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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 1997 Commission File Number: 0-19746
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EcoScience Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
04-2912632
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(I.R.S. Employer Identification No.)
10 Alvin Court, East Brunswick, New Jersey 08816
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(Address of principal executive offices, including zip code)
908-432-8200
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(Registrant's telephone number, including area code)
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.
YES X NO ___
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 12, 1997
----- ---------------------------
Common Stock, par value $.01 per share 10,392,177
Total Number of Sequentially Numbered Pages: 96 Exhibit Index on Page: 20
<PAGE>
ECOSCIENCE CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
Page
----
Part I. - Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets -
March 31, 1997 and June 30, 1996 3
Consolidated Statements of Operations -
Three and Nine Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 16
Part II. - Other Information 17 - 18
Signatures 19
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<PAGE>
ECOSCIENCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, June 30,
1997 1996
--------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 1,089 $ 734
Short-term investments .................................. 25 700
Restricted cash, cash equivalents and
short-term investments ............................. 749 1,205
Accounts receivable, less reserves of $164 at
March 31, 1997 and $118 at June 30, 1996 ........... 2,350 1,552
Interest receivable ..................................... 1 32
Inventories ............................................. 2,128 2,001
Other current assets .................................... 959 795
------- -------
Total current assets ............................... 7,301 7,019
------- -------
Property and equipment, net ................................ 599 998
Intangible assets, net ..................................... 1,796 1,949
Other noncurrent assets .................................... 220 145
------- -------
Total assets........................................ $ 9,916 $10,111
======= =======
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Current maturities of noncurrent liabilities ........... $ 1,051 $ 2,441
Accounts payable ....................................... 2,487 2,347
Accrued restructuring costs ............................ 573 730
Accrued expenses and other current liabilities ......... 1,962 1,809
------- -------
Total current liabilities .......................... 6,073 7,327
------- -------
Noncurrent liabilities:
Long-term debt, less current maturities ................ 3 11
Other long-term liabilities ............................ 300 300
------- -------
Total noncurrent liabilities ....................... 303 311
------- -------
Commitments and contingencies .............................. - -
Stockholders' investment:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding ............ - -
Common stock, $.01 par value, 25,000,000 shares
authorized; 10,392,177 and 9,342,177 shares issued
and outstanding at March 31, 1997 and June 30, 1996,
respectively ....................................... 104 93
Additional paid-in capital ............................. 57,194 56,077
Accumulated deficit .................................... (53,758) (53,697)
------- -------
Total stockholders' investment ..................... 3,540 2,473
------- -------
Total liabilities and stockholders' investment ..... $ 9,916 $10,111
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
ECOSCIENCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended March 31, Nine months ended March 31,
--------------------------- ---------------------------
1997 1996 1997 1996
-------- -------- -------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Product sales .................................... $ 3,633 $ 3,097 $ 15,894 $ 11,454
Cost of goods sold ............................... 2,608 2,097 12,062 8,177
-------- -------- -------- ---------
Gross profit ..................................... 1,025 1,000 3,832 3,277
-------- -------- -------- ---------
Operating expenses:
Research and development ..................... 128 197 409 782
Selling and marketing ........................ 657 659 1,867 1,922
General and administrative ................... 542 541 1,627 1,665
Reversal of restructuring charge ............. -- (1,550) (77) (1,550)
-------- -------- -------- ---------
Total operating expenses ............... 1,327 (153) 3,826 2,819
-------- -------- -------- ---------
Operating income (loss) .......................... (302) 1,153 6 458
-------- -------- -------- ---------
Other income (expense):
Research, development, licensing
fees and other income .................... -- -- 7 125
Investment income ............................ 25 42 80 174
Interest and other expense ................... (34) (85) (154) (538)
-------- -------- -------- ---------
Total other expense .................... (9) (43) (67) (239)
-------- -------- -------- ---------
Net income (loss) before extraordinary gain ...... (311) 1,110 (61) 219
Extraordinary gain on early extinguishment of debt -- 241 -- 241
-------- -------- -------- ---------
Net income (loss) ................................ $ (311) $ 1,351 $ (61) $ 460
======== ======== ======== =========
Net income (loss) per common share:
Income (loss) before extraordinay item ........... $ (0.03) $ 0.12 $ (0.01) $ 0.02
Extraordinary gain ............................... -- 0.03 -- 0.03
-------- -------- -------- ---------
Net income (loss) ................................ $ (0.03) $ 0.15 $ (0.01) $ 0.05
======== ======== ======== =========
Weighted average number of common and
common equivalent shares outstanding ........ 10,386 9,303 10,049 9,020
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
ECOSCIENCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------
1997 1996
------- -------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................................... $ (61) $ 460
Adjustments to reconcile net income (loss) to
net cash used for operating activities:
Depreciation and amortization .............................. 286 466
(Gain) loss on sale of investments ........................ (2) 58
Gain on sale of property and equipment ..................... -- (74)
Gain on settlement of accounts payable ..................... -- (51)
Gain on early extinguishment of debt ....................... -- (241)
Reversal of restructuring charge ........................... (77) (1,550)
Foreign exchange (gain) .................................... (24) (12)
Changes in current assets and liabilities:
Accounts and interest receivable ..................... (767) 473
Inventories .......................................... (127) (313)
Other current assets ................................. (164) 273
Accounts payable and accrued expenses ................ 318 (1,120)
Accrued restructuring costs .......................... (157) (1,112)
------- -------
Net cash used for operating activities ........................ (775) (2,743)
------- -------
Cash flows from investing activities:
Purchases of property and equipment ............................... (62) (71)
Proceeds from sale of property and equipment ...................... -- 368
Purchases of restricted cash equivalents and short-term investments -- (705)
Proceeds from sale of short-term investments ...................... 677 6,159
Proceeds from release of restricted cash .......................... 456 --
(Increase ) decrease in other noncurrent assets ................... (75) 60
------- -------
Net cash provided by investing activities ...................... 996 5,811
------- -------
Cash flows from financing activities:
Proceeds from issuance of stock ................................... 1,128 1
Proceeds from long-term debt ...................................... -- 7
Payments on long-term debt and capital leases ..................... (993) (2,776)
------- -------
Net cash provided by (used for) financing activities ........... 135 (2,768)
Effect of exchange rate changes on cash .................................. (1) 6
------- -------
Increase in cash and cash equivalents .................................... 355 306
Cash and cash equivalents at beginning of period ......................... 734 481
------- -------
Cash and cash equivalents at end of period ............................... $ 1,089 $ 787
======= =======
Total unrestricted and restricted cash, cash equivalents
and short-term investments at end of period ......................... $ 1,863 $ 2,693
======= =======
Supplemental Cash Flow Information
Cash paid for:
Interest .......................................................... $ 166 $ 548
Income taxes ...................................................... 15 7
Non-cash investing and financing activities:
Disposition of equipment under capital lease ...................... 308 --
Disposition of manufacturing facility under capital lease ......... -- 2,936
Termination of capital lease obligations .......................... (1,248) (5,550)
Issuance of common stock in connection with the termination
of facility lease obligation ................................ -- 500
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 5 -
<PAGE>
ECOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
1. OPERATIONS
EcoScience Corporation ("EcoScience") and its wholly owned subsidiaries
(collectively, the "Company"), Agro Dynamics, Inc. and Agro Dynamics Canada
Inc. (collectively, "AGRO") and EcoScience Produce Systems Corp. ("EPSC")
are engaged in the development and commercialization of natural pest
control products, naturally derived coatings to preserve food quality and
extend the shelf life of fruits and vegetables, and the marketing and
distribution of advanced technologies, products, growing systems and
services for the intensive farming, horticulture and produce packing
industries. The Company derives a major portion of its revenues from the
AGRO and EPSC operations through the sale of growing medium products to the
North American intensive farming and horticulture industries, sorting,
grading and packing systems to the produce packing industry, and
postharvest coating products to the fresh fruit and vegetable markets
throughout the western hemisphere.
Prior to the acquisition of AGRO in November 1992 and EPSC in May 1994,
substantially all revenues generated by the Company were from collaborative
research and development arrangements and investment income. During this
period, the Company had devoted substantially all of its efforts toward new
product research and development, and commercialization of certain
products. The Company is subject to a number of risks similar to those of
other companies in similar stages of development, including dependence on
key individuals, competition from other products and companies, the
necessity to develop, register, and manufacture commercially usable
products, the ability to achieve profitable operations and the need to
raise additional funds through public or private debt or equity financing.
The Company believes its unrestricted and restricted cash, cash equivalents
and short-term investments as of March 31, 1997, and funds available under
its new revolving line of credit (see Note 4), along with revenues from
product sales will be sufficient to finance the Company's working capital
needs for at least the next twelve months. At such time, the Company may
need to raise additional funds through public or private debt or equity
financing; although there can be no assurances that such funds will be
available on terms favorable to the Company, if at all. The Company
continues to explore various strategic options aimed at enhancing
stockholder value and improving the long-term commercial viability of the
Company.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company and reflect all adjustments, consisting of only
normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of financial results for the three and
nine month periods ended March 31, 1997 and 1996, in accordance with
generally accepted accounting principles for interim financial reporting
and pursuant to Article 10 of Regulation S-X. Certain information and
footnote disclosures
-6-
<PAGE>
normally included in the Company's annual audited consolidated financial
statements have been condensed or omitted pursuant to such rules and
regulations.
The results of operations for the three and nine month periods ended March
31, 1997 and 1996 are not necessarily indicative of the results of
operations to be expected for a full fiscal year. These interim
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the fiscal year ended June
30, 1996, which are included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
The accompanying interim consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, AGRO and EPSC.
All material intercompany transactions and balances have been eliminated in
consolidation. The financial statements for the three and nine months ended
March 31, 1997 contain certain reclassifications to conform with the
current year basis of presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and disclosures of
contingent assets and liabilities as of the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128).
This Statement establishes standards for computing and presenting earnings
per share and applies to entities with publicly traded common stock or
potential common stock. SFAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997 and early
adoption is not permitted. When adopted, the statement will require
restatement of prior years' earnings per share. The Company will adopt this
statement, for its year ending June 30, 1998.
3. INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and consist of the following:
March 31, June 30,
1997 1996
--------- --------
(In thousands)
Raw materials ......................... $ 346 $ 226
Work in process ....................... -- --
Finished good ......................... 1,782 1,775
------- -------
$ 2,128 $ 2,001
======= =======
Work in process and finished goods include material, labor and
manufacturing overhead.
-7-
<PAGE>
4. DEBT
On October 28, 1994, the Company and AGRO entered into a revolving line of
credit with a bank, under which AGRO may borrow up to the lesser of
$1,500,000 or the sum of 75% of eligible accounts receivable and 25% of
eligible inventories up to a maximum of $250,000 on a revolving basis for
working capital needs. Funds borrowed under the revolving line of credit
have borne interest at a rate of prime (8.50% at March 31, 1997) plus 1.5%
and are secured by all assets of AGRO and all the outstanding common stock
of AGRO owned by the Company. Interest on funds borrowed under the
revolving line of credit is payable monthly in arrears and repayment of
principal was originally due on January 5, 1996. On October 5, 1995, the
Company and the bank entered into an amendment to the revolving line of
credit agreement pursuant to which the bank, among other modifications,
extended the expiration date of the credit agreement from January 5, 1996
to July 5, 1996, and any principal amounts outstanding, together with
accrued interest thereon, were due on such date.
From July 5, 1996 to February 15, 1997, the Company and the bank entered
into a series of five amendments to the revolving line of credit agreement
pursuant to which the bank extended the expiration date of the credit
agreement from July 5, 1996 to March 15, 1997 on the same terms, and any
principal amount outstanding, together with accrued interest thereon, were
due on March 15, 1997. On April 28, 1997, the Company and the bank amended
the existing revolving line of credit agreement and merged it into a new,
expanded revolving line of credit, under which EcoScience and subsidiaries
may borrow up to the lesser of $3,000,000 or the sum of (i) 85% of eligible
account receivables and (ii) eligible inventory at stratified rates from
25% to 50% up to a maximum of the lesser of $1,200,000 or 66.67% of the
amount outstanding against accounts receivable. Funds borrowed under the
new revolving line of credit bear interest at a rate of prime plus 2.0% and
are secured by all the assets of the Company and all of the outstanding
common stock of AGRO owned by the Company. Interest on funds borrowed under
the revolving line of credit is payable monthly in arrears and repayment of
principle is due on April 27, 1998, subject to automatic renewal, as
provided. The revolving line of credit imposes a financial covenant on the
Company that requires a minimum tangible net worth of $750,000. In
addition, the new line of credit eliminates certain provisions under the
old line of credit: (i) elimination of the cash collateral requirement, the
balance of which was $749,000 at March 31, 1997; (ii) elimination of the
67% cash collateral coverage requirement on additional borrowings and (iii)
elimination of the $1,000,000 minimum cash balance requirement. The Company
believes this proposed credit facility in combination with unrestricted and
restricted cash, cash equivalents and short-term investments and revenues
from product sales, will meet its operational funding requirements for at
least the next twelve months.
5. NET INCOME (LOSS) PER COMMON SHARE
The net loss per common share for the three and nine months ended March 31,
1997 is computed based on the weighted average number of common shares
outstanding. Common equivalent shares are not included in these per share
calculations as the effect of their inclusion would be anti-dilutive.
The net income per common share for the three and nine months ended March
31, 1996 is computed based on the weighted average number of common and
common equivalent shares outstanding.
-8-
<PAGE>
ECOSCIENCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a marketing, sales and product development company servicing the
needs of the agricultural specialties markets and professional pest control
operators ("PCOs"). The Company provides (i) sophisticated growing systems to
greenhouse operators, (ii) technologically advanced sorting, grading and packing
systems to produce packers, (iii) equipment, coatings and disease control
products, including natural biologicals for protecting fruits, vegetables and
ornamentals in storage and transit to market, and (iv) unique biological pest
control products to PCOs. The Company focuses on the technical marketing of
agricultural specialties products and services, and the development of
biological pest control products.
The Company serves the specialty agriculture market through its subsidiaries:
AGRO and EPSC. In November 1992, EcoScience acquired all of the outstanding
capital stock of AGRO, an East Brunswick, New Jersey based company that designs,
markets and distributes advanced technologies, products, growing systems and
services to the North American intensive farming, horticulture and produce
packing industries. In May 1994, the Company acquired certain assets and
liabilities of American Machinery Corporation ("AMC"), an Orlando, Florida based
business that provides postharvest coating products and services to the fresh
fruit and vegetable markets throughout the United States, the Caribbean, Central
America and South America. Concurrent with the acquisition of AMC, the Company
formed EPSC to combine the AMC product line and operating unit with its existing
activities in those markets. EcoScience sells to PCOs through a marketing
collaboration with Terminix International Company L.P. ("Terminix").
Additionally, EcoScience has initiated an extensive testing, development and
marketing program with Maruwa Biochemical Co., Ltd. and Shinto Paint Co., Ltd.
for biological products in Japan.
The Company's primary products are (i) advanced growing systems based on
Stonewool(R) manufactured by Grodania A/S, (ii) sophisticated sorting, grading
and packing systems manufactured by Aweta, B.V., (iii) computerized
environmental and irrigation control systems manufactured by H. Hoogendoorn
Automation B.V., (iv) PacRite(R) and Indian River GoldTM coatings manufactured
by EPSC, (v) Bio-SaveTM PostHarvest BioProtectant line of products and (vi)
Bio-BlastTM Biological Termiticide manufactured by EcoScience. In addition, the
Company distributes a broad array of specialty products used in greenhouses and
in fruit, vegetable and ornamental packing.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 vs.
Three Months Ended March 31, 1996
The Company's product sales increased $536,000 or 17% to $3,633,000 for the
three months ended March 31, 1997 from $3,097,000 for the same period in 1996.
This increase was due to the increases in product sales by AGRO of $588,000 and
EcoScience of $53,000, partially offset by a decrease in product sales by EPSC
of $105,000.
-9-
<PAGE>
The following table sets forth the Company's product sales by operating company
for the three months ended March 31, 1997 and 1996:
Three Months Ended
March 31,
---------------------------------------
Increase
1997 1996 (Decrease)
---- ---- ----------
(In thousands)
AGRO .............................. $ 2,643 $ 2,055 $ 588
EPSC .............................. 937 1,042 (105)
EcoScience ........................ 53 -- 53
------- ------- -------
Consolidated .................. $ 3,633 $ 3,097 $ 536
======= ======= =======
AGRO is the exclusive distributor in the United States and Canada of the Grodan
brand of stonewool, which is an inert growing medium supplied by Grodania A/S, a
Danish Company. In addition, AGRO is the exclusive distributor of sophisticated
sorting, grading and packing systems, manufactured by Aweta B.V., a Netherlands
based company, to the fruit, vegetable and flower markets in the United States,
Canada, Mexico and the Caribbean. The Company believes that revenues under these
distribution agreements will each account for more than 10% of the Company's
product sales in fiscal 1997.
The Company's biological product sales for the three months ended March 31, 1997
were $192,000 as compared to $16,000 for the three months ended March 31, 1996,
an increase of $176,000 due primarily to the following: (i) EcoScience's
Bio-Blast Biological Termiticide sales increased $53,000 for the three months
ended March 31, 1997 versus the same period last fiscal year and (ii) EPSC's
Bio-Save PostHarvest BioProtectant sales increased $123,000 for the three months
ended March 31, 1997 versus the same period in the prior fiscal year,
representing broader market exposure and customer acceptance.
Cost of goods sold increased $511,000 or 24% to $2,608,000 for the three months
ended March 31, 1997 from $2,097,000 for the same period in 1996 due primarily
to the increases in AGRO's cost of goods sold of $516,000. AGRO's increase in
cost of goods sold resulted primarily from increased sales volume.
Gross profit on product sales increased $25,000 or 3% to $1,025,000 for the
three months ended March 31, 1997 from $1,000,000 for the same period in 1996,
while gross profit margin on product sales decreased to 28% for the three months
ended March 31, 1997 from 32% for the same period in 1996, due primarily to
AGRO's change in product mix, and lower margins to achieve greater market
penetration and address competitive factors.
Research and development expenses decreased $69,000 or 35% to $128,000 for the
three months ended March 31, 1997 from $197,000 for the same period in 1996 due
primarily to reductions in personnel and related costs at EcoScience and EPSC.
The Company has and will continue to incur ongoing research and development
expenses for its Bio-SaveTM PostHarvest BioProtectant, Bio-BlastTM Biological
Termiticide and other select programs in fiscal 1997.
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<PAGE>
Selling and marketing expenses decreased $2,000 to $657,000 for the three months
ended March 31, 1997 from $659,000 for the same period in 1996 due primarily to
an increase in AGRO's selling and marketing expenses of $46,000 and a decrease
of $46,000 at EPSC. The increase in AGRO's selling and marketing expenses was
primarily due to additional personnel, promotional and related costs to support
higher product sales. The decrease in EPSC's selling and marketing expenses for
the three months ended March 31, 1997 was primarily attributable to the
continued reduction of selling and marketing department personnel and related
costs.
General and administrative expenses increased $1,000 to $542,000 for the three
months ended March 31, 1997 from $541,000 for the same period in 1996 due
primarily to an increase in such expenses by EcoScience of $81,000, offset by a
decrease in AGRO and EPSC of $51,000 and $29,000, respectively. The increase in
EcoScience's general and administrative expenses was primarily attributable to
higher personnel, professional fees and related costs to support increased
business activity. The decrease in AGRO's and EPSC's general and administrative
expenses for the three months ended March 31, 1997 was primarily attributable to
reductions of personnel, professional fees and related costs.
On January 11, 1996, the Company entered into a lease termination agreement for
its Worcester corporate headquarters and research and development facility under
which the Company paid the landlord $125,000 and issued 500,000 shares of the
Company's common stock with a market value of $500,000 in exchange for an
immediate termination of the lease. Additionally, the Company incurred
approximately $25,000 for expenses related to the completion of the transaction.
After accounting for these settlement provisions, which totaled $650,000, the
Company reversed $1,550,000 of accrued restructuring costs in the three months
ended March 31, 1996 that related to the accrued restructuring costs which were
originally recorded in fiscal 1995 ($2,000,000) and the remaining accrued
restructuring costs which were originally recorded in fiscal 1994 ($200,000).
Operating income decreased $1,455,000 to a loss of ($302,000) for the three
months ended March 31, 1997 as compared to operating income of $1,153,000 for
the same period in 1996. The decrease in operating income resulted from a
$1,480,000 increase in total operating expenses, of which $1,550,000 relates to
the reversal of accrued restructuring costs discussed above, offset by a $25,000
increase in gross profit for the three months ended March 31, 1997 as compared
to the same period in 1996. The ($302,000) operating loss for the three months
ended March 31, 1997, represents a decrease of $95,000 or 24%, as compared to an
operating loss of ($397,000) for the three months ended March 31, 1996, when the
$1,550,000 reversal of accrued restructuring costs is excluded. Operating
expenses decreased $70,000 or 5% to $1,327,000 for the three months ended March
31, 1997 as compared to $1,397,000 for the same period in 1996 when the
restructuring reversal is excluded.
Other income/expense decreased $34,000 or 79% to $9,000 net expense in the three
months ended March 31, 1997 as compared to $43,000 net expense for the same
period in 1996. The decrease was primarily attributable to a reduction in
interest and other expenses of $51,000 or 60% to $34,000, due primarily to the
decrease in interest expense resulting from the lower average level of long-term
debt and capital lease obligations outstanding during the three months ended
March 31, 1997 as compared to the same period in 1996, offset by a decrease in
investment income of $17,000 resulting from a decline in the average funds
available for investment for the three months ended March 31, 1997 as compared
to the same period in 1996.
In connection with the acquisition of AMC in May 1994, the Company issued a
promissory note in the principal amount of $430,000 to the shareholder of AMC.
In February 1996, the Company settled the remaining balance of the promissory
note and other acquisition related liabilities totaling $501,000 for $251,000,
excluding $9,000 of related transaction expenses, which resulted in an
extraordinary gain on the early extinguishment of debt of $241,000 or $0.03 per
share with no related income tax effect, as recorded in the three months ended
March 31, 1996.
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<PAGE>
The Company's net income decreased $1,662,000 or $0.18 per share to a net loss
of ($311,000) or ($0.03) per share for the three months ended March 31, 1997 as
compared to net income of $1,351,000 or $0.15 per share for the same period in
1996. The ($311,000) or ($0.03) per share net loss for the three months ended
March 31, 1997 represents a decrease of $129,000, 29% or $0.02 per share as
compared to a net loss of ($440,000) or ($0.05) per share for the three months
ended March 31, 1996, when the $1,550,000 or $0.17 per share reversal of accrued
restructuring costs and the $241,000 or $0.03 per share extraordinary gain on
early extinguishment of debt are excluded.
Nine Months Ended March 31, 1997 vs.
