly or indirectly, immediately following
such merger or consolidation, more than fifty percent (50%) of the
combined voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the shares of
common stock immediately before such merger or consolidation;
(ii) any sale, lease, license, exchange or other transfer (in
one transaction or a series of related transactions) of all, or
substantially all, of the business and/or assets of the Company or
assets representing over 50% of the operating revenue of the Company;
or
(iii) any person (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) who was not, on December 2, 1998, a
"controlling person" (as defined in Rule 405 under the Securities Act
of 1933, as amended) (a "Controlling Person") of the Company shall
become (x) the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of over 50% of the combined voting power of the
Company's then outstanding voting securities entitled to vote generally
or (y) a Controlling Person of the Company.
(g) Any termination by the Company pursuant to Section 1(b), 1(c) or,
1(d) shall be communicated by a Notice of Termination. A "Notice of Termination"
means a written notice indicating the specific provisions in this Agreement
relied upon and, in reasonable detail, the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
(h) "Date of Termination" means (i) if this Agreement is terminated by
the Company for Disability, 30 days after Notice of Termination is given to the
Executive, provided that the Executive shall not have returned to the
performance of the Executive's duties on a full-time basis during such 30-day
period, (ii) if the Executive's employment is terminated by the Company for any
other reason, the date on which a Notice of Termination is given or (iii) if the
Executive gives notice of such termination, immediately upon the giving of such
notice.
2. Compensation. If the requirements of Section 1 are fulfilled, the
Company shall continue to pay to the Executive, as severance pay, the
Executive's base salary for a period of two years following the Termination Date
and shall, for such period, continue to (a) cover the Executive and the
Executive's family on all life insurance, health insurance, hospitalization,
dental, drug prescription, disability and accidental death and dismemberment
plans and policies of the Company that the Executive and the Executive's family
are participating in at the time of termination on the same basis of
participation as applied prior to termination, to the extent such plans and
3
<PAGE> 4
policies permit non-employees to participate therein and subject to any other
terms and conditions of such plans and policies and (b) provide the Executive
with other standard benefits available at the time to the Company's executive
officers, such as automobile privileges; provided, however, if any of the plans
described in clause (a) above do not permit the participation therein of persons
who are not employees of the Company, the Company shall endeavor, in lieu
thereof, to replace such benefit for the Executive with a substantially
equivalent benefit to the extent such benefit may be obtained on commercially
reasonable terms.
3. Mitigation; Other Contractual Rights. (a) The Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor shall the amount of
any payment provided for under this Agreement be reduced by any compensation
earned by the Executive as the result of employment by another employer after
the Date of Termination or otherwise.
(b) This Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish the Executive's
existing rights or rights that would accrue solely as a result of the passage of
time, under any Benefit Plan, Incentive Plan or Securities Plan, employment
agreement or other contract, plan or arrangement.
4. Successors. (a) The Company shall require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Any failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement and shall
entitle the Executive to terminate the Executive's employment for Good Reason.
"Company" means, as used throughout this Agreement, the Company as hereinbefore
defined and any successor or assign to its business and/or assets as aforesaid
that executes and delivers the agreement provided for in this Section or that
otherwise becomes bound by this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee or other designee,
or, if there be no such designee, to the Executive's estate.
4
<PAGE> 5
5. Golden Parachute Excise Tax. To the extent that, as a result of a
Change in Control, the Executive receives the compensation set forth in Section
2, the Company shall pay to Executive an amount equal to (i) any excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), on any portion of the increased value accruing to Executive in
connection with such compensation set forth in Section 2 plus (ii) any other
excise taxes imposed by the Code or under federal, state or local law on the
payments provided for in this Agreement. It being understood that in connection
with the payment by the Company to Executive of the amounts set forth in the
immediately preceding sentence the Company will reimburse Executive's tax cost
relating to such payments, including by providing for an appropriate gross-up to
ensure that Executive bears no federal (including, without limitation, Medicare
taxes), state and local income taxes (the foregoing taxes are hereinafter
collectively referred to as "Income Taxes") with respect to such payments. The
amount of the taxes provided for in the first sentence of this Section shall be
determined by KPMG LLP or another national accounting firm selected by the
Company. Any amounts payable by the Company to Executive pursuant to this
Section shall be paid to Executive no later than five (5) business days before
Executive is obligated to pay any taxes to the Internal Revenue Service or the
appropriate state and local revenue authorities. The amounts payable to
Executive by the Company pursuant to this Section shall be in addition to, and
not in limitation of, the amounts payable to, or on behalf of Executive by the
Company pursuant to Section 2 hereof.
6. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid, upon the termination of the
Executive's employment with the Company on account of death, Disability,
Retirement or Cause or by the Executive other than for Good Reason.
7. Notice. Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or mailed by United States registered mail, return receipt
requested, postage prepaid, as follows:
If to the Company:
Ecogen Inc.
2005 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: James P. Reilly, Jr.
Chief Executive Officer
If to the Executive:
James P. Reilly, Jr.
16 Inlet Terrace
Belmar, New Jersey 07719
5
<PAGE> 6
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
10. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses that the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
11. General. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party that are not set forth expressly in this
Agreement. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ECOGEN INC.
By
-----------------------------
Name:
Title:
------------------------------
Name: James P. Reilly, Jr.
Title: Chairman and Chief
Executive Officer
7
<PAGE> 1
TERM LOAN AND SECURITY AGREEMENT
BETWEEN
ECOGEN INC.
AND
THE BERKSHIRE BANK
DATED AS OF DECEMBER 23, 1999
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS.......................................................1
1.01. Defined Terms.................................................1
1.02. Accounting Terms..............................................7
1.03. UCC Terms.....................................................7
ARTICLE 2. THE LOAN..........................................................8
2.01. General Terms.................................................8
2.02. The Note......................................................8
2.03. Repayment of the Loan.........................................8
2.04. Payment of Interest...........................................8
2.05. Lawful Interest...............................................8
2.06. Facility Fee..................................................8
2.07. Closing Expenses..............................................8
2.08. Optional Prepayment of the Loan...............................9
2.09. Payments to the Bank..........................................9
2.10. Interest on Overdue Obligations...............................9
ARTICLE 3. CONDITIONS PRECEDENT..............................................9
3.01. Conditions Precedent to the Closing...........................9
3.02. Additional Conditions Precedent to the Loan..................12
3.03. Closing Fees.................................................13
3.04. Post Closing Conditions......................................13
ARTICLE 4. COLLATERAL SECURITY..............................................13
4.01. Composition of the Collateral................................13
4.02. Security Agreement...........................................13
4.03. Perfection and Maintenance of Security Interest..............14
4.04. Provisions Relating to Receivables...........................15
4.05. Provisions Relating to Inventory.............................15
4.06. Provisions Relating to Machinery and Equipment...............16
4.07. Provisions Relating to Intellectual Property.................16
4.08. Provisions Relating to the Monsanto Royalty..................16
4.09. Priority of Security Interests...............................17
ARTICLE 5. REPRESENTATIONS AND WARRANTIES...................................17
5.01. Inducing Representations and Warranties......................17
5.02. Survival.....................................................21
ARTICLE 6. RESERVED.........................................................21
ARTICLE 7. FINANCIAL REPORTING..............................................21
7.01. Financial Statements.........................................21
7.02. GAAP Reporting...............................................22
7.03. Communications with Accountants..............................22
ARTICLE 8. COVENANTS........................................................22
8.01. Affirmative Covenants........................................22
8.02. Negative Covenants...........................................26
ARTICLE 9. DEFAULT..........................................................28
9.01. Events of Default............................................28
9.02. Remedies.....................................................30
9.03. UCC Remedies.................................................30
<PAGE> 3
9.04. Right of Set-off.............................................31
9.05. Discretion to Apply the Collateral...........................32
9.06. Rights and Remedies Cumulative; Waivers......................32
9.07. Injunctive Relief............................................32
9.08. Loan by Bank for Borrower Expenses...........................32
9.09. Power of Attorney............................................33
9.10. Actions......................................................33
ARTICLE 10. MISCELLANEOUS...................................................33
10.01. Construction..............................................33
10.02. Further Assurances........................................34
10.03. Preferences...............................................34
10.04. Indemnification...........................................34
10.05. Reimbursement for Bank Expenses...........................34
10.06. Strict Enforcement by the Bank............................35
10.07. Notices...................................................35
10.08. Bank Participations.......................................35
10.09. Assignments by the Borrower...............................36
10.10. Continuing Obligation.....................................36
10.11. Superseding Agreement.....................................36
10.12. Amendments and Waivers in Writing.........................36
10.13. Severability..............................................36
10.14. Governing Law.............................................36
10.15. Consent to Jurisdiction; Waiver of Trial by Jury..........36
10.16. Headings..................................................37
10.17. Counterparts..............................................37
Exhibit A Form of Note
Exhibit B Form of Guarantee
Exhibit C Form of Intercreditor Agreement
Exhibit D Locations of Inventory
Exhibit E Locations of Machinery and Equipment
Exhibit F Places of Business
Exhibit G Consents and Approvals
<PAGE> 4
TERM LOAN AND SECURITY AGREEMENT
THIS TERM LOAN AND SECURITY AGREEMENT, dated as of December 23, 1999, between
ECOGEN INC., a Delaware corporation (the "BORROWER"), and THE BERKSHIRE BANK, a
New York banking corporation (the "BANK"),
WITNESSETH:
In consideration of the mutual covenants made herein and other good and
valuable consideration, receipt of which is hereby acknowledged, and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS.
1.01. DEFINED TERMS. As used herein:
"ADJUSTED BASE RATE" shall mean a fluctuating rate of interest equal to
the Base Rate plus two percent (2%) per annum; provided, however, that upon the
occurrence and during the continuation of an Event of Default, such rate shall
be equal to the Base Rate plus six percent (6%) per annum.
"AFFILIATE" shall mean, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, said Person. For the purposes of
this Agreement, the term "CONTROL" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of a Person, whether through ownership of common stock, by contract or
otherwise.
"AGREEMENT" shall mean this Term Loan and Security Agreement, as the
same may, from time to time, be amended or supplemented.
"BANK" shall mean The Berkshire Bank, a bank organized under the laws
of the State of New York, and its successors and assigns.
"BASE RATE" shall mean a fluctuating interest rate per annum which for
each day shall equal the rate of interest announced publicly by the Bank, from
time to time, as the Bank's base rate (it being understood and agreed that such
rate shall not necessarily be the lowest rate of interest available to the most
preferred customers of the Bank), with each change in such rate to be effective
for purposes hereof on the day on which such change is so reported, and if not
so reported, as determined by the Bank in good faith by the best means available
to it.
<PAGE> 5
"BANKING DAY" shall mean any day other than a Saturday, a Sunday or any
other day in which commercial banks in New York City and Pennsylvania are
required or authorized to be closed.
"BORROWER" shall mean Ecogen Inc., a Delaware corporation, and its
successors and assigns.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day in which commercial banks in New York City and Pennsylvania are required or
authorized to be closed.
"CLOSING" has the meaning given to such term in Section 3.01 hereof.
"CLOSING DATE" shall mean the date of the Closing.
"COLLATERAL" has the meaning given to such term in Section 4.01 hereof.
"COMMITMENT" shall mean $1,500,000.
"DEFAULT" shall mean the occurrence of any of the events set forth in
Section 9.01 hereof which after the giving of notice, the passage of time, or
both, would become an Event of Default.
"EVENT OF DEFAULT" has the meaning provided in Section 9.01 hereof.
"LOAN" shall have the meaning set forth in Section 2.01 hereof.
"GAAP" shall mean United States generally accepted accounting
principles consistently applied and maintained throughout the period indicated
and consistent with the prior financial practice of the Borrower and any
predecessor, as reflected on the historical and pro-forma financial statements
referred to in Article 7 hereof, except for changes mandated by the Financial
Accounting Standards Board or any similar accounting authority of comparable
standing and except for changes concurred with by a firm of independent
certified public accountants reasonably acceptable to the Bank.
"GENERAL INTANGIBLES" shall mean and include all of the general
intangibles of the Borrower, whether now existing or hereafter acquired or
arising or in which the Borrower now has or hereafter acquires any rights,
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, goodwill,
registrations, copyrights, licenses, franchises, customer lists, tax refunds,
tax refund claims, rights and claims against carriers and shippers, leases,
rights to indemnification and all other intangible personal property of every
kind and nature (other than Receivables).
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<PAGE> 6
"GOVERNMENTAL AUTHORITY" shall mean the United States, the States of
Delaware and Pennsylvania, or any other political subdivision in which the
Borrower owns any property or conducts any business, or any other political
subdivision, agency, authority, board, bureau, commission, court, arbitrator or
arbitration board, department, or instrumentality properly exercising
jurisdiction over the Borrower.
"GUARANTEE" means the Guarantee, dated as of the date hereof, executed
by the Guarantor , in substantially the form of Exhibit B hereto.
"GUARANTOR" means Momar Corporation, a Maryland corporation.
"INDEBTEDNESS" shall mean without duplication:
(a) all indebtedness of such Person for borrowed money, but
excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six (6) months
unless being contested in good faith;
(b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or
not matured;
(c) all obligations evidenced by notes, bonds, debentures or
similar instruments;
(d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default is
limited to repossession or sale of such property);
(e) all Indebtedness referred to above secured by (or for
which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property or other
assets (including accounts and contract rights) owned by such Person
even though such Person has not assumed or become liable for the
payment of such Indebtedness;
(f) intercompany loans with Subsidiaries (other than the
Principal Subsidiaries) made in the normal course of business;
(g) All indebtedness guaranteed, directly or indirectly, in
any manner, or endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse by the
Borrower;
(h) All indebtedness guaranteed by the Borrower, directly or
indirectly, through agreements, contingent or otherwise: (1) to
purchase such indebtedness; or (2) to purchase, sell, or lease (as
lessee or lessor) property, products, materials, or supplies or to
purchase or sell services, primarily for the
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<PAGE> 7
purpose of enabling the debtor to make payment of such indebtedness or
to insure the owner of the indebtedness against loss; or (3) to supply
funds to, or in any other manner invest in, the debtor;
(i) All indebtedness secured by (or for which the holder of
such indebtedness has a right, contingent or otherwise, to be secured
by) any mortgage, deed of trust, pledge, lien, security interest, or
other charge or encumbrance upon property owned or acquired subject
thereto whether or not the liabilities secured thereby have been
assumed; and
(j) the Obligations.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement, dated
as of the date hereof, among the Borrower, the Bank and Congress Financial
Corporation, in substantially the form attached hereto as Exhibit C.
"INTELLECTUAL PROPERTY" means (i) all patents, patent applications,
patent rights, inventions and improvements, shop rights, processes and formulae,
trade secrets, proprietary technical information, technology and know-how, (ii)
all trademarks, service marks, trade names, label designs and other trade dress
(including the goodwill of the business associated therewith) and copyrights and
(iii) all transferable rights under license agreements with respect to any of
the foregoing.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"INVENTORY" shall mean and include all of the inventory of the
Borrower, whether now existing or hereafter acquired or arising or in which the
Borrower now has or hereafter acquires any rights, (i) including, without
limitation, goods held by the Borrower for sale or lease or to be furnished
under any contract of service, or so furnished by the Borrower, and all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in the
business of the Borrower or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
all returned or repossessed goods now, or at any time or times hereafter, in the
possession or under the control of the Borrower or the Bank, and all documents
of title or documents representing the same, and (ii) excluding any of such
items as set forth in (i) herein to the extent the Borrower does not have an
ownership interest in such items.
"LAWS" shall mean all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any thereof.
"LOAN" shall mean the loan under the Loan by the Bank to or for the
account of the Borrower pursuant to Article 2 hereof.
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<PAGE> 8
"MACHINERY AND EQUIPMENT" shall mean and include all of the equipment
and fixtures of the Borrower, whether now existing or hereafter acquired or
arising or in which the Borrower now has or hereafter acquires any rights,
including, without limitation, furniture, machinery, vehicles (but excluding
titled vehicles) and trade fixtures, together with any and all accessories,
accessions, parts and appurtenances thereto, substitutions therefor and
replacements thereof.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 5.01(d)
hereof.
"MATURITY DATE" shall mean June 23, 2001.
"MONSANTO ACCOUNT" has the meaning set forth in Section 4.08 hereof.