Nine Months Ended March 31, 1996
The Company's product sales increased $4,440,000 or 39% to $15,894,000 for the
nine months ended March 31, 1997 from $11,454,000 for the same period in 1996.
This increase was due to the increase in product sales by AGRO of $4,399,000 and
EPSC of $48,000, partially offset by a decrease in product sales by EcoScience
of $7,000.
The following table sets forth the Company's product sales by operating company
for the nine months ended March 31, 1997 and 1996:
Nine Months Ended
March 31,
---------------------------------------
Increase
1997 1996 (Decrease)
---- ---- ----------
(In thousands)
AGRO .............................. $13,357 $ 8,958 $ 4,399
EPSC .............................. 2,382 2,334 48
EcoScience ........................ 155 162 (7)
------- ------- -------
Consolidated .................. $15,894 $11,454 $ 4,440
======= ======= =======
AGRO is the exclusive distributor in the United States and Canada of the Grodan
brand of stonewool, which is an inert growing medium supplied by Grodania A/S, a
Danish Company. In addition, AGRO is the exclusive distributor of sophisticated
sorting, grading and packing systems, manufactured by Aweta B.V., a Netherlands
based company, to the fruit, vegetable and flower markets in the United States,
Canada, Mexico and the Caribbean. The Company believes that revenues under these
distribution agreements will each account for more than 10% of the Company's
product sales in fiscal 1997.
The Company's biological product sales for the nine months ended March 31, 1997
were $470,000 as compared to $184,000 for the nine months ended March 31, 1996,
an increase of $286,000 due primarily to the following: (i) EcoScience's
Bio-Blast Biological Termiticide sales increased $116,000 for the nine months
ended March 31, 1997 versus the same period last fiscal year, (ii) EcoScience's
Bio-Path Cockroach Control Chamber sales were $123,000 for the nine months ended
March 31, 1996 versus nil for the same period this fiscal year, as the remaining
balance of inventory of this product was shipped last fiscal year, and (iii)
EPSC's Bio-Save PostHarvest BioProtectant sales increased $293,000 for the nine
months
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<PAGE>
ended March 31, 1997 versus the same period last fiscal year, representing
broader market exposure and customer acceptance.
Cost of goods sold increased $3,885,000 or 48% to $12,062,000 for the nine
months ended March 31, 1997 from $8,177,000 for the same period in 1996 due
primarily to the increase in AGRO's cost of goods sold of $3,874,000. AGRO's
increase in cost of goods sold resulted primarily from increased sales volume.
Gross profit on product sales increased $555,000 or 17% to $3,832,000 for the
nine months ended March 31, 1997 from $3,277,000 for the same period in 1996,
while gross profit margin on product sales decreased to 24% for the nine months
ended March 31, 1997 from 29% for the same period in 1996, due primarily to
AGRO's change in product mix, and lower margins to achieve greater market
penetration and address competitive factors.
Research and development expenses decreased $373,000 or 48% to $409,000 for the
nine months ended March 31, 1997 from $782,000 for the same period in 1996 due
primarily to reductions in personnel and related costs at EcoScience and EPSC.
The Company has and will continue to incur ongoing research and development
expenses for its Bio-Save PostHarvest BioProtectant, Bio-Blast Biological
Termiticide and other select programs in fiscal 1997.
Selling and marketing expenses decreased $55,000 or 3% to $1,867,000 for the
nine months ended March 31, 1997 from $1,922,000 for the same period in 1996 due
primarily to a decrease in EPSC's selling and marketing expenses of $211,000 and
an increase of $152,000 at AGRO. The decrease in EPSC's selling and marketing
expenses for the nine months ended March 31, 1997 was primarily attributable to
the continued reduction of selling and marketing department personnel and
related costs. The increase in AGRO's selling and marketing expenses was
primarily due to additional personnel, promotional and related costs to support
higher product sales.
General and administrative expenses decreased $38,000 or 2% to $1,627,000 for
the nine months ended March 31, 1997 from $1,665,000 for the same period in 1996
due primarily to the decrease in EPSC's general and administrative expenses of
$104,000, which was partially offset by an increase in such expenses at
EcoScience of $75,000. The decrease in EPCS's general and administrative
expenses for the nine months ended March 31, 1997 was primarily attributable to
reductions in personnel and related costs. The increase in EcoScience's general
and administrative expenses was primarily attributable to higher personnel,
professional fees and related costs to support increased business activity.
In August 1996, the Company and a finance company reached a lease settlement
agreement under which the Company paid $880,000 to satisfy the remaining lease
obligation of approximately $1,248,000 of principal and $17,000 of accrued
interest, and returned certain leased equipment with a net book value of
$308,000 to the financing company, which resulted in a reversal of a
restructuring charge of $77,000.
On January 11, 1996, the Company entered into a lease termination agreement for
its Worcester corporate headquarters and research and development facility under
which the Company paid the landlord $125,000 and issued 500,000 shares of the
Company's common stock with a market value of $500,000 in exchange for an
immediate termination of the lease. Additionally, the Company incurred
approximately $25,000 for expenses related to the completion of the transaction.
After accounting for these settlement provisions, which totaled $650,000, the
Company reversed $1,550,000 of accrued restructuring costs in the nine months
ended March 31, 1996 that related to the accrued restructuring costs which were
originally recorded in fiscal 1995 ($2,000,000) and the remaining accrued
restructuring costs which were originally recorded in fiscal 1994 ($200,000).
Operating income decreased $452,000 to $6,000 for the nine months ended March
31, 1997 as compared to operating income of $458,000 for the same period in
1996. The decrease in operating income resulted from a $1,007,000 increase of
total operating expenses in the nine
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<PAGE>
months ended March 31, 1997 as compared to the same period in 1996, offset by a
$555,000 increase in gross profit. The operating loss for the nine months ended
March 31, 1997 was ($71,000) or a decrease of $1,021,000 or 93%, when the
$77,000 reversal of restructuring charge related to the leased equipment
settlement is excluded, as compared to an operating loss of ($1,092,000) for the
nine months ended March 31, 1996, when the $1,550,000 reversal of accrued
restructuring costs related to the facility lease settlement is excluded.
Operating expenses decreased $466,000 or 11% to $3,903,000 for the nine months
ended March 31, 1997 as compared to $4,369,000 for the same period in 1996 when
the restructuring reversals are excluded for both periods.
Other income/expense decreased $172,000 or 72% to $67,000 net expense in the
nine months ended March 31, 1997 as compared to $239,000 net expense for the
same period in 1996. The decrease was primarily attributable to a reduction in
interest and other expenses of $384,000 or 71% to $154,000, due primarily to the
decrease in interest expense resulting from the lower average level of long-term
debt and capital lease obligations outstanding during the nine months ended
March 31, 1997 as compared to the same period in 1996; partially offset by (i) a
decrease in investment income of $94,000 resulting from a decline in the average
funds available for investment for the nine months ended March 31, 1997 as
compared to the same period in 1996 and (ii) a $74,000 gain on sale of property
and equipment and a $51,000 gain on settlements of accounts payable recorded in
the nine months ended March 31, 1997.
In connection with the acquisition of AMC in May 1994, the Company issued a
promissory note in the principal amount of $430,000 to the shareholder of AMC.
In February 1996, the Company settled the remaining balance of the promissory
note and other acquisition related liabilities totaling $501,000 for $251,000,
excluding $9,000 of related transaction expenses, which resulted in an
extraordinary gain on the early extinguishment of debt of $241,000 or $0.03 per
share with no related income tax effect, as recorded in the nine months ended
March 31, 1996.
The Company's net income decreased $521,000 or $0.06 per share to a net loss of
($61,000) or ($0.01) per share for the nine months ended March 31, 1997 as
compared to net income of $460,000 or $0.05 per share for the same period in
1996. Excluding non-recurring amounts from net income / loss, the net loss from
the nine months ended March 31, 1997 was ($138,000) or ($0.01) per share, a
$1,318,000 or 91% decrease as compared to the net loss of ($1,456,000) or
($0.16) per share for the same period in 1996. The excluded non-recurring
amounts are: (i) for the nine months ended March 31, 1997: the $77,000 reversal
of restructuring charges related to the lease equipment settlement; and (ii) for
the nine months ended March 31, 1996: (a) the $1,550,000 reversal of accrued
restructuring costs related to the facility lease settlement, (b) the $74,000
gain on sale of property and equipment and the $51,000 gain on settlements of
accounts payable, and (c) the $241,000 extraordinary gain on early
extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
Since inception the Company's cash expenditures have exceeded its revenues. The
Company's operations have been funded through public and private placements of
its equity securities, bank loans and lease financing, revenues from product
sales, licensing, collaborative research and development arrangements, and
investment income. In conjunction with the asset valuation and restructuring
charges recorded in 1995, the Company implemented and substantially completed in
fiscal 1996 a program to reduce its operating losses and to conserve its cash
resources for use in the Company's operating businesses. This restructuring
program has significantly reduced research and development and general and
administrative costs from historical levels. In the nine months ended March 31,
1997, the Company funded $157,000 of accrued restructuring costs that had been
recorded in 1995. The funded amount consisted of $135,000 related to employee
severance benefits and $22,000 related to other
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<PAGE>
contractual liabilities. The balance of accrued restructuring costs, $873,000
(total current and noncurrent portions), as of March 31, 1997, is expected to be
funded in 1997 and beyond. The Company expects to incur administrative, business
development and commercialization expenditures in the future as it advances the
development, manufacturing, and marketing of Bio-Blast and Bio-Save. In
addition, the Company expects to incur incremental costs associated with its
plans to expand product lines at AGRO. The Company may also use cash to acquire
technology, products or companies that support the growth strategy of the
Company.
Cash and cash equivalents were $1,089,000 at March 31, 1997 compared to $734,000
at June 30, 1996. Unrestricted and restricted cash, cash equivalents, and
short-term investments totaled $1,863,000 compared to $2,639,000 at June 30,
1996. Cash flows used for operating activities totaled $775,000 for the nine
months ended March 31, 1997 and are principally represented by an increase in
accounts and interest receivable of $767,000 resulting from increases in product
sales and is partially offset by an increase in accounts payable and accrued
expenses of $318,000 due to increased business activity. Cash flows provided by
financing activities totaled $135,000 for the nine months ended March 31, 1997,
which consisted principally of proceeds from the issuance of common stock of
$1,128,000 and was partially offset by payments of $993,000 on debt and capital
leases. Cash flows provided by investment activities for the nine months ended
March 31, 1997 totaled $996,000, principally represented by (i) proceeds from
the sale of short-term investments of $677,000 and (ii) proceeds from the
reduction of restricted cash of $456,000. The Company's working capital and
current ratio were $1,228,000 and 1.2 to 1, respectively, at March 31, 1997,
compared to ($308,000) and 0.9 to 1, respectively, at June 30, 1996.
On October 28, 1994, the Company and AGRO entered into a revolving line of
credit with a bank, under which AGRO may borrow up to the lesser of $1,500,000
or the sum of 75% of eligible accounts receivable and 25% of eligible
inventories up to a maximum of $250,000 on a revolving basis for working capital
needs. Funds borrowed under the revolving line of credit have borne interest at
a rate of prime (8.50% at March 31, 1997) plus 1.5% and were secured by all
assets of AGRO and all the outstanding common stock of AGRO owned by the
Company. Interest on funds borrowed under the revolving line of credit was
payable monthly in arrears and repayment of principal was originally due on
January 5, 1996. On October 5, 1995, the Company and the bank entered into an
amendment to the revolving line of credit agreement pursuant to which the bank,
among other modifications, extended the expiration date of the credit agreement
from January 5, 1996 to July 5, 1996, and any principal amounts outstanding,
together with accrued interest thereon, were due on such date.
From July 5, 1996 to February 15, 1997, the Company and the bank entered into a
series of five amendments to the revolving line of credit agreement pursuant to
which the bank extended the expiration date of the credit agreement from July 5,
1996 to March 15, 1997 on the same terms, and any principal amount outstanding,
together with accrued interest thereon, were due on March 15, 1997. On April 28,
1997, the Company and the bank amended the existing revolving line of credit
agreement and merged it into a new, expanded revolving line of credit, under
which EcoScience and subsidiaries may borrow up to the lesser of $3,000,000 or
the sum of (i) 85% of eligible account receivables and (ii) eligible inventory
at stratified rates from 25% to 50% up to a maximum of the lesser of $1,200,000
or 66.67% of the amount outstanding against accounts receivable. Funds borrowed
under the new revolving line of credit bear interest at a rate of prime plus
2.0% and are secured by all the assets of the Company and all of the outstanding
common stock of AGRO owned by the Company. Interest on funds borrowed under the
revolving line of credit is payable monthly in arrears and repayment of
principle is due on April 27, 1998, subject to automatic renewal, as provided.
The revolving line of credit imposes a financial covenant on the Company of
maintenance of minimum tangible net worth of $750,000. In addition, the new line
of credit eliminates certain provisions under the old line of credit: (i)
elimination of the cash collateral requirement, balance of which was $749,000 at
March 31, 1997; (ii) elimination of the 67% cash collateral coverage requirement
on additional borrowings and (iii) elimination of the $1,000,000 minimum cash
balance requirement. The Company believes this proposed credit
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<PAGE>
facility in combination with unrestricted and restricted cash, cash equivalents
and short-term investments and revenues from product sales, will meet its
operational funding requirements for at least the next twelve months.
On December 31, 1996, a letter of credit collateralized by a $425,000
certificate of deposit expired and accordingly, the certificate of deposit which
had been classified as a restricted cash equivalent, was reclassified as an
unrestricted cash equivalent.
The Company plans to fund its operations principally with existing cash
reserves, represented by approximately $1,089,000 of unrestricted cash and cash
equivalents, $25,000 of short-term investments and $749,000 of restricted cash,
cash equivalents and short-term investments as of March 31, 1997. The Company
believes that such cash reserves, along with revenues from product sales, and
funds available under its new revolving line of credit agreement, as discussed
above, will be sufficient to finance the Company's working capital needs for the
next twelve months. The Company may need to raise additional funds to finance
its ongoing operations after March 31, 1998, although there can be no assurances
that such funds will be available on terms favorable to the Company, if at all.
The Company continues to explore various strategic options aimed at enhancing
stockholder value and improving long-term commercial viability of the Company.
SEASONALITY
The timing of the Company's operating revenues may vary as a result of the
seasonal nature of its businesses. In addition, operating revenues may be
affected by the timing of new product launches, acquisitions, sales orders,
sales mix and other economic factors. Operating revenues may be concentrated in
the Company's first and second quarters as a result of the North American
growing season. Although the Company believes that the historical trend in
quarterly revenues is such that the first and second quarters of each year are
generally higher than the third and fourth quarters, there can be no assurance
that this will occur in future periods. Accordingly, quarterly or other interim
results should not be considered indicative of results to be expected for any
other quarter or the full fiscal year.
FORWARD LOOKING STATEMENTS
This report contains forward looking statements that describe the Company's
business prospects. These statements involve risks and uncertainties including,
but not limited to, regulatory uncertainty, level of demand for the Company's
products and services, product acceptance, industry wide competitive factors,
seasonality factors, timing of completion of major equipment projects and
political, economic or other conditions. Furthermore, market trends are subject
to changes which could adversely affect future results.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
1) Exhibit 10.50 - Loan and Security Agreement dated as of
April 28, 1997 by and among the Registrant, Agro Dynamics,
Inc., Agro Dynamics Canada Inc. and EcoScience Produce
Systems Corp. and Silicon Valley Bank.
2) Exhibit 10.51 - Schedule to Loan and Security Agreement
dated as of April 28, 1997 by and among the Registrant, Agro
Dynamics, Inc., Agro Dynamics Canada Inc. and EcoScience
Produce Systems Corp. and Silicon Valley Bank.
3) Exhibit 10.52 - Continuing Guaranty by each of the
Registrant, EcoScience Produce Systems Corp. and Agro
Dynamics, Inc. guaranteeing the obligations of the
Registrant, EcoScience Produce Systems Corp., Agro Dynamics,
Inc. and Agro Dynamics Canada Inc. in favor of Silicon
Valley Bank.
4) Exhibit 10.53 - Continuing Guarantee by Agro Dynamics Canada
Inc. guaranteeing the obligations of the Registrant in favor
of Silicon Valley Bank.
5) Exhibit 10.54 - Collateral Assignment, Patent Mortgage and
Security Agreement by and between EcoScience Corporation
(Assignor) and Silicon Valley Bank (Assignee).
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<PAGE>
6) Exhibit 10.55 - Collateral Assignment, Patent Mortgage and
Security Agreement by and between EcoScience Produce Systems
Corp. (Assignor) and Silicon Valley Bank (Assignee).
7) Exhibit 10.56 - Collateral Assignment, Patent Mortgage and
Security Agreement by and between Agro Dynamics, Inc.
(Assignor) and Silicon Valley Bank (Assignee).
8) Exhibit 27 - Financial Data Schedule as of and for the Nine
Months Ended March 31, 1997
b. Reports on Form 8-K
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECOSCIENCE CORPORATION
Date: May 15, 1997 By: /s/Michael A. DeGiglio
-----------------------
Michael A. DeGiglio
President & Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1997 By: /s/Harold A. Joannidi
-----------------------
Harold A. Joannidi
Treasurer & Secretary
(Principal Financial & Accounting Officer)
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<PAGE>
ECOSCIENCE CORPORATION
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
----------- ---------------------- --------
10.50 Loan and Security Agreement dated as of 21 - 36
April 28, 1997 by and among the
Registrant, Agro Dynamics, Inc., Agro
Dynamics Canada Inc. and EcoScience
Produce Systems Corp. and Silicon Valley
Bank.
10.51 Schedule to Loan and Security Agreement 37 - 43
dated as of April 28, 1997 by and among
the Registrant, Agro Dynamics, Inc.,
Agro Dynamics Canada Inc. and EcoScience
Produce Systems Corp. and Silicon Valley
Bank.
10.52 Guaranty by each of the Registrant, 44 - 51
EcoScience Produce Systems Corp. and
Agro Dynamics, Inc. guaranteeing the
obligations of the Registrant,
EcoScience Produce Systems Corp., Agro
Dynamics, Inc. and Agro Dynamics Canada
Inc. in favor of Silicon Valley Bank.
10.53 Continuing Guarantee by Agro Dynamics 52 - 59
Canada Inc. guaranteeing the obligations
of the Registrant in favor of Silicon
Valley Bank.
10.54 Collateral Assignment, Patent Mortgage 60 - 71
and Security Agreement by and between
EcoScience Corporation (Assignor) and
Silicon Valley Bank (Assignee).
10.55 Collateral Assignment, Patent Mortgage 72 - 83
and Security Agreement by and between
EcoScience Produce Systems Corp.
(Assignor) and Silicon Valley Bank
(Assignee).
10.56 Collateral Assignment, Patent Mortgage 84 - 95
and Security Agreement by and between
Agro Dynamics, Inc. (Assignor) and
Silicon Valley Bank (Assignee).
27 Financial Data Schedule as of and for 96
the Nine Months Ended March 31, 1997.
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[GRAPHIC OMITTED] Silicon Valley Bank
Loan and Security Agreement
Borrower: EcoScience Corporation
EcoScience Produce Systems Corp.
Agro Dynamics, Inc.
Agro Dynamics Canada Inc.
Address: 10 Alvin Court
East Brunswick, New Jersey 08816
Date: April 28, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
(jointly and severally, the "Borrower"*), whose chief executive office is
located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") shall for all purposes be deemed to be a part of this
Agreement, and the same is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)
*provided that Loans will be made to each Borrower based on the Eligible
Receivables and Eligible Inventory of each Borrower, subject to the Overall
Credit Limit (as defined in the Schedule) for all Loans to all Borrowers
combined
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its sole discretion, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing.
1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest").
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
1.4 Fees. Borrower shall pay Silicon the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 Letters of Credit. At the request of Borrower, Silicon may, in its sole
discretion, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon
in its sole discretion (collectively, "Letters of Credit"). The aggregate face
amount of all outstanding Letters of Credit from time to time shall not exceed
the amount
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<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------------
shown on the Schedule (the "Letter of Credit Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.*
*1.6 Currency and Related Provisions.
(a) Obligation to Bill and Make Payments in Dollars. Payment in United
States Dollars ("Dollars") of all amounts due under this Agreement and all other
present and future documents, instruments and agreements relating hereto is of
the essence, and Dollars shall be the currency of account in all events. The
payment obligations of the Borrower under this Agreement shall not be discharged
by an amount paid in another currency or in another place, whether pursuant to a
judgment or otherwise, to the extent that the amount so paid on conversion to
Dollars and transfer to Silicon under normal banking procedures (after premium
and costs of exchange) does not yield the amount of Dollars due under this
Agreement. If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in Dollars into another currency (the
"Other Currency"), the rate of exchange used shall be that at which in
accordance with normal banking procedures Silicon could purchase Dollars with
the Other Currency on the Business Day preceding that on which final judgment is
given. The obligation of the Borrower in respect of any such sum due from it to
Silicon under this Agreement shall, notwithstanding any judgment in such Other
Currency, be discharged only to the extent that on the Business Day following
receipt by Silicon of any sum adjudged to be so due in the Other Currency,
Silicon may in accordance with normal banking procedures purchase Dollars with
the Other Currency; if the Dollars so purchased are less than the sum originally
due Silicon in Dollars, the Borrower agrees, as a separate and independent
obligation and notwithstanding any such judgment, to indemnify Silicon against
such loss, and if the Dollars so purchased exceed the sum originally due to
Silicon in Dollars, Silicon agrees to remit to the Borrower such excess.
(b) No Reduction of Payments. The Borrower shall pay all amounts of
principal, interest, fees and other amounts due under this Agreement free and
clear of, and without reduction for or on account of, any present and future
taxes, levies, imposts, duties, fees, assessments, charges, deductions or
withholdings and all liabilities with respect thereto (all such taxes, levies,
imposts, duties, fees, assessments, charges, deductions, withholdings and
liabilities being hereinafter referred to as "Taxes"). If any Taxes shall be
required by law to be deducted or withheld from any payment, the Borrower shall
increase the amount paid so that Silicon receives when due (and is entitled to
retain), after deduction or withholding for or on account of such Taxes
(including deductions or withholdings applicable to additional sums payable
under this Section), the full amount of the payment provided for in this
Agreement.
(c) Deduction or Withholding; Tax Receipts. If the Borrower makes any
payment hereunder in respect of which it is required by law to make any
deduction or withholding, it shall pay the full amount to be deducted or
withheld to the relevant taxation or other authority within the time allowed for
such payment under applicable law and promptly thereafter shall furnish to
Silicon an original or certified copy of a receipt evidencing payment thereof,
together with such other information and documents as Silicon may reasonably
request. If no Taxes are payable in respect of any payment hereunder or in
connection herewith, the Borrower shall, upon request of Silicon, furnish to
Silicon a certificate from each appropriate taxing authority, or an opinion of
counsel
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<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------------
acceptable to Silicon, in either case stating that such payment is exempt from
or not subject to Taxes.
(d) Indemnity. Without limiting any other provisions of this
Agreement, if Silicon is required by law to make any payment on account of
Taxes, or any liability in respect of any Tax is imposed, levied or assessed
against Silicon, the Borrower shall indemnify Silicon for and against such
payment or liability, together with any incremental taxes, interest or
penalties, and all costs and expenses, payable or incurred in connection
therewith, including Taxes imposed on amounts payable under this Section 1.6,
whether or not such payment or liability was correctly or legally asserted. A
certificate of Silicon as to the amount of any such payment shall, in the
absence of manifest error, be conclusive and binding for all purposes.
(e) Other Charges. Without limiting any other provisions of this
Agreement, the Borrower agrees to indemnify Silicon against and hold it harmless
from any and all present and future stamp, transfer, documentary and other such
taxes, levies, fees, assessments and other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of this
Agreement.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitation,
all of Borrower's Deposit Accounts, and all money, and all property now or at
any time in the future in Silicon's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing (all of the foregoing,
together with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively, as the
"Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule. **
** Except as set forth in Exhibit C to the Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Silicon now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Silicon and the Collateral against all claims of others.
None of the Collateral now is or will be
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affixed to any real property in such a manner, or with such intent, as to become
a fixture. Borrower is not and will not become a lessee under any real property
lease pursuant to which the lessor may obtain any rights in any of the
Collateral and no such lease now prohibits, restrains, impairs or will prohibit,
restrain or impair Borrower's right to remove any Collateral from the leased
premises. Whenever any Collateral is located upon premises in which any third
party has an interest (whether as owner, mortgagee, beneficiary under a deed of
trust, lien or otherwise), Borrower shall, whenever requested by Silicon, use
its best efforts to cause such third party to execute and deliver to Silicon, in
form acceptable to Silicon, such waivers and subordinations as Silicon shall
specify, so as to ensure that Silicon's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the Collateral now or in the future may be
located.*
*Borrower shall advise Silicon of any non-payment of rent or other
obligations under any lease of real property at which any of the Collateral may
be located now or in the future, and Borrower shall immediately advise Silicon
of any notices from lessors or owners pertaining to the non-payment of rent or
intention to distrain.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower. *
* Except as set forth in Exhibit B to the Schedule.
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan
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will be used to purchase or carry any "margin stock" or to extend credit to
others for the purpose of purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 Representations Relating to Receivables. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall deliver
to Silicon transaction reports and loan requests, schedules and assignments of
all Receivables, and schedules of collections, all on Silicon's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Silicon's security interest and other rights in all of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein. Loan requests received after 2:30 PM will not be considered by Silicon
until the next Business Day. Together with each such schedule and assignment, or
later if requested by Silicon, Borrower shall furnish Silicon with copies (or,
at Silicon's request, originals) of all contracts, orders, invoices, and other
similar documents, and all original shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Receivables, and Borrower warrants the
genuineness of all of the foregoing. Borrower shall also furnish to Silicon an
aged accounts receivable trial balance in such form and at such intervals as
Silicon shall request. In addition, Borrower shall deliver to Silicon the
originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Receivables, immediately
upon receipt thereof and in the same form as received, with all necessary
indorsements, all of which shall be with recourse. Borrower shall also provide
Silicon with copies of all credit memos within two days after the date issued.
4.4 Collection of Receivables. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its
discretion, require that all proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify.
*Silicon or its designee may, at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.
*After an Event of Default has occurred, or after an event which with
notice or the passage of time or both would constitute an Event of Default has
occurred,
4.5. Remittance of Proceeds. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred, Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to
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Silicon on the regular reports provided to Silicon; (ii) no Default or Event of
Default has occurred and is continuing; and (iii) taking into account all such
discounts settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit. Silicon may, at any time after the occurrence of an
Event of Default, settle or adjust disputes or claims directly with Account
Debtors for amounts and upon terms which Silicon considers advisable in its
reasonable credit judgment and, in all cases, Silicon shall credit Borrower's
Loan account with only the net amounts received by Silicon in payment of any
Receivables.
4.7 Returns. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 No Liability. Silicon shall not under any circumstances be responsible
or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of all reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.
5.4 Access to Collateral, Books and Records. *, and on one Business Day's
notice, Silicon, or its agents, shall have the right to inspect the Collateral,
and the right to audit and copy Borrower's books and records. Silicon shall take
reasonable steps to keep confidential all information obtained in any such
inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Borrower's expense and the charge therefor shall be $500 per person per
day (or such higher amount as shall represent Silicon's then current standard
charge for the same), plus reasonable out of pocket expenses. Borrower will not
enter into any agreement with any accounting firm, service bureau or third party
to store Borrower's books or records at any location other than Borrower's
Address, without first obtaining Silicon's written consent, which may be
conditioned upon such accounting firm, service bureau or other third party
agreeing to give Silicon the same rights with respect to access to books and
records and related rights as Silicon has under this Loan Agreement. Borrower
waives the benefit of any accountant-client privilege or other evidentiary
privilege
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precluding or limiting the disclosure, divulgence or delivery of any of its
books and records (except that Borrower does not waive any attorney-client
privilege).
*Quartely, or as conditions warrant,
5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, *do any of the
following: (i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter into
any other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower's business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business; (v) store any Inventory
or other Collateral with any warehouseman or other third party; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets; (viii) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on Borrower or on the prospect of repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's stock;
(xii) make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or (xiii) pay total compensation, including salaries, fees,
bonuses, commissions, and all other payments, whether directly or indirectly, in
money or otherwise, to Borrower's executives, officers and directors (or any
relative thereof) in an amount in excess of the amount set forth on the
Schedule; or (xiv) dissolve or elect to dissolve. Transactions permitted by the
foregoing provisions of this Section are only permitted if no Default or Event
of Default would occur as a result of such transaction.
*which consent will not be unreasonably withheld,
5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Silicon under
this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount
equal to* The termination fee shall be due and payable on the effective date of
termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations.
(a) 1.0% of the Credit Limit if this Agreement is terminated during the
first six months from the date hereof; (b) 0.5% of the Credit Limit if this
Agreement is terminated during the seventh month from the date hereof; (c) 0.42%
of the Credit Limit if this Agreement is terminated during the eighth month from
the date hereof; (d) 0.33% of the Credit Limit if this Agreement is terminated
during the ninth month from the date hereof; (e) 0.25% of the Credit Limit if
this Agreement is terminated during the tenth month from the date hereof; (f)
0.17% of the Credit Limit if this Agreement is terminated during the eleventh
month from the date hereof; and (g) 0.083% of the Credit Limit if this Agreement
is terminated during the twelvth month from the date hereof; provided that no
termination fee shall be charged if the credit facility hereunder is replaced
with a new facility from another division of Silicon Valley Bank, or if Silicon
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specifically gives notification to Borrower to seek financing elsewhere.
6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within 5 Business Days after the date due; or (f) Any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) there shall be a change in
the record or beneficial ownership of an aggregate of more than 20% of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
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law; or (p) there shall be a material adverse change in Borrower's business or
financial condition; or (q) Silicon, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an event
prior to the effective date hereof of which Silicon had no knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date. Silicon may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred.
7.2 Remedies. Upon the occurrence of any Event of Default, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto*. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.**
*and (j) appoint any person or persons, whether or not a representative of
Silicon, by instrument in writing to be a receiver or receiver and manager, as
more fully set forth in Section 7.2.1 below.
**7.2.1 APPOINTMENT OF A RECEIVER.
7.2.1.1 Appointment. Any receiver appointed by Silicon may be any
person or persons, whether or not a representative of Silicon, and Silicon may
remove any receiver so appointed and appoint another or others in his or their
stead. Any such receiver shall, so far as concerns responsibility for his acts,
save for the purposes of taking possession of the Collateral and, except as
specifically provided below, be deemed the agent of the Borrower, including, for
the purposes of
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occupying any premises of the Borrower in carrying on the Borrower's business.
For the purposes of realizing upon the security interest granted Silicon by the
Borrower under the terms of this Agreement, the receiver may sell, lease, rent
or otherwise dispose of the Collateral as agent for the Borrower or as agent for
Silicon, as it in its sole discretion may determine.
7.2.1.2 Powers. Any receiver so appointed shall have the following
powers: (a) to enter upon, use and occupy all premises owned or occupied by the
Borrower; (b) to take possession of all or any part of the Collateral; (c) to
continue to carry on the business of the Borrower; (d) to borrow money required
for the maintenance, preservation, protection or repair of the Collateral or for
the carrying on of the business of the Borrower and, in the discretion of the
receiver, to charge and grant further security interests in the Collateral in
priority to Silicon's security interest, to secure the money so borrowed; (e) to
sell, lease or otherwise dispose of the Collateral or any part thereof on such
terms and conditions and in such manner as the receiver, in its sole discretion,
shall determine; (f) to demand, commence, continue or defend any judicial or
administrative proceeding for the purpose of protecting, seizing, collecting,
realizing or obtaining possession or payment of the Collateral and to give valid
and effectual receipts and discharges therefor and to compromise or give time
for the payment or performance of all or any part of the Receivables or any
other obligation of any third party to the Borrower; and (g) to exercise any
rights or remedies which could have been exercised by Silicon against the
Borrower or the Collateral.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 Power of Attorney. Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become
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part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.
7.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Eligible Inventory" means Inventory which Silicon, in its sole judgment,
deems eligible for borrowing, based on such considerations as Silicon may from
time to time deem appropriate. Without limiting the fact that the determination
of which Inventory is eligible for borrowing is a matter of Silicon's
discretion, Inventory which does not meet the following requirements will not be
deemed to be Eligible Inventory: Inventory which (i) consists of finished goods,
in good, new and salable condition which is not perishable, not obsolete or
unmerchantable, and is not comprised of raw materials, work in process,
packaging materials or supplies*; (ii) meets all applicable governmental
standards; (iii) has been manufactured in compliance with the Fair Labor
Standards Act; (iv) conforms in all respects to the warranties and
representations set forth in this Agreement; (v) is at all times subject to
Silicon's duly perfected, first priority security interest; and (vi) is situated
at a one of the locations set forth on the Schedule.
*(except to the extent the same are included in Exhibit A to the Schedule)
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date,*** (ii) the Receivable must not represent
progress billings, or be due under a fulfillment or requirements contract with
the Account Debtor, (iii) the Receivable must not be subject to any
contingencies (including Receivables arising from sales on consignment,
guaranteed sale or other terms pursuant to which payment by the Account Debtor
may be conditional), (iv) the Receivable must not be owing from an Account
Debtor with whom the Borrower has any dispute (whether or not relating to the
particular Receivable), (v) the Receivable
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must not be owing from an Affiliate of Borrower, (vi) the Receivable must not be
owing from an Account Debtor which is subject to any insolvency or bankruptcy
proceeding, or whose financial condition is not acceptable to Silicon, or which,
fails or goes out of a material portion of its business, (vii) the Receivable
must not be owing from the United States * or any department, agency or
instrumentality thereof (unless there has been compliance, to Silicon's
satisfaction, with the United States Assignment of Claims Act**), (viii) the
Receivable must not be owing from an Account Debtor located outside the United
States or Canada (unless pre-approved by Silicon in its discretion in writing,
or backed by a letter of credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), (ix) the Receivable must not be owing from an Account
Debtor to whom Borrower is or may be liable for goods purchased from such
Account Debtor or otherwise. Receivables owing from one Account Debtor will not
be deemed Eligible Receivables to the extent they exceed 25% of the total
eligible Receivables outstanding. In addition, if more than 50% of the
Receivables owing from an Account Debtor are outstanding more than 90 days from
their invoice date (without regard to unapplied credits) or are otherwise not
eligible Receivables, then all Receivables owing from that Account Debtor will
be deemed ineligible for borrowing. Silicon may, from time to time, in its
discretion, revise the Minimum Eligibility Requirements, upon written notice to
the Borrower.
*,or Canada,
**or similar statute, if any, applicable in Canada
*** except as set forth in Exhibit B to the Schedule
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this
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Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent; (vii) liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by liens of
the type described above in clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods. Silicon will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on Silicon's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate security interest shall also constitute an Event of
Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations three Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 2:30 PM on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 Application of Payments. All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Silicon shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one Business
Day following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
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9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 Waivers. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
only Silicon and not Borrower in connection with this Agreement. If either
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
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9.15 Limitation of Actions. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Silicon, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Silicon in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.
9.16 Paragraph Headings; Construction. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER
-15-
<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------------
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
ECOSCIENCE CORPORATION
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
ECOSCIENCE PRODUCE SYSTEMS CORP.
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
AGRO DYNAMICS, INC.
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
AGRO DYNAMICS CANADA INC.
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
Silicon:
SILICON VALLEY BANK
By /s/ John G. Riley
Title Vice President
-16-
---------------------------------------------------------------------------
[GRAPHIC OMITTED] Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: EcoScience Corporation
EcoScience Produce Systems Corp.
Agro Dynamics, Inc.
Agro Dynamics Canada Inc.
Address: 10 Alvin Court
East Brunswick, New Jersey 08816
Date: April 28, 1997
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of a total of
$3,000,000 at any one time outstanding (the
"Overall Credit Limit"), or the sum of (a) and (b)
below:
(a) 85% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above),
plus
(b) an amount not to exceed the lesser of:
(1) the percentages of the value of
Borrower's Eligible Inventory (as
defined in Section 8 above) set
forth on Exhibit A hereto,
calculated at the lower of cost or
market value and determined on a
first-in, first-out basis, or
(2) $1,200,000; or
(3) 66.67% of the amount of outstanding
Loans against Borrower's
Receivables.
Loans will be made to each Borrower based on the
Eligible Receivables and Eligible Inventory of
each Borrower, subject to the Overall Credit Limit
set forth above for all Loans to all Borrowers
combined.
Letter of Credit Sublimit
(Section 1.5): $1,000,000.
Foreign Exchange Up to $1,000,000 of the Credit Limit (the
Contract Sublimit "Contract Limit") may be utilized for spot and
future foreign exchange contracts (the "Exchange
Contracts"). The Credit Limit
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------------
at any time shall be reduced by the following
amounts (the "Foreign Exchange Reserve") on each
day (the "Determination Date"): (i) on all
outstanding Exchange Contracts on which delivery
is to be effected or settlement allowed more than
two business days from the Determination Date, 10%
of the gross amount of the Exchange Contracts;
plus (ii) on all outstanding Exchange Contracts on
which delivery is to be effected or settlement
allowed within two business days after the
Determination Date, 100% of the gross amount of
the Exchange Contracts. In lieu of the Foreign
Exchange Reserve for 100% of the gross amount of
any Exchange Contract, the Borrower may request
that Silicon debit the Borrower's bank account
with Silicon for such amount, provided Borrower
has immediately available funds in such amount in
its bank account.
Silicon may, in its discretion, terminate the
Exchange Contracts at any time (a) that an Event
of Default occurs or (b) that there is not
sufficient availability under the Credit Limit and
Borrower does not have available funds in its bank
account to satisfy the Foreign Exchange Reserve.
If either Silicon or Borrower terminates the
Exchange Contracts, and without limitation of the
FX Indemnity Provisions (as referred to below),
Borrower agrees to reimburse Silicon for any and
all fees, costs and expenses relating thereto or
arising in connection therewith.
Borrower shall not permit the total gross amount
of all Exchange Contracts on which delivery is to
be effected and settlement allowed in any two
business day period to be more than $500,000 (the
"Settlement Limit"), nor shall Borrower permit the
total gross amount of all Exchange Contracts to
which Borrower is a party, outstanding at any one
time, to exceed the Contract Limit.
Notwithstanding the above, however, the amount
which may be settled in any two (2) business day
period may, in Silicon's sole discretion, be
increased above the Settlement Limit up to, but in
no event to exceed, the amount of the Contract
Limit (the "Discretionary Settlement Amount")
under either of the following circumstances (the
"Discretionary Settlement Circumstances"):
(i) if there is sufficient availability under
the Credit Limit in the amount of the Foreign
Exchange Reserve as of each Determination
Date, and Silicon in advance shall reserve
the full amount of the Foreign Exchange
Reserve against the Credit Limit; or
(ii) if there is insufficient availability
under the Credit Limit as to settlements
within any two (2) business day period, and
if Silicon is able to: (A) verify good funds
overseas prior to crediting Borrower's
deposit account with Silicon (in the case of
Borrower's sale of foreign currency); or (B)
debit Borrower's deposit account with Silicon
prior to delivering foreign currency overseas
(in the case of Borrower's purchase of
foreign currency);
Provided that it is expressly understood that
Silicon's willingness to adopt the Discretionary
Settlement Amount is a matter of Silicon's sole
discretion and the existence of the Discretionary
Settlement Circumstances in no way means or
implies that Silicon shall be obligated to permit
the Borrower to exceed the Settlement Limit in any
two business day period.
In the case of Borrower's purchase of foreign
currency, Borrower shall instruct Silicon in
advance upon settlement either to treat the
settlement amount as an advance under the Credit
Limit, or to debit Borrower's account for the
amount settled.
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------------
The Borrower shall execute all standard form
applications and agreements of Silicon in
connection with the Exchange Contracts, and
without limiting any of the terms of such
applications and agreements, the Borrower will pay
all standard fees and charges of Silicon in
connection with the Exchange Contracts.
Without limiting any of the other terms of this
Loan Agreement or any such standard form
applications and agreements of Silicon, Borrower
agrees to indemnify Silicon and hold it harmless,
from and against any and all claims, debts,
liabilities, demands, obligations, actions, costs
and expenses (including, without limitation,
attorneys' fees of counsel of Silicon's choice),
of every nature and description, which it may
sustain or incur, based upon, arising out of, or
in any way relating to any of the Exchange
Contracts or any transactions relating thereto or
contemplated thereby (collectively referred to as
the "FX Indemnity Provisions").
The Exchange Contracts shall have maturity dates
no later than the Maturity Date.
================================================================================
2. INTEREST.
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect from
time to time, plus 2.0% per annum. Interest shall
be calculated on the basis of a 360-day year for
the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate
upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable
to the Obligations shall change on each date there
is a change in the Prime Rate.
Minimum Monthly
Interest (Section 1.2): None.
================================================================================
(3. FEES Section 1.4):
Loan Fee: $30,000, payable concurrently herewith. (Any
Commitment Fee previously paid by the Borrower in
connection with this loan shall be credited
against this Fee.)
Collateral Monitoring
Fee: $750, per month, payable in arrears (prorated for
any partial month at the beginning and at
termination of this Agreement) for maintaining and
monitoring the Borrower's account and related
services rendered by Silicon with respect thereto.
================================================================================
================================================================================
4. MATURITY DATE
(Section 6.1): One year from the date of this Agreement, subject
to automatic renewal as provided in Section 6.1
above, and early termination as provided in
Section 6.2 above.
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------------
================================================================================
================================================================================
5. FINANCIAL COVENANTS
(Section 5.1): Borrower (on a consolidated basis) shall comply
with all of the following covenants. Compliance
shall be determined as of the end of each month,
except as otherwise specifically provided below:
Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of
not less than $750,000.
Definitions. For purposes of the foregoing financial covenants,
the following terms shall have the following
meanings:
"Tangible Net Worth" shall mean the excess of
total assets over total liabilities, determined in
accordance with generally accepted accounting
principles, with the following adjustments:
(A) there shall be excluded from assets: (i)
notes, accounts receivable and other
obligations owing to the Borrower from its
officers or other Affiliates in excess of
$500,000, and (ii) all assets which would be
classified as intangible assets under
generally accepted accounting principles,
including without limitation goodwill,
licenses, patents, trademarks, trade names,
copyrights, capitalized software and
organizational costs, licenses and franchises
(B) there shall be excluded from liabilities:
all indebtedness which is subordinated to the
Obligations under a subordination agreement
in form specified by Silicon or by language
in the instrument evidencing the indebtedness
which is acceptable to Silicon in its
discretion.
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------------
================================================================================
================================================================================
6. REPORTING.
(Section 5.3): Each Borrower shall provide Silicon with the
following:
1. Monthly Receivable agings, aged by invoice
date, within twenty days after the end of
each month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers, if any, within twenty days after
the end of each month.
3. Monthly reconciliations of Receivable agings
(aged by invoice date), transaction reports,
and general ledger, within twenty days after
the end of each month.
4. Monthly perpetual inventory reports for the
Inventory valued on a first-in, first-out
basis at the lower of cost or market (in
accordance with generally accepted accounting
principles) or such other inventory reports
as are reasonably requested by Silicon, all
within twenty days after the end of each
month.
5. Monthly unaudited financial statements
(consolidated and consolidating), as soon as
available, and in any event within thirty
days after the end of each month.
6. Monthly Compliance Certificates, within
thirty days after the end of each month, in
such form as Silicon shall reasonably
specify, signed by the Chief Financial
Officer of Borrower, certifying that as of
the end of such month Borrower was in full
compliance with all of the terms and
conditions of this Agreement, and setting
forth calculations showing compliance with
the financial covenants set forth in this
Agreement and such other information as
Silicon shall reasonably request, including,
without limitation, a statement that at the
end of such month there were no held checks.
7. Quarterly unaudited financial statements
(consolidated and consolidating), as soon as
available, and in any event within forty-five
days after the end of each fiscal quarter of
Borrower.
8. Copies of the Borrower's Reports to the
Securities and Exchange Commission on Form
10-Q and 10-K, and all other Reports and
statements required to be filed with the
Securities and Exchange Commission, within
five days after the earlier of the date they
are filed or are required to be filed with
the Securities and Exchange Commission.
9. Annual operating budgets (including income
statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal
year of Borrower within thirty days prior to
the end of each fiscal year of Borrower.
10. Annual financial statements (consolidated and
consolidating), as soon as available, and in
any event within 90 days following the end of
Borrower's fiscal year, certified by
independent certified public accountants
acceptable to Silicon.
================================================================================
================================================================================
7. COMPENSATION
(Section 5.5): Not Applicable.
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------------
================================================================================
================================================================================
8. BORROWER INFORMATION:
Prior Names of
Borrower
(Section 3.2): None.
Prior Trade
Names of Borrower
(Section 3.2): None.
Existing Trade
Names of Borrower
(Section 3.2): Produce Systems Division
American Machinery Corp.
AMC
Other Locations and
Addresses (Section 3.3): 4300 LB McLeod Road, Orlando, FL 32811;
1525-B East Acequia Avenue, Vasalia, CA 93092;
1430 North Ventura Avenue, Ventura, CA 93001;
7950 East Prentice Avenue, Englewood, CO 80111;
1903 South 14th Street, Union Gap, WA 98903;
415 Industrial Avenue, Milton, Ontario CANADA
L9T 5A6
Material Adverse
Litigation
(Section 3.10): None
================================================================================
================================================================================
9. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of
the following additional covenants:
(1) Banking Relationship. Borrower shall at
all times maintain its primary banking
relationship with Silicon.