"MONSANTO INSTRUCTIONS" has the meaning set forth in Section 4.08
hereof.
"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.
"NOTE" shall mean the promissory note referred to in Section 2.02
hereof.
"OBLIGATIONS" shall mean:
(a) the obligations of the Borrower to pay the principal of,
and interest on, the Note in accordance with the terms thereof and to
satisfy all of its other liabilities to the Bank hereunder, under the
Note, and under any of the other Related Documents, whether now
existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions, modifications,
renewals thereof, and substitutions therefor;
(b) the obligations of the Borrower to repay to the Bank
hereunder, under the Note and under any of the other Related Documents,
all amounts advanced by the Bank on behalf of the Borrower, including,
but without limitation, advances for principal or interest payments to
prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, rent, or repairs to, or maintenance of the Collateral;
(c) all advances, liabilities, obligations, covenants and
duties, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which are owing by
the Borrower to the Bank and arise under this Agreement or any Related
Document, whether or not for the payment of money, whether direct or
indirect, absolute or contingent, or due or to become due; and
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<PAGE> 9
(d) the obligations of the Borrower to reimburse the Bank on
demand, for all of the Bank's out-of-pocket expenses and costs,
including the reasonable fees and expenses of its counsel, in
connection with the preparation, amendment, modification, or
enforcement of this Agreement and the documents required hereunder, and
in connection with any proceeding brought, or threatened, to enforce
payment of any of the obligations referred to in the foregoing
paragraphs (a), (b) and (c).
"OBLIGOR" shall mean any Person that is an obligor on a Receivable.
"OUTSTANDING AMOUNT" shall mean, from time to time, the principal
amount outstanding under the Loan.
"PARTICIPATING BANK" shall mean any participating or co-lending bank
with which, pursuant to Section 10.08 hereof, the Bank may enter into a
participation or co-lending agreement.
"PERMITTED ENCUMBRANCES" shall mean (A) the security interest of
Congress Financial Corporation granted pursuant to the Loan and Security
Agreement, dated August 20, 1998, as amended, between Congress Financial
Corporation and the Borrower, (B) liens for taxes not yet subject to penalties
or which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provision (in the
opinion of an authorized financial officer of the Bank) shall have been
established on the books of the Borrower, (C) pledges or deposits made under
workmen's compensation, unemployment insurance, social security and similar
legislation, or in connection with appeal or surety bonds incident to
litigation, or to secure statutory obligations, (D) mechanics', repairmen's,
materialmen's, warehousemen's, and other like liens with respect to liabilities
which are not yet due or which are being contested in good faith, (E)
encumbrances on assets that are not Collateral and are not used to secure any
Indebtedness of the Borrower, (F) purchase money security interests in Machinery
and Equipment (including capital leases) not to exceed $925,000 in the aggregate
at any time outstanding so long as such security interests do not apply to any
property of the Borrower or any of its Subsidiaries other than the Machinery and
Equipment so acquired and the Indebtedness secured thereby does not exceed the
cost of the Machinery and Equipment so acquired and the Indebtedness secured,
(G) liens and security interests of the Bank and (H) such other minor defects of
title which in the opinion of counsel acceptable to the Bank will not materially
impair the value of, or the Bank's security interest in, the Collateral for any
reasonable use or the ability of the Bank to realize the value of, or its
security interest in, the Collateral.
"PERSON" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, court, or government or political subdivision or agency thereof.
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<PAGE> 10
"PREFERRED DIVIDENDS" shall mean the dividends provided under the
Series 1999A Convertible Preferred Stock and the Series 1998C Convertible
Preferred Shares.
"PRINCIPAL SUBSIDIARIES" shall mean Ecogen-Bio Inc., Ecogen Investments
Inc., Ecogen Technologies I Incorporated, Ecosearch 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.
"RECEIVABLES" shall mean and include, with respect to the Borrower, all
of the accounts, contract rights, chattel paper and instruments of the Borrower,
whether now existing or hereafter acquired or arising or in which the Borrower
now has or hereafter acquires any rights, including, without limitation, all
present and future rights to payments for goods, merchandise or Inventory sold
or leased or for services rendered, whether or not represented by instruments or
chattel paper, and whether or not earned by performance; proceeds of any letter
of credit on which the Borrower is beneficiary; and all forms of obligations
whatsoever owing to the Borrower, together with all instruments and documents of
title representing any of the foregoing, all rights in any goods, merchandise or
Inventory which any of the foregoing may represent, all rights in any returned
or repossessed goods, merchandise or Inventory, and all rights, security and
guaranties with respect to each of the foregoing, including, without limitation,
any right of stoppage in transit.
"RECORDS" shall mean correspondence, memoranda, tapes, discs, papers,
books, and other documents, or transcribed information of any type, whether
expressed in ordinary or machine language, wheresoever the same may be located,
and whether or not the same are in the possession of the Borrower or another
Person.
"RELATED DOCUMENTS" shall mean the documents, whether deliverable at or
after the Closing, required under Section 3.01 hereof.
"SUBSIDIARY" shall mean, with respect to the Borrower, any corporation
of which more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the board of directors of such corporation is at the time
directly or indirectly owned or controlled by the Borrower or by one or more
Subsidiaries.
"TRANSACTION DOCUMENTS" has the meaning set forth in Section 5.01(b)
hereof.
1.02. ACCOUNTING TERMS. Accounting terms used and not otherwise defined
in this Agreement have the meanings determined by GAAP, and all calculations
with respect to accounting or financial matters unless otherwise provided herein
shall be computed in accordance with GAAP.
1.03. UCC TERMS. All terms used herein that are defined in the Uniform
Commercial Code of the applicable jurisdiction (the "UCC") and are not otherwise
defined herein shall have the meanings assigned to such terms in the UCC.
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<PAGE> 11
ARTICLE 2.
THE LOAN.
2.01. GENERAL TERMS. Subject to the provisions of this Agreement, the
Bank hereby establishes a term loan facility for the account of the Borrower,
under which the Bank agrees to make a term loan to the Borrower (the "LOAN") on
the Closing Date in a principal amount equal to the Commitment.
2.02. THE NOTE. On the Closing Date, the Borrower shall execute and
deliver a promissory note to the Bank (the "NOTE"), which Note shall be in the
form of Exhibit A hereto. The Note shall be in the principal amount of the
Commitment.
2.03. REPAYMENT OF THE LOAN. An amount of principal on the Loan equal
to $500,000 shall be due and payable on June 23, 2000 and the Outstanding Amount
shall be due and payable on the Maturity Date.
2.04. PAYMENT OF INTEREST. Interest for the Loan shall be payable by
the Borrower at the Adjusted Base Rate monthly in arrears on the first day of
each month, calculated on the basis of a 360-day year for actual days elapsed.
2.05. LAWFUL INTEREST. Nothing contained in this Agreement or in the
Note or in any other agreement or instrument evidencing or relating to the
Obligations shall be construed to permit the Bank to receive at any time
interest, fees or other charges in excess of the amounts which the Bank is
legally entitled to charge and receive under any law to which such interest,
fees or charges are subject. In no contingency or event whatsoever shall the
compensation payable to the Bank by the Borrower, howsoever characterized or
computed, hereunder or under the Note or under any other agreement or instrument
evidencing or relating to the Obligations exceed the highest rate permissible
under any law to which such compensation is subject. There is no intention that
the Bank shall contract for, charge or receive compensation in excess of the
highest lawful rate, and, in the event it should be determined that the Bank has
contracted for any rate of interest in excess of the highest lawful rate, then
ipso facto such rate shall be reduced to the highest lawful rate so that no
amounts shall be charged which are in excess thereof, and, in the event it
should be determined that any excess over such highest lawful rate has been
charged or received, the Bank shall promptly refund such excess to the Borrower;
provided, however, that, if lawful, any such excess shall be paid by the
Borrower to the Bank as additional interest (accruing at a rate equal to the
maximum legal rate minus the rate provided for hereunder) during any subsequent
period when regular interest is accruing hereunder at less than the maximum
legal rate.
2.06. FACILITY FEE. On the Closing Date, the Borrower shall pay to the
Bank a facility fee in the amount of $7,500.
2.07. CLOSING EXPENSES. On the Closing Date, the Borrower shall
reimburse the Bank for the reasonable fees and disbursements of counsel to the
Bank, and all other
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<PAGE> 12
out-of-pocket fees and expenses incurred by the Bank referred to in Section
10.05 hereof relating to the Loan.
2.08. OPTIONAL PREPAYMENT OF THE LOAN. Upon one (1) Business Day's
notice to the Bank, or upon same day notice received by the Bank prior to 12:00
noon (New York time), the Borrower may prepay the Outstanding Amount of the Loan
in whole or, from time to time, in part, without premium or penalty, any partial
payment to be made in integral multiples of $100,000; provided, however, that
any such prepayment shall be applied solely to principal due under the Loan.
2.09. PAYMENTS TO THE BANK. (a) All payments of interest on, and
principal of, the Loan, all fees, and all other sums payable to the Bank shall
be paid directly to the Bank, at its address set forth in Section 10.07 hereof,
or such other place as the Bank shall by written notice to the Borrower
designate, in immediately available funds on the dates specified hereunder, or
if any such date is not a Business Day, then on the next succeeding Business
Day, in such currency of the United States of America as is, at the time of
payment, legal tender for the payment of public and private debts. Except as
otherwise provided in this Agreement, the Bank shall send the Borrower
statements of all amounts due hereunder for interest, principal, and fees, which
statements shall be considered correct and presumptively binding on the Borrower
unless the Borrower notifies the Bank to the contrary within thirty (30) days of
its receipt of any statement which it deems to be incorrect.
(b) All payments made by the Borrower under this Agreement shall be
made free and clear of, and without reduction for or on account of, any present
or future stamp or other taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, restrictions or conditions of any nature whatsoever
now or hereafter imposed, levied, collected, withheld or assessed by any country
(or by any political subdivision or taxing authority thereof or therein)
excluding income and franchise taxes now or hereafter imposed on the Bank.
2.10. INTEREST ON OVERDUE OBLIGATIONS. Except as otherwise expressly
provided herein, the Borrower agrees to pay to the Bank interest at the Adjusted
Base Rate on all Obligations which are due hereunder and unpaid from the due
date to the date of payment by the Borrower.
ARTICLE 3.
CONDITIONS PRECEDENT.
The obligation of the Bank to make the Loan is subject to the
following:
3.01. CONDITIONS PRECEDENT TO THE CLOSING. The Borrower shall have
delivered to the Bank, prior to December 23, 1999 (the date upon which all of
the following have been delivered to the Bank to be defined as the "CLOSING
DATE"), the following:
(a) the Note, duly executed by the Borrower;
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<PAGE> 13
(b) the Guarantee, duly executed by the Guarantor;
(c) the Intercreditor Agreement, duly executed by the Borrower
and Congress Financial Corporation;
(d) a list of insurance policies complying with Section
8.01(k) hereof and a copy of the certificate of insurance with respect
to each such policy, and, with respect to casualty insurance policies,
loss payable endorsements naming the Bank as loss payee, together with
evidence that all premiums that are due have been paid on each such
policy;
(e) the written consent of Congress Financial Corporation to
this Agreement and the transactions contemplated hereby;
(f) such Uniform Commercial Code filings as are necessary in
the Commonwealth of Pennsylvania to perfect the security interests of
the Bank in the Collateral;
(g) a copy of the certificate of incorporation of the
Borrower, certified as of a current date by the Secretary of State of
Delaware;
(h) a good standing certificate for the Borrower, issued as of
a current date by the Secretary of State of Delaware;
(i) a certificate or certificates issued as of a current date
by the Secretary of Commonwealth of Pennsylvania, or other evidence
acceptable to the Bank in its sole discretion, stating that the
Borrower is qualified to do business in, and is in good standing as a
foreign corporation doing business in, the Commonwealth of
Pennsylvania;
(j) a certificate of the secretary of the Borrower certifying
(i) that attached thereto is a true and complete copy of the bylaws of
the Borrower as in effect on the date of such certification, (ii) that
attached thereto is a true and complete copy of resolutions adopted by
the board of directors of the Borrower authorizing the execution,
delivery and performance of this Agreement and each of the other
Related Documents to which it is a party, and (iii) as to the
incumbency and genuineness of the signature of each officer of the
Borrower executing this Agreement;
(k) a certificate signed by the president of the Borrower
attesting to such factual matters as shall be requested by the Bank,
including that (i) the representations and warranties set forth in
Article 5 hereof (as they relate solely to the transactions
contemplated by the Closing) are true and correct in all material
respects on and as of such date with the same effect as though made on
and as of such date, (ii) the Borrower is on such date in compliance
with all the terms and
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<PAGE> 14
provisions set forth in this Agreement and the other Related Documents
(each, as they relate solely to the transactions contemplated by the
Closing) on its part to be observed or performed, and (iii) on such
date, and after giving effect to the consummation of the transactions
contemplated by this Agreement, no Default or Event of Default nor any
event or condition which with the making of the Loan, the consummation
of such transactions or any combination thereof would constitute such a
Default or Event of Default, has occurred and is continuing;
(l) a written opinion of Paul, Hastings, Janofsky & Walker
LLP, counsel to the Borrower, dated the Closing Date and addressed to
the Bank, in form satisfactory to the Bank, to the effect that:
(1) the Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware, and has the power to own its assets and to
transact the business in which it is engaged,
(2) the Borrower has the power to execute, deliver
and perform the Borrower's obligations under the Transaction
Documents and the shareholders and the board of directors of
the Borrower have taken all necessary action required under
the certificate of incorporation and bylaws of the Borrower to
authorize the execution and delivery by the Borrower of, and
performance of the Borrower's obligations under, the
Transaction Documents,
(3) the execution and delivery by the Borrower of,
and performance by the Borrower of the Borrower's obligations
under, the Transaction Documents (i) will not violate any
provision of any applicable law (including laws relating to
usury) or regulation or of any order, writ, judgment,
injunction or decree of any governmental authority, (ii) will
not violate any provision of the certificate of incorporation
or bylaws of the Borrower and (iii) will not violate any
provision of, or constitute a default under, or result in the
creation or imposition of any prohibited lien on any asset of
the Borrower pursuant to the provisions of, any mortgage,
indenture, contract, agreement or other undertaking known to
such counsel to which the Borrower is a party or which is
binding upon the Borrower or upon any of its assets,
(4) the Transaction Documents have been duly executed
and delivered by the Borrower, and constitute the legal, valid
and binding obligations of the Borrower, subject to
bankruptcy, insolvency, moratorium, or other similar laws
affecting creditors' rights generally and to principles of
equity,
(5) with respect to the Commonwealth of Pennsylvania,
all financing statements necessary or desirable to be filed in
connection with
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<PAGE> 15
the perfection of the security interests in the Collateral
granted hereunder and under the Related Documents have been
duly filed and no other filing or recording is required (other
than that, prior to the expiration of five years from the date
of the initial filing, the filing of continuation statements
shall be required) and the foregoing are effective to create a
valid and perfected security interest in the Collateral in
favor of the Bank securing the Obligations, and
(6) to the knowledge of such counsel, there is no
action, suit, proceeding, inquiry or investigation, at law or
in equity, before or by any court, public board or body
pending or threatened in writing against or affecting the
Borrower wherein an unfavorable decision, ruling or finding
would materially, adversely affect the transactions
contemplated by this Agreement or any of the obligations of
the Borrower;
(m) a copy of the Monsanto Instructions with evidence of the
mailing thereof to Monsanto Company by certified mail; and
(n) such other documents, instruments, agreements and opinions
as the Bank may reasonably request.
In addition, the Borrower shall have delivered or caused the Guarantor
to deliver to the Bank, prior to the Closing Date:
(i) a copy of the certificate of incorporation of the
Guarantor, certified as of a current date by the Secretary of State of
Maryland;
(ii) a good standing certificate for the Guarantor, issued as
of a current date by the Secretary of State of Maryland; and
(iii) a certificate of the president of the Guarantor
certifying (i) that attached thereto is a true and complete copy of the
bylaws of the Guarantor as in effect on the date of such certification,
(ii) that attached thereto is a true and complete copy of resolutions
adopted by the board of directors of the Guarantor authorizing the
execution, delivery and performance of the Guarantee, and (iii) as to
the incumbency and genuineness of the signature of each officer of the
Guarantor executing the Guarantee.