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------------
(2) Collateral Assignment, Patent Mortgage
and Security Agreement. On or before the
date hereof, each of EcoScience
Corporation and Agro Dynamics, Inc.
shall execute Silicon's standard form of
Collateral Assignment, Patent Mortgage
and Security Agreement.
Borrower: Silicon:
ECOSCIENCE CORPORATION SILICON VALLEY BANK
By /s/ Michael A. DeGiglio By /s/ John G. Riley
President or Vice President Title Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
ECOSCIENCE PRODUCE SYSTEMS CORP.
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
AGRO DYNAMICS, INC.
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
AGRO DYNAMICS CANADA INC.
By /s/ Michael A. DeGiglio
President or Vice President
By /s/ Harold A. Joannidi
Secretary or Ass't Secretary
---------------------------------------------------------------------------
[GRAPHIC OMITTED] Silicon Valley Bank
Continuing Guaranty
Borrower: EcoScience Corporation
EcoScience Produce Systems Corp.
Agro Dynamics, Inc.
Agro Dynamics Canada Inc.
Guarantor(s): EcoScience Corporation
EcoScience Produce Systems Corp.
Agro Dynamics, Inc.
Date: April 28, 1997
This Continuing Guaranty is executed by the above-named guarantor(s)
(jointly and severally, the "Guarantor"), as of the above date, in favor of
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054, with respect to the Indebtedness of the above-named
borrower (jointly and severally, the "Borrower").
1. Continuing Guaranty. Guarantor hereby unconditionally guarantees and
promises to pay on demand to Silicon, at the address indicated above, or at such
other address as Silicon may direct, in lawful money of the United States, and
to perform for the benefit of Silicon, all Indebtedness of Borrower now or
hereafter owing to or held by Silicon. As used herein, the term "Indebtedness"
is used in its most comprehensive sense and shall mean and include without
limitation: (a) any and all debts, duties, obligations, liabilities,
representations, warranties and guaranties of Borrower or any one or more of
them, heretofore, now, or hereafter made, incurred, or created, whether directly
to Silicon or acquired by Silicon by assignment or otherwise, or held by Silicon
on behalf of others, however arising, whether voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated, certain or
uncertain, determined or undetermined, monetary or nonmonetary, written or oral,
and whether Borrower may be liable individually or jointly with others, and
regardless of whether recovery thereon may be or hereafter become barred by any
statute of limitations, discharged or uncollectible in any bankruptcy,
insolvency or other proceeding, or otherwise unenforceable; and (b) any and all
amendments, modifications, renewals and extensions of any or all of the
foregoing, including without limitation amendments, modifications, renewals and
extensions which are evidenced by any new or additional instrument, document or
agreement; and (c) any and all attorneys' fees, court costs, and collection
charges incurred in endeavoring to collect or enforce any of the foregoing
against Borrower, Guarantor, or any other person liable thereon (whether or not
suit be brought) and any other expenses of, for or incidental to collection
thereof. As used herein, the term "Borrower" shall include any successor to the
business and assets of Borrower, and shall also include Borrower in its capacity
as a debtor or debtor in possession under the federal Bankruptcy Code, and any
trustee, custodian or receiver for Borrower or any of its assets, should
Borrower hereafter become the subject of any bankruptcy or insolvency
proceeding, voluntary or involuntary; and all indebtedness, liabilities and
obligations incurred by any such person shall be included in the Indebtedness
guaranteed hereby. This Guaranty is given in consideration for credit and other
financial accommodations which may, from time to time, be given by Silicon to
Borrower in Silicon's sole discretion, but Guarantor acknowledges and agrees
that acceptance by Silicon of this Guaranty shall not constitute a commitment of
any kind by Silicon to extend such credit or other financial accommodation to
Borrower or to permit Borrower to incur Indebtedness to Silicon. All sums due
under this Guaranty shall bear interest from the date due until the date paid at
the highest rate charged with respect to any of the Indebtedness.
2. Waivers. Guarantor hereby waives: (a) presentment for payment, notice of
dishonor, demand, protest, and notice thereof as to any instrument, and all
other notices and demands to which Guarantor might be entitled, including
without limitation notice of all of the following: the
<PAGE>
Silicon Valley Bank Continuing Guaranty
---------------------------------------------------------------------------
acceptance hereof; the creation, existence, or acquisition of any Indebtedness;
the amount of the Indebtedness from time to time outstanding; any foreclosure
sale or other disposition of any property which secures any or all of the
Indebtedness or which secures the obligations of any other guarantor of any or
all of the Indebtedness; any adverse change in Borrower's financial position;
any other fact which might increase Guarantor's risk; any default, partial
payment or non-payment of all or any part of the Indebtedness; the occurrence of
any other Event of Default (as hereinafter defined); any and all agreements and
arrangements between Silicon and Borrower and any changes, modifications, or
extensions thereof, and any revocation, modification or release of any guaranty
of any or all of the Indebtedness by any person (including without limitation
any other person signing this Guaranty); (b) any right to require Silicon to
institute suit against, or to exhaust its rights and remedies against, Borrower
or any other person, or to proceed against any property of any kind which
secures all or any part of the Indebtedness, or to exercise any right of offset
or other right with respect to any reserves, credits or deposit accounts held by
or maintained with Silicon or any indebtedness of Silicon to Borrower, or to
exercise any other right or power, or pursue any other remedy Silicon may have;
(c) any defense arising by reason of any disability or other defense of Borrower
or any other guarantor or any endorser, co-maker or other person, or by reason
of the cessation from any cause whatsoever of any liability of Borrower or any
other guarantor or any endorser, co-maker or other person, with respect to all
or any part of the Indebtedness, or by reason of any act or omission of Silicon
or others which directly or indirectly results in the discharge or release of
Borrower or any other guarantor or any other person or any Indebtedness or any
security therefor, whether by operation of law or otherwise; (d) any defense
arising by reason of any failure of Silicon to obtain, perfect, maintain or keep
in force any security interest in, or lien or encumbrance upon, any property of
Borrower or any other person; (e) any defense based upon any failure of Silicon
to give Guarantor notice of any sale or other disposition of any property
securing any or all of the Indebtedness, or any defects in any such notice that
may be given, or any failure of Silicon to comply with any provision of
applicable law in enforcing any security interest in or lien upon any property
securing any or all of the Indebtedness including, but not limited to, any
failure by Silicon to dispose of any property securing any or all of the
Indebtedness in a commercially reasonable manner; (f) any defense based upon or
arising out of any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against Borrower or any other guarantor or any endorser, co-maker or other
person, including without limitation any discharge of, or bar against
collecting, any of the Indebtedness (including without limitation any interest
thereon), in or as a result of any such proceeding; and (g) the benefit of any
and all statutes of limitation with respect to any action based upon, arising
out of or related to this Guaranty. Until all of the Indebtedness has been paid,
performed, and discharged in full, nothing shall discharge or satisfy the
liability of Guarantor hereunder except the full performance and payment of all
of the Indebtedness. If any claim is ever made upon Silicon for repayment or
recovery of any amount or amounts received by Silicon in payment of or on
account of any of the Indebtedness, because of any claim that any such payment
constituted a preferential transfer or fraudulent conveyance, or for any other
reason whatsoever, and Silicon repays all or part of said amount by reason of
any judgment, decree or order of any court or administrative body having
jurisdiction over Silicon or any of its property, or by reason of any settlement
or compromise of any such claim effected by Silicon with any such claimant
(including without limitation the Borrower), then and in any such event,
Guarantor agrees that any such judgment, decree, order, settlement and
compromise shall be binding upon Guarantor, notwithstanding any revocation or
release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any release of any of the Indebtedness,
and the Guarantor shall be and remain liable to Silicon under this Guaranty for
the amount so repaid or recovered, to the same extent as if such amount had
never originally been received by Silicon, and the provisions of this sentence
shall survive, and continue in effect, notwithstanding any revocation or release
of this Guaranty. Until all of the Indebtedness has been irrevocably paid and
performed in full, Guarantor hereby expressly and unconditionally waives all
rights of subrogation, reimbursement and indemnity of every kind against
Borrower, and all rights of recourse to any assets or property of Borrower, and
all rights to any collateral or security held for the payment and performance of
any Indebtedness, including (but not limited to) any of the foregoing rights
which Guarantor may have under any present or future document or agreement with
any Borrower or other person, and including (but not limited to) any of the
foregoing rights which Guarantor may have under any equitable doctrine of
subrogation, implied contract, or unjust enrichment, or any other equitable or
legal doctrine. Neither Silicon, nor any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Silicon
shall be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by Guarantor or any other party
through the ordinary negligence of Silicon, or any of its directors, officers,
employees, agents, attorneys or any other person affiliated with or representing
Silicon.
3. Consents. Guarantor hereby consents and agrees that, without notice to
or by Guarantor and without affecting or impairing in any way the obligations or
liability of Guarantor hereunder, Silicon may, from time to time before or after
revocation of this Guaranty, do any one or more of
<PAGE>
Silicon Valley Bank Continuing Guaranty
---------------------------------------------------------------------------
the following in Silicon's sole and absolute discretion: (a) accelerate, accept
partial payments of, compromise or settle, renew, extend the time for the
payment, discharge, or performance of, refuse to enforce, and release all or any
parties to, any or all of the Indebtedness; (b) grant any other indulgence to
Borrower or any other person in respect of any or all of the Indebtedness or any
other matter; (c) accept, release, waive, surrender, enforce, exchange, modify,
impair, or extend the time for the performance, discharge, or payment of, any
and all property of any kind securing any or all of the Indebtedness or any
guaranty of any or all of the Indebtedness, or on which Silicon at any time may
have a lien, or refuse to enforce its rights or make any compromise or
settlement or agreement therefor in respect of any or all of such property; (d)
substitute or add, or take any action or omit to take any action which results
in the release of, any one or more endorsers or guarantors of all or any part of
the Indebtedness, including, without limitation one or more parties to this
Guaranty, regardless of any destruction or impairment of any right of
contribution or other right of Guarantor; (e) amend, alter or change in any
respect whatsoever any term or provision relating to any or all of the
Indebtedness, including the rate of interest thereon; (f) apply any sums
received from Borrower, any other guarantor, endorser, or co-signer, or from the
disposition of any collateral or security, to any indebtedness whatsoever owing
from such person or secured by such collateral or security, in such manner and
order as Silicon determines in its sole discretion, and regardless of whether
such indebtedness is part of the Indebtedness, is secured, or is due and
payable; (g) apply any sums received from Guarantor or from the disposition of
any collateral or security securing the obligations of Guarantor, to any of the
Indebtedness in such manner and order as Silicon determines in its sole
discretion, regardless of whether or not such Indebtedness is secured or is due
and payable. Guarantor consents and agrees that Silicon shall be under no
obligation to marshal any assets in favor of Guarantor, or against or in payment
of any or all of the Indebtedness. Guarantor further consents and agrees that
Silicon shall have no duties or responsibilities whatsoever with respect to any
property securing any or all of the Indebtedness. Without limiting the
generality of the foregoing, Silicon shall have no obligation to monitor,
verify, audit, examine, or obtain or maintain any insurance with respect to, any
property securing any or all of the Indebtedness.
4. Account Stated. Silicon's books and records showing the account between
it and the Borrower shall be admissible in evidence in any action or proceeding
as prima facie proof of the items therein set forth. Silicon's monthly
statements rendered to the Borrower shall be binding upon the Guarantor (whether
or not the Guarantor receives copies thereof), and shall constitute an account
stated between Silicon and the Borrower, unless Silicon receives a written
statement of the Borrower's exceptions within 30 days after the statement was
mailed to the Borrower. The Guarantor assumes full responsibility for obtaining
copies of such monthly statements from the Borrower, if the Guarantor desires
such copies.
5. Exercise of Rights and Remedies; Foreclosure of Trust Deeds. Guarantor
consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Silicon may, from time to time, before or after revocation of this
Guaranty, exercise any right or remedy it may have with respect to any or all of
the Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure, nonjudicial
foreclosure, exercise of a power of sale, and taking a deed, assignment or
transfer in lieu of foreclosure as to any such property, and Guarantor expressly
waives any defense based upon the exercise of any such right or remedy,
notwithstanding the effect thereof upon any of Guarantor's rights, including
without limitation, any destruction of Guarantor's right of subrogation against
Borrower and any destruction of Guarantor's right of ocontribution or other
right against any other guarantor of any or all of the Indebtedness or against
any other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Without limiting the generality of the foregoing, (a)
The guarantor waives all rights and defenses that the Guarantor may have because
the Indebtedness is secured by real property. This means, among other things:
(1) Silicon may collect from the Guarantor without first foreclosing on any real
or personal property collateral pledged by the Borrower. (2) If Silicon
forecloses on any real property collateral pledged by the Borrower: (A) The
amount of the Indebtedness may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price. (B) Silicon may collect from the Guarantor even if Silicon,
by foreclosing on the real property collateral, has destroyed any right the
Guarantor may have to collect from the Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses the Guarantor may have because the
Indebtedness is secured by real property. These rights and defenses include, but
are not limited to, any rights or defenses based upon Section 580a, 580b, 580d,
or 726 of the Code of Civil Procedure. (b) The guarantor waives all rights and
defenses that the Guarantor may have because the guaranty of another guarantor
is secured by real property. This means, among other things: (1) Silicon may
collect from the Guarantor without first foreclosing on any real or personal
property collateral pledged by the other guarantor. (2) If Silicon forecloses on
any real property collateral pledged by the other guarantor: (A) The amount of
the Indebtedness may be reduced only by the price for which that collateral is
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Silicon Valley Bank Continuing Guaranty
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sold at the foreclosure sale, even if the collateral is worth more than the sale
price. (B) Silicon may collect from the Guarantor even if Silicon, by
foreclosing on the real property collateral, has destroyed any right the
Guarantor may have to obtain contribution from the other guarantor. This is an
unconditional and irrevocable waiver of any rights and defenses the Guarantor
may have because the obligations of the other guarantor are secured by real
property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil
Procedure.
6. Acceleration. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, at the option of Silicon, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) any warranty, representation, statement,
report, or certificate made or delivered to Silicon by Borrower or Guarantor, or
any of their respective officers, partners, employees, or agents, is incorrect,
false, untrue, or misleading when given in any material respect; or (b) Borrower
or Guarantor shall fail to pay or perform when due all or any part of the
Indebtedness; or (c) Guarantor shall fail to pay or perform when due any
indebtedness or obligation of Guarantor to Silicon or to any parent, subsidiary
or corporate affiliate of Silicon, whether under this Guaranty or any other
instrument, document, or agreement heretofore or hereafter entered into; or (d)
there occurs in Silicon's judgment a material impairment of the prospect of
payment or performance of any or all of the Indebtedness; or (e) any event shall
occur which may or does result in the acceleration of the maturity of any
indebtedness of Borrower or Guarantor to others (regardless of any requirement
of notice, opportunity to cure or other condition prior to the exercise of any
right of acceleration); or (f) Borrower or Guarantor shall fail promptly to
perform or comply with any term or condition of any agreement with any third
party which does or may result in a material adverse effect on the business of
Borrower or Guarantor; or (g) there shall be made or exist any levy, assessment,
attachment, seizure, lien, or encumbrance for any cause or reason whatsoever
upon all or any part of the property of Borrower or Guarantor (unless discharged
by payment, release or bond not more than ten days after such event has
occurred); or (h) there shall occur the dissolution, termination of existence,
insolvency, or business failure of Borrower or Guarantor, or the appointment of
a receiver, trustee or custodian for Borrower or Guarantor or all or any part of
the property of either of them, or the assignment for the benefit of creditors
by Borrower or Guarantor, or the commencement of any proceeding by or against
Borrower or Guarantor under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or hereafter in effect; or (i) Borrower or Guarantor shall
be deceased or declared incompetent by any court or a guardian or conservator
shall be appointed for either of them or for the property of either of them; or
(j) Guarantor or Borrower shall generally not pay their respective debts as they
become due or shall enter into any agreement (whether written or oral), or offer
to enter into any such agreement, with all or a significant number of its
creditors regarding any moratorium or other indulgence with respect to its debts
or the participation of such creditors or their representatives in the
supervision, management, or control of the business of either of them; or (k)
Borrower or Guarantor shall conceal, remove or permit to be concealed or removed
any part of its property, with intent to hinder, delay or defraud its creditors,
or make or suffer any transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law, or shall make any
transfer of its property to or for the benefit of any creditor at a time when
other creditors similarly situated have not been paid; or (l) the board of
directors or shareholders of Borrower or Guarantor shall adopt any resolution or
plan for its dissolution or the liquidation of all or substantially all of its
assets; or (m) Guarantor shall revoke this Guaranty or contest or deny liability
under this Guaranty. All of the foregoing are hereinafter referred to as "Events
of Default".
7. Right to Attachment Remedy. Guarantor agrees that, notwithstanding the
existence of any property securing any or all of the Indebtedness, Silicon shall
have all of the rights of an unsecured creditor of Guarantor, including without
limitation the right to obtain a temporary protective order and writ of
attachment against Guarantor with respect to any sums due under this Guaranty.
Guarantor further agrees that in the event any property secures the obligations
of Guarantor under this Guaranty, to the extent that Silicon, in its sole and
absolute discretion, determines prior to the disposition of such property that
the amount to be realized by Silicon therefrom may be less than the indebtedness
of the Guarantor under this Guaranty, Silicon shall have all the rights of an
unsecured creditor against Guarantor, including without limitation the right of
Silicon, prior to the disposition of said property, to obtain a temporary
protective order and writ of attachment against Guarantor. Guarantor waives the
benefit of Section 483.010(b) of the California Code of Civil Procedure and of
any and all other statutes and rules of law now or hereafter in effect requiring
Silicon to first resort to or exhaust all such collateral before seeking or
obtaining any attachment remedy against Guarantor. Silicon shall have no
liability to Guarantor as a result thereof, whether or not the actual deficiency
realized by Silicon is less than the anticipated deficiency on the basis of
which Silicon obtains a temporary protective order or writ of attachment.
8. Indemnity. Guarantor hereby agrees to indemnify Silicon and hold Silicon
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions,
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Silicon Valley Bank Continuing Guaranty
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causes of action, penalties, costs and expenses (including without limitation
attorneys' fees), of every nature, character and description, which Silicon may
sustain or incur based upon or arising out of any of the Indebtedness, any
actual or alleged failure to collect and pay over any withholding or other tax
relating to Borrower or its employees, any relationship or agreement between
Silicon and Borrower, any actual or alleged failure of Silicon to comply with
any writ of attachment or other legal process relating to Borrower or any of its
property, or any other matter, cause or thing whatsoever occurred, done, omitted
or suffered to be done by Silicon relating in any way to Borrower or the
Indebtedness (except any such amounts sustained or incurred as the result of the
gross negligence or willful misconduct of Silicon or any of its directors,
officers, employees, agents, attorneys, or any other person affiliated with or
representing Silicon). Notwithstanding any provision in this Guaranty to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination or revocation of this Guaranty and shall for all purposes continue
in full force and effect.
9. Subordination. Any and all rights of Guarantor under any and all debts,
liabilities and obligations owing from Borrower to Guarantor, including any
security for and guaranties of any such obligations, whether now existing or
hereafter arising, are hereby subordinated in right of payment to the prior
payment in full of all of the Indebtedness. * payment in respect of any such
subordinated obligations shall at any time be made to or accepted by Guarantor
if at the time of such payment any Indebtedness is outstanding. If any Event of
Default has occurred, Borrower and any assignee, trustee in bankruptcy,
receiver, or any other person having custody or control over any or all of
Borrower's property are hereby authorized and directed to pay to Silicon the
entire unpaid balance of the Indebtedness before making any payments whatsoever
to Guarantor, whether as a creditor, shareholder, or otherwise; and insofar as
may be necessary for that purpose, Guarantor hereby assigns and transfers to
Silicon all rights to any and all debts, liabilities and obligations owing from
Borrower to Guarantor, including any security for and guaranties of any such
obligations, whether now existing or hereafter arising, including without
limitation any payments, dividends or distributions out of the business or
assets of Borrower. Any amounts received by Guarantor in violation of the
foregoing provisions shall be received and held as trustee for the benefit of
Silicon and shall forthwith be paid over to Silicon to be applied to the
Indebtedness in such order and sequence as Silicon shall in its sole discretion
determine, without limiting or affecting any other right or remedy which Silicon
may have hereunder or otherwise and without otherwise affecting the liability of
Guarantor hereunder. Guarantor hereby expressly waives any right to set-off or
assert any counterclaim against Borrower.
*After an Event of Default has occurred, or after an event which with
notice or the passage of time or both would constitute an Event of Default has
occurred, no
10. Revocation. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving 90 days' advance written notice of
revocation to Silicon at its address above by registered first-class U.S. mail,
postage prepaid, return receipt requested, and only as to new loans made by
Silicon to Borrower more than 90 days after actual receipt of such written
notice by Silicon. No termination or revocation of this Guaranty shall be
effective until 90 days following the date of actual receipt of said written
notice of revocation by Silicon. Notwithstanding such written notice of
revocation or any other act of Guarantor or any other event or circumstance,
Guarantor agrees that this Guaranty and all consents, waivers and other
provisions hereof shall continue in full force and effect as to any and all
Indebtedness which is outstanding on or before the 90th day following actual
receipt of said written notice of revocation by Silicon, and all extensions,
renewals and modifications of said Indebtedness (including without limitation
amendments, extensions, renewals and modifications which are evidenced by new or
additional instruments, documents or agreements executed before or after
expiration of said 90-day period), and all interest thereon, accruing before or
after expiration of said 90-day period, and all attorneys' fees, court costs and
collection charges, incurred before or after expiration of said 90-day period,
in endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof.
11. Independent Liability. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor, in the
same action in which Borrower may be sued or in separate actions, as often as
deemed advisable by Silicon. The liability of Guarantor hereunder is exclusive
and independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable unless
set forth in a writing signed by Silicon or set forth in this Guaranty); or (b)
any direction as to the application of payment by Borrower or by any other
party;
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Silicon Valley Bank Continuing Guaranty
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or (c) any other continuing or restrictive guaranty or undertaking or any
limitation on the liability of any other guarantor (whether under this Guaranty
or under any other agreement); or (d) any payment on or reduction of any such
other guaranty or undertaking; or (e) any revocation, amendment, modification or
release of any such other guaranty or undertaking; or (f) any dissolution or
termination of, or increase, decrease, or change in membership of any Guarantor
which is a partnership. Guarantor hereby expressly represents that he was not
induced to give this Guaranty by the fact that there are or may be other
guarantors either under this Guaranty or otherwise, and Guarantor agrees that
any release of any one or more of such other guarantors shall not release
Guarantor from his obligations hereunder either in full or to any lesser extent.
If Guarantor is a married person, Guarantor hereby expressly agrees that
recourse may be had against his or her separate property for all of his or her
obligations hereunder.
12. Financial Condition of Borrower. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon his own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of Silicon with respect thereto. Guarantor
represents and warrants that he is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Silicon to
furnish to him any information now or hereafter in Silicon's possession
concerning the same or any other matter. By executing this Guaranty, Guarantor
knowingly accepts the full range of risks encompassed within a contract of
continuing guaranty, which risks Guarantor acknowledges include without
limitation the possibility that Borrower will incur additional Indebtedness for
which Guarantor will be liable hereunder after Borrower's financial condition or
ability to pay such Indebtedness has deteriorated and/or after bankruptcy or
insolvency proceedings have been commenced by or against Borrower. Guarantor
shall have no right to require Silicon to obtain or disclose any information
with respect to the Indebtedness, the financial condition or character of
Borrower, the existence of any collateral or security for any or all of the
Indebtedness, the filing by or against Borrower of any bankruptcy or insolvency
proceeding, the existence of any other guaranties of all or any part of the
Indebtedness, any action or non-action on the part of Silicon, Borrower, or any
other person, or any other matter, fact, or occurrence.
13. Reports and Financial Statements of Guarantor. Guarantor shall, at its
sole cost and expense, at any time and from time to time, prepare or cause to be
prepared, and provide to Silicon upon Silicon's request (i) such financial
statements and reports concerning Guarantor for such periods of time as Silicon
may designate, (ii) any other information concerning Guarantor's business,
financial condition or affairs as Silicon may request, and (iii) copies of any
and all foreign, federal, state and local tax returns and reports of or relating
to Guarantor as Silicon may from time to time request. Guarantor hereby
intentionally and knowingly waives any and all rights and privileges it may have
not to divulge or deliver said tax returns, reports and other information which
are requested by Silicon hereunder or in any litigation in which Silicon may be
involved relating directly or indirectly to Borrower or to Guarantor. Guarantor
further agrees immediately to give written notice to Silicon of any adverse
change in Guarantor's financial condition and of any condition or event which
constitutes an Event of Default under this Guaranty. All reports and information
furnished to Silicon hereunder shall be complete, accurate and correct in all
respects. Whenever requested, Guarantor shall further deliver to Silicon a
certificate signed by Guarantor (and, if Guarantor is a partnership, by all
general partners of Guarantor, in their individual capacities, and, if Guarantor
is a corporation, by the president and secretary of Guarantor, in their
individual capacities) warranting and representing that all reports, financial
statements and other documents and information delivered or caused to be
delivered to Silicon under this Guaranty, are complete, correct and thoroughly
and accurately present the financial condition of Guarantor, and that there
exists on the date of delivery of said certificate to Silicon no condition or
event which constitutes an Event of Default under this Guaranty.
14. Representations and Warranties. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower in
procuring credit, because Borrower is an affiliate of Guarantor, furnishes goods
or services to Guarantor, purchases or acquires goods or services from
Guarantor, and/or otherwise has a direct or indirect corporate or business
relationship with Guarantor, (ii) this Guaranty has been duly and validly
authorized, executed and delivered and constitutes the valid and binding
obligation of Guarantor, enforceable in accordance with its terms, and (iii) the
execution and delivery of this Guaranty does not violate or constitute a default
under (with or without the giving of notice, the passage of time, or both) any
order, judgment, decree, instrument or agreement to which Guarantor is a party
or by which it or its assets are affected or bound.
15. Costs. Whether or not suit be instituted, Guarantor agrees to reimburse
Silicon on demand for all reasonable attorneys' fees and all other reasonable
costs and expenses incurred by Silicon in enforcing this Guaranty, or arising
out of or relating in any way to this Guaranty, or in enforcing any of the
Indebtedness against Borrower, Guarantor, or any other person, or in connection
with any property of any kind securing all or any part of the Indebtedness.
Without limiting the generality of the
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Silicon Valley Bank Continuing Guaranty
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foregoing, and in addition thereto, Guarantor shall reimburse Silicon on demand
for all reasonable attorneys' fees and costs Silicon incurs in any way relating
to Guarantor, Borrower or the Indebtedness, in order to: obtain legal advice;
enforce or seek to enforce any of its rights; commence, intervene in, respond
to, or defend any action or proceeding; file, prosecute or defend any claim or
cause of action in any action or proceeding (including without limitation any
probate claim, bankruptcy claim, third-party claim, secured creditor claim,
reclamation complaint, and complaint for relief from any stay under the
Bankruptcy Code or otherwise); protect, obtain possession of, sell, lease,
dispose of or otherwise enforce any security interest in or lien on any property
of any kind securing any or all of the Indebtedness; or represent Silicon in any
litigation with respect to Borrower's or Guarantor's affairs. In the event
either Silicon or Guarantor files any lawsuit against the other predicated on a
breach of this Guaranty, the prevailing party in such action shall be entitled
to recover its attorneys' fees and costs of suit from the non-prevailing party.
16. Notices. Any notice which a party shall be required or shall desire to
give to the other hereunder (except for notice of revocation, which shall be
governed by Section 10 of this Guaranty) shall be given by personal delivery or
by telecopier or by depositing the same in the United States mail, first class
postage pre-paid, addressed to Silicon at its address set forth in the heading
of this Guaranty and to Guarantor at his address set forth under his signature
hereon, and such notices shall be deemed duly given on the date of personal
delivery or one day after the date telecopied or 3 business days after the date
of mailing as aforesaid. Silicon and Guarantor may change their address for
purposes of receiving notices hereunder by giving written notice thereof to the
other party in accordance herewith. Guarantor shall give Silicon immediate
written notice of any change in his address.
17. Claims. Guarantor agrees that any claim or cause of action by Guarantor
against Silicon, or any of Silicon's directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other present or future agreement between Silicon and Guarantor
or between Silicon and Borrower, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by Silicon, or by Silicon's directors, officers,
employees, agents, accountants or attorneys, whether sounding in contract or in
tort or otherwise, shall be barred unless asserted by Guarantor by the
commencement of an action or proceeding in a court of competent jurisdiction
within Santa Clara County, California, by the filing of a complaint within one
year after the first act, occurrence or omission upon which such claim or cause
of action, or any part thereof, is based and service of a summons and complaint
on an officer of Silicon or any other person authorized to accept service of
process on behalf of Silicon, within 30 days thereafter. Guarantor agrees that
such one year period is a reasonable and sufficient time for Guarantor to
investigate and act upon any such claim or cause of action. The one year period
provided herein shall not be waived, tolled, or extended except by a specific
written agreement of Silicon. This provision shall survive any termination of
this Guaranty or any other agreement.
18. Construction; Severability. If more than one person has executed this
Guaranty, the term "Guarantor" as used herein shall be deemed to refer to all
and any one or more such persons and their obligations hereunder shall be joint
and several. Without limiting the generality of the foregoing, if more than one
person has executed this Guaranty, this Guaranty shall in all respects be
interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used herein in the singular shall
include the plural and words used in the plural shall include the singular,
wherever the context so reasonably requires. If any provision of this Guaranty
or the application thereof to any party or circumstance is held invalid, void,
inoperative or unenforceable, the remainder of this Guaranty and the application
of such provision to other parties or circumstances shall not be affected
thereby, the provisions of this Guaranty being severable in any such instance.
19. General Provisions. Silicon shall have the right to seek recourse
against Guarantor to the full extent provided for herein and in any other
instrument or agreement evidencing obligations of Guarantor to Silicon, and
against Borrower to the full extent of the Indebtedness. No election in one form
of action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of Silicon's right to proceed in any other form of action or
proceeding or against any other party. The failure of Silicon to enforce any of
the provisions of this Guaranty at any time or for any period of time shall not
be construed to be a waiver of any such provision or the right thereafter to
enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to Silicon by law or under any
other instrument or agreement. Time is of the essence in the performance by
Guarantor of each and every obligation under this Guaranty. If Borrower is a
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corporation, partnership or other entity, Guarantor hereby agrees that Silicon
shall have no obligation to inquire into the power or authority of Borrower or
any of its officers, directors, partners, or agents acting or purporting to act
on its behalf, and any Indebtedness made or created in reliance upon the
professed exercise of any such power or authority shall be included in the
Indebtedness guaranteed hereby. This Guaranty is the entire and only agreement
between Guarantor and Silicon with respect to the guaranty of the Indebtedness
of Borrower by Guarantor, and all representations, warranties, agreements, or
undertakings heretofore or contemporaneously made, which are not set forth
herein, are superseded hereby. No course of dealings between the parties, no
usage of the trade, and no parol or extrinsic evidence of any nature shall be
used or be relevant to supplement or explain or modify any term or provision of
this Guaranty. There are no conditions to the full effectiveness of this
Guaranty. The terms and provisions hereof may not be waived, altered, modified,
or amended except in a writing executed by Guarantor and a duly authorized
officer of Silicon. All rights, benefits and privileges hereunder shall inure to
the benefit of and be enforceable by Silicon and its successors and assigns and
shall be binding upon Guarantor and his heirs, executors, administrators,
personal representatives, successors and assigns. Neither the death of Guarantor
nor notice thereof to Silicon shall terminate this Guaranty as to his estate,
and, notwithstanding the death of Guarantor or notice thereof to Silicon, this
Guaranty shall continue in full force and effect with respect to all
Indebtedness, including without limitation Indebtedness incurred or created
after the death of Guarantor and notice thereof to Silicon. Section headings are
used herein for convenience only. Guarantor acknowledges that the same may not
describe completely the subject matter of the applicable Section, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof.
20. Governing Law; Venue and Jurisdiction. This instrument and all acts and
transactions pursuant or relating hereto and all rights and obligations of the
parties hereto shall be governed, construed, and interpreted in accordance with
the internal laws of the State of California. In order to induce Silicon to
accept this Guaranty, and as a material part of the consideration therefor,
Guarantor (i) agrees that all actions or proceedings relating directly or
indirectly hereto shall, at the option of Silicon, be litigated in courts
located within Santa Clara County, California, (ii) consents to the jurisdiction
of any such court and consents to the service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Guarantor may have to transfer or change the venue of
any such action or proceeding.
21. Mutual Waiver of Right to Jury Trial. SILICON AND GUARANTOR HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS GUARANTEE OR ANY
SUPPLEMENT OR AMENDMENT THERETO; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN SILICON AND GUARANTOR ; OR (iii) ANY BREACH, CONDUCT, ACTS
OR OMISSIONS OF SILICON OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR
REPRESENTING SILICON OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
22. Receipt of Copy. Guarantor acknowledges receipt of a copy of this
Guaranty.
Guarantor Signature: EcoScience Corporation
By /s/ Harold A. Joannidi
Title Treasurer
Address: 10 Alvin Court
East Brunswick, NJ 08816
Guarantor Signature: EcoScience Produce Systems Corp.
By /s/ Harold A. Joannidi
Title Vice President
Address: 10 Alvin Court
East Brunswick, NJ 08816
Guarantor Signature: Agro Dynamics, Inc.
By /s/ Harold A. Joannidi
Title Treasuer
Address: 10 Alvin Court
East Brunswick, NJ 08816
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[GRAPHIC OMITTED] Silicon Valley Bank
Continuing Guaranty
Borrower: EcoScience Corporation
Guarantor(s): Agro Dynamics Canada Inc.
Date: April 28, 1997
This Continuing Guaranty is executed by the above-named guarantor(s)
(jointly and severally, the "Guarantor"), as of the above date, in favor of
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054, with respect to the Indebtedness of the above-named
borrower (jointly and severally, the "Borrower").
1. Continuing Guaranty. Guarantor hereby unconditionally guarantees and
promises to pay on demand to Silicon, at the address indicated above, or at such
other address as Silicon may direct, in lawful money of the United States, and
to perform for the benefit of Silicon, all Indebtedness of Borrower now or
hereafter owing to or held by Silicon. As used herein, the term "Indebtedness"
is used in its most comprehensive sense and shall mean and include without
limitation: (a) any and all debts, duties, obligations, liabilities,
representations, warranties and guaranties of Borrower or any one or more of
them, heretofore, now, or hereafter made, incurred, or created, whether directly
to Silicon or acquired by Silicon by assignment or otherwise, or held by Silicon
on behalf of others, however arising, whether voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated, certain or
uncertain, determined or undetermined, monetary or nonmonetary, written or oral,
and whether Borrower may be liable individually or jointly with others, and
regardless of whether recovery thereon may be or hereafter become barred by any
statute of limitations, discharged or uncollectible in any bankruptcy,
insolvency or other proceeding, or otherwise unenforceable; and (b) any and all
amendments, modifications, renewals and extensions of any or all of the
foregoing, including without limitation amendments, modifications, renewals and
extensions which are evidenced by any new or additional instrument, document or
agreement; and (c) any and all attorneys' fees, court costs, and collection
charges incurred in endeavoring to collect or enforce any of the foregoing
against Borrower, Guarantor, or any other person liable thereon (whether or not
suit be brought) and any other expenses of, for or incidental to collection
thereof. As used herein, the term "Borrower" shall include any successor to the
business and assets of Borrower, and shall also include Borrower in its capacity
as a debtor or debtor in possession under the federal Bankruptcy Code, and any
trustee, custodian or receiver for Borrower or any of its assets, should
Borrower hereafter become the subject of any bankruptcy or insolvency
proceeding, voluntary or involuntary; and all indebtedness, liabilities and
obligations incurred by any such person shall be included in the Indebtedness
guaranteed hereby. This Guaranty is given in consideration for credit and other
financial accommodations which may, from time to time, be given by Silicon to
Borrower in Silicon's sole discretion, but Guarantor acknowledges and agrees
that acceptance by Silicon of this Guaranty shall not constitute a commitment of
any kind by Silicon to extend such credit or other financial accommodation to
Borrower or to permit Borrower to incur Indebtedness to Silicon. All sums due
under this Guaranty shall bear interest from the date due until the date paid at
the highest rate charged with respect to any of the Indebtedness.
2. Waivers. Guarantor hereby waives: (a) presentment for payment, notice of
dishonor, demand, protest, and notice thereof as to any instrument, and all
other notices and demands to which Guarantor might be entitled, including
without limitation notice of all of the following: the acceptance hereof; the
creation, existence, or acquisition of any Indebtedness; the amount of the
Indebtedness from time to time outstanding; any foreclosure sale or other
disposition of any property which secures any or all of the Indebtedness or
which secures the obligations of any other guarantor of any or all of the
Indebtedness; any adverse change in Borrower's financial position; any other
fact which might increase Guarantor's risk; any default, partial payment or
non-payment of all or any part of the Indebtedness; the occurrence of any other
Event of Default (as hereinafter defined); any and all agreements and
arrangements between Silicon and Borrower and any changes, modifications, or
extensions thereof, and any revocation, modification or release of any guaranty
of any or
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all of the Indebtedness by any person (including without limitation
any other person signing this Guaranty); (b) any right to require Silicon to
institute suit against, or to exhaust its rights and remedies against, Borrower
or any other person, or to proceed against any property of any kind which
secures all or any part of the Indebtedness, or to exercise any right of offset
or other right with respect to any reserves, credits or deposit accounts held by
or maintained with Silicon or any indebtedness of Silicon to Borrower, or to
exercise any other right or power, or pursue any other remedy Silicon may have;
(c) any defense arising by reason of any disability or other defense of Borrower
or any other guarantor or any endorser, co-maker or other person, or by reason
of the cessation from any cause whatsoever of any liability of Borrower or any
other guarantor or any endorser, co-maker or other person, with respect to all
or any part of the Indebtedness, or by reason of any act or omission of Silicon
or others which directly or indirectly results in the discharge or release of
Borrower or any other guarantor or any other person or any Indebtedness or any
security therefor, whether by operation of law or otherwise; (d) any defense
arising by reason of any failure of Silicon to obtain, perfect, maintain or keep
in force any security interest in, or lien or encumbrance upon, any property of
Borrower or any other person; (e) any defense based upon any failure of Silicon
to give Guarantor notice of any sale or other disposition of any property
securing any or all of the Indebtedness, or any defects in any such notice that
may be given, or any failure of Silicon to comply with any provision of
applicable law in enforcing any security interest in or lien upon any property
securing any or all of the Indebtedness including, but not limited to, any
failure by Silicon to dispose of any property securing any or all of the
Indebtedness in a commercially reasonable manner; (f) any defense based upon or
arising out of any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against Borrower or any other guarantor or any endorser, co-maker or other
person, including without limitation any discharge of, or bar against
collecting, any of the Indebtedness (including without limitation any interest
thereon), in or as a result of any such proceeding; and (g) the benefit of any
and all statutes of limitation with respect to any action based upon, arising
out of or related to this Guaranty. Until all of the Indebtedness has been paid,
performed, and discharged in full, nothing shall discharge or satisfy the
liability of Guarantor hereunder except the full performance and payment of all
of the Indebtedness. If any claim is ever made upon Silicon for repayment or
recovery of any amount or amounts received by Silicon in payment of or on
account of any of the Indebtedness, because of any claim that any such payment
constituted a preferential transfer or fraudulent conveyance, or for any other
reason whatsoever, and Silicon repays all or part of said amount by reason of
any judgment, decree or order of any court or administrative body having
jurisdiction over Silicon or any of its property, or by reason of any settlement
or compromise of any such claim effected by Silicon with any such claimant
(including without limitation the Borrower), then and in any such event,
Guarantor agrees that any such judgment, decree, order, settlement and
compromise shall be binding upon Guarantor, notwithstanding any revocation or
release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any release of any of the Indebtedness,
and the Guarantor shall be and remain liable to Silicon under this Guaranty for
the amount so repaid or recovered, to the same extent as if such amount had
never originally been received by Silicon, and the provisions of this sentence
shall survive, and continue in effect, notwithstanding any revocation or release
of this Guaranty. Until all of the Indebtedness has been irrevocably paid and
performed in full, Guarantor hereby expressly and unconditionally waives all
rights of subrogation, reimbursement and indemnity of every kind against
Borrower, and all rights of recourse to any assets or property of Borrower, and
all rights to any collateral or security held for the payment and performance of
any Indebtedness, including (but not limited to) any of the foregoing rights
which Guarantor may have under any present or future document or agreement with
any Borrower or other person, and including (but not limited to) any of the
foregoing rights which Guarantor may have under any equitable doctrine of
subrogation, implied contract, or unjust enrichment, or any other equitable or
legal doctrine. Neither Silicon, nor any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Silicon
shall be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by Guarantor or any other party
through the ordinary negligence of Silicon, or any of its directors, officers,
employees, agents, attorneys or any other person affiliated with or representing
Silicon.
3. Consents. Guarantor hereby consents and agrees that, without notice to
or by Guarantor and without affecting or impairing in any way the obligations or
liability of Guarantor hereunder, Silicon may, from time to time before or after
revocation of this Guaranty, do any one or more of the following in Silicon's
sole and absolute discretion: (a) accelerate, accept partial payments of,
compromise or settle, renew, extend the time for the payment, discharge, or
performance of, refuse to enforce, and release all or any parties to, any or all
of the Indebtedness; (b) grant any other indulgence to Borrower or any other
person in respect of any or all of the Indebtedness or any other matter; (c)
accept, release, waive, surrender, enforce, exchange, modify, impair, or extend
the time for the performance, discharge, or payment of, any and all property of
any kind securing any or all of the Indebtedness or any guaranty of any or all
of the Indebtedness, or on which Silicon at any time may have a lien, or refuse
to enforce its rights or make any compromise or settlement or agreement therefor
in
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respect of any or all of such property; (d) substitute or add, or take any
action or omit to take any action which results in the release of, any one or
more endorsers or guarantors of all or any part of the Indebtedness, including,
without limitation one or more parties to this Guaranty, regardless of any
destruction or impairment of any right of contribution or other right of
Guarantor; (e) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Indebtedness, including the rate of
interest thereon; (f) apply any sums received from Borrower, any other
guarantor, endorser, or co-signer, or from the disposition of any collateral or
security, to any indebtedness whatsoever owing from such person or secured by
such collateral or security, in such manner and order as Silicon determines in
its sole discretion, and regardless of whether such indebtedness is part of the
Indebtedness, is secured, or is due and payable; (g) apply any sums received
from Guarantor or from the disposition of any collateral or security securing
the obligations of Guarantor, to any of the Indebtedness in such manner and
order as Silicon determines in its sole discretion, regardless of whether or not
such Indebtedness is secured or is due and payable. Guarantor consents and
agrees that Silicon shall be under no obligation to marshal any assets in favor
of Guarantor, or against or in payment of any or all of the Indebtedness.
Guarantor further consents and agrees that Silicon shall have no duties or
responsibilities whatsoever with respect to any property securing any or all of
the Indebtedness. Without limiting the generality of the foregoing, Silicon
shall have no obligation to monitor, verify, audit, examine, or obtain or
maintain any insurance with respect to, any property securing any or all of the
Indebtedness.
4. Account Stated. Silicon's books and records showing the account between
it and the Borrower shall be admissible in evidence in any action or proceeding
as prima facie proof of the items therein set forth. Silicon's monthly
statements rendered to the Borrower shall be binding upon the Guarantor (whether
or not the Guarantor receives copies thereof), and shall constitute an account
stated between Silicon and the Borrower, unless Silicon receives a written
statement of the Borrower's exceptions within 30 days after the statement was
mailed to the Borrower. The Guarantor assumes full responsibility for obtaining
copies of such monthly statements from the Borrower, if the Guarantor desires
such copies.
5. Exercise of Rights and Remedies; Foreclosure of Trust Deeds. Guarantor
consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Silicon may, from time to time, before or after revocation of this
Guaranty, exercise any right or remedy it may have with respect to any or all of
the Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure, nonjudicial
foreclosure, exercise of a power of sale, and taking a deed, assignment or
transfer in lieu of foreclosure as to any such property, and Guarantor expressly
waives any defense based upon the exercise of any such right or remedy,
notwithstanding the effect thereof upon any of Guarantor's rights, including
without limitation, any destruction of Guarantor's right of subrogation against
Borrower and any destruction of Guarantor's right of ocontribution or other
right against any other guarantor of any or all of the Indebtedness or against
any other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Without limiting the generality of the foregoing, (a)
The guarantor waives all rights and defenses that the Guarantor may have because
the Indebtedness is secured by real property. This means, among other things:
(1) Silicon may collect from the Guarantor without first foreclosing on any real
or personal property collateral pledged by the Borrower. (2) If Silicon
forecloses on any real property collateral pledged by the Borrower: (A) The
amount of the Indebtedness may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price. (B) Silicon may collect from the Guarantor even if Silicon,
by foreclosing on the real property collateral, has destroyed any right the
Guarantor may have to collect from the Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses the Guarantor may have because the
Indebtedness is secured by real property. These rights and defenses include, but
are not limited to, any rights or defenses based upon Section 580a, 580b, 580d,
or 726 of the Code of Civil Procedure. (b) The guarantor waives all rights and
defenses that the Guarantor may have because the guaranty of another guarantor
is secured by real property. This means, among other things: (1) Silicon may
collect from the Guarantor without first foreclosing on any real or personal
property collateral pledged by the other guarantor. (2) If Silicon forecloses on
any real property collateral pledged by the other guarantor: (A) The amount of
the Indebtedness may be reduced only by the price for which that collateral is
sold at the foreclosure sale, even if the collateral is worth more than the sale
price. (B) Silicon may collect from the Guarantor even if Silicon, by
foreclosing on the real property collateral, has destroyed any right the
Guarantor may have to obtain contribution from the other guarantor. This is an
unconditional and irrevocable waiver of any rights and defenses the Guarantor
may have because the obligations of the other guarantor are secured by real
property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil
Procedure.