3.02. ADDITIONAL CONDITIONS PRECEDENT TO THE LOAN. Notwithstanding any
other provision of this Agreement, the Bank shall have no obligation to make the
Loan unless and until the following conditions have been met with respect to the
Borrower:
(a) Immediately before and after the Loan, no Event of Default
(other than as set forth in Section 5.01(o) hereof) shall have occurred
and be continuing; and
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<PAGE> 16
(b) The representations and warranties of the Borrower
contained in this Agreement shall be true as if made on and as of the
date of the Loan.
3.03. CLOSING FEES. In addition to the conditions set forth in Sections
3.01 and 3.02 hereof, it shall be a condition precedent to the Closing that the
Borrower shall have paid to the Bank the facility fee provided for in Section
2.06 hereof plus the fees and expenses of the Bank related to the Closing which
are provided for in Section 2.07 hereof.
3.04. POST CLOSING CONDITIONS. The Borrower shall deliver to the Bank,
prior to January 17, 1999, the following:
(a) a UCC search report reflecting that such personal property
security interests constitute valid and perfected first priority
security interests (except for Permitted Encumbrances), duly recorded
in the appropriate recording or filing offices with all recording or
filing fees and taxes, if any, paid thereof; and
(b) termination statements executed by any creditors holding
security interests, if any, which are not Permitted Encumbrances in any
of the Collateral.
ARTICLE 4.
COLLATERAL SECURITY.
4.01. COMPOSITION OF THE COLLATERAL. The property in which a security
interest is granted pursuant to the provisions of Section 4.02 is herein
collectively called the "COLLATERAL." The Collateral, together with all other
property of the Borrower of any kind held by the Bank shall stand as one
general, continuing collateral security for all Obligations and may be retained
by the Bank as collateral security until all Obligations have been satisfied in
full.
4.02. SECURITY AGREEMENT. As security for all Obligations, the Borrower
grants to the Bank (in addition to any collateral security in which a security
interest is granted pursuant to any of the other Related Documents) a security
interest (subject to Permitted Encumbrances) in and assignment of:
(a) all of the Borrower's Receivables;
(b) all of the Borrower's Machinery and Equipment;
(c) all of the right, title and interest of the Borrower in
and to any agreements or contracts for the sale of goods and services,
and other miscellaneous agreements and contracts as such agreements may
be amended or otherwise modified from time to time herein including
without limitation: (i) all rights of the Borrower to receive moneys
due and to become due under or pursuant to such agreements or
contracts, (ii) all rights of the Borrower to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the
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<PAGE> 17
agreements or contracts, (iii) claims of the Borrower for damages
arising out of or for breach of or default under the agreements or
contracts and (iv) the right of the Borrower to terminate the
agreements or contracts, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder.
(d) all of the Borrower's General Intangibles;
(e) all of the Borrower's Inventory;
(f) all of the Borrower's goods, chattels, business Records,
contracts, documents of title, fixtures, insurance policies and
proceeds, licenses, licensing fees, permits, approvals, consents,
certificates, stock, surveys, engineering reports, tools, landscaping,
all other equipment and machinery, furniture, furnishings, business
machines, appliances, deposits, security deposits, money, securities,
claims, demands, causes of action, refunds, rebates, income and all
other tangible and intangible real, personal or mixed property whether
now owned or hereafter acquired; and
(g) all proceeds, products, additions to, replacements of,
substitutions for and accessions of any and all Collateral described in
subparagraphs (a), (b), (c), (d), (e) and (f) above.
4.03. PERFECTION AND MAINTENANCE OF SECURITY INTEREST. Until all
Obligations have been fully satisfied, the Bank's security interest in the
Collateral, and all products and proceeds thereof, whether such goods and rights
are now owned or hereafter acquired, shall continue in full force and effect.
The Borrower shall perform or cause to be performed any and all steps requested
by the Bank to perfect, maintain and protect the Bank's security interest in the
Collateral, including, without limitation, executing and filing financing or
continuation statements, or amendments thereof, in form and substance
satisfactory to the Bank, maintaining a perpetual inventory and complete and
accurate stock records, delivering to the Bank any warehouse receipts not
pledged to a secured party under any Permitted Encumbrance covering that portion
of the Collateral, if any, located in warehouses or storage facilities and for
which negotiable warehouse receipts are issued, or taking such other steps as
are deemed necessary by the Bank to maintain the Bank's control of the
Inventory. The Bank may file one or more financing statements disclosing the
Bank's security interest under this Agreement without the Borrower's signature
appearing thereon or may execute any such financing statement on behalf of the
Borrower and the Borrower shall pay the reasonable costs of, or incidental to,
any recording or filing of any financing statements concerning the Collateral;
provided, however, that the Bank shall give prompt notice in writing to the
Borrower of any such action. Upon the occurrence and during the continuance of
an Event of Default, the Borrower shall, upon the Bank's Request, perform or
cause to be performed the transferring of Inventory to warehouses or storage
facilities designated by the Bank. If any Inventory is in the possession or
control of any warehouseman or of the agents or bailees of the Borrower, the
Borrower shall notify such agents or bailees of the Bank's security interest in
such Inventory and, upon the occurrence and during the continuance
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<PAGE> 18
of an Event of Default, instruct them to hold all such Inventory for the Bank's
account and subject to the Bank's instructions. From time to time, the Borrower
shall, upon the Bank's request, execute and deliver or cause to be executed and
delivered confirmatory written instruments pledging to the Bank the Inventory
described in any such written instruments or otherwise; provided, however, that
no failure of the Borrower to execute and deliver such confirmatory instruments
shall affect or limit the Bank's security interest or other rights in and to the
Inventory.
4.04. PROVISIONS RELATING TO RECEIVABLES. The following provisions
relating to Receivables shall be applicable to the Borrower during the term
hereof:
(a) Without the prior written consent of the Bank, which will
not be unreasonably withheld, in each case, the Borrower will not
redate any invoice or sale or make sales on extended dating beyond that
customary in its industry or materially change the terms of sale
customarily offered to its customers.
(b) If the Borrower becomes aware of anything materially
detrimental to the credit of any Obligor that owes the Borrower more
than $100,000, it will promptly advise the Bank thereof.
(c) During the term of this Agreement, the Borrower shall not
sell or assign or grant any security interest in any Receivables to
anyone other than the Bank or to holders of Permitted Encumbrances.
(d) The Bank may, at all times after the occurrence and during
the continuance of an Event of Default, settle or adjust disputes and
claims directly with the Obligors for amounts and upon terms which the
Bank considers advisable, subject to the consent of holders of
Permitted Encumbrances.
(e) The Borrower agrees, represents and warrants that each
Receivable will be owned by the Borrower free and clear of any liens,
claims or encumbrances except in favor of the Bank and the holders of
Permitted Encumbrances and will cover a bona fide sale and delivery of
Inventory usually dealt in by the Borrower, or the provision by the
Borrower of services to the Obligors in the ordinary course of
business.
(f) Upon the occurrence and during the continuance of an Event
of Default, the Bank or its designee may notify the Obligors at any
time that Receivables have been assigned to the Bank or of the Bank's
security interest therein, collect them directly and charge the
collection costs and expenses to the Borrower's loan account.
4.05. PROVISIONS RELATING TO INVENTORY. The Borrower represents,
warrants and covenants that all the Inventory is and will be owned by the
Borrower free of all liens and encumbrances other than the Bank's security
interest hereunder and except for Permitted Encumbrances, and shall be kept by
the Borrower at the locations set forth on Exhibit D
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<PAGE> 19
hereto, and that the Borrower shall not (without the Bank's prior written
approval) remove the Inventory therefrom except for the purposes of sale in the
regular course of its business and except as required by the holders of
Permitted Encumbrances. Except for sales of Inventory made in the ordinary
course of business, the Borrower shall not sell, encumber or dispose of or
permit the sale, encumbrance or disposal of any Inventory without the Bank's
prior written consent.
4.06. PROVISIONS RELATING TO MACHINERY AND EQUIPMENT. The Borrower
shall keep and maintain its Machinery and Equipment in good operating condition
and repair and shall make all necessary replacements thereof so that the value
and operating efficiency thereof shall at all times be maintained and preserved,
and shall not permit any such items to become a fixture to real estate or
accession to other personal property unless the Bank has a security interest in
such real estate or other personal property subject only to Permitted
Encumbrances. The Borrower shall, immediately on demand therefor by the Bank,
deliver to the Bank any and all evidence of ownership of any of the Machinery
and Equipment. The Machinery and Equipment shall be maintained at locations
specified in Exhibit E hereto. The Borrower shall not sell, lease, grant a
security interest in or otherwise dispose of or encumber the Machinery and
Equipment, or any part thereof (except that the Borrower may sell and replace
obsolete Machinery and Equipment in the ordinary course of business), other than
with Permitted Encumbrances.
4.07. PROVISIONS RELATING TO INTELLECTUAL PROPERTY. The Borrower and
each Subsidiary has good and valid title to, or has all necessary rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and other intellectual property rights
(collectively, the "Intellectual Property Rights") which the Borrower reasonably
believes are necessary for use in connection with its business and the business
of each Subsidiary, and which the failure to so have would have a Material
Adverse Effect. To the best knowledge of the Borrower, 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.
4.08. PROVISIONS RELATING TO THE MONSANTO ROYALTY. The Borrower shall
establish an account with the Bank (the "MONSANTO ACCOUNT") which shall be used
for the sole purpose of receiving payments on the Monsanto Royalty. The Borrower
shall instruct Monsanto Company in writing (the "MONSANTO INSTRUCTIONS") to make
all payments on the Monsanto Royalty to the Bank for deposit into the Monsanto
Account, which instructions shall provide that the Monsanto Instructions may not
be modified or rescinded without the written consent of the Bank. Amounts on
deposit in the Monsanto Account may be applied, during the continuance of an
Event of Default, to the payment of regularly scheduled payments of principal
and interest on the Loan. Any amounts on deposit in the Monsanto Account not
currently required to make payments on the Loan as aforesaid shall be paid to
the Borrower, but only with the consent of the Bank, which consent shall not be
unreasonably withheld; provided, however, that the Bank shall not withhold its
consent with respect to any amounts in excess of the unpaid principal balance of
the Loan.
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<PAGE> 20
4.09. PRIORITY OF SECURITY INTERESTS. The Borrower warrants that the
security interests of the Bank in the Collateral shall be perfected security
interests, subject only to Permitted Encumbrances.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES.
5.01. INDUCING REPRESENTATIONS AND WARRANTIES. In order to induce the
Bank to enter into this Agreement and to make the Loan, the Borrower represents
and warrants to the Bank that (where appropriate, giving effect to the
consummation of the transactions contemplated by this Agreement) as of the
Closing Date:
(a) Organization and Qualification. The Borrower and each
Subsidiary (as defined below) 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"), comprise all of the entities which would be deemed
"significant subsidiaries" of the Borrower, 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 Borrower 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, charges or encumbrances or rights of first refusal of any
nature whatsoever.
(b) Authority. The Borrower has the requisite corporate power
and authority to enter into and to consummate the transactions
contemplated by each of this Agreement and the other agreements and
instruments executed and delivered by it pursuant hereto (collectively,
the "Transaction Documents") and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Borrower and the consummation by it of the
transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Borrower and no further action is
required by the Borrower. Each of the Transaction Documents has been
duly executed by the Borrower 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 Borrower enforceable against the
Borrower in accordance with its terms. Neither the Borrower 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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<PAGE> 21
(c) Due Authorization. The execution, delivery and performance
of this Agreement and each of the other Related Documents to which the
Borrower is a party and the creation of the security interests and
liens provided for under this Agreement have been duly authorized by
all necessary or proper action on the part of the Borrower, including
the consent of its shareholders where required.
(d) Noncontravention. The execution, delivery and performance
of the Transaction Documents by the Borrower and the consummation by
the Borrower 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) 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, or result in a loss of
contractual benefits under any agreement, credit facility, indenture or
instrument (evidencing a Borrower debt or otherwise) to which the
Borrower or any Subsidiary is party or by which any property or asset
of the Borrower 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 Borrower or any Subsidiary is subject or by
which any property or asset of the Borrower or any Subsidiary 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) have
or result in a material adverse effect on the business, operations,
property, assets, liabilities (financial or otherwise) or prospects of
the Borrower and the Subsidiaries, taken as a whole, or (y) adversely
impair the Borrower's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (x) or (y),
being a "Material Adverse Effect").
(e) Valid and Binding Obligations. This Agreement, the Note
and each of the other Related Documents to which the Borrower is a
party are, or upon delivery thereof to the Borrower will be, the legal,
valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency and other
similar laws affecting creditors' rights generally and to principles of
equity affecting the enforcement of contractual obligations generally.
(f) Corporate and Fictitious Names. During the five (5) years
preceding the date of this Agreement, neither the Borrower nor any
predecessor of the Borrower has been known as or used any corporate or
fictitious name other than its current corporate name.
(g) Places of Business. The Borrower's chief executive offices
and principal place of business, and the place where the Borrower
maintains all records relating to the Collateral, is at the address set
forth in Section 10.07
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<PAGE> 22
hereof. The Borrower has no other place of business, except as
specified in Exhibit F hereto and the Borrower maintains Collateral at
no other locations, except as specified in Exhibits D, E and F hereto.
(h) Title to Assets. The Borrower has good, indefeasible, and
merchantable title to and ownership of the Collateral, free and clear
of all liens, claims, security interests and encumbrances other than
Permitted Encumbrances.
(i) Governmental Authorizations to Conduct Business. Each of
the Borrower and its Subsidiaries possesses all permits and other
governmental authorizations that are material to the conduct of its
business. Such licenses, permits and other governmental authorizations
are valid and sufficient for the business presently carried on by the
Borrower and its Subsidiaries, and neither the execution, delivery or
performance of this Agreement or the Related Documents nor the
consummation of the transactions contemplated hereby will affect the
validity thereof or require consent with respect thereto, and, to the
best of the knowledge of the Borrower, there is no threat of suspension
or cancellation of any such license, permit or governmental
authorization. Neither the business of the Borrower or any of its
Subsidiaries is being conducted in violation of any law, ordinance or
regulation of any Governmental Authority, including any filing
requirement in respect thereof, except for violations which,
individually or in the aggregate, do not and will not have Material
Adverse Effect.
(j) Consents and Approvals. Except as specifically set forth
in Exhibit G neither the Borrower 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 governmental authority or other Person in
connection with the execution, delivery and performance by the Borrower
of the Transaction Documents.
(k) Legal Proceedings. There is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any
governmental authority pending or, to the best of the Borrower's
knowledge, threatened against or affecting the Borrower or any
Subsidiary (and to the best of the Borrower's knowledge, there is no
basis therefor) (i) wherein an unfavorable decision, ruling or finding
would have a Material Adverse Effect.
(l) Taxes. Each of the Borrower and its Subsidiaries has filed
all federal, state and local tax returns which are required to be
filed, and has paid, or made provision for the payment of, all taxes
which have become due pursuant to said returns or pursuant to any
statement, it any, received by the Borrower or any Subsidiary. The
income tax returns filed by each of the Borrower and its Subsidiaries
properly reflect the income and taxes of the Borrower and its
Subsidiaries and for the periods covered thereby, subject only to
reasonable adjustments required by the Internal Revenue Service or
other applicable tax authority upon audit, and having no Material
Adverse Effect.
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<PAGE> 23
(m) SEC Documents; Financial Statements. The Borrower has
previously furnished the Purchaser with true and correct copies of all
documents which have been filed by the Borrower with the Commission
pursuant to the Exchange Act since October 31, 1998 (collectively, the
"SEC Documents"). The SEC Documents constitute all reports and other
documents the Borrower was required to file under the Exchange Act
since October 31, 1998. 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 present fairly the consolidated financial condition
and results of operations and changes in stockholders' equity and cash
flows of the Borrower and its consolidated subsidiaries as of the dates
and for the periods indicated, in each case in accordance with GAAP
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 Borrower shall be deemed to
include the notes to such financial statements. Neither the Borrower
nor 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 Borrower or in the notes thereto, prepared in
accordance with GAAP consistently applied except for (A) liabilities or
obligations that were reserved on or reflected in the consolidated
balance sheet of the Borrower at October 31, 1998 (and notes thereto)
included in the SEC Documents, (B) liabilities or obligations arising
in the ordinary course of business since October 31, 1998, (C)
liabilities or obligations which are not, individually or in the
aggregate, material to the Borrower and its Subsidiaries taken as a
whole, or (D) liabilities and obligations described in the SEC
Documents. Except as described in the SEC Documents, since October 31,
1998, there has not been any material adverse change in the condition
(financial or otherwise) results of operations, business, assets,
liabilities or prospects of the Borrower and the Subsidiaries, taken as
a whole.