6. Acceleration. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the
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Indebtedness shall, at the option of Silicon, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) any warranty, representation, statement,
report, or certificate made or delivered to Silicon by Borrower or Guarantor, or
any of their respective officers, partners, employees, or agents, is incorrect,
false, untrue, or misleading when given in any material respect; or (b) Borrower
or Guarantor shall fail to pay or perform when due all or any part of the
Indebtedness; or (c) Guarantor shall fail to pay or perform when due any
indebtedness or obligation of Guarantor to Silicon or to any parent, subsidiary
or corporate affiliate of Silicon, whether under this Guaranty or any other
instrument, document, or agreement heretofore or hereafter entered into; or (d)
there occurs in Silicon's judgment a material impairment of the prospect of
payment or performance of any or all of the Indebtedness; or (e) any event shall
occur which may or does result in the acceleration of the maturity of any
indebtedness of Borrower or Guarantor to others (regardless of any requirement
of notice, opportunity to cure or other condition prior to the exercise of any
right of acceleration); or (f) Borrower or Guarantor shall fail promptly to
perform or comply with any term or condition of any agreement with any third
party which does or may result in a material adverse effect on the business of
Borrower or Guarantor; or (g) there shall be made or exist any levy, assessment,
attachment, seizure, lien, or encumbrance for any cause or reason whatsoever
upon all or any part of the property of Borrower or Guarantor (unless discharged
by payment, release or bond not more than ten days after such event has
occurred); or (h) there shall occur the dissolution, termination of existence,
insolvency, or business failure of Borrower or Guarantor, or the appointment of
a receiver, trustee or custodian for Borrower or Guarantor or all or any part of
the property of either of them, or the assignment for the benefit of creditors
by Borrower or Guarantor, or the commencement of any proceeding by or against
Borrower or Guarantor under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or hereafter in effect; or (i) Borrower or Guarantor shall
be deceased or declared incompetent by any court or a guardian or conservator
shall be appointed for either of them or for the property of either of them; or
(j) Guarantor or Borrower shall generally not pay their respective debts as they
become due or shall enter into any agreement (whether written or oral), or offer
to enter into any such agreement, with all or a significant number of its
creditors regarding any moratorium or other indulgence with respect to its debts
or the participation of such creditors or their representatives in the
supervision, management, or control of the business of either of them; or (k)
Borrower or Guarantor shall conceal, remove or permit to be concealed or removed
any part of its property, with intent to hinder, delay or defraud its creditors,
or make or suffer any transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law, or shall make any
transfer of its property to or for the benefit of any creditor at a time when
other creditors similarly situated have not been paid; or (l) the board of
directors or shareholders of Borrower or Guarantor shall adopt any resolution or
plan for its dissolution or the liquidation of all or substantially all of its
assets; or (m) Guarantor shall revoke this Guaranty or contest or deny liability
under this Guaranty. All of the foregoing are hereinafter referred to as "Events
of Default".
7. Right to Attachment Remedy. Guarantor agrees that, notwithstanding the
existence of any property securing any or all of the Indebtedness, Silicon shall
have all of the rights of an unsecured creditor of Guarantor, including without
limitation the right to obtain a temporary protective order and writ of
attachment against Guarantor with respect to any sums due under this Guaranty.
Guarantor further agrees that in the event any property secures the obligations
of Guarantor under this Guaranty, to the extent that Silicon, in its sole and
absolute discretion, determines prior to the disposition of such property that
the amount to be realized by Silicon therefrom may be less than the indebtedness
of the Guarantor under this Guaranty, Silicon shall have all the rights of an
unsecured creditor against Guarantor, including without limitation the right of
Silicon, prior to the disposition of said property, to obtain a temporary
protective order and writ of attachment against Guarantor. Guarantor waives the
benefit of Section 483.010(b) of the California Code of Civil Procedure and of
any and all other statutes and rules of law now or hereafter in effect requiring
Silicon to first resort to or exhaust all such collateral before seeking or
obtaining any attachment remedy against Guarantor. Silicon shall have no
liability to Guarantor as a result thereof, whether or not the actual deficiency
realized by Silicon is less than the anticipated deficiency on the basis of
which Silicon obtains a temporary protective order or writ of attachment.
8. Indemnity. Guarantor hereby agrees to indemnify Silicon and hold Silicon
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
without limitation attorneys' fees), of every nature, character and description,
which Silicon may sustain or incur based upon or arising out of any of the
Indebtedness, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Silicon and Borrower, any actual or alleged failure of
Silicon to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Silicon relating in any way to
Borrower or the Indebtedness (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of Silicon or any of
its directors, officers,
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employees, agents, attorneys, or any other person affiliated with or
representing Silicon). Notwithstanding any provision in this Guaranty to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination or revocation of this Guaranty and shall for all purposes continue
in full force and effect.
9. Subordination. Any and all rights of Guarantor under any and all debts,
liabilities and obligations owing from Borrower to Guarantor, including any
security for and guaranties of any such obligations, whether now existing or
hereafter arising, are hereby subordinated in right of payment to the prior
payment in full of all of the Indebtedness. * No payment in respect of any such
subordinated obligations shall at any time be made to or accepted by Guarantor
if at the time of such payment any Indebtedness is outstanding. If any Event of
Default has occurred, Borrower and any assignee, trustee in bankruptcy,
receiver, or any other person having custody or control over any or all of
Borrower's property are hereby authorized and directed to pay to Silicon the
entire unpaid balance of the Indebtedness before making any payments whatsoever
to Guarantor, whether as a creditor, shareholder, or otherwise; and insofar as
may be necessary for that purpose, Guarantor hereby assigns and transfers to
Silicon all rights to any and all debts, liabilities and obligations owing from
Borrower to Guarantor, including any security for and guaranties of any such
obligations, whether now existing or hereafter arising, including without
limitation any payments, dividends or distributions out of the business or
assets of Borrower. Any amounts received by Guarantor in violation of the
foregoing provisions shall be received and held as trustee for the benefit of
Silicon and shall forthwith be paid over to Silicon to be applied to the
Indebtedness in such order and sequence as Silicon shall in its sole discretion
determine, without limiting or affecting any other right or remedy which Silicon
may have hereunder or otherwise and without otherwise affecting the liability of
Guarantor hereunder. Guarantor hereby expressly waives any right to set-off or
assert any counterclaim against Borrower.
*After an Event of Default has occurred, or after an event which with
notice or the passage of time or both would constitute an Event of Default has
occurred, no
10. Revocation. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving 90 days' advance written notice of
revocation to Silicon at its address above by registered first-class U.S. mail,
postage prepaid, return receipt requested, and only as to new loans made by
Silicon to Borrower more than 90 days after actual receipt of such written
notice by Silicon. No termination or revocation of this Guaranty shall be
effective until 90 days following the date of actual receipt of said written
notice of revocation by Silicon. Notwithstanding such written notice of
revocation or any other act of Guarantor or any other event or circumstance,
Guarantor agrees that this Guaranty and all consents, waivers and other
provisions hereof shall continue in full force and effect as to any and all
Indebtedness which is outstanding on or before the 90th day following actual
receipt of said written notice of revocation by Silicon, and all extensions,
renewals and modifications of said Indebtedness (including without limitation
amendments, extensions, renewals and modifications which are evidenced by new or
additional instruments, documents or agreements executed before or after
expiration of said 90-day period), and all interest thereon, accruing before or
after expiration of said 90-day period, and all attorneys' fees, court costs and
collection charges, incurred before or after expiration of said 90-day period,
in endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof.
11. Independent Liability. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor, in the
same action in which Borrower may be sued or in separate actions, as often as
deemed advisable by Silicon. The liability of Guarantor hereunder is exclusive
and independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable unless
set forth in a writing signed by Silicon or set forth in this Guaranty); or (b)
any direction as to the application of payment by Borrower or by any other
party; or (c) any other continuing or restrictive guaranty or undertaking or any
limitation on the liability of any other guarantor (whether under this Guaranty
or under any other agreement); or (d) any payment on or reduction of any such
other guaranty or undertaking; or (e) any revocation, amendment, modification or
release of any such other guaranty or undertaking; or (f) any dissolution or
termination of, or increase, decrease, or change in membership of any Guarantor
which is a partnership. Guarantor hereby expressly represents that he was not
induced to give this Guaranty by the fact that there are or may be other
guarantors either under this Guaranty or otherwise, and Guarantor agrees that
any release of any one or more of such other guarantors shall not release
Guarantor from his obligations hereunder either in full or to any lesser extent.
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If Guarantor is a married person, Guarantor hereby expressly agrees that
recourse may be had against his or her separate property for all of his or her
obligations hereunder.
12. Financial Condition of Borrower. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon his own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of Silicon with respect thereto. Guarantor
represents and warrants that he is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Silicon to
furnish to him any information now or hereafter in Silicon's possession
concerning the same or any other matter. By executing this Guaranty, Guarantor
knowingly accepts the full range of risks encompassed within a contract of
continuing guaranty, which risks Guarantor acknowledges include without
limitation the possibility that Borrower will incur additional Indebtedness for
which Guarantor will be liable hereunder after Borrower's financial condition or
ability to pay such Indebtedness has deteriorated and/or after bankruptcy or
insolvency proceedings have been commenced by or against Borrower. Guarantor
shall have no right to require Silicon to obtain or disclose any information
with respect to the Indebtedness, the financial condition or character of
Borrower, the existence of any collateral or security for any or all of the
Indebtedness, the filing by or against Borrower of any bankruptcy or insolvency
proceeding, the existence of any other guaranties of all or any part of the
Indebtedness, any action or non-action on the part of Silicon, Borrower, or any
other person, or any other matter, fact, or occurrence.
13. Reports and Financial Statements of Guarantor. Guarantor shall, at its
sole cost and expense, at any time and from time to time, prepare or cause to be
prepared, and provide to Silicon upon Silicon's request (i) such financial
statements and reports concerning Guarantor for such periods of time as Silicon
may designate, (ii) any other information concerning Guarantor's business,
financial condition or affairs as Silicon may request, and (iii) copies of any
and all foreign, federal, state and local tax returns and reports of or relating
to Guarantor as Silicon may from time to time request. Guarantor hereby
intentionally and knowingly waives any and all rights and privileges it may have
not to divulge or deliver said tax returns, reports and other information which
are requested by Silicon hereunder or in any litigation in which Silicon may be
involved relating directly or indirectly to Borrower or to Guarantor. Guarantor
further agrees immediately to give written notice to Silicon of any adverse
change in Guarantor's financial condition and of any condition or event which
constitutes an Event of Default under this Guaranty. All reports and information
furnished to Silicon hereunder shall be complete, accurate and correct in all
respects. Whenever requested, Guarantor shall further deliver to Silicon a
certificate signed by Guarantor (and, if Guarantor is a partnership, by all
general partners of Guarantor, in their individual capacities, and, if Guarantor
is a corporation, by the president and secretary of Guarantor, in their
individual capacities) warranting and representing that all reports, financial
statements and other documents and information delivered or caused to be
delivered to Silicon under this Guaranty, are complete, correct and thoroughly
and accurately present the financial condition of Guarantor, and that there
exists on the date of delivery of said certificate to Silicon no condition or
event which constitutes an Event of Default under this Guaranty.
14. Representations and Warranties. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower in
procuring credit, because Borrower is an affiliate of Guarantor, furnishes goods
or services to Guarantor, purchases or acquires goods or services from
Guarantor, and/or otherwise has a direct or indirect corporate or business
relationship with Guarantor, (ii) this Guaranty has been duly and validly
authorized, executed and delivered and constitutes the valid and binding
obligation of Guarantor, enforceable in accordance with its terms, and (iii) the
execution and delivery of this Guaranty does not violate or constitute a default
under (with or without the giving of notice, the passage of time, or both) any
order, judgment, decree, instrument or agreement to which Guarantor is a party
or by which it or its assets are affected or bound.
15. Costs. Whether or not suit be instituted, Guarantor agrees to reimburse
Silicon on demand for all reasonable attorneys' fees and all other reasonable
costs and expenses incurred by Silicon in enforcing this Guaranty, or arising
out of or relating in any way to this Guaranty, or in enforcing any of the
Indebtedness against Borrower, Guarantor, or any other person, or in connection
with any property of any kind securing all or any part of the Indebtedness.
Without limiting the generality of the foregoing, and in addition thereto,
Guarantor shall reimburse Silicon on demand for all reasonable attorneys' fees
and costs Silicon incurs in any way relating to Guarantor, Borrower or the
Indebtedness, in order to: obtain legal advice; enforce or seek to enforce any
of its rights; commence, intervene in, respond to, or defend any action or
proceeding; file, prosecute or defend any claim or cause of action in any action
or proceeding (including without limitation any probate claim, bankruptcy claim,
third-party claim, secured creditor claim, reclamation complaint, and complaint
for relief from any stay under the Bankruptcy Code or otherwise); protect,
obtain possession of, sell, lease, dispose of or otherwise enforce any security
interest in or lien on any property of any kind securing any or all of the
Indebtedness; or represent Silicon in any
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litigation with respect to Borrower's or Guarantor's affairs. In the event
either Silicon or Guarantor files any lawsuit against the other predicated on a
breach of this Guaranty, the prevailing party in such action shall be entitled
to recover its attorneys' fees and costs of suit from the non-prevailing party.
16. Notices. Any notice which a party shall be required or shall desire to
give to the other hereunder (except for notice of revocation, which shall be
governed by Section 10 of this Guaranty) shall be given by personal delivery or
by telecopier or by depositing the same in the United States mail, first class
postage pre-paid, addressed to Silicon at its address set forth in the heading
of this Guaranty and to Guarantor at his address set forth under his signature
hereon, and such notices shall be deemed duly given on the date of personal
delivery or one day after the date telecopied or 3 business days after the date
of mailing as aforesaid. Silicon and Guarantor may change their address for
purposes of receiving notices hereunder by giving written notice thereof to the
other party in accordance herewith. Guarantor shall give Silicon immediate
written notice of any change in his address.
17. Claims. Guarantor agrees that any claim or cause of action by Guarantor
against Silicon, or any of Silicon's directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other present or future agreement between Silicon and Guarantor
or between Silicon and Borrower, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by Silicon, or by Silicon's directors, officers,
employees, agents, accountants or attorneys, whether sounding in contract or in
tort or otherwise, shall be barred unless asserted by Guarantor by the
commencement of an action or proceeding in a court of competent jurisdiction
within Santa Clara County, California, by the filing of a complaint within one
year after the first act, occurrence or omission upon which such claim or cause
of action, or any part thereof, is based and service of a summons and complaint
on an officer of Silicon or any other person authorized to accept service of
process on behalf of Silicon, within 30 days thereafter. Guarantor agrees that
such one year period is a reasonable and sufficient time for Guarantor to
investigate and act upon any such claim or cause of action. The one year period
provided herein shall not be waived, tolled, or extended except by a specific
written agreement of Silicon. This provision shall survive any termination of
this Guaranty or any other agreement.
18. Construction; Severability. If more than one person has executed this
Guaranty, the term "Guarantor" as used herein shall be deemed to refer to all
and any one or more such persons and their obligations hereunder shall be joint
and several. Without limiting the generality of the foregoing, if more than one
person has executed this Guaranty, this Guaranty shall in all respects be
interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used herein in the singular shall
include the plural and words used in the plural shall include the singular,
wherever the context so reasonably requires. If any provision of this Guaranty
or the application thereof to any party or circumstance is held invalid, void,
inoperative or unenforceable, the remainder of this Guaranty and the application
of such provision to other parties or circumstances shall not be affected
thereby, the provisions of this Guaranty being severable in any such instance.
19. General Provisions. Silicon shall have the right to seek recourse
against Guarantor to the full extent provided for herein and in any other
instrument or agreement evidencing obligations of Guarantor to Silicon, and
against Borrower to the full extent of the Indebtedness. No election in one form
of action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of Silicon's right to proceed in any other form of action or
proceeding or against any other party. The failure of Silicon to enforce any of
the provisions of this Guaranty at any time or for any period of time shall not
be construed to be a waiver of any such provision or the right thereafter to
enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to Silicon by law or under any
other instrument or agreement. Time is of the essence in the performance by
Guarantor of each and every obligation under this Guaranty. If Borrower is a
corporation, partnership or other entity, Guarantor hereby agrees that Silicon
shall have no obligation to inquire into the power or authority of Borrower or
any of its officers, directors, partners, or agents acting or purporting to act
on its behalf, and any Indebtedness made or created in reliance upon the
professed exercise of any such power or authority shall be included in the
Indebtedness guaranteed hereby. This Guaranty is the entire and only agreement
between Guarantor and Silicon with respect to the guaranty of the Indebtedness
of Borrower by Guarantor, and all representations, warranties, agreements, or
undertakings heretofore or contemporaneously made, which are not set forth
herein, are superseded hereby. No course of dealings between the parties, no
usage of the trade, and no parol or
<PAGE>
Silicon Valley Bank Continuing Guaranty
---------------------------------------------------------------------------
extrinsic evidence of any nature shall be used or be relevant to supplement or
explain or modify any term or provision of this Guaranty. There are no
conditions to the full effectiveness of this Guaranty. The terms and provisions
hereof may not be waived, altered, modified, or amended except in a writing
executed by Guarantor and a duly authorized officer of Silicon. All rights,
benefits and privileges hereunder shall inure to the benefit of and be
enforceable by Silicon and its successors and assigns and shall be binding upon
Guarantor and his heirs, executors, administrators, personal representatives,
successors and assigns. Neither the death of Guarantor nor notice thereof to
Silicon shall terminate this Guaranty as to his estate, and, notwithstanding the
death of Guarantor or notice thereof to Silicon, this Guaranty shall continue in
full force and effect with respect to all Indebtedness, including without
limitation Indebtedness incurred or created after the death of Guarantor and
notice thereof to Silicon. Section headings are used herein for convenience
only. Guarantor acknowledges that the same may not describe completely the
subject matter of the applicable Section, and the same shall not be used in any
manner to construe, limit, define or interpret any term or provision hereof.
20. Governing Law; Venue and Jurisdiction. This instrument and all acts and
transactions pursuant or relating hereto and all rights and obligations of the
parties hereto shall be governed, construed, and interpreted in accordance with
the internal laws of the State of California. In order to induce Silicon to
accept this Guaranty, and as a material part of the consideration therefor,
Guarantor (i) agrees that all actions or proceedings relating directly or
indirectly hereto shall, at the option of Silicon, be litigated in courts
located within Santa Clara County, California, (ii) consents to the jurisdiction
of any such court and consents to the service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Guarantor may have to transfer or change the venue of
any such action or proceeding.
21. Mutual Waiver of Right to Jury Trial. SILICON AND GUARANTOR HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS GUARANTEE OR ANY
SUPPLEMENT OR AMENDMENT THERETO; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN SILICON AND GUARANTOR ; OR (iii) ANY BREACH, CONDUCT, ACTS
OR OMISSIONS OF SILICON OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR
REPRESENTING SILICON OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
22. Receipt of Copy. Guarantor acknowledges receipt of a copy of this
Guaranty.
Guarantor Signature: Agro Dynamics Canada Inc.
By /s/ Harold A. Joannidi
Title Treasurer
Address: 10 Alvin Court
East Brunswick, NJ 08816
COLLATERAL ASSIGNMENT, PATENT MORTGAGE
AND SECURITY AGREEMENT
This Collateral Assignment, Patent Mortgage and Security Agreement is made
as of the 28th day of April, 1997, by and between EcoScience Corporation
("Assignor"), and Silicon Valley Bank, a California banking corporation
("Assignee").
RECITALS
A. Assignee has agreed to lend to Assignor certain funds (the "Loans"),
pursuant to a Loan and Security Agreement dated substantially even date herewith
(the "Loan Agreement") and Assignor desires to borrow such funds from Assignee.
B. In order to induce Assignee to make the Loans, Assignor has agreed to
assign certain intangible property to Assignee for purposes of securing the
obligations of Assignor to Assignee.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Assignment, Patent Mortgage and Grant of Security Interest. As
collateral security for the prompt and complete payment and performance of all
of Assignor's present or future indebtedness, obligations and liabilities to
Assignee, Assignor hereby assigns, transfers, conveys and grants a security
interest and mortgage to Assignee, as security, but not as an ownership
interest, in and to Assignor's entire right, title and interest in, to and under
the following (all of which shall collectively be called the "Collateral"):
(a) All of present and future United States registered copyrights and
copyright registrations, including, without limitation, the registered
copyrights listed in Exhibit A-1 to this Agreement (and including all of the
exclusive rights afforded a copyright registrant in the United States under 17
U.S.C. ss.106 and any exclusive rights which may in the future arise by act of
Congress or otherwise) and all present and future applications for copyright
registrations (including applications for copyright registrations of derivative
works and compilations) (collectively, the "Registered Copyrights"), and any and
all royalties, payments, and other amounts payable to Assignor in connection
with the Registered Copyrights, together with all renewals and extensions of the
Registered Copyrights, the right to recover for all past, present, and future
infringements of the Registered Copyrights, and all computer programs, computer
databases, computer program flow diagrams, source codes, object codes and all
tangible property embodying or incorporating the Registered Copyrights, and all
other rights of every kind whatsoever accruing thereunder or pertaining thereto.
(b) All present and future copyrights which are not registered in the
United States Copyright Office (the "Unregistered Copyrights"), whether now
owned or hereafter acquired, including without limitation the Unregistered
Copyrights listed in Exhibit A-2 to this Agreement, and any and all royalties,
payments, and other amounts payable to Assignor in connection with the
Unregistered Copyrights, together with all renewals and extensions of the
Unregistered Copyrights, the right to recover for all past, present, and future
infringements of the Unregistered Copyrights, and all computer programs,
computer databases, computer program flow diagrams, source codes, object codes
and all tangible property embodying or incorporating the Unregistered
Copyrights, and all other rights of every kind whatsoever accruing thereunder or
pertaining thereto. The Registered Copyrights and the Unregistered Copyrights
collectively are referred to herein as the "Copyrights."
(c) All right, title and interest in and to any and all present and
future license agreements with respect to the Copyrights, including without
limitation the license agreements listed in Exhibit A-3 to this Agreement (the
"Licenses").
(d) All present and future accounts, accounts receivable and other
rights to payment arising from, in connection with or relating to the
Copyrights.