(n) Violations of Law. The Borrower is not in violation of any
applicable statute, regulation or ordinance of any Governmental
Authority, in any respect materially and adversely affecting the
Collateral or the business, property, assets, operations or condition
of the Borrower, financial or otherwise.
(o) No Default or Violation. Neither the Borrower 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 Borrower or any Subsidiary
under), nor has the Borrower or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any
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<PAGE> 24
indenture, loan or credit agreement or any other material agreement or
instrument to which it is a party or by which it or any of its
properties is bound, except that the Borrower is in default of the
provisions contained in Sections 9.14 and 9.15 of the Loan and Security
Agreement, dated August 20, 1998, between the Borrower and Congress
Financial Corporation (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 as is
not reasonably likely, individually or in the aggregate, to have or
result in a Material Adverse Effect.
(p) Certain Fees. No fees or commissions will be payable by
the Borrower to any broker, financial advisor or consultant, finder,
placement agent, investment banker, or bank with respect to the
transactions contemplated by this Agreement.
(q) Delivery of Information. Neither any Related Document nor
any document, report, notice, lease, operating agreement, schedule,
certificate, statement or other writing (collectively, the "DOCUMENTS")
furnished or caused to be furnished by the Borrower to the Bank
contains, to the best of the Borrower's knowledge, any untrue statement
of a material fact or omits to state a material fact necessary to make
the statements made therein not misleading in light of the
circumstances under which they were made. To the best of the Borrower's
knowledge, there is no fact which could materially adversely affect the
Borrower or its ability to meet its obligations under this Agreement or
any Related Document. To the best of the Borrower's knowledge, since
the furnishing of the Documents, there has been no change or any
development or event involving a prospective change with respect to the
Borrower which would render any of the Documents untrue or misleading
in any material respect.
(r) Investment Company. The Borrower 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.
5.02. SURVIVAL. All of the representations and warranties set forth in
Section 5.01 shall survive until all Obligations are satisfied in full, and
there remain no outstanding commitments hereunder.
ARTICLE 6.
RESERVED.
ARTICLE 7.
FINANCIAL REPORTING.
7.01. FINANCIAL STATEMENTS. During the term of this Agreement, the
Borrower shall deliver to the Bank:
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<PAGE> 25
(a) Quarterly Statements. Within fifty (50) days after the end
of each of the first three fiscal quarters, a copy of the unaudited
consolidated quarterly financial statements of the Borrower, consisting
of a balance sheet and statements of income for the quarter and
year-to-date period then ended, prepared by the Borrower (subject to
normal year-end audit adjustments); and
(b) Annual Audit Report. Within one-hundred five (105) days
after the close of each fiscal year of the Borrower, (i) a copy of the
consolidated annual financial statements of the Borrower, consisting of
a balance sheet and statements of income and cash flows for the fiscal
year then ended, accompanied by the unqualified report of the
independent certified public accountants regularly retained by the
Borrower and acceptable to the Bank (the "Annual Audit Report").
7.02. GAAP REPORTING. All financial information required to be
furnished to the Bank under this Article 7 shall be prepared in accordance with
GAAP.
7.03. COMMUNICATIONS WITH ACCOUNTANTS. In the event that the Bank
determines that it has not received the Annual Audit Report from the Borrower,
the Borrower authorizes the Bank to communicate directly with its independent
public accountants, and authorizes those accountants to disclose to the Bank any
and all financial statements and other information of any kind that they may
have with respect to the Borrower and its Subsidiaries and their respective
businesses and financial affairs. The Borrower shall upon the request of the
Bank deliver a letter addressed to such accountants instructing them to comply
with the provisions of this paragraph upon request therefor by the Bank.
ARTICLE 8.
COVENANTS.
8.01. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees
with the Bank that, so long as any of the Obligations remain unsatisfied or any
commitments hereunder remain outstanding, it will comply at all times with the
following affirmative covenants unless the Bank shall have otherwise agreed in
writing:
(a) Use of Proceeds. The proceeds of the Loan will be used by
the Borrower only for working capital;
(b) Reports and Notices. The Borrower shall furnish to the
Bank:
(1) Place of Business. Promptly, notice of any change
in the location of the Borrower's principal place of business
or chief executive office or of any change in the location or
the Borrower's books and Records;
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<PAGE> 26
(2) Events of Default. As soon as possible and in any
event within ten (10) days after the Borrower obtains actual
knowledge of the occurrence and continuance of any Default,
Event of Default or any event of default under the Loan and
Security Agreement, dated August 20, 1998, between the
Borrower and Congress Financial Corporation, as amended,
modified, supplemented, extended, renewed, restated or
replaced, a statement setting forth details of such default
and the action which the Borrower proposes to take with
respect thereto, other than those defaults disclosed in
Section 5.01(o) hereof;
(3) Litigation and Labor Disputes. Immediately,
notice of (1) any litigation or proceeding in which the
Borrower is a party if an adverse decision therein would
require it to pay more than $50,000 or deliver assets the
value of which could have a Material Adverse Effect (whether
or not the claim is considered to be covered by insurance);
(2) the institution of any other suit or proceeding involving
the Borrower that might materially and adversely affect its
operations, financial condition, property or business
prospects; and (3) any labor dispute to which the Borrower may
become a party which may, if unfavorably resolved, have a
material financial impact on it, any strikes, walkouts or work
stoppages having a duration of more than one week, and the
expiration of any labor contract to which it is a party or by
which it is bound;
(4) Material Adverse Changes. Immediately, notice of
any material adverse change in the business prospects,
financial condition or results of operations of the Borrower
of which it becomes aware;
(5) Bankruptcy Proceedings. Immediately, notice of
the commencement of any proceedings by or against the Borrower
under any applicable bankruptcy, reorganization, liquidation,
insolvency or other similar law now or hereafter in effect or
of any proceeding in which a receiver, liquidator, trustee or
other similar official is sought to be appointed for the
Borrower;
(6) Regulatory Supervision or Penalty. Immediately,
notice of the receipt of notice from any agency or
governmental body having authority over the conduct of the
Borrower's business that (A) the Borrower is being placed
under regulatory supervision if such regulatory supervision is
likely to, in the aggregate, have a material adverse effect on
the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrower taken as
a whole, (B) any license, permit, charter, membership or
registration material to the conduct of the Borrower's
business is to be suspended or revoked, or (C) the Borrower is
to cease and desist any practice, procedure or policy employed
by the Borrower in the conduct of its business, and such
cessation would have a material adverse effect upon the value
of the Collateral or upon the
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<PAGE> 27
Borrower's ability to perform its obligations under this
Agreement or any Related Document; and
(7) Other Information. Promptly upon the request of
the Bank, such other documents and information with respect to
the Collateral, to the Borrower and the compliance by the
Borrower with the requirements of the Transaction Documents as
the Bank may from time to time reasonably request.
Each notice given pursuant to this subsection (B) shall be accompanied
by a statement of the Borrower setting forth details of the occurrence
referred to therein and stating what action, if any, the Borrower
proposes to take with respect thereto;
(c) Financial Records. The Borrower shall keep adequate
Records and books of account with respect to its business activities in
which proper entries are made and all Annual Audit Reports required to
be furnished to the Bank shall be prepared in accordance with GAAP
reflecting all its financial transactions;
(d) Asset Records. The Borrower shall keep accurate and
complete Records of its Receivables, Inventory, Machinery and
Equipment, and General Intangibles consistent with sound business
practices;
(e) Access to Premises and Records. The Bank may at all times
have access to, inspect, audit and make extracts from all of the books
and Records of the Borrower. Such inspections shall be conducted upon
reasonable notice during normal business hours and shall not
unreasonably disrupt the business of the Borrower;
(f) Taxes. The Borrower shall file all federal, state and
local tax returns and other reports as the Borrower is required by law
to file, maintain adequate reserves for the payment of all taxes,
assessments, governmental charges, and levies imposed upon it, its
income, or its profits, or upon any property belonging to it, and pay
and discharge all such taxes, assessments, governmental charges and
levies prior to the date on which penalties attach thereto, except
where the same may be contested in good faith by appropriate
proceedings and appropriate reserves have been established with respect
thereto; provided, however, that the Borrower shall pay or cause to be
paid all such taxes, assessments, charges, or levies forthwith whenever
foreclosure on any lien that may have attached (or security therefor)
appears imminent;
(g) Observance of Laws. The Borrower shall duly observe and
conform to all laws, rules and regulations made by any Governmental
Authority, and all valid requirements of any regulatory body which may
acquire jurisdiction, which apply to the Borrower, including, without
limitation, any environmental, pollution or toxic or hazardous waste
law, except where the failure to duly
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<PAGE> 28
observe and conform is not reasonably likely to, in the aggregate, have
a material adverse effect on the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrower
taken as a whole;
(h) Maintain Corporate Existence, Etc. The Borrower shall
preserve and maintain its separate corporate existence and all rights,
privileges, and franchises in connection therewith, and maintain its
qualification and good standing in all states in which such
qualification is necessary in order for the Borrower to conduct its
business in such states;
(i) Maintain Licenses. The Borrower shall maintain in full
force and effect all licenses, permits, charters and registrations
which are material to the conduct of its business;
(j) Maintenance. The Borrower shall keep and maintain or cause
to be kept and maintained its inventory, equipment, fixtures and all
buildings, structures and improvements in good repair, working order
and condition;
(k) Insurance. The Borrower shall keep all of its property
insured by insurance companies licensed to do business in the State of
New York and the states in which such property is located against loss
or damage by fire, flood or other risk usually insured against under
extended coverage endorsement and theft, burglary and pilferage, and
such other hazards, each as shall be customary in the Borrower's
industry and location, in amounts reasonably satisfactory to the Bank.
The Borrower shall deliver to the Bank, on or before the Closing Date,
and annually thereafter on the anniversary thereof, a list of all such
insurance policies in effect and certificates of insurance with respect
to all such policies. All insurance shall contain endorsements, in form
reasonably satisfactory to the Bank, providing that the insurance shall
not be cancelable, except upon thirty (30) days prior written notice to
the Bank (unless such insurance policies are cancelled for nonpayment
of premium, in which case the Bank shall receive ten (10) days prior
written notice) and showing the Bank as a loss payee, subordinate to
any holders of any Permitted Encumbrances. The Borrower agrees to make
all such policies of insurance available for inspection by the Bank at
any time during regular business hours;
(l) Payment of Indebtedness. The Borrower shall pay when due
(or within applicable grace periods) all of its other Indebtedness due
third Persons, except when the amount thereof is being contested in
good faith by appropriate proceedings and with adequate reserves
therefor being set aside on its books; and
(m) Further Assurances. The Borrower, at the request of the
Bank, shall provide and, if necessary, execute, deliver and file such
further instruments, and shall take such further actions as may be
reasonably necessary in the Bank's reasonable judgment to effectuate
the provisions of the Transaction Documents.
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8.02. NEGATIVE COVENANTS. The Borrower hereby covenants and agrees with
the Bank that, so long as any of the Obligations remain unsatisfied or any
commitments hereunder remain outstanding, it will comply at all times with the
following negative covenants, unless the Bank shall have otherwise agreed in
writing:
(a) Disposal of Assets. The Borrower shall not, and shall not
permit any Subsidiary to, sell, lease, transfer, assign, or otherwise
dispose of any of its assets, including the Collateral, other than in
the ordinary course of business; provided, however, that the Borrower
may sell Machinery and Equipment in an aggregate market value not
greater than $75,000 for all such sales in one calendar year;
(b) Liens and Encumbrances.(1) The Borrower shall not, and
shall not permit any Subsidiary to, mortgage, pledge, grant, or permit
to exist a security interest in, or a lien or encumbrance upon, any of
its assets of any kind, including the Collateral, now owned or
hereafter acquired, except for Permitted Encumbrances; (2) the Borrower
shall not enter into any other Agreement with any other Person which
shall contain a covenant substantially similar to that set forth in
clause (1) of this Section 8.02(b), except under Permitted
Encumbrances;
(d) Corporate and Fictitious Names. The Borrower shall not use
any corporate name (other than its own) or any fictitious name, except
for names disclosed in writing to the Bank prior to the use thereof;
(e) New Places of Business. The Borrower shall not transfer
its executive offices, or open new facilities, or transfer existing
facilities, or maintain Records with respect to accounts, at any
locations other than those at which the same are presently kept or
maintained except with the Bank's prior written consent (which shall
not be unreasonably withheld or delayed) and after the delivery to the
Bank of financing statements, if required by the Bank, in form
satisfactory to the Bank;
(f) Guaranties. Except for guaranties in effect on the date
hereof, the Borrower shall not, and shall not permit any Subsidiary to,
become liable directly or indirectly, as guarantor or otherwise for any
obligation of any other Person, except for endorsement for deposit or
collection in the ordinary course of the Borrower's business;
(g) Indebtedness. The Borrower shall not, and shall not permit
any Subsidiary to, incur, create, assume, or permit to exist any
Indebtedness except for (i) the Loan, (ii) Indebtedness secured by
Permitted Encumbrances, (iii) trade payables or other obligations
incurred in the ordinary course of business and (iv) intercompany debt
incurred among the Company and its Principal Subsidiaries in the
ordinary course of business consistent with past practices and pursuant
to the reasonable requirements of its business;
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<PAGE> 30
(h) Mergers. The Borrower shall not merge with or into or
consolidate with any other Person unless (i) the Borrower is the
corporation surviving such consolidation or merger, or the corporation
surviving such consolidation or merger, if not the Borrower, assumes
the obligations of the Borrower hereunder in a writing acceptable to
the Bank and (ii) in each case, after giving effect thereto, no Default
shall have occurred and be continuing;
(i) Subsidiaries. The Borrower shall not create any direct or
indirect Subsidiary not currently in existence or divest itself of any
material assets by transferring them to any Subsidiary or enter into
any partnership, joint venture or similar arrangement, or make any
material change in its capital structure;
(j) Loans to Shareholders and Employees. The Borrower shall
not, and shall not permit any Subsidiary to, make any loan or advance
to any shareholder or employee of the Borrower, except (i) for business
travel and similar temporary advances in the ordinary course of
business; (ii) other loans or advances in the ordinary course of
business, not to exceed $50,000 individually or $100,000 in the
aggregate principal amount at any one time outstanding; and (iii) loans
provided for in any existing employment agreement disclosed to the
Bank;
(k) Dividends. The Borrower shall not pay any dividends,
except for Preferred Dividends, make any capital distribution, or
redeem or retire any capital stock or take any action which would have
an effect equivalent to any of the foregoing, other than (A) cash
dividends in an amount not to exceed (i) ten percent (10%) of the
Borrower's net income plus (ii) all sums required to pay in full the
federal, state and local income taxes of shareholders of the Borrower
attributable to the taxable net income of the Borrower and (B)
repurchases or redemptions of minority stock interests which would
require an expenditure by the Borrower in excess of $100,000 in the
aggregate;
(l) Transactions with Affiliates. The Borrower shall not, and
shall not permit any Subsidiary to, enter into, or be a party to, any
transaction with any of its Affiliates or enter into any partnership,
joint venture or operating management agreement with any of its
Affiliates, except for transactions that are (1) in the ordinary course
of business consistent with past practices and pursuant to the
reasonable requirements of its business or (2) upon fair and reasonable
terms which are, upon a request by the Bank to disclose all such
transactions, fully disclosed to the Bank and are no less favorable to
it than it would obtain in a comparable arm's length transaction with a
Person not its Affiliate;
(m) Loans to Affiliates. The Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly make any loan or
advance monies to any Affiliate (other than intercompany debt incurred
among the Company and its Principal Subsidiaries in the ordinary course
of business consistent with past practices and pursuant to the
reasonable requirements of its business) in a sum or sums greater than
$100,000 in the aggregate outstanding at any one time without
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<PAGE> 31
the prior written consent of the Bank and any such loan or advance
consented to by the Bank shall be evidenced by a promissory note and
shall be pledged to the Bank;
(n) Investments. The Borrower shall not, and shall not permit
any Subsidiary to, make any loans to, or purchase any debt or equity
securities of, or otherwise make any investment in, any Person, and
will not purchase or otherwise invest in, directly or indirectly, any
nonoperating real estate or nonoperating assets, except (1) direct
obligations of the United States of America, or of the Bank, negotiable
certificates of deposit and overnight repurchase transactions with the
Bank or any bank satisfactory to the Bank, commercial paper rated A-1
or P-1, or other investments approved in advance in writing by the
Bank, and (2) operating assets that hereafter become nonoperating
assets;
(o) Amendments to or Waivers of Related Documents. The
Borrower shall not, and shall not permit any Subsidiary to, enter into
any contract or agreement the substance of which shall act as an
amendment to, or a waiver of any of the provisions of, any of the
Related Documents;
(p) Untrue Statements or Omissions. The Borrower shall not,
and shall not permit any Subsidiary to, willfully furnish or cause to
be furnished to the Bank any certificate or other document that will
contain any untrue statement of material fact or that will omit to
state a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished; and
(q) Margin Stock. The Borrower shall not directly or
indirectly apply any part of the proceeds of the Loan to the purchasing
or carrying of any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any
regulations, interpretations, or rulings thereunder.