(e) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
<PAGE>
(f) Any and all design rights which may be available to Assignor now
or hereafter existing, created, acquired or held;
(g) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications set forth on Exhibit B attached hereto
(collectively, the "Patents");
(h) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Assignor connected with and symbolized by
such trademarks, including without limitation those set forth on Exhibit C
attached hereto (collectively, the "Trademarks")
(i) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(j) All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;
(k) All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(l) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE CONSTRUED
AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ASSIGNOR'S
OBLIGATIONS TO ASSIGNEE UNDER THE LOAN AGREEMENT.
2. Authorization and Request. Assignor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this conditional assignment.
3. Covenants and Warranties. Assignor represents, warrants, covenants and
agrees as follows:
(a) Assignor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Assignor to its customers in the ordinary
course of business*.
*and one exclusive license granted by Assignor to Terminix International
Company, L.P. for the sale and marketing of Bio-Blast.
(b) Listed on Exhibits A-1 and A-2 are all copyrights owned by
Assignor, in which Assignor has an interest, or which are used in Assignor's
business.
(c) Each employee, agent and/or independent contractor who has
participated in the creation of the property constituting the Collateral has
either executed an assignment of his or her rights of authorship to Assignor or
is an employee of Assignor acting within the scope of his or her employment and
was such an employee at the time of said creation.
(d) All of Assignor's present and future software, computer programs
and other works of authorship subject to United States copyright protection, the
sale, licensing or other disposition of which results in royalties receivable,
license fees receivable, accounts receivable or other sums owing to Assignor
(collectively, "Receivables"), have been and shall be registered with the United
States Copyright Office prior to the date Assignor requests or accepts any loan
from Assignee with respect to such Receivables and prior to the date Assignor
includes
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<PAGE>
any such Receivables in any accounts receivable aging, borrowing base
report or certificate or other similar report provided to Assignee, and Assignor
shall provide to Assignee copies of all such registrations promptly upon the
receipt of the same.
(e) Assignor shall undertake all reasonable measures to cause its
employees, agents and independent contractors to assign to Assignor all rights
of authorship to any copyrighted material in which Assignor has or may
subsequently acquire any right or interest.
(f) Performance of this Assignment does not conflict with or result in
a breach of any agreement to which Assignor is bound, except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the licensor's or other party's consent and
this Assignment constitutes an assignment.
(g) During the term of this Agreement, Assignor will not transfer or
otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Assignor in the ordinary course of business or as set forth
in this Assignment;
(h) Each of the Patents is valid and enforceable, and no part of the
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Collateral violates the rights of any
third party;
(i) Assignor shall promptly advise Assignee of any material adverse
change in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Assignor in or to any Trademark, Patent or
Copyright not specified in this Assignment;
(j) Assignor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Assignee in writing of material infringements detected and (iii)
not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited or
dedicated to the public without the written consent of Assignee, which shall not
be unreasonably withheld unless Assignor determines that reasonable business
practices suggest that abandonment is appropriate.
(k) Assignor shall promptly register the most recent version of any of
Assignor's Copyrights, if not so already registered, and shall, from time to
time, execute and file such other instruments, and take such further actions as
Assignee may reasonably request from time to time to perfect or continue the
perfection of Assignee's interest in the Collateral;
(l) This Assignment creates, and in the case of after acquired
Collateral, this Assignment will create at the time Assignor first has rights in
such after acquired Collateral, in favor of Assignee a valid and perfected first
priority security interest in the Collateral in the United States securing the
payment and performance of the obligations evidenced by the Loan Agreement upon
making the filings referred to in clause (m) below;
(m) To its knowledge, except for, and upon, the filing with the United
States Patent and Trademark office with respect to the Patents and Trademarks
and the Register of Copyrights with respect to the Copyrights necessary to
perfect the security interests and assignment created hereunder and except as
has been already made or obtained, no authorization, approval or other action
by, and no notice to or filing with, any U.S. governmental authority or U.S.
regulatory body is required either (i) for the grant by Assignor of the security
interest granted hereby or for the execution, delivery or performance of this
Assignment by Assignor in the U.S. or (ii) for the perfection in the United
States or the exercise by Assignee of its rights and remedies thereunder;
(n) All information heretofore, herein or hereafter supplied to
Assignee by or on behalf of Assignor with respect to the Collateral is accurate
and complete in all material respects.
(o) Assignor shall not enter into any agreement that would materially
impair or conflict with Assignor's obligations hereunder without Assignee's
prior written consent, which consent shall not be unreasonably
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<PAGE>
withheld. Assignor shall not permit the inclusion in any material contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Assignor's rights and interest in
any property included within the definition of the Collateral acquired under
such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts.
(p) Upon any executive officer of Assignor obtaining actual knowledge
thereof, Assignor will promptly notify Assignee in writing of any event that
materially adversely affects the value of any material Collateral, the ability
of Assignor to dispose of any material Collateral or the rights and remedies of
Assignee in relation thereto, including the levy of any legal process against
any of the Collateral.
4. Assignee's Rights. Assignee shall have the right, but not the
obligation, to take, at Assignor's sole expense, any actions that Assignor is
required under this Assignment to take but which Assignor fails to take, after
fifteen (15) days' notice to Assignor. Assignor shall reimburse and indemnify
Assignee for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.
5. Inspection Rights. Assignor hereby grants to Assignee and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Assignor, and any of Assignor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Assignor and as often as may be
reasonably requested, but not more than one (1) in every six (6) months;
provided, however, nothing herein shall entitle Assignee access to Assignor's
trade secrets and other proprietary information.
6. Further Assurances; Attorney in Fact.
(a) Upon an Event of Default, on a continuing basis thereafter,
Assignor will, subject to any prior licenses, encumbrances and restrictions and
prospective licenses, make, execute, acknowledge and deliver, and file and
record in the proper filing and recording places in the United States, all such
instruments, including, appropriate financing and continuation statements and
collateral agreements and filings with the United States Patent and Trademarks
Office and the Register of Copyrights, and take all such action as may
reasonably be deemed necessary or advisable, or as requested by Assignee, to
perfect Assignee's security interest in all Copyrights, Patents and Trademarks
and otherwise to carry out the intent and purposes of this Collateral
Assignment, or for assuring and confirming to Assignee the grant or perfection
of a security interest in all Collateral.
(b) Upon an Event of Default, Assignor hereby irrevocably appoints
Assignee as Assignor's attorney-in-fact, with full authority in the place and
stead of Assignor and in the name of Assignor, Assignee or otherwise, from time
to time in Assignee's discretion, upon Assignor's failure or inability to do so,
to take any action and to execute any instrument which Assignee may deem
necessary or advisable to accomplish the purposes of this Collateral Assignment,
including:
(i) To modify, in its sole discretion, this Collateral Assignment
without first obtaining Assignor's approval of or signature to such modification
by amending Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Assignor after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Assignor no longer has or claims any
right, title or interest; and
(ii) To file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Assignor where permitted by law.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Assignment:
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<PAGE>
(a) An Event of Default occurs under the Loan Agreement; or
(b) Assignor breaches any warranty or agreement made by Assignor in
this Assignment.
8. Remedies. Upon the occurrence and continuance of an Event of Default,
Assignee shall have the right to exercise all the remedies of a secured party
under the California Uniform Commercial Code, including without limitation the
right to require Assignor to assemble the Collateral and any tangible property
in which Assignee has a security interest and to make it available to Assignee
at a place designated by Assignee. Assignee shall have a nonexclusive, royalty
free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Assignee to exercise its rights and remedies upon
the occurrence of an Event of Default. Assignor will pay any expenses (including
reasonable attorney's fees) incurred by Assignee in connection with the exercise
of any of Assignee's rights hereunder, including without limitation any expense
incurred in disposing of the Collateral. All of Assignee's rights and remedies
with respect to the Collateral shall be cumulative.
9. Indemnity. Assignor agrees to defend, indemnify and hold harmless
Assignee and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Assignee as a
result of or in any way arising out of, following or consequential to
transactions between Assignee and Assignor, whether under this Assignment or
otherwise (including without limitation, reasonable attorneys fees and
reasonable expenses), except for losses arising form or out of Assignee's gross
negligence or willful misconduct.
10. Release. At such time as Assignor shall completely satisfy all of the
obligations secured hereunder, Assignee shall execute and deliver to Assignor
all assignments and other instruments as may be reasonably necessary or proper
to terminate Assignee's security interest in the Collateral, subject to any
disposition of the Collateral which may have been made by Assignee pursuant to
this Agreement. For the purpose of this Agreement, the obligations secured
hereunder shall be deemed to continue if Assignor enters into any bankruptcy or
similar proceeding at a time when any amount paid to Assignee could be ordered
to be repaid as a preference or pursuant to a similar theory, and shall continue
until it is finally determined that no such repayment can be ordered.
11. No Waiver. No course of dealing between Assignor and Assignee, nor any
failure to exercise nor any delay in exercising, on the part of Assignee, any
right, power, or privilege under this Agreement or under the Loan Agreement or
any other agreement, shall operate as a waiver. No single or partial exercise of
any right, power, or privilege under this Agreement or under the Loan Agreement
or any other agreement by Assignee shall preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege by Assignee.
12. Rights Are Cumulative. All of Assignee's rights and remedies with
respect to the Collateral whether established by this Agreement, the Loan
Agreement, or any other documents or agreements, or by law shall be cumulative
and may be exercised concurrently or in any order.
13. Course of Dealing. No course of dealing, nor any failure to exercise,
nor any delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
14. Attorneys' Fees. If any action relating to this Assignment is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.
15. Amendments. This Assignment may be amended only by a written instrument
signed by both parties hereto. To the extent that any provision of this
Agreement conflicts with any provision of the Loan Agreement, the provision
giving Assignee greater rights or remedies shall govern, it being understood
that the purpose of this Agreement is to add to, and not detract from, the
rights granted to Assignee under the Loan Agreement. This Agreement, the Loan
Agreement, and the documents relating thereto comprise the entire agreement of
the parties with respect to the matters addressed in this Agreement.
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<PAGE>
16. Severability. The provisions of this Agreement are severable. If any
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.
17. Counterparts. This Assignment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
18. California Law and Jurisdiction. This Assignment shall be governed by
the laws of the State of California, without regard for choice of law
provisions. Assignor and Assignee consent to the nonexclusive jurisdiction of
any state or federal court located in Santa Clara County, California.
19. Confidentiality. In handling any confidential information, Assignee
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Assignment
except that the disclosure of this information may be made (i) to the affiliates
of the Assignee, (ii) to prospective transferee or purchasers of an interest in
the obligations secured hereby, provided that they have entered into a
comparable confidentiality agreement in favor of Assignor and have delivered a
copy to Assignor, (iii) as required by law, regulation, rule or order, subpoena
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Assignee.
20. WAIVER OF RIGHT TO JURY TRIAL. ASSIGNEE AND ASSIGNOR EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN ASSIGNEE AND ASSIGNOR; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF ASSIGNEE OR ASSIGNOR OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
ASSIGNEE OR ASSIGNOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the
day and year first above written.
Address of Assignor: ASSIGNOR:
10 Alvin Court
East Brunswick, NJ 08816 ECOSCIENCE CORPORATION
By: /s/ Harold A. Joannidi
Name: Harold A. Joannidi
-6-
<PAGE>
STATE OF NEW JERSEY )
) ss.
COUNTY OF MIDDLESEX )
On May 2, 1997, before me, Marianne Colucci, Notary Public, personally
appeared Harold Joannidi, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
Witness my hand and official seal.
/s/ Marianne Colucci
(Seal)
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<PAGE>
Exhibit "A-1" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-1"
REGISTERED COPYRIGHTS
REG. NO. REG. DATE COPYRIGHT
- -------- --------- ---------
NONE
-8-
<PAGE>
Exhibit "A-2" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-2"
UNREGISTERED COPYRIGHTS
DESCRIPTION OF COPYRIGHTS
NONE
-9-
<PAGE>
Exhibit "A-3" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-3"
DESCRIPTION OF LICENSE AGREEMENTS
NONE
-10-
<PAGE>
Exhibit "B" attached to that certain Collateral Assignment, Patent Mortgage and
Security Agreement
EXHIBIT "B"
PATENTS
TITLE SERIAL NO. FILING DATE
- ----- ---------- -----------
Insect Contamination Chamber D324406 March 3, 1992
Method and Device for the
Biological Control of Cockroaches 5057315 October 15, 1991
Method and Device for the
Biological Control of Insects 5057316 October 15, 1991
Method and Device for the
Biological Control of Flying Insects 5189831 March 2, 1993
Device for the Biological
Control of Cockroaches 5310552 May 10, 1994
Device Containing Fungus for
the Biological Control of Insects 5427784 June 27, 1995
Maintenance and Long Term
Stabilization of Fungal Conidia
Using Surfactants 5512280 April 30, 1996
Pseudomonas Syringae Atcc
55389 and Use Thereof for
Inhibiting Microbial Decay on Fruit 5554368 September 10, 1996
-11-
<PAGE>
Exhibit "C" attached to that certain Collateral Assignment, Patent Mortgage and
Security Agreement
EXHIBIT "C"
TRADEMARKS
MARK REG./FILE DATE APP./SERIAL NO. STATUS
- ---- -------------- --------------- ------
EcoScience with the
EcoScience logo
Bio-Path
Horizontal Transfer
Nature Seal (as sublicensee)
Bio-Blast
Bio-Save
Back-Off
-12-
COLLATERAL ASSIGNMENT, PATENT MORTGAGE
AND SECURITY AGREEMENT
This Collateral Assignment, Patent Mortgage and Security Agreement is made
as of the 28th day of April, 1997, by and between EcoScience Produce Systems
Corp. ("Assignor"), and Silicon Valley Bank, a California banking corporation
("Assignee").
RECITALS
A. Assignee has agreed to lend to Assignor certain funds (the "Loans"),
pursuant to a Loan and Security Agreement dated substantially even date herewith
(the "Loan Agreement") and Assignor desires to borrow such funds from Assignee.
B. In order to induce Assignee to make the Loans, Assignor has agreed to
assign certain intangible property to Assignee for purposes of securing the
obligations of Assignor to Assignee.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Assignment, Patent Mortgage and Grant of Security Interest. As
collateral security for the prompt and complete payment and performance of all
of Assignor's present or future indebtedness, obligations and liabilities to
Assignee, Assignor hereby assigns, transfers, conveys and grants a security
interest and mortgage to Assignee, as security, but not as an ownership
interest, in and to Assignor's entire right, title and interest in, to and under
the following (all of which shall collectively be called the "Collateral"):
(a) All of present and future United States registered copyrights and
copyright registrations, including, without limitation, the registered
copyrights listed in Exhibit A-1 to this Agreement (and including all of the
exclusive rights afforded a copyright registrant in the United States under 17
U.S.C. ss.106 and any exclusive rights which may in the future arise by act of
Congress or otherwise) and all present and future applications for copyright
registrations (including applications for copyright registrations of derivative
works and compilations) (collectively, the "Registered Copyrights"), and any and
all royalties, payments, and other amounts payable to Assignor in connection
with the Registered Copyrights, together with all renewals and extensions of the
Registered Copyrights, the right to recover for all past, present, and future
infringements of the Registered Copyrights, and all computer programs, computer
databases, computer program flow diagrams, source codes, object codes and all
tangible property embodying or incorporating the Registered Copyrights, and all
other rights of every kind whatsoever accruing thereunder or pertaining thereto.
(b) All present and future copyrights which are not registered in the
United States Copyright Office (the "Unregistered Copyrights"), whether now
owned or hereafter acquired, including without limitation the Unregistered
Copyrights listed in Exhibit A-2 to this Agreement, and any and all royalties,
payments, and other amounts payable to Assignor in connection with the
Unregistered Copyrights, together with all renewals and extensions of the
Unregistered Copyrights, the right to recover for all past, present, and future
infringements of the Unregistered Copyrights, and all computer programs,
computer databases, computer program flow diagrams, source codes, object codes
and all tangible property embodying or incorporating the Unregistered
Copyrights, and all other rights of every kind whatsoever accruing thereunder or
pertaining thereto. The Registered Copyrights and the Unregistered Copyrights
collectively are referred to herein as the "Copyrights."
(c) All right, title and interest in and to any and all present and
future license agreements with respect to the Copyrights, including without
limitation the license agreements listed in Exhibit A-3 to this Agreement (the
"Licenses").
(d) All present and future accounts, accounts receivable and other
rights to payment arising from, in connection with or relating to the
Copyrights.
(e) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
<PAGE>
(f) Any and all design rights which may be available to Assignor now
or hereafter existing, created, acquired or held;
(g) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications set forth on Exhibit B attached hereto
(collectively, the "Patents");
(h) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Assignor connected with and symbolized by
such trademarks, including without limitation those set forth on Exhibit C
attached hereto (collectively, the "Trademarks")
(i) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(j) All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;
(k) All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(l) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE CONSTRUED
AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ASSIGNOR'S
OBLIGATIONS TO ASSIGNEE UNDER THE LOAN AGREEMENT.
2. Authorization and Request. Assignor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this conditional assignment.
3. Covenants and Warranties. Assignor represents, warrants, covenants and
agrees as follows:
(a) Assignor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Assignor to its customers in the ordinary
course of business.
(b) Listed on Exhibits A-1 and A-2 are all copyrights owned by
Assignor, in which Assignor has an interest, or which are used in Assignor's
business.
(c) Each employee, agent and/or independent contractor who has
participated in the creation of the property constituting the Collateral has
either executed an assignment of his or her rights of authorship to Assignor or
is an employee of Assignor acting within the scope of his or her employment and
was such an employee at the time of said creation.
(d) All of Assignor's present and future software, computer programs
and other works of authorship subject to United States copyright protection, the
sale, licensing or other disposition of which results in royalties receivable,
license fees receivable, accounts receivable or other sums owing to Assignor
(collectively, "Receivables"), have been and shall be registered with the United
States Copyright Office prior to the date Assignor requests or accepts any loan
from Assignee with respect to such Receivables and prior to the date Assignor
includes any such Receivables in any accounts receivable aging, borrowing base
report or certificate or other similar report provided to Assignee, and Assignor
shall provide to Assignee copies of all such registrations promptly upon the
receipt of the same.
-2-
<PAGE>
(e) Assignor shall undertake all reasonable measures to cause its
employees, agents and independent contractors to assign to Assignor all rights
of authorship to any copyrighted material in which Assignor has or may
subsequently acquire any right or interest.
(f) Performance of this Assignment does not conflict with or result in
a breach of any agreement to which Assignor is bound, except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the licensor's or other party's consent and
this Assignment constitutes an assignment.
(g) During the term of this Agreement, Assignor will not transfer or
otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Assignor in the ordinary course of business or as set forth
in this Assignment;
(h) Each of the Patents is valid and enforceable, and no part of the
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Collateral violates the rights of any
third party;
(i) Assignor shall promptly advise Assignee of any material adverse
change in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Assignor in or to any Trademark, Patent or
Copyright not specified in this Assignment;
(j) Assignor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Assignee in writing of material infringements detected and (iii)
not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited or
dedicated to the public without the written consent of Assignee, which shall not
be unreasonably withheld unless Assignor determines that reasonable business
practices suggest that abandonment is appropriate.
(k) Assignor shall promptly register the most recent version of any of
Assignor's Copyrights, if not so already registered, and shall, from time to
time, execute and file such other instruments, and take such further actions as
Assignee may reasonably request from time to time to perfect or continue the
perfection of Assignee's interest in the Collateral;
(l) This Assignment creates, and in the case of after acquired
Collateral, this Assignment will create at the time Assignor first has rights in
such after acquired Collateral, in favor of Assignee a valid and perfected first
priority security interest in the Collateral in the United States securing the
payment and performance of the obligations evidenced by the Loan Agreement upon
making the filings referred to in clause (m) below;
(m) To its knowledge, except for, and upon, the filing with the United
States Patent and Trademark office with respect to the Patents and Trademarks
and the Register of Copyrights with respect to the Copyrights necessary to
perfect the security interests and assignment created hereunder and except as
has been already made or obtained, no authorization, approval or other action
by, and no notice to or filing with, any U.S. governmental authority or U.S.
regulatory body is required either (i) for the grant by Assignor of the security
interest granted hereby or for the execution, delivery or performance of this
Assignment by Assignor in the U.S. or (ii) for the perfection in the United
States or the exercise by Assignee of its rights and remedies thereunder;
(n) All information heretofore, herein or hereafter supplied to
Assignee by or on behalf of Assignor with respect to the Collateral is accurate
and complete in all material respects.
(o) Assignor shall not enter into any agreement that would materially
impair or conflict with Assignor's obligations hereunder without Assignee's
prior written consent, which consent shall not be unreasonably withheld.
Assignor shall not permit the inclusion in any material contract to which it
becomes a party of any provisions that could or might in any way prevent the
creation of a security interest in Assignor's rights and interest in any
property included within the definition of the Collateral acquired under such
contracts, except that certain
-3-
<PAGE>
contracts may contain anti-assignment provisions that could in effect prohibit
the creation of a security interest in such contracts.
(p) Upon any executive officer of Assignor obtaining actual knowledge
thereof, Assignor will promptly notify Assignee in writing of any event that
materially adversely affects the value of any material Collateral, the ability
of Assignor to dispose of any material Collateral or the rights and remedies of
Assignee in relation thereto, including the levy of any legal process against
any of the Collateral.
4. Assignee's Rights. Assignee shall have the right, but not the
obligation, to take, at Assignor's sole expense, any actions that Assignor is
required under this Assignment to take but which Assignor fails to take, after
fifteen (15) days' notice to Assignor. Assignor shall reimburse and indemnify
Assignee for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.
5. Inspection Rights. Assignor hereby grants to Assignee and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Assignor, and any of Assignor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Assignor and as often as may be
reasonably requested, but not more than one (1) in every six (6) months;
provided, however, nothing herein shall entitle Assignee access to Assignor's
trade secrets and other proprietary information.
6. Further Assurances; Attorney in Fact.
(a) Upon an Event of Default, on a continuing basis thereafter,
Assignor will, subject to any prior licenses, encumbrances and restrictions and
prospective licenses, make, execute, acknowledge and deliver, and file and
record in the proper filing and recording places in the United States, all such
instruments, including, appropriate financing and continuation statements and
collateral agreements and filings with the United States Patent and Trademarks
Office and the Register of Copyrights, and take all such action as may
reasonably be deemed necessary or advisable, or as requested by Assignee, to
perfect Assignee's security interest in all Copyrights, Patents and Trademarks
and otherwise to carry out the intent and purposes of this Collateral
Assignment, or for assuring and confirming to Assignee the grant or perfection
of a security interest in all Collateral.