ARTICLE 9.
DEFAULT.
9.01. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events with respect to the Borrower shall constitute an Event of
Default hereunder:
(a) The Borrower shall fail to pay to the Bank when due any
principal payment on the Note or, within ten (10) days from receipt of
written notice from the Bank, any other Obligation owing from the
Borrower to the Bank, or shall fail to remit or deposit funds as
required under this Agreement within 10 days after written notice;
(b) The Borrower shall fail to observe or perform any other
obligation to be observed or performed by it hereunder or under any of
the Related Documents, and such failure shall be willful or shall
continue for twenty (20) days after (1) notice of such failure from the
Bank; or (2) the Bank is notified of
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such failure or should have been so notified pursuant to the provisions
of Section 8.01(b)(3) hereof, whichever is earlier;
(c) Any financial statement, representation, warranty, or
certificate made or furnished to the Bank by, or with respect to, the
Borrower in connection with this Agreement, or as inducement to the
Bank to enter into this Agreement, or in any separate statement or
document to be delivered to the Bank hereunder, shall be materially
false, incorrect, or incomplete when made;
(d) The Borrower or any Subsidiary shall (1) fail to make any
payment or payments, equal to or exceeding $100,000 in the aggregate,
of any Indebtedness (including any interest or premium thereon) when
due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such indebtedness, or (2) fail to perform or
observe any term, covenant or condition on its part to be performed or
observed under any agreement or instrument (other than, prior to
February 14, 2000, a default of the provisions contained in Sections
9.14 and 9.15 of the Loan and Security Agreement, dated August 20,
1998, between the Borrower and Congress Financial Corporation), if the
effect of such failure to perform or observe is to accelerate, or to
permit the acceleration of, the maturity of any indebtedness, the
unpaid principal amount or amounts of which then equals or exceeds
$100,000 in the aggregate; provided, however, that the foregoing shall
not apply to any such failure where the Borrower is contesting the
existence of the obligation involved by appropriate proceedings, and
any reserves required in accordance with GAAP have been established;
(e) The Borrower or any Subsidiary shall (1) apply for or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of the Borrower or any
Subsidiary or of all or a substantial part of its property, (2) admit
in writing its inability, or be generally unable, to pay its debts as
such debts become due, (3) make a general assignment for the benefit of
its creditors, (4) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), (5) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of
debts or (6) take any corrective action for the purposes of effecting
any of the foregoing;
(f) A proceeding or case shall be commenced, without the
application or consent of the Borrower or any Subsidiary, in any court
of competent jurisdiction, seeking (1) the liquidation, reorganization,
dissolution, winding-up or composition or readjustment of debts of the
Borrower or any Subsidiary, (2) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower or any Subsidiary, or
of all or any substantial part of its assets, or (3) similar relief in
respect of the Borrower or any Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
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adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of sixty (60) days from commencement of such proceeding or
case, or an order for relief against the Borrower shall be entered in
an involuntary case under the Federal Bankruptcy Code;
(g) The Borrower or any Subsidiary shall suffer final
judgments for payment of money in excess of its insurance coverage and
shall not discharge the same within a period of thirty (30) days;
(h) A judgment creditor of the Borrower shall obtain
possession of any of the Collateral by any means, including (without
implied limitation) levy, distraint, replevin, or self-help;
(i) The loss of any license, patent, trademark or franchise
which has a Material Adverse Effect, unless such franchise was
terminated, surrendered or cancelled by the Borrower with the Bank's
consent; or
(j) The cancellation of any license, permit or other
governmental authorization required to be possessed by the Borrower
which has a Material Adverse Effect.
9.02. REMEDIES. If an Event of Default shall have occurred then, and in
any such event at any time thereafter if such Event of Default is continuing,
the Bank may, in its discretion, do any one or more of the following:
(a) by notice to the Borrower declare the Note (together with
accrued interest thereon and accrued fees) to be, and the Note shall
thereupon become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower; provided, that in the case of any of the Events
of Default specified in Sections 9.01(e) or (f), without any notice to
the Borrower or any other act by the Bank, the Note (together with
accrued interest thereon) shall become immediately due and payable
without presentment, demand, protest, or other notice of any kind, all
of which are hereby waived by the Borrower; and
(b) exercise any and all other rights and remedies existing at
law or in equity or by statute (including, without limitation, the
right to proceed by appropriate court action, either in law or in
equity, to enforce performance by the Borrower of the applicable
representations and warranties and covenants of this Agreement or to
recover damages for the breach thereof.
9.03. UCC REMEDIES. Further, upon the occurrence and during the
continuance of an Event of Default the Bank shall have, in addition to all other
rights provided herein and in each of the Related Documents, the rights and
remedies of a secured party under
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the Uniform Commercial Code of each state in which any of the Collateral is
located, and further, the Bank may, without demand and without advertisement,
notice or legal process of any kind (except as may be required by law), all of
which the Borrower waives, at any time or times, take physical possession of the
Collateral, and maintain such possession on the Borrower's premises, without
cost to the Bank, or remove the Collateral, or any part thereof, to such other
place or places as the Bank may desire, and the Bank may sell and deliver any or
all of the Collateral held by or for the Bank at public or private sale, for
cash, upon credit or otherwise, at such prices and upon such terms as the Bank
deems advisable, at its sole discretion. The Bank or any Affiliate of the Bank
may be the purchaser at any such sale, if it is public, free from any right of
redemption after such sale, which the Borrower also waives. The Bank may, if it
deems it reasonable, postpone or adjourn any sale of the Collateral from time to
time by an announcement at the time and place of such postponed or adjourned
sale, without being required to give a new notice of sale. The Borrower agrees
that the Bank has no obligation to preserve rights to the Collateral against
prior parties or to marshall any Collateral for the benefit of any Person. The
Bank is hereby granted a license or other right to use, without charge, the
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any property of a
similar nature as it pertains to the Collateral, and all of the Borrower's
licenses and franchise agreements shall inure to the Bank's benefit, for the
purposes of completing production or processing of, advertising for sale, and
selling any Collateral in the exercise of the Bank's rights and remedies
hereunder. In addition thereto, the Borrower further agrees that (a) in the
event that notice is necessary under applicable law, written notice mailed to
the Borrower in the manner specified in Section 10.07 hereof ten (10) Business
Days prior to the date of public sale of any of the Collateral subject to the
security interest created herein or prior to the date after which private sale
or any other disposition of said Collateral will be made shall constitute
reasonable notice, but notice given in any other reasonable manner or at any
other time shall be sufficient if actually received; (b) without precluding any
other method of sale, the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of asset-based lenders disposing of similar property, but
in any event the Bank may sell on such terms as the Bank may choose without
assuming any credit risk and without any obligation to advertise or give notice
of any kind; and (c) the Bank may require the Borrower to assemble the
Collateral, taking all necessary or appropriate action to preserve and keep it
in good condition, and make such available to the Bank at a place and time
convenient to the Borrower and the Bank, all at the Borrower's expense. The
proceeds of any such sale or disposition shall be applied first to the
satisfaction of the Bank's reasonable attorneys' fees, legal expenses, and other
costs and expenses incurred in connection with the taking, re-taking, holding,
preparing for sale and selling of the Collateral and second to the payment (in
whatever order the Bank elects) of all Obligations. After the application of all
such proceeds as aforesaid, the Bank will return any excess to the Borrower. The
Borrower shall remain liable to the Bank for any deficiency.
9.04. RIGHT OF SET-OFF. Upon the occurrence and during the continuance
of any Event of Default, the Bank may, and is hereby authorized by the Borrower,
at any time
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and from time to time, to the fullest extent permitted by applicable Laws,
without advance notice to the Borrower (any such notice being expressly waived
by the Borrower), set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and any other
indebtedness at any time owing by the Bank to or for the credit or the account
of, the Borrower against any or all of the Obligations of the Borrower now or
hereafter existing, whether or not such Obligations have matured and
irrespective of whether the Bank has exercised any other rights which it has or
may have with respect to such Obligations, including, without limitation, any
acceleration rights. The Bank agrees promptly to notify the Borrower after any
such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Bank under this Section 9.04 are in addition to the other rights and remedies
(including, without limitation, other rights of set-off) that the Bank may have.
9.05. DISCRETION TO APPLY THE COLLATERAL. The Bank may, in its sole
discretion, (i) exchange, enforce, waive or release any security or portion of
the Collateral, (ii) apply such security or any proceeds thereof and direct the
order or manner of sale thereof as the Bank may, from time to time, determine,
and (iii) settle, compromise, collect or otherwise liquidate any such security
for the Obligations in any manner following the occurrence and during the
continuance of an Event of Default without affecting or impairing the Bank's
right to take any other further action with respect to any security for the
Obligations or any part thereof.
9.06. RIGHTS AND REMEDIES CUMULATIVE; WAIVERS. The Bank's rights and
remedies under this Agreement shall be cumulative and not exclusive of any other
right or remedy which the Bank may have. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one default or Event of Default shall not be
construed to be a waiver of any subsequent default or Event of Default or impair
any remedy, right or power consequent thereon.
9.07. INJUNCTIVE RELIEF. The Borrower recognizes that, in the event the
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to the Bank; therefore, the Borrower agrees that the Bank, if the Bank so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
9.08. LOAN BY BANK FOR BORROWER EXPENSES. If the Borrower or any
co-tenant of the Borrower fails to pay any taxes, assessments or governmental
charges levied or assessed or imposed upon or with respect to it or upon its
income or profits, or upon any of its property, or otherwise incurs any lien or
encumbrance (other than a Permitted Encumbrance) with respect to any of its
property or fails to discharge when due and payable any Indebtedness secured by
any encumbrance (whether or not a Permitted Lien) or fails to pay any insurance
premium when due, or otherwise fails to pay any amount
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<PAGE> 36
necessary for the protection and preservation of the Collateral and such event
is an Event of Default, the Bank may pay the same, at the Bank's option,
together with interest and penalty, and the Borrower agrees to immediately
reimburse the Bank for amounts so paid. Additionally, in order to protect any
security interest which the Bank is granted hereunder, upon the occurrence and
continuation of an Event of Default, the Bank may, in its sole discretion,
maintain guards, pay any service bureau or warehouseman, obtain bonds, obtain
any record and take any other action which shall be necessary or appropriate, in
the Bank's sole discretion, for the protection and preservation of the
Collateral and the Borrower agrees to immediately reimburse the Bank upon demand
for amounts so paid.
9.09. POWER OF ATTORNEY. The Borrower on behalf of the Borrower hereby
appoints the Bank or any other Person whom the Bank may designate as its
attorney, with power, following the occurrence and during the continuance of an
Event of Default: (a) to endorse the Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Bank's possession; (b) to sign the Borrower's name on any invoice
or bill of lading relating to any accounts, on drafts against customers, on
schedules and assignments of accounts, on notices of assignment, financing
statements and other public records, on verifications of accounts and on notices
to customers; (c) to notify the post office authorities to change the address
for delivery of the Borrower's mail to an address designated by the Bank; and to
receive, open and remove documents relating to the Collateral from all mail
addressed to the Borrower (with all other mail to be returned promptly to the
Borrower); (d) to send requests for verification of accounts to customers or
account debtors; and (e) to do all things necessary to carry out this Agreement.
The Borrower ratifies and approves all acts of such attorney. Neither the Bank
nor the attorney will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable until the Obligations have been fully satisfied.
9.10. ACTIONS. Following the occurrence and during the continuance of
an Event of Default, the Bank may (but shall not be obligated to) commence,
appear in, or defend any action or proceeding purporting to affect the Borrower,
the Collateral or the respective rights and obligations of the Bank and the
Borrower pursuant hereto or to any Related Document. The Bank may (but shall not
be obligated to) pay all necessary expenses, including reasonable attorneys'
fees and expenses incurred in connection with such proceedings or actions, which
the Borrower agrees to repay to the Bank upon demand.
ARTICLE 10.
MISCELLANEOUS.
10.01. CONSTRUCTION. The provisions of this Agreement shall be in
addition to those of the Related Documents, all of which shall be construed as
complementary to each other. Nothing herein contained shall prevent the Bank
from enforcing any or all the Related Documents in accordance with their
respective terms. In the event of any conflict
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between the terms and provisions of this Agreement and the terms and provisions
of any of the Related Documents, the terms and provisions of this Agreement
shall prevail.
10.02. FURTHER ASSURANCES. From time to time, the Borrower shall
promptly execute and deliver to the Bank such additional documents and will
provide such additional information as the Bank may reasonably require to carry
out the terms of this Agreement and be informed of the status and affairs of the
Borrower.
10.03. PREFERENCES. The Bank shall have the continuing and exclusive
right to apply or reverse and re-apply any and all payments to any portion of
the Obligations. To the extent that the Borrower makes a payment or payments to
the Bank or the Bank receives any payment or proceeds of the Collateral for the
Borrower's benefit, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the Bank.
10.04. INDEMNIFICATION. The Borrower hereby agrees to indemnify and
hold harmless the Bank from and against any and all claims, damages, losses,
liabilities, reasonable out-of-pocket costs or expenses whatsoever which the
Bank may incur (or which may be claimed against the Bank by any person or entity
whatsoever) by reason of or in connection with the occurrence of an Event of
Default or the pursuit by the Bank of any remedy in connection with an Event of
Default; provided, however, that the Borrower shall not be required to indemnify
the Bank for claims, damages, losses, liabilities, costs or expenses, to the
extent, but only to the extent caused by the willful misconduct or the gross
negligence of the Bank.
10.05. REIMBURSEMENT FOR BANK EXPENSES. The Borrower shall reimburse
the Bank on demand for all of the reasonable out-of-pocket expenses incurred by
the Bank in connection with the negotiation, preparation, execution, delivery,
modification and administration of this Agreement, and the Related Documents,
including, without limitation, searches, search fees, title insurance premiums,
fees for title abstracts, filings, filing fees and taxes, consulting fees,
printing expenses, closing costs, recording charges, brokerage fees,
compensation and commissions, and the fees and disbursements of counsel to the
Bank, Kirkpatrick & Lockhart LLP, and any other counsel retained by the Bank,
all printing expenses, communication, closing and publicity expenses, and all
reasonable out-of-pocket expenses incurred by the Bank (including, without
limitation, reasonable attorney's fees and disbursements) to: (i) commence,
defend or intervene in any court proceeding relating to the Collateral or the
Related Documents; (ii) file a petition, complaint, answer, motion or other
pleadings, or to take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to the Collateral or the Related
Documents; (iii) protect, collect, lease, sell, take possession of, or liquidate
any of the Collateral; (iv) attempt to enforce any lien or security interest in
any of the Collateral; (v) cure defaults of the Borrower, perform any covenants
of the Borrower, and
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protect the rights of the Bank under the Related Documents; and (vi) enforce or
seek legal advice with respect to the Bank's rights under this Agreement, or any
of the Related Documents or any other remedies with respect to collecting the
Obligations. The Borrower also agrees to pay, and to save harmless the Bank from
any delay in paying, any intangibles, documentary stamp and other taxes, if any,
which may be payable in connection with the execution and delivery of any of the
Related Documents, or the recording of filing of any thereof, or any
modification thereof, except that the Borrower shall not be required to pay any
such tax which the Borrower is prohibited from paying under applicable law.
10.06. STRICT ENFORCEMENT BY THE BANK. The Bank shall have the right at
all times to enforce the provisions of the Transaction Documents in strict
accordance with the terms hereof and thereof, notwithstanding any conduct or
custom on the part of the Bank in refraining from so doing at any time or times.
The failure of the Bank at any time or times to enforce its rights under such
provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or as having in any way or manner modified or waived the same.
10.07. NOTICES. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered (i) if delivered in
person, when so delivered, (ii) if sent by telecopy, when so sent and confirmed
as received by the receiving telecopier, and (iii) if sent by registered mail,
postage prepaid, return receipt requested, three (3) Business Days after being
sent, as follows, unless such address is changed by written notice hereunder:
(A) If to the Borrower:
Ecogen Inc.
2000 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: President
Telecopy: 215-757-3339
(B) If to the Bank:
The Berkshire Bank
600 Madison Avenue
New York, New York 10022
Attention: President
Telecopy: 212-935-7480
10.08. BANK PARTICIPATIONS. Notwithstanding any other provision of this
Agreement, the Borrower understands that the Bank may, at its own cost and
expense, at any time enter into participation or co-lending agreements with one
or more banks or other institutions (each a "PARTICIPATING BANK") whereby the
Bank may allocate certain
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<PAGE> 39
percentages of its commitment to them or allow such Banks to fund a portion of
the Loan, but only so long as the Bank remains the servicing agent for the Loan.
For purposes of servicing the Loan, the Borrower shall only be required to
respond to and communicate with the Bank. The Borrower hereby agrees to execute
such other documents as the Bank reasonably may require to facilitate the
execution and delivery of, and performance under any participation or co-lending
agreements. The Borrower acknowledges that, for the convenience of all parties,
this Agreement is being entered into with the Bank only and that the Obligations
are undertaken for the benefit of, and as an inducement to, any such
Participating Bank as well as the Bank, and the Borrower hereby grants to each
such Participating Bank, to the extent of its participation in or funding of the
Loan and, to the extent permitted by applicable law, the right to set off
deposit accounts maintained by the Borrower with such bank.
10.09. ASSIGNMENTS BY THE BORROWER. The Borrower shall not have the
right to assign this Agreement or any interest therein, and hereby agree that no
Person other than the Borrower shall have any interest in this Agreement or the
proceeds of the Loan.
10.10. CONTINUING OBLIGATION. This Agreement is a continuing obligation
and shall be binding upon the Borrower, its successors and assigns and inure to
the benefit of and be enforceable by the Bank and its successors, transferees
and assigns until all the Obligations shall have been paid in full, whereupon
this Agreement shall terminate; provided, however, that the indemnification
obligations of the Borrower pursuant to Sections 2.09(b), 10.04 and 10.05 hereof
shall survive the termination of this Agreement.
10.11. SUPERSEDING AGREEMENT. This Agreement supersedes any commitment
letters or other agreements between the Bank and the Borrower prior to the date
hereof relating to the subject matter hereof.
10.12. AMENDMENTS AND WAIVERS IN WRITING. No amendment of this
Agreement or waiver of any of the provisions hereof shall be effective unless it
is in writing and signed by the party against whom enforcement of such amendment
or waiver is sought, and then only to the extent specifically stated.
10.13. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.14. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, except to the
extent that personal property security interests in the Collateral are governed
by the law of other jurisdictions.
10.15. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY. THE BORROWER
IRREVOCABLY AND UNCONDITIONALLY (I) AGREES THAT ANY SUIT, ACTION OR OTHER
-36-
<PAGE> 40
LEGAL PROCEEDING ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF
RECORD OF THE STATE OF NEW YORK OR THE COURTS OF THE UNITED STATES LOCATED IN
THE STATE OF NEW YORK; (II) CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF EACH
SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; AND (III) WAIVES ANY
OBJECTION WHICH IT MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY OF SUCH COURTS; AND IN ANY ACTION HEREUNDER THE BORROWER AND
THE BANK WAIVE THE RIGHT TO DEMAND A TRIAL BY JURY.
10.16. HEADINGS. Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
10.17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
-37-
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ECOGEN INC.
By:__________________________
Name:
Title: President
THE BERKSHIRE BANK
By:__________________________
Name: Moses Krausz
Title: President
-38-
<PAGE> 42
ACKNOWLEDGEMENT
STATE OF NEW YORK |
| SS:
COUNTY OF NEW YORK |
On December __, 1999, before me, the undersigned, a Notary Public in
and for said State, personally appeared ______________________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________________
Notary Public
My commission expires: ______________
<PAGE> 43
EXHIBIT A
This instrument and the obligations evidenced hereby are subordinated, in the
manner and to the extent set forth in an Intercreditor and Subordination
Agreement (the "Subordination Agreement") dated as of December 23, 1999 by and
between Congress Financial Corporation and the Payee of this instrument, and the
holder of this instrument, by such holder's acceptance hereof, agrees (i) to be
bound by the terms of the Subordination Agreement, and (ii) in the event that
any conflict exists between the terms of this instrument or any document
executed in connection with the delivery of this instrument and the terms of the
Subordination Agreement, the terms of such Subordination Agreement shall govern
and be controlling.
TERM LOAN PROMISSORY NOTE
$1,500,000 December 23, 1999
FOR VALUE RECEIVED, the undersigned, ECOGEN INC., a Delaware
corporation, with an office at 2000 Cabot Boulevard West, Langhorne,
Pennsylvania 19047 (the "Borrower"), promises to pay to the order of THE
BERKSHIRE BANK, a New York banking corporation, with an office at 600 Madison
Avenue, New York, New York 10022 (hereinafter referred to as the "Bank"; the
Bank, and any subsequent holder(s) hereof, being hereinafter referred to
collectively as the "Holder"), as set forth below, at the above office of the
Bank, or at such other place as the Holder may designate to the Borrower in
writing from time to time, such sums as the Holder may advance to the Borrower
hereunder, up to the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000) in lawful money of the United States of America which shall at the
time of payment be legal tender in payment of all debts and dues, public and
private, and to pay interest on the unpaid balance of said principal sums from
time to time outstanding from the date hereof until payment in full, whether
before or after maturity, in like funds and money at said office, payable and
computed as provided in the Term Loan and Security Agreement (hereinafter
defined), such interest to be payable monthly in arrears on the last day of each
month, commencing on January 31, 2000, and on the date the principal of this
Note shall be due (at stated maturity, on acceleration, or otherwise).
An amount of principal on this Note equal to $500,000 shall be due and
payable on June 23, 2000 and the outstanding principal balance of this Note
shall be due and payable on June 23, 2001.
The unpaid balance of this Note at any time shall be the total amounts
loaned or advanced by the Holder hereof, less the amount of payments or
prepayments of principal made hereon by or for the account of the Borrower. All
payments or prepayments made hereunder on account of principal or interest may
be endorsed by the Holder hereof on the Schedule attached hereto and made a part
hereof for all purposes. Additional Schedule pages may be attached hereto from
time to time by the Holder hereof if more space is necessary.
B-1
<PAGE> 44
This Note may be prepaid in whole or in part at any time as provided in
the Term Loan and Security Agreement.
All payments hereon shall be credited first to accrued interest, next
to any other sums due hereunder and the remainder to the unpaid principal
balance, until all funds due hereunder have been paid in full.
Without limiting the right of the Holder to bring any action or
proceeding against property of the Borrower arising out of or relating to this
Note (an "Action") in the courts of other jurisdictions, the Borrower hereby
irrevocably submits to the jurisdiction of any court of New York State or any
court of the United States of America sitting in New York City, and the Borrower
hereby irrevocably agrees that any Action may be heard and determined in such
New York State court or in such United States court. The Borrower hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of any Action in any jurisdiction.
The Borrower hereby irrevocably agrees that the summons and complaint or any
other process in any Action in any jurisdiction may be served by mailing to the
address of the Borrower set forth in the Term Loan and Security Agreement or by
hand delivery to a person of suitable age and discretion at such address. Such
service will be complete on the date such process is so mailed or delivered, and
the Borrower will have thirty days from such completion of service in which to
respond in the manner provided by law. The Borrower may also be served in any
other manner permitted by law, in which event the Borrower's time to respond
shall be the time provided by law.
Both the Borrower and the Holder hereby irrevocably waive all right to
trial by jury in any action, proceeding or counterclaim arising out of or
relating to any obligation under this Note.
In the event this Note or any part thereof is collected by or through
an attorney at law, the Borrower agrees to pay all costs of collection,
including but not limited to, reasonable attorney's fees and court costs
actually incurred.
Time is of the essence of this Note. Presentment for payment, demand,
notice of dishonor, protest and all other notices other than as set forth herein
or in the Term Loan and Security Agreement and Related Documents are hereby
waived by the Borrower. No failure to accelerate the debt evidenced hereby by
reason of default hereunder, acceptance of a past due installment, or
indulgences granted from time to time shall be construed (i) as a novation of
this Note or as a reinstatement of the indebtedness evidenced hereby or as a
waiver of such right of acceleration or of the right of the Holder thereafter to
insist upon strict compliance with the terms of this Note, or (ii) to prevent
the exercise of such right of acceleration or any other right granted hereunder
or by the laws of the State of New York; and the Borrower hereby expressly
waives the benefit of any statute or rule of law or equity now provided, or
which may hereafter be provided, which would produce a result contrary to or in
conflict with the foregoing. No extension of time for the payment of this Note
or any installment due hereunder, made by agreement with any person now
B-2
<PAGE> 45
or hereafter liable for the payment of this Note shall operate to release,
discharge, modify, change or affect the original liability of the Borrower under
this Note, either in whole or in part unless the Holder agrees otherwise in
writing. This Note may not be changed orally, but only in writing signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought.
The Borrower hereby waives and renounces for itself, its successors and
assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, exemption and homestead now provided, or which may
hereafter be provided by the Constitution and laws of the United States of
America and of any state thereof, both as to itself and in and to all of its
property, real and personal, against the enforcement and collection of the
obligations evidenced by this Note.
This Note is issued pursuant to that certain Term Loan and Security
Agreement, dated as of December 23, 1999 (the "Term Loan and Security
Agreement"), between the Borrower and the Bank, and is one of the Note as
defined in the Term Loan and Security Agreement.
It is the intention of the parties hereto to conform strictly to
applicable usury laws as in effect from time to time. Accordingly, if any
transactions contemplated hereby would be usurious under applicable law
(including the laws of the United States of America, or of any other
jurisdiction whose laws may be mandatorily applicable), then, in that event,
notwithstanding anything to the contrary in this Note, or any other agreement
entered into in connection with this Note, it is agreed that the aggregate of
all consideration that constitutes interest under applicable law that is
contracted for, charged, or received under this Note, or under any of the other
aforesaid agreements or otherwise in connection with this Note shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited to the Borrower by the Holder that has
contracted for, charged, or received such excess interest (or, if such
consideration shall have been paid in full, such excess refunded to the Borrower
by the Holder). All sums paid, or agreed to be paid, to the Holder for the use,
forbearance, and detention of the indebtedness of the Borrower by the Holder
shall, to the extent permitted by applicable law, be amortized, pro rated,
allocated, and spread throughout the full term of such indebtedness until
payment in full so that the actual rate of interest is uniform, but does not
exceed the highest lawful rate, throughout the full term thereof. In the event
it should be determined that the Bank has contracted for any rate of interest in
excess of the highest lawful rate, then ipso facto such rate shall be reduced to
the highest lawful rate so that no amounts shall be charged which are in excess
thereof, and, in the event it should be determined that any excess over such
highest lawful rate has been charged or received, the Bank shall promptly refund
such excess to the Borrower; provided, however, that, if lawful, any such excess
shall be paid by the Borrower to the Bank as additional interest (accruing at a
rate equal to the maximum legal rate minus the rate provided for hereunder)
during any subsequent period when regular interest is accruing hereunder at less
than the maximum legal rate.
B-3
<PAGE> 46
Wherever possible, each provision of this instrument shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this instrument shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this instrument.
As used herein the terms "Borrower", "Bank" and "Holder" shall be
deemed to include their respective heirs, successors, legal representatives and
assigns, whether by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, the Borrower has executed this Note on the date
first above written.
ECOGEN INC.
By:__________________________
Name:
Title:
B-4
<PAGE> 47
SCHEDULE OF TERM LOAN PAYMENTS OF PRINCIPAL
<TABLE>
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<S> <C> <C> <C>
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</TABLE>
B-5
<PAGE> 48
ACKNOWLEDGEMENT
STATE OF NEW YORK |
| SS:
COUNTY OF NEW YORK |
On December __, 1999, before me, the undersigned, a Notary Public in
and for said State, personally appeared ______________________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________________
Notary Public
My commission expires: ______________
B-6
<PAGE> 1
Void after 5:00 P.M. New York Time on December 23, 2004
No. W-1 Warrant to Purchase
200,000 Shares
of Common Stock
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
ECOGEN INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, MOMAR CORPORATION, a
Maryland corporation, or registered assigns (the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from Ecogen Inc., a
Delaware corporation (the "Company"), at the Exercise Price hereinafter set
forth, up to 200,000 shares (as adjusted from time to time as provided
hereunder) of Common Stock at any time and from time to time on or after the
date hereof and not later than 5:00 P.M. New York time on December 23, 2004 (the
"Expiration Date").
(a) DEFINITIONS. For the purposes of this Warrant, the following terms
shall have the following meanings:
(1) "Common Stock" shall mean the Common Stock, $0.01 par
value per share, of the Company of the class authorized as of the date
hereof and any other class of stock ranking on a parity with such
Common Stock. However, subject to the provisions of Section (l) hereof,
shares issuable upon exercise hereof shall include only shares of the
class designated as Common Stock of the Company as of the date hereof.
(2) "Exercise Price" shall mean $1.25 per share, as adjusted
from time to time as provided hereunder.
(3) "Registry Office" shall mean the principal executive
office of the Company at 2000 Cabot Boulevard West, Langhorne,
Pennsylvania 19047.
(4) "Warrant Stock" shall mean the shares of Common Stock
deliverable upon exercise of the Warrants, as adjusted from time to
time as provided hereunder.
(b) EXERCISE OF WARRANT. Subject to the provisions of this Warrant, the
Holder shall have the right to purchase from the Company, and the Company shall
be obligated to issue and sell to the Holder, the number of fully paid and
nonassessable shares of Warrant Stock purchasable hereunder, free of all
preemptive rights of stockholders and all other liens, claims and encumbrances
of any nature whatsoever. This Warrant may be exercised in whole or in part at
any time or from time to time, but not
<PAGE> 2
later than the Expiration Date, or if the Exercise Time is a day on which
banking institutions in the Commonwealth of Pennsylvania are authorized by law
to close, then on the next succeeding day which shall not be such a day, by
presentation and surrender hereof to the Registry Office of the Company, with
the form of Election to Purchase annexed hereto duly executed and accompanied by
payment of the Exercise Price multiplied by the number of shares specified in
such form. Payment of the Exercise Price may be made in cash, or by check, bank
draft or postal or express money order payable in United States currency, to the
order of the Company. Upon such surrender of this Warrant and payment of the
Exercise Price, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Holder and in such name
or names as the Holder may designate a certificate or certificates for the
number of full shares of Common Stock so purchased upon the exercise of this
Warrant together with cash as provided in Section (d) in respect of any fraction
of a share of Common Stock otherwise issuable upon such surrender. If this
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, promptly execute and deliver to the Holder a new
Warrant evidencing the right of the Holder to purchase the balance of the shares
purchasable hereunder. Upon receipt by the Company of this Warrant at the
Registry Office, in proper form for exercise, the Holder shall be deemed to be
the holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
(c) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of its Common stock as shall be required for
issuance or delivery upon exercise of this Warrant.