(b) Upon an Event of Default, Assignor hereby irrevocably appoints
Assignee as Assignor's attorney-in-fact, with full authority in the place and
stead of Assignor and in the name of Assignor, Assignee or otherwise, from time
to time in Assignee's discretion, upon Assignor's failure or inability to do so,
to take any action and to execute any instrument which Assignee may deem
necessary or advisable to accomplish the purposes of this Collateral Assignment,
including:
(i) To modify, in its sole discretion, this Collateral Assignment
without first obtaining Assignor's approval of or signature to such modification
by amending Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Assignor after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Assignor no longer has or claims any
right, title or interest; and
(ii) To file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Assignor where permitted by law.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Assignment:
(a) An Event of Default occurs under the Loan Agreement; or
(b) Assignor breaches any warranty or agreement made by Assignor in
this Assignment.
-4-
<PAGE>
8. Remedies. Upon the occurrence and continuance of an Event of Default,
Assignee shall have the right to exercise all the remedies of a secured party
under the California Uniform Commercial Code, including without limitation the
right to require Assignor to assemble the Collateral and any tangible property
in which Assignee has a security interest and to make it available to Assignee
at a place designated by Assignee. Assignee shall have a nonexclusive, royalty
free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Assignee to exercise its rights and remedies upon
the occurrence of an Event of Default. Assignor will pay any expenses (including
reasonable attorney's fees) incurred by Assignee in connection with the exercise
of any of Assignee's rights hereunder, including without limitation any expense
incurred in disposing of the Collateral. All of Assignee's rights and remedies
with respect to the Collateral shall be cumulative.
9. Indemnity. Assignor agrees to defend, indemnify and hold harmless
Assignee and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Assignee as a
result of or in any way arising out of, following or consequential to
transactions between Assignee and Assignor, whether under this Assignment or
otherwise (including without limitation, reasonable attorneys fees and
reasonable expenses), except for losses arising form or out of Assignee's gross
negligence or willful misconduct.
10. Release. At such time as Assignor shall completely satisfy all of the
obligations secured hereunder, Assignee shall execute and deliver to Assignor
all assignments and other instruments as may be reasonably necessary or proper
to terminate Assignee's security interest in the Collateral, subject to any
disposition of the Collateral which may have been made by Assignee pursuant to
this Agreement. For the purpose of this Agreement, the obligations secured
hereunder shall be deemed to continue if Assignor enters into any bankruptcy or
similar proceeding at a time when any amount paid to Assignee could be ordered
to be repaid as a preference or pursuant to a similar theory, and shall continue
until it is finally determined that no such repayment can be ordered.
11. No Waiver. No course of dealing between Assignor and Assignee, nor any
failure to exercise nor any delay in exercising, on the part of Assignee, any
right, power, or privilege under this Agreement or under the Loan Agreement or
any other agreement, shall operate as a waiver. No single or partial exercise of
any right, power, or privilege under this Agreement or under the Loan Agreement
or any other agreement by Assignee shall preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege by Assignee.
12. Rights Are Cumulative. All of Assignee's rights and remedies with
respect to the Collateral whether established by this Agreement, the Loan
Agreement, or any other documents or agreements, or by law shall be cumulative
and may be exercised concurrently or in any order.
13. Course of Dealing. No course of dealing, nor any failure to exercise,
nor any delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
14. Attorneys' Fees. If any action relating to this Assignment is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.
15. Amendments. This Assignment may be amended only by a written instrument
signed by both parties hereto. To the extent that any provision of this
Agreement conflicts with any provision of the Loan Agreement, the provision
giving Assignee greater rights or remedies shall govern, it being understood
that the purpose of this Agreement is to add to, and not detract from, the
rights granted to Assignee under the Loan Agreement. This Agreement, the Loan
Agreement, and the documents relating thereto comprise the entire agreement of
the parties with respect to the matters addressed in this Agreement.
16. Severability. The provisions of this Agreement are severable. If any
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.
-5-
<PAGE>
17. Counterparts. This Assignment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
18. California Law and Jurisdiction. This Assignment shall be governed by
the laws of the State of California, without regard for choice of law
provisions. Assignor and Assignee consent to the nonexclusive jurisdiction of
any state or federal court located in Santa Clara County, California.
19. Confidentiality. In handling any confidential information, Assignee
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Assignment
except that the disclosure of this information may be made (i) to the affiliates
of the Assignee, (ii) to prospective transferee or purchasers of an interest in
the obligations secured hereby, provided that they have entered into a
comparable confidentiality agreement in favor of Assignor and have delivered a
copy to Assignor, (iii) as required by law, regulation, rule or order, subpoena
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Assignee.
20. WAIVER OF RIGHT TO JURY TRIAL. ASSIGNEE AND ASSIGNOR EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN ASSIGNEE AND ASSIGNOR; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF ASSIGNEE OR ASSIGNOR OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
ASSIGNEE OR ASSIGNOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the
day and year first above written.
Address of Assignor: ASSIGNOR:
10 Alvin Court
East Brunswick, NJ 08816 ECOSCIENCE PRODUCE SYSTEMS
CORP.
By: /s/ Harold A. Joannidi
Name: Harold A. Joannidi
-6-
<PAGE>
STATE OF MIDDLESEX )
) ss.
COUNTY OF NEW JERSEY )
On May 2, 1997, before me, Marianne Colucci, Notary Public, personally
appeared Harold Joannidi, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
Witness my hand and official seal.
Marianne Colucci
(Seal)
-7-
<PAGE>
Exhibit "A-1" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-1"
REGISTERED COPYRIGHTS
REG. NO. REG. DATE COPYRIGHT
- -------- --------- ---------
NONE
-8-
<PAGE>
Exhibit "A-2" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-2"
UNREGISTERED COPYRIGHTS
DESCRIPTION OF COPYRIGHTS
NONE
-9-
<PAGE>
Exhibit "A-3" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-3"
DESCRIPTION OF LICENSE AGREEMENTS
NONE
-10-
<PAGE>
Exhibit "B" attached to that certain Collateral Assignment, Patent Mortgage and
Security Agreement
EXHIBIT "B"
PATENTS
TITLE SERIAL NO. FILING DATE
- ----- ---------- -----------
NONE
-11-
<PAGE>
Exhibit "C" attached to that certain Collateral Assignment, Patent Mortgage and
Security Agreement
EXHIBIT "C"
TRADEMARKS
MARK REG./FILE DATE APP./SERIAL NO. STATUS
- ---- -------------- --------------- ------
PacRite
SEALBRITE
CITRASHINE
PRIME-SHINE
DURA-FRESH
STORE-RITE
-12-
COLLATERAL ASSIGNMENT, PATENT MORTGAGE
AND SECURITY AGREEMENT
This Collateral Assignment, Patent Mortgage and Security Agreement is made
as of the 28th day of April, 1997, by and between Agro Dynamics, Inc.
("Assignor"), and Silicon Valley Bank, a California banking corporation
("Assignee").
RECITALS
A. Assignee has agreed to lend to Assignor certain funds (the "Loans"),
pursuant to a Loan and Security Agreement dated substantially even date herewith
(the "Loan Agreement") and Assignor desires to borrow such funds from Assignee.
B. In order to induce Assignee to make the Loans, Assignor has agreed to
assign certain intangible property to Assignee for purposes of securing the
obligations of Assignor to Assignee.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Assignment, Patent Mortgage and Grant of Security Interest. As
collateral security for the prompt and complete payment and performance of all
of Assignor's present or future indebtedness, obligations and liabilities to
Assignee, Assignor hereby assigns, transfers, conveys and grants a security
interest and mortgage to Assignee, as security, but not as an ownership
interest, in and to Assignor's entire right, title and interest in, to and under
the following (all of which shall collectively be called the "Collateral"):
(a) All of present and future United States registered copyrights and
copyright registrations, including, without limitation, the registered
copyrights listed in Exhibit A-1 to this Agreement (and including all of the
exclusive rights afforded a copyright registrant in the United States under 17
U.S.C. ss.106 and any exclusive rights which may in the future arise by act of
Congress or otherwise) and all present and future applications for copyright
registrations (including applications for copyright registrations of derivative
works and compilations) (collectively, the "Registered Copyrights"), and any and
all royalties, payments, and other amounts payable to Assignor in connection
with the Registered Copyrights, together with all renewals and extensions of the
Registered Copyrights, the right to recover for all past, present, and future
infringements of the Registered Copyrights, and all computer programs, computer
databases, computer program flow diagrams, source codes, object codes and all
tangible property embodying or incorporating the Registered Copyrights, and all
other rights of every kind whatsoever accruing thereunder or pertaining thereto.
(b) All present and future copyrights which are not registered in the
United States Copyright Office (the "Unregistered Copyrights"), whether now
owned or hereafter acquired, including without limitation the Unregistered
Copyrights listed in Exhibit A-2 to this Agreement, and any and all royalties,
payments, and other amounts payable to Assignor in connection with the
Unregistered Copyrights, together with all renewals and extensions of the
Unregistered Copyrights, the right to recover for all past, present, and future
infringements of the Unregistered Copyrights, and all computer programs,
computer databases, computer program flow diagrams, source codes, object codes
and all tangible property embodying or incorporating the Unregistered
Copyrights, and all other rights of every kind whatsoever accruing thereunder or
pertaining thereto. The Registered Copyrights and the Unregistered Copyrights
collectively are referred to herein as the "Copyrights."
(c) All right, title and interest in and to any and all present and
future license agreements with respect to the Copyrights, including without
limitation the license agreements listed in Exhibit A-3 to this Agreement (the
"Licenses").
(d) All present and future accounts, accounts receivable and other
rights to payment arising from, in connection with or relating to the
Copyrights.
(e) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
<PAGE>
(f) Any and all design rights which may be available to Assignor now
or hereafter existing, created, acquired or held;
(g) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications set forth on Exhibit B attached hereto
(collectively, the "Patents");
(h) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Assignor connected with and symbolized by
such trademarks, including without limitation those set forth on Exhibit C
attached hereto (collectively, the "Trademarks")
(i) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(j) All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;
(k) All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(l) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE CONSTRUED
AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ASSIGNOR'S
OBLIGATIONS TO ASSIGNEE UNDER THE LOAN AGREEMENT.
2. Authorization and Request. Assignor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this conditional assignment.
3. Covenants and Warranties. Assignor represents, warrants, covenants and
agrees as follows:
(a) Assignor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Assignor to its customers in the ordinary
course of business.
(b) Listed on Exhibits A-1 and A-2 are all copyrights owned by
Assignor, in which Assignor has an interest, or which are used in Assignor's
business.
(c) Each employee, agent and/or independent contractor who has
participated in the creation of the property constituting the Collateral has
either executed an assignment of his or her rights of authorship to Assignor or
is an employee of Assignor acting within the scope of his or her employment and
was such an employee at the time of said creation.
(d) All of Assignor's present and future software, computer programs
and other works of authorship subject to United States copyright protection, the
sale, licensing or other disposition of which results in royalties receivable,
license fees receivable, accounts receivable or other sums owing to Assignor
(collectively, "Receivables"), have been and shall be registered with the United
States Copyright Office prior to the date Assignor requests or accepts any loan
from Assignee with respect to such Receivables and prior to the date Assignor
includes any such Receivables in any accounts receivable aging, borrowing base
report or certificate or other similar report provided to Assignee, and Assignor
shall provide to Assignee copies of all such registrations promptly upon the
receipt of the same.
-2-
<PAGE>
(e) Assignor shall undertake all reasonable measures to cause its
employees, agents and independent contractors to assign to Assignor all rights
of authorship to any copyrighted material in which Assignor has or may
subsequently acquire any right or interest.
(f) Performance of this Assignment does not conflict with or result in
a breach of any agreement to which Assignor is bound, except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the licensor's or other party's consent and
this Assignment constitutes an assignment.
(g) During the term of this Agreement, Assignor will not transfer or
otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Assignor in the ordinary course of business or as set forth
in this Assignment;
(h) Each of the Patents is valid and enforceable, and no part of the
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Collateral violates the rights of any
third party;
(i) Assignor shall promptly advise Assignee of any material adverse
change in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Assignor in or to any Trademark, Patent or
Copyright not specified in this Assignment;
(j) Assignor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Assignee in writing of material infringements detected and (iii)
not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited or
dedicated to the public without the written consent of Assignee, which shall not
be unreasonably withheld unless Assignor determines that reasonable business
practices suggest that abandonment is appropriate.
(k) Assignor shall promptly register the most recent version of any of
Assignor's Copyrights, if not so already registered, and shall, from time to
time, execute and file such other instruments, and take such further actions as
Assignee may reasonably request from time to time to perfect or continue the
perfection of Assignee's interest in the Collateral;
(l) This Assignment creates, and in the case of after acquired
Collateral, this Assignment will create at the time Assignor first has rights in
such after acquired Collateral, in favor of Assignee a valid and perfected first
priority security interest in the Collateral in the United States securing the
payment and performance of the obligations evidenced by the Loan Agreement upon
making the filings referred to in clause (m) below;
(m) To its knowledge, except for, and upon, the filing with the United
States Patent and Trademark office with respect to the Patents and Trademarks
and the Register of Copyrights with respect to the Copyrights necessary to
perfect the security interests and assignment created hereunder and except as
has been already made or obtained, no authorization, approval or other action
by, and no notice to or filing with, any U.S. governmental authority or U.S.
regulatory body is required either (i) for the grant by Assignor of the security
interest granted hereby or for the execution, delivery or performance of this
Assignment by Assignor in the U.S. or (ii) for the perfection in the United
States or the exercise by Assignee of its rights and remedies thereunder;
(n) All information heretofore, herein or hereafter supplied to
Assignee by or on behalf of Assignor with respect to the Collateral is accurate
and complete in all material respects.
(o) Assignor shall not enter into any agreement that would materially
impair or conflict with Assignor's obligations hereunder without Assignee's
prior written consent, which consent shall not be unreasonably withheld.
Assignor shall not permit the inclusion in any material contract to which it
becomes a party of any provisions that could or might in any way prevent the
creation of a security interest in Assignor's rights and interest in any
property included within the definition of the Collateral acquired under such
contracts, except that certain -3-
<PAGE>
contracts may contain anti-assignment provisions that could in effect prohibit
the creation of a security interest in such contracts.
(p) Upon any executive officer of Assignor obtaining actual knowledge
thereof, Assignor will promptly notify Assignee in writing of any event that
materially adversely affects the value of any material Collateral, the ability
of Assignor to dispose of any material Collateral or the rights and remedies of
Assignee in relation thereto, including the levy of any legal process against
any of the Collateral.
4. Assignee's Rights. Assignee shall have the right, but not the
obligation, to take, at Assignor's sole expense, any actions that Assignor is
required under this Assignment to take but which Assignor fails to take, after
fifteen (15) days' notice to Assignor. Assignor shall reimburse and indemnify
Assignee for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.
5. Inspection Rights. Assignor hereby grants to Assignee and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Assignor, and any of Assignor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Assignor and as often as may be
reasonably requested, but not more than one (1) in every six (6) months;
provided, however, nothing herein shall entitle Assignee access to Assignor's
trade secrets and other proprietary information.
6. Further Assurances; Attorney in Fact.
(a) Upon an Event of Default, on a continuing basis thereafter,
Assignor will, subject to any prior licenses, encumbrances and restrictions and
prospective licenses, make, execute, acknowledge and deliver, and file and
record in the proper filing and recording places in the United States, all such
instruments, including, appropriate financing and continuation statements and
collateral agreements and filings with the United States Patent and Trademarks
Office and the Register of Copyrights, and take all such action as may
reasonably be deemed necessary or advisable, or as requested by Assignee, to
perfect Assignee's security interest in all Copyrights, Patents and Trademarks
and otherwise to carry out the intent and purposes of this Collateral
Assignment, or for assuring and confirming to Assignee the grant or perfection
of a security interest in all Collateral.
(b) Upon an Event of Default, Assignor hereby irrevocably appoints
Assignee as Assignor's attorney-in-fact, with full authority in the place and
stead of Assignor and in the name of Assignor, Assignee or otherwise, from time
to time in Assignee's discretion, upon Assignor's failure or inability to do so,
to take any action and to execute any instrument which Assignee may deem
necessary or advisable to accomplish the purposes of this Collateral Assignment,
including:
(i) To modify, in its sole discretion, this Collateral Assignment
without first obtaining Assignor's approval of or signature to such modification
by amending Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Assignor after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Assignor no longer has or claims any
right, title or interest; and
(ii) To file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Assignor where permitted by law.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Assignment:
(a) An Event of Default occurs under the Loan Agreement; or
(b) Assignor breaches any warranty or agreement made by Assignor in
this Assignment.
-4-
<PAGE>
8. Remedies. Upon the occurrence and continuance of an Event of Default,
Assignee shall have the right to exercise all the remedies of a secured party
under the California Uniform Commercial Code, including without limitation the
right to require Assignor to assemble the Collateral and any tangible property
in which Assignee has a security interest and to make it available to Assignee
at a place designated by Assignee. Assignee shall have a nonexclusive, royalty
free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Assignee to exercise its rights and remedies upon
the occurrence of an Event of Default. Assignor will pay any expenses (including
reasonable attorney's fees) incurred by Assignee in connection with the exercise
of any of Assignee's rights hereunder, including without limitation any expense
incurred in disposing of the Collateral. All of Assignee's rights and remedies
with respect to the Collateral shall be cumulative.
9. Indemnity. Assignor agrees to defend, indemnify and hold harmless
Assignee and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Assignee as a
result of or in any way arising out of, following or consequential to
transactions between Assignee and Assignor, whether under this Assignment or
otherwise (including without limitation, reasonable attorneys fees and
reasonable expenses), except for losses arising form or out of Assignee's gross
negligence or willful misconduct.
10. Release. At such time as Assignor shall completely satisfy all of the
obligations secured hereunder, Assignee shall execute and deliver to Assignor
all assignments and other instruments as may be reasonably necessary or proper
to terminate Assignee's security interest in the Collateral, subject to any
disposition of the Collateral which may have been made by Assignee pursuant to
this Agreement. For the purpose of this Agreement, the obligations secured
hereunder shall be deemed to continue if Assignor enters into any bankruptcy or
similar proceeding at a time when any amount paid to Assignee could be ordered
to be repaid as a preference or pursuant to a similar theory, and shall continue
until it is finally determined that no such repayment can be ordered.
11. No Waiver. No course of dealing between Assignor and Assignee, nor any
failure to exercise nor any delay in exercising, on the part of Assignee, any
right, power, or privilege under this Agreement or under the Loan Agreement or
any other agreement, shall operate as a waiver. No single or partial exercise of
any right, power, or privilege under this Agreement or under the Loan Agreement
or any other agreement by Assignee shall preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege by Assignee.
12. Rights Are Cumulative. All of Assignee's rights and remedies with
respect to the Collateral whether established by this Agreement, the Loan
Agreement, or any other documents or agreements, or by law shall be cumulative
and may be exercised concurrently or in any order.
13. Course of Dealing. No course of dealing, nor any failure to exercise,
nor any delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
14. Attorneys' Fees. If any action relating to this Assignment is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.
15. Amendments. This Assignment may be amended only by a written instrument
signed by both parties hereto. To the extent that any provision of this
Agreement conflicts with any provision of the Loan Agreement, the provision
giving Assignee greater rights or remedies shall govern, it being understood
that the purpose of this Agreement is to add to, and not detract from, the
rights granted to Assignee under the Loan Agreement. This Agreement, the Loan
Agreement, and the documents relating thereto comprise the entire agreement of
the parties with respect to the matters addressed in this Agreement.
16. Severability. The provisions of this Agreement are severable. If any
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.
-5-
<PAGE>
17. Counterparts. This Assignment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
18. California Law and Jurisdiction. This Assignment shall be governed by
the laws of the State of California, without regard for choice of law
provisions. Assignor and Assignee consent to the nonexclusive jurisdiction of
any state or federal court located in Santa Clara County, California.
19. Confidentiality. In handling any confidential information, Assignee
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Assignment
except that the disclosure of this information may be made (i) to the affiliates
of the Assignee, (ii) to prospective transferee or purchasers of an interest in
the obligations secured hereby, provided that they have entered into a
comparable confidentiality agreement in favor of Assignor and have delivered a
copy to Assignor, (iii) as required by law, regulation, rule or order, subpoena
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Assignee.
20. WAIVER OF RIGHT TO JURY TRIAL. ASSIGNEE AND ASSIGNOR EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN ASSIGNEE AND ASSIGNOR; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF ASSIGNEE OR ASSIGNOR OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
ASSIGNEE OR ASSIGNOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the
day and year first above written.
Address of Assignor: ASSIGNOR:
10 Alvin Court
East Brunswick, NJ 08816 AGRO DYNAMICS, INC.
By: /s/ Harold A. Joannidi
Name: Harold A. Joannidi
-6-
<PAGE>
STATE OF NEW JERSEY )
) ss.
COUNTY OF MIDDLESEX )
On May 2, 1997, before me, Marianne Colucci, Notary Public, personally
appeared Harold Joannidi, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
Witness my hand and official seal.
/s/ Marianne Colucci
(Seal)
-7-
<PAGE>
Exhibit "A-1" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-1"
REGISTERED COPYRIGHTS
REG. NO. REG. DATE COPYRIGHT
- -------- --------- ---------
NONE
-8-
<PAGE>
Exhibit "A-2" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-2"
UNREGISTERED COPYRIGHTS
DESCRIPTION OF COPYRIGHTS
NONE
-9-
<PAGE>
Exhibit "A-3" attached to that certain Collateral Assignment, Patent Mortgage
and Security Agreement
EXHIBIT "A-3"
DESCRIPTION OF LICENSE AGREEMENTS
NONE
-10-
<PAGE>
Exhibit "B" attached to that certain Collateral Assignment, Patent Mortgage and
Security Agreement
EXHIBIT "B"
PATENTS
TITLE SERIAL NO. FILING DATE
- ----- ---------- -----------
Plant Tray with Locking
Mechanism and Method of Use 4999946 March 19, 1991
-11-
<PAGE>
Exhibit "C" attached to that certain Collateral Assignment, Patent Mortgage and
Security Agreement
EXHIBIT "C"
TRADEMARKS
MARK REG./FILE DATE APP./SERIAL NO. STATUS
- ---- -------------- --------------- ------
Agro-Dynamics
ISYS
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet as of March 31, 1997 and Consolidated
Statement of Operations for the Nine Months Ended March 31, 1997 and is
qualified in its' entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,838
<SECURITIES> 25
<RECEIVABLES> 2,351
<ALLOWANCES> 164
<INVENTORY> 2,128
<CURRENT-ASSETS> 7,301
<PP&E> 1,070
<DEPRECIATION> 471
<TOTAL-ASSETS> 9,916
<CURRENT-LIABILITIES> 6,073
<BONDS> 3
0
0
<COMMON> 104
<OTHER-SE> 3,436
<TOTAL-LIABILITY-AND-EQUITY> 9,916
<SALES> 15,894
<TOTAL-REVENUES> 15,894
<CGS> 12,062
<TOTAL-COSTS> 12,062
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 46
<INTEREST-EXPENSE> 154
<INCOME-PRETAX> (61)
<INCOME-TAX> 0
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ($61)
<EPS-PRIMARY> ($0.01)
<EPS-DILUTED> ($0.01)
</TABLE>