(d) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant; provided,
however, that if more than one Warrant is exercised by the same holder at the
same time, fractional shares of all such Warrants shall be consolidated and the
holder shall be entitled to purchase the number of whole shares obtained by
consolidating such fractional shares. With respect to any remaining fraction of
a share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the excess over the
Exercise Price of the current market value of a share of Common Stock determined
for all purposes of this Warrant as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange,
or is listed on NASDAQ, the current value shall be the last reported
sale price of the Common Stock on such exchange or NASDAQ on the last
day such exchange was open prior to the date of exercise of this
Warrant or, if no such sale is made on such day, the average closing
bid and asked prices for such day on such exchange; or
-2-
<PAGE> 3
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current value shall be the mean of the
last reported bid and asked prices reported by any national stock price
quotation service on the last day on which such bid and asked prices
were reported prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current value shall be an amount, not less than book
value, determined in good faith and in such reasonable manner as may be
prescribed by the Board of Directors of the Company, such determination
to be final and binding on the Holder.
(e) REGISTRATION. The Company shall maintain books for the transfer and
registration of the Warrants. Upon the initial issuance of the Warrants, the
Company shall issue and register the Warrants in the names of the respective
registered holders thereof, and upon subsequent re-issuances of Warrants, such
Warrants shall be registered in the names of their respective registered
holders.
(f) PAYMENT OF TAXES. The Company shall pay all state and federal
taxes, if any, attributable to the exercise of this Warrant and to the initial
issuance of the Warrant Stock; provided that the Company shall not be required
to pay any tax or taxes which may be payable because of the transfer involved in
the issue or delivery of any certificates for Warrant Stock in a name other than
that of the registered holder of the Warrants being exercised or any income
taxes or capital gains tax of the Holder.
(g) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option or the Holder, upon presentation
and surrender hereof to the Company, alone or with other Warrants with the same
Exercise Price, for any other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder at the same Exercise Price. This Warrant is
transferable in the same manner and with the same effect upon payment by the
Holder of all federal and state taxes applicable to such transfer, subject to
the provisions of Section (o) hereof. Upon surrender of this Warrant to the
Company with the form of Assignment annexed hereto duly executed, with funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be cancelled. If and when this
Warrant is assigned in blank, the Company shall, subject to the provisions of
Section (o) hereof, treat the bearer hereof as the absolute owner of this
Warrant for all purposes and the Company shall not be affected by any notice to
the contrary. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office or agency of the
Company maintained for that purpose, together with a written notice specifying
the names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged, and the term "Holder"
-3-
<PAGE> 4
as used herein includes any holder of any Warrant into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost or stolen,
destroyed or mutilated shall be at any time enforceable by anyone.
(h) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
(i) ANTI-DILUTION PROVISIONS.
(1) ADJUSTMENTS OF EXERCISE PRICE. If the Company should at any time or
from time to time hereafter issue or sell any share of Common Stock (other than
the shares which are to be issued upon exercise of the options or warrants
described in clause (A), or conversions of the Convertible Securities described
in clause (B), of this subsection (i)(1) or the Warrant Stock which may be
purchased under the Warrants) without consideration or for a consideration per
share less than the greater of (i) the Exercise Price of the Warrant in effect
immediately prior to the time of such issue or sale and (ii) the then current
market value of a share of Common Stock (such greater amount, the "Floor
Amount"), then forthwith upon such issue or sale, the Exercise Price of all
Warrants shall be adjusted to a price (computed to the nearest cent) determined
by dividing (i) the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Floor Amount, and (y)
the consideration, if any, received by the Company upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale. For the purposes of this subsection (i)(1), the following
provisions (A) through (G) shall also be applicable:
(A) OPTIONS AND RIGHTS. In case at any time hereafter the
Company shall in any manner grant any right to subscribe for or to
purchase, or any option for the purchase of, Common Stock or any stock
or other securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being hereinafter
referred to as "Convertible Securities") and the minimum price per
share for which Common Stock is issuable, pursuant to such rights or
options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of such rights
and options, plus, in the case of such Convertible
-4-
<PAGE> 5
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable pursuant to
such rights or options or upon the conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than the highest
Exercise Price in effect immediately prior to the time of the granting
of such rights or options, then the total maximum number of shares of
Common Stock issuable pursuant to such rights or options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall
(as of the date of granting of such rights or options) be deemed to be
outstanding and to have been issued for said price per share as so
determined; provided, however, that no further adjustment of the
Exercise Price shall be made upon the actual issue of Common Stock so
deemed to have been issued; and, further provided, that, upon the
expiration of such rights (including rights to convert or exchange) or
options, (a) a number of shares of Common Stock deemed to have been
issued and outstanding by reason of the fact that they were issuable
pursuant to such rights or options or upon conversion or exchange of
Convertible Securities so issuable, which rights or options (including
rights to convert or exchange) were not exercised, shall no longer be
deemed to be issued and outstanding, and (b) the Exercise Price shall
forthwith be adjusted to the price which would have prevailed had all
adjustments been made on the basis of the issue only of the shares of
Common Stock actually issued upon the exercise of such rights or
options or upon conversion or exchange of such Convertible Securities.
(B) CONVERTIBLE SECURITIES. In case the Company shall
hereafter in any manner issue or sell any Convertible Securities other
than as described in clause (A) of this Section (i)(1) and the minimum
price per share for which Common Stock is issuable upon conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
highest Exercise Price of any of the Warrants in effect immediately
prior to the time of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for said Price per share as so determined; provided that no
further adjustment of the Exercise Price shall be made upon the actual
issue of Common Stock so deemed to have been issued; and, further
provided, that if any such issue or sale of such Convertible Securities
is made upon exercise of any right to subscribe for or to purchase or
any option to purchase any such Convertible Securities for which an
adjustment of the Exercise
-5-
<PAGE> 6
Price has been or is to be made pursuant to other provisions of this
subsection (i)(1), no further adjustment of the Exercise Price shall be
made by reason of such issue or sale; and, further provided, that, upon
the termination of the right to convert or to exchange such Convertible
Securities for Common Stock, (a) the number of shares of Common Stock
deemed to have been issued and outstanding by reason of the fact that
they were issuable upon conversion of exchange of any such Convertible
Securities, which were not so converted or exchanged, shall no longer
be deemed to be issued and outstanding, and (b) the Exercise Price
shall forthwith be adjusted to the price which would have prevailed had
all adjustments been made on the basis of the issue only of the number
of shares of Common Stock actually issued upon conversion or exchange
of such Convertible Securities.
(C) DISTRIBUTIONS. In case the Company shall, at any time
prior to the expiration of this Warrant and prior to the exercise
thereof, make any distribution of its assets to holders of its Common
Stock as a liquidation or partial liquidation dividend or by way of
return of capital, or other than as a dividend payable out of earnings
or any surplus legally available for dividends under the laws of the
State of Delaware, then the Holder of this Warrant who thereafter
exercises the same as herein provided after the date of record for the
determination of those holders of Common Stock entitled to such
distribution of assets shall be entitled to receive for the purchase
price of the shares of Common Stock stated in this Warrant, in addition
to the shares of Common Stock, the amount of such assets (or at the
option of the Company a sum equal to the value thereof at the time of
such distribution to holders of Common Stock as such value is
determined by the Board of Directors of the company in good faith),
which would have been payable to such Holder had it been the holder of
record of such shares of Common Stock, receivable upon the exercise of
this Warrant on the record date for the determination of those entitled
to such distribution.
(D) DISSOLUTION OR LIQUIDATION. In case the Company shall, at
any time prior to the expiration of this Warrant and prior to the
exercise thereof, dissolve, liquidate or wind up its affairs, the
Holder of this Warrant shall be entitled, upon the exercise thereof, to
receive, in lieu of the shares of Common Stock of the Company which it
would have been entitled to receive, the same kind and amount of assets
as would have been issued, distributed or paid to it upon any such
dissolution, liquidation or winding up with respect to such shares of
Common Stock of the Company, had it been the holder of record of such
shares of Common Stock receivable upon the exercise of this Warrant on
the record date for the determination of those entitled to receive any
such liquidation distribution. After any such dissolution, liquidation
or winding up which shall result in any cash distribution in excess of
the Exercise Price provided for by this Warrant, the Holder of this
Warrant may at its option exercise the same without making payment of
the Exercise Price and in such case the Company shall upon the
distribution to said Warrant Holder consider that said Exercise Price
has been paid
-6-
<PAGE> 7
in full to it and in making settlement to said Warrant Holder, shall
deduct from the amount payable to such Holder an amount equal to such
Exercise Price.
(E) DETERMINATION OF ISSUE PRICE. In case any shares of Common
Stock or Convertible Securities or any rights or options to purchase
any such stock or securities shall be issued for cash, the
consideration received therefor, after deducting therefrom any
commissions or other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with, the issuance thereof,
shall be deemed to be the amount received by the Company therefor. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such stock or securities shall be issued for
a consideration, part or all of which shall be other than cash, then,
for the purpose of this subsection (i)(1), such Common Stock,
Convertible Securities, rights or options shall be deemed to have been
issued for an amount of cash equal to the fair market value of such
consideration. The reclassification of securities other than Common
Stock into securities including Common Stock shall be deemed to involve
the issuance for a consideration other than cash of such Common Stock
immediately prior to the close of business on the date fixed for the
determination of securityholders entitled to receive such Common Stock.
In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such stock or other securities shall
be issued together with other stock or securities or other assets of
the Company for a consideration which includes both, the consideration
for the issuance of the shares of Common Stock or Convertible
Securities or rights or options shall be determined by subtracting the
fair market value of the other stock or securities or assets from the
total consideration received.
(F) DETERMINATION OF DATE OF ISSUE. In case the Company shall
take a record of the holders of any Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock or in Convertible Securities, or (ii) to subscribe for
or purchase Common Stock or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the shares
of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date
of the granting of such right of subscription or purchase, as the case
may be.
(G) TREASURY SHARES. For the purpose of this subsection
(i)(1), shares of Common Stock at any relevant time owned or held by or
for the account of the Company shall not be deemed outstanding.
(2) ADJUSTMENT OF NUMBER OF SHARES. Anything in this Section (i) to the
contrary notwithstanding, in case the Company shall any time issue Common Stock
or Convertible Securities by way of dividend or other distribution on any stock
of the Company or subdivide or combine the outstanding shares of Common Stock,
the Exercise
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<PAGE> 8
Price shall be proportionately decreased in the case of such issuance (on the
day following the date fixed for determining shareholders entitled to receive
such dividend or other distribution) or decreased in the case of such
subdivision or increased in the case of such combination (on the date that such
subdivision or combination shall become effective).
(3) NO ADJUSTMENTS FOR SMALL AMOUNTS. Anything in this Section (i) to
the contrary notwithstanding, the Company shall not be required to give effect
to any adjustment in the Exercise Price unless and until the net effect of one
or more adjustments, determined as above provided, shall have required a change
of the Exercise Price by at least 1%, but when the cumulative net effect of more
than one adjustment so determined shall be to change the actual Exercise Price
by at least 1%, such change in the Exercise Price shall thereupon be given
effect.
(4) NUMBER OF SHARES ADJUSTED. Upon any adjustment of the Exercise
Price, the holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of this Warrant by
the Exercise Price in effect on the date hereof and dividing the product so
obtained by the new Exercise Price.
(j) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (i) hereof, the Company shall
forthwith file, in the custody of its Secretary or an Assistant Secretary at its
Registry Office, an officer's certificate showing the adjusted Exercise Price
determined as herein provided and setting forth in reasonable detail the facts
requiring such adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the Holder and the Company
shall, forthwith after each such adjustment, deliver a copy of such certificate
to the Holder.
(k) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding and unexercised (i) if the Company shall pay any dividend or make
any distribution upon the Common Stock or (ii) if the Company shall offer to the
holders of Common Stock for subscription or purchase by them any share of stock
of any class or any other rights or (iii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale, lease or transfer
of all or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then, in any such case, the Company shall
cause to be delivered to the Holder, at least ten (10) days prior to the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock of record shall be entitled
to
-8-
<PAGE> 9
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(l) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Company shall cause effective provision to be made so that the Holder shall have
the right thereafter, by exercising this Warrant, to purchase the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance by a holder of the number of shares of Common Stock which
might have been purchased upon exercise of this Warrant immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (l) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in any such capital reorganization or reclassification,
consolidation, mergers, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for or of a security of the Company other than Common Stock, any such
issue shall be treated as an issue of Common Stock covered by the provisions of
subsection (i)(1) hereof.
(m) SECURITIES ACT REGISTRATION.
(1) In the event that the Company files a registration statement under
the Securities Act of 1933, as amended (the "Act"), which relates to a current
offering of securities of the Company for its own account or the account of any
of its shareholders, such registration statement and the prospectus included
therein shall also, at the written request to the Company by the Holder, relate
to, and meet the requirements of the Act with respect to, any public offering of
the Warrant Stock so as to permit the public sale thereof in compliance with the
Act. The Company shall give written notice to the Holder of its intention to
file a registration statement under the Act relating to a current offering of
the aforesaid securities of the Company, thirty (30) or more days prior to the
filing of such registration statement, and the written request provided for in
the first sentence of this subsection (m)(1), shall be made by the Holder
fifteen (15) or more days prior to the
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<PAGE> 10
date specified in the notice as the date on which it is intended to file such
registration statement. Neither the delivery of such notice by the Company nor
of such request by the Holder shall in any way obligate the Company to file such
registration statement and notwithstanding the filing of such registration
statement, the Company may, at any time prior to the effective date thereof,
determine not to offer the securities to which such registration statement
relates, without liability to the Holder, except that the Company shall pay such
expenses as are contemplated to be paid by it under subsection (4) of this
Section (m).
(2) In addition, upon written notice from the Holder that it
contemplates the transfer of all or any of its Warrant Stock under such
circumstances that a public offering, within the meaning of the Act, of the
Warrant Stock will be involved, the Company, as promptly as possible after the
receipt of such notice, shall file a new registration statement with respect to
the offering and sale or other disposition of the Warrant Stock with respect to
which it shall have received such notice; provided, however, that the Company
shall not be required to file more than two registration statements pursuant to
this Section (m)(2). Notwithstanding the foregoing, the Company shall not be
obligated to effect a registration pursuant to this Section (m)(2) if the
Company shall furnish to the Holder within ten (10) days of a registration
request a certificate signed by the president of the Company stating that in the
good faith judgment of the board of directors of the Company it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be effected at such time, in which event the Company shall have the
right to defer the filing of the registration statement for a period of not more
than ninety (90) days after the receipt of the request of the Holder.
(3) In each instance in which pursuant to subsections (1) and (2) of
this Section (m) , the Company shall take any action to permit a public offering
and sale or other distribution of Warrant Stock, the Company shall:
(A) Supply to the Holder a conformed copy of the new
registration statement and of the preliminary, final and other
prospectus in conformity with requirements of the Act and the Rules and
Regulations and true copies of such other documents as the Holder shall
reasonably request;
(B) Cooperate in taking such action as may be necessary to
register or qualify the Warrant Stock under such other securities acts
or blue sky laws of such jurisdictions as the Holder shall reasonably
request and do any and all other acts and things which may be necessary
or advisable to enable the Holder to consummate such proposed sale or
other disposition of the Warrant Stock in any such jurisdiction;
provided, however, that in no event shall the Company be obligated, in
connection therewith, to qualify to do business or to file a general
consent to service of process in any jurisdiction where it shall not
then be qualified;
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<PAGE> 11
(C) Keep effective for a period of 180 days after the initial
effectiveness thereof or until all Warrant Stock covered thereby has
been sold, whichever is later, all such registrations and
qualifications under the Act and state securities and blue sky laws,
and do any and all other acts and things for such period as may be
necessary to permit the public sale or other disposition of such
Warrant Stock by the Holder; and
(D) Indemnify and hold harmless the Holder and each
underwriter, within the meaning of the Act, who may purchase from or
sell for the Holder any Warrant Stock, and their respective officers,
directors, partners, stockholders, agents, representatives and
controlling persons from and against any and all losses, claims,
damages, and liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing,
defending or settling any claim) arising from (i) any untrue or alleged
untrue statement of a material fact contained in any registration
statement furnished pursuant to clause (A) of this subsection (m)(3),
or any prospectus or offering circular included therein or (ii) any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading (unless such untrue statement or omission or such alleged
untrue statement or omission was based upon information furnished or
required to be furnished in writing to the Company by the Holder or
underwriter expressly for use therein), which indemnification shall
include each person, if any, who controls the Holder or underwriter
within the meaning of the Act; provided, however, that the Company
shall not be so obligated to indemnify the Holder or underwriter or
controlling person unless the Holder and underwriter shall at the same
time indemnify the Company, its directors, each officer signing any
registration statement or any amendment to any registration statement
and each person, if any, who controls the Company within the meaning of
the Act, from and against any and all losses, claims, damages, and
liabilities (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing, defending
or settling any claim) arising from (a) any untrue or alleged untrue
statement of a material fact contained in any registration statement or
any amendment to any registration statement or prospectus furnished
pursuant to clause (A) of this subsection (m)(3), or (b) any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, based upon information furnished, or required to be
furnished, in writing to the Company by the Holder or underwriter
expressly for use therein. This indemnity agreement shall not inure to
the benefit of any such underwriter (or to the benefit of any person
who controls such underwriter) on account of any losses, claims,
damages, liabilities or actions or proceedings in respect thereof)
arising from the sale of any of such Warrant Stock by such underwriter
to any person if such underwriter failed to send or give a copy of the
prospectus furnished pursuant to clause (A) of this subsection (m)(3),
as the same may then be supplemented or amended (if such supplement or
amendment shall
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<PAGE> 12
have been furnished to the Holder pursuant to said clause (A)), to such
person with or prior to the written confirmation of the sale involved.
(4) The Company shall bear all costs and expenses incurred in
connection with the Company's obligations under this Section (m) , including,
without limiting the generality of the foregoing, accounting fees, fees and
disbursements of counsel for the Company, all costs and expenses incurred in
connection with the compliance with state securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request, and expenses incurred for
preparing, printing and distributing such quantity of prospectuses as the Holder
shall reasonably request; provided, however, that any discounts, commissions,
broker's fees and similar fees to securities industry professionals, and any
transfer taxes relating to the sale of the Warrant Stock shall be paid by the
Holder.
(5) The Company's obligations under subsections (1) and (2) of this
Section (m) shall be conditioned, as to each such public offering, upon a timely
receipt by the Company in writing of:
(A) Information as to the terms of such public offering
furnished by or on behalf of the Holder; and
(B) Such other information as the Company may reasonably
require from the Holder or any underwriter for inclusion in such
registration statement or post-effective amendment.
(6) Any notices or certificates by the Company to the Holder and by the
Holder to the Company shall be deemed delivered if in writing and delivered
personally or sent by certified mail, if to the Holder, addressed to it at its
registered address or, if the Holder has designated by notice in writing to the
Company any other address, to such other address, and, if to the Company,
addressed to it at its Registry Office. The Company may change its Registry
Office by written notice to the holders of the Warrants and the Holder may
change its address by written notice to the Company.
(7) The Company's agreements with respect to registration of the
Warrant Stock in this Section (m) shall apply to and continue in effect,
regardless of the exercise or surrender of this Warrant; provided, however, that
the Company shall have no obligation to register Warrant Stock pursuant hereto
if (i) in the written opinion of counsel for the Company, which opinion shall be
satisfactory in form and substance to the Holder, the Warrant Stock is freely
tradable without the need for such registration, (ii) the Holder is provided
with unlegended certificates representing the Warrants or Warrant Stock and
(iii) all stop transfer orders on the Warrants and Warrant Stock are removed by
the Company
(n) GOVERNMENTAL APPROVALS AND STOCK EXCHANGE LISTINGS. The Company
shall from time to time take all action which may be necessary to obtain and
keep
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<PAGE> 13
effective any and all permits, consents and approvals of governmental agencies
and authorities which may be or become requisite in connection with the
issuances, sales, transfer, delivery and exercise of the Warrants by the
registered holders thereof, and the issuance, sale, transfer and delivery of the
Warrant Stock by such holders, and all action which may be necessary so that
such shares of Warrant Stock, immediately upon their issuance pursuant to the
exercise of the Warrants, will be listed or entitled to unlisted trading
privileges each securities exchange (or on NASDAQ, if applicable) on which
Common Stock is then listed or entitled to unlisted trading privileges, and on
the identical basis.
(o) TRANSFER RESTRICTIONS.
(1) This Warrant or the Warrant Stock may not be sold, transferred or
otherwise disposed of except as follows:
(A) to any person who, in the opinion of counsel provided by
the Holder and satisfactory to the Company, is a person to whom this
Warrant or such Warrant Stock may legally be transferred without
registration and without the delivery of a current prospectus or
offering circular under the Act with respect thereto and then only
against receipt of an agreement of such person to comply with the
provisions of this Section (o) with respect to any resale or other
disposition of such securities; or
(B) with respect to the Warrant Stock, to any person upon
delivery of a prospectus then meeting the registration requirements of
the Act relating to the Warrant Stock and the offering thereof for such
sale or disposition.
(2) The Company may cause a legend substantially in the following form
to be set forth on each certificate representing Warrant Stock not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Section (m) hereof, unless counsel for the Company is of the opinion
as to any such certificate that such legend is unnecessary:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
(p) APPLICABLE LAW. THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
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<PAGE> 14
(q) AMENDMENT. This Warrant may only be amended by a written instrument
executed by the Company and the Holder.
(r) REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows: (i) execution and delivery of this Warrant by
the Company has been duly authorized by all necessary corporate action, and this
Warrant constitutes the valid and binding obligation of the Company in
accordance with its terms; (ii) the Warrant and the Warrant Stock have been duly
authorized for issuance, and upon delivery of the Warrant the Holder will have
good and valid title thereto, free and clear of any and all liens, claims and
encumbrances of any nature whatsoever; (iii) the Warrant Stock has been, and
will continue to be, duly reserved for issuance; and (iv) upon exercise of the
Warrant in accordance with the terms thereof, the Warrant Stock shall have been
duly and validly issued, fully paid and non-assessable.
-14-
<PAGE> 15
(s) BINDING EFFECT. Subject to the provisions of Sections (g) and (o),
this Warrant and the rights evidenced hereby shall inure to the benefit of, and
be binding upon, the Company and the Holder and their respective successors and
assigns, including any permitted transferee of the Warrant or Warrant Stock.
ECOGEN INC.
By ____________________________
President
Date: ____________________
(SEAL)
Attest:
__________________________
Secretary
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<PAGE> 16
ACKNOWLEDGEMENT
STATE OF NEW YORK |
| SS:
COUNTY OF NEW YORK |
On December __, 1999, before me, the undersigned, a Notary Public in
and for said State, personally appeared _______________, personally known to me
or proved to me on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________________
Notary Public
My commission expires: ______________
<PAGE> 17
[FORM OF]
ELECTION TO PURCHASE
Ecogen Inc.
2000 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: Treasurer
The undersigned registered owner of the within Warrant hereby
irrevocably elects to exercise the right of purchase represented by the within
Warrant for, and to purchase thereunder ______________ shares of the stock
provided for therein, and requests that certificates for such shares shall be
issued in the name of
________________________________________________________________________________
(Please Print)
and be delivered to ____________________________________________________________
at _____________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: ____________________
Name of Registered Owner:
________________________________________________________________________________
(Please Print)
Address: _______________________________________________________________________
Signature: _____________________________________________________________________
Note: The above signature must correspond with the name as written upon the face
of this Warrant in every particular, without alteration or enlargement or any
change whatever.
Signature Guaranteed: ___________________________
<PAGE> 18
[FORM OF]
ASSIGNMENT
For value received, the undersigned registered owner of the within Warrant
________________________________________________________________________________
does hereby sell, assign and transfer unto
________________________________________________________________________________
the within Warrant, together with all right, title and interest therein, with
respect to ___________________ shares of Common Stock, and does hereby
irrevocably constitute and appoint
________________________________________________________________________________
attorney, to transfer said Warrant on the books of the within-named Company,
with full power of substitution in the premises.
Social Security or
other identifying number
of assignee: ______________________________
Dated: _______________________
Signature: ________________________
Note: The above signature must correspond with the name as written upon the face
of this Warrant in every particular, without alteration or enlargement or any
change whatever.
Signature Guaranteed: ___________________________
<PAGE> 1
SECOND AMENDMENT TO LEASE
This AMENDMENT TO LEASE, dated as of this 17th day of December 1999, by
and between ECOGEN INC., a corporation organized and existing under the laws of
the State of Delaware ("Tenant"), and Brandywine Operating Partnership, L.P., a
Pennsylvania limited partnership, acting through its Agent, Brandywine Realty
Services Corporation ("Landlord").
BACKGROUND
WHEREAS, Landlord's predecessor in interest, Advent Realty Limited Partnership,
and Tenant, by Lease Agreement dated January 13, 1988, (and an Amendment thereto
dated March 31, 1992) leased 14,900 rentable square feet of space, located in
that certain Building known as 2000 Cabot Boulevard West, Langhorne,
Pennsylvania (said Lease Agreement and Amendment being hereinafter referred to
as the "Lease").
WHEREAS, by acquisition of the Land and Building of which the Premises
is a part, the Landlord herein has acquired all right, title and interest of
said predecessor therein and thereto, including all rights and obligations as
Landlord under said Lease and
WHEREAS, Landlord and Tenant mutually desire to extend the Term of said
Lease, which is currently due to expire on March 31, 2000, and modify certain
other provisions thereof all on the terms and conditions as hereinafter
provided.
NOW THEREFORE, in consideration of the mutual covenants herein set
forth, intending to be legally bound hereby, Landlord and Tenant agree as
follows:
1. Incorporation; Definitions. The defined terms used in this Second
Amendment to Lease shall be deemed to have the meanings ascribed thereto in the
Lease or, if defined herein, in this Second Amendment to Lease. The headings of
paragraphs are for convenience only and shall not be deemed to enlarge or
diminish the provisions of this Second Amendment to Lease.
2. Extension Term. The Term of said Lease is hereby extended for a
period of five (5) years from April 1, 2000 to March 31, 2005 (the "New Ending
Date of Term").
3. Tenant Improvements. No improvements to the Premises are required of
the Landlord in connection with the extension of the Lease Term provided herein
- - the Premises being accepted by Tenant in its current condition, "As-Is".
Landlord shall reimburse Tenant up to $20,000 for improvements tenant shall make
to the Premises. Landlord shall pay Tenant, within forty five (45) days of
Landlord's receipt of invoices, for such improvements, which expenses shall be
certified by Tenant as incurred. Tenant shall have one (1) year from, April 1,
2000 to use and request reimbursement for Tenant Improvements.
<PAGE> 2
4. Renewal Option. The Option to renew provided for in paragraph (6) of
the above mentioned Amendment dated March 31, 1992 (i.e. Lease Extension
Agreement) is hereby deleted and shall be of no further force or effect - this
Amendment being deemed in lieu thereof.
5. Annual Base Rent. During the extension Term the Annual Base Rent
shall be payable by Tenant to Landlord, at the times and in the manner set forth
in the Lease, according to the following schedule:
<TABLE>
<CAPTION>
Monthly
Period of Installment of Total Annual Base Rent Per
Lease Term Base Rent Rent for Period Rentable Square Foot
<S> <C> <C> <C>
4/1/00-3/31/01 $15,694.67 $188,336.00 $12.64
4/1/01-3/31/02 $16,005.08 $192,061.00 $12.89
4/1/02-3/31/03 $16,315.50 $195,786.00 $13.14
4/1/03-3/31/04 $16,625.92 $199,511.00 $13.39
4/1/04-3/31/05 $16,936.33 $203,236.00 $13.64
</TABLE>
6. Operating Expenses. The parties agree that with respect the Tenants
obligations under Articles 4 and 7 of said Lease, same are hereby Amended as
follows:
Article 4 - Commencing April 1, 2000 and continuing throughout the
Extension Term the Tenant shall only be responsible to pay its proportionate
share of Real Estate Taxes that are in excess of the Real Estate Taxes allocable
to the Base Year 2000 (i.e. calendar year 2000 for County Taxes and 7/1/99 -
6/30/00 - fiscal year for school Taxes). It is anticipated therefore that the
billing for Real Estate Taxes for the Extension Term would not occur until after
December 31, 2000, whether the billings would be estimated or actual as
contemplated in said Article 4.
Article 7 - This provision shall during the extension Term be deemed
modified to the extent that Landlord shall undertake all services for and make
all repairs to the Building and the Premises except that Tenant will continue to
be responsible for (a) all interior non structural repairs to Premises and any
repairs or replacement necessitated by acts or immersions of Tenant, its agents
or employees, (b) the janitorial services to the Premises (c) HVAC maintenance
and repair and (d) cost of all services and utilities as contemplated in Lease
Article 14.
After the commencement of the Extension Term, Landlord will deliver to
Tenant a Statement of Expenses covering any unpaid amounts due and owing from
Tenant under the Lease for the period ending March 31, 2000.
<PAGE> 3
7. Broker. Each party warrants to the others that it has had no
dealings with any broker or agent, other than Gola Corporate Real Estate, in
connection with the negotiation or execution of this Extension of Term and/or
Amendment to Lease. Tenant agrees to indemnify Owner, and Owner agrees to
indemnify Tenant, against all costs, expenses, reasonable attorney's fees or
other liability for commissions or other compensation or charges claimed by an
broker or agent claiming the same by, through or under said indemnifying party.
8. Affirmation and Applicability of Original Lease. Each term,
condition and provision of the Lease is in full force and effect as of the
date hereof and shall remain in full force and effect as is fully set forth in
this Second Amendment to Lease, except as expressly modified and amended by
this Second Amendment to Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Lease to be duly executed as of the day and year first written
above.
ATTEST: TENANT: Ecogen Inc.
A Delaware Corporation
By: _________________________ By: ________________________________
Authorized Representative
By: ________________________________
Please print name and title
ATTEST: LANDLORD: Brandywine Operating
Partnership, L.P. by its Agent,
Brandywine Realty Services
Corporation, Landlord
By: _________________________ By: ________________________________
Authorized Representative Jeff DeVuono
Vice President-Operations
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES*
STATE OR OTHER JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION
- ------------------ ------------------------------
Ecogen-Bio Inc. Delaware
Ecogen Investments Inc. Delaware
Ecogen-Jerusalem Inc. Delaware
Ecogen-Israel Inc. Delaware
Ecogen Technologies I Incorporated Delaware
Ecogen-Bio Germany GmbH Germany
Ecogen Biotechnologies Israel Ltd. Israel
* All of the subsidiaries listed above are wholly-owned subsidiaries with the
exception of Ecogen Technologies I Incorporated of which Ecogen Inc. owns
approximately 70% of the outstanding common stock.
<PAGE> 1
Exhibit 24
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ecogen Inc:
We consent to the incorporation by reference in the registration statement (No.
33-23767) on Form S-8/S-3, registration statements (No. 33-39687, No. 33-50478
and No. 33-70538) on Form S-8 and registration statements (No. 33-87510, No.
33-45975, No. 33-48020, No. 33-71854 and No. 333-58535) on Form S-3, of Ecogen
Inc. of our report dated December 16, 1999, except as to note 19 which is as of
February 15, 2000, relating to the consolidated balance sheets of Ecogen Inc.
and subsidiaries as of October 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended October 31, 1999,
which report appears in the October 31, 1999 annual report on Form 10-K of
Ecogen Inc.
KPMG LLP
Short Hills, New Jersey
February 14, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<EXCHANGE RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,814,973
<ALLOWANCES> 129,023
<INVENTORY> 5,358,017
<CURRENT-ASSETS> 7,431,010
<PP&E> 7,284,090
<DEPRECIATION> 4,909,628
<TOTAL-ASSETS> 10,462,272
<CURRENT-LIABILITIES> 6,203,265
<BONDS> 0
0
474
<COMMON> 99,859
<OTHER-SE> 922,706
<TOTAL-LIABILITY-AND-EQUITY> 10,462,272
<SALES> 6,566,022
<TOTAL-REVENUES> 7,242,299
<CGS> 5,975,954
<TOTAL-COSTS> 9,469,654
<OTHER-EXPENSES> (114,932)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522,894
<INCOME-PRETAX> (8,611,271)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,611,271)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,611,271)
<EPS-BASIC> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
