-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DlCjnzgpikF3ssQlEwfSlM+G/J00kvjmAwsBO9cCJ1aMjyqViSjKfH9Ohod3s504 jdEQS4sUzUFSYpG+X0hgPg== 0000893220-00-000212.txt : 20000223 0000893220-00-000212.hdr.sgml : 20000223 ACCESSION NUMBER: 0000893220-00-000212 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 20000222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECOGEN INC CENTRAL INDEX KEY: 0000814050 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 222487948 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-09579 FILM NUMBER: 550581 BUSINESS ADDRESS: STREET 1: 2005 CABOT BLVD W #170 CITY: LANGHORNE STATE: PA ZIP: 19047-1811 BUSINESS PHONE: 2157571590 MAIL ADDRESS: STREET 1: 2005 CABOT BLVD W CITY: LANGHORNE STATE: PA ZIP: 19047 10-K/A 1 FORM 10-K/A ECOGEN INC. 1 As filed with the Securities and Exchange Commission on February 18, 2000. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (AMENDMENT NO. 1) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999 OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from ________ to __________ COMMISSION FILE NUMBER 1-9579 ECOGEN INC. (Exact name of registrant as specified in its charter) DELAWARE 22-2487948 (State or other Jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2000 W. CABOT BOULEVARD, #170 19047-1811 LANGHORNE, PENNSYLVANIA (Zip Code) (Address of Principal Executive Offices) Registrant's telephone number, including area code: (215) 757-1590 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01 PAR VALUE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. [X] YES [ ] NO THE APPROXIMATE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT IS $15,594,428 AS OF JANUARY 31, 2000. (A) 10,509,623 (NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF JANUARY 28, 2000) ------ Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ DOCUMENTS INCORPORATED BY REFERENCE Definitive Proxy Statement with respect to the Annual Meeting of Stockholders scheduled to be held on April 6, 2000 to be filed by Ecogen Inc. with the Commission (hereinafter the "Proxy Statement") is incorporated by reference into Part III of this Form 10-K. (A) Excludes 3,578,406 shares of common stock held of record by directors, officers and stockholders known to the registrant to hold more than five percent of the common stock outstanding as of January 31, 2000. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant. 2 (AMENDMENT NO. 1) FORM 10-K/A. The purpose of this Form 10-K/A is to file Exhibits 3.6, 4.3, 4.4, 4.5, 10.149, 10.150, 10.151, 10.152, 21, 24 and 27 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(3) Exhibits Exhibit No. Description - ----------- ----------- 3.1 Restated Certificate of Incorporation of Ecogen Inc. (Form 10-K for fiscal quarter ended January 31, 1996)* 3.2 Bylaws of Ecogen Inc., as amended. (Form S-1 Registration Statement)* 3.3 Certificate of Designations, Preferences and Rights of Series 1998-A Convertible Preferred Stock (Form 10-Q for fiscal quarter ended April 30, 1998)* 3.4 Certificate of Designations, Preferences and Rights of Series 1998-C Convertible Preferred Stock (Form 9-K dated September 2, 1998)* 3.5 Corrected Certificate of Designations, Preferences and Rights of Series 1999-A Convertible Preferred Stock (Form 10-Q for fiscal quarter ended April 30, 1999)* 3.6 Certificate of Designations, Preferences and Rights of Series 2000-A Convertible Preferred Stock. 4.3 Ecogen Inc. Stock Option Plan, as amended. 4.4 Ecogen Inc. 1998 Stock Option Plan, as amended. 4.5 Ecogen Inc. 1999 Stock Option Plan, as amended. 10.14 Form of Confidentiality Agreement between Ecogen Inc. and all Ecogen Inc. employees. (Form S-1 Registration Statement)* 10.30 Lease Agreement, dated June 4, 1985, between Linpro Bucks County II, Limited and Ecogen Inc. (Form S-1 Registration Statement)* 10.67 Bt Gene License Agreement, dated April 11, 1991, between Ecogen Inc. and Pioneer Hi-Bred International, Inc. (Form S-1 Registration Statement filed on May 1, 1991, as amended)* 10.88 Form of Technology License Agreement between Ecogen-Bio Inc. and certain Program Subsidiaries. (Form 10-K for fiscal year ended December 31, 1992)* 10.89 Form of Research and Development Agreement between Ecogen Inc. and certain Program Subsidiaries. (Form 10-K for fiscal year ended December 31, 1992)* 10.90 Form of Marketing Option Agreement between Ecogen Inc. and certain Program Subsidiaries. (Form 10-K for fiscal year ended December 31, 1992)* 10.119 Form of Incentive Stock Option Agreement, as amended. (Form 10-K for fiscal year ended October 31, 1994)* - -------------------- * These items are hereby incorporated by reference from the exhibits of the filing or report indicated (except where noted, Commission File No. 1-9579, File No. 33-14119 in the case of the Form S-1 Registration Statement and File No. 33-40319 in the case of the Form S-1 Registration Statement filed on May 1, 1991, as amended) and are made part of this report.
3
Exhibit No. Description - ----------- ----------- 10.122 Investment Agreement, dated as of January 24, 1996, between the Company and Monsanto Company. (Form 10-Q for fiscal quarter ended January 31, 1996)* 10.123 Technology Assignment Agreement, dated as of January 24, 1996, between the Company, Ecogen-Bio Inc. and Monsanto Company. (Form 10-Q for fiscal quarter ended January 31, 1996)* 10.125 Form of Indemnification Agreement for Directors and Officers (Form 10-Q for fiscal quarter ended January 31, 1997)* 10.127 Amendment No. 1 to Technology Assignment by and between Monsanto Company and Ecogen Inc. dated September 15, 1997. (Form 10-K for fiscal year ended October 31, 1997)* 10.128 Convertible Note Purchase Agreement by and among Ecogen Inc., Ecogen Investment Inc., Ecogen-Bio Inc. and United Equities (Commodities) Company dated October 31, 1997. (Form 10-K for fiscal year ended October 31, 1997)* 10.129 8% Convertible Note due October 31, 2002 issued to United Equities (Commodities) Company dated October 31, 1997. (Form 10-K for fiscal year ended October 31, 1997)* 10.130 Security Agreement by and among Ecogen Inc., Ecogen Investment Inc., Ecogen-Bio Inc. and United Equities (Commodities) Company dated October 31, 1997. (Form 10-K for fiscal year ended October 31, 1997)* 10.132 Amended and Restated Research and Development Agreement dated January 30, 1998 by and between Monsanto Company and Ecogen Inc. (Form 10-Q for fiscal quarter ended January 31, 1998)* 10.133 Asset Purchase and Sale Agreement among Ecogen Inc., Ecogen-Bio Inc. and Scentry Biologicals Inc. dated April 28, 1998. (Form 10-Q for fiscal quarter ended April 30, 1998)* 10.134 Convertible Preferred Stock Purchase Agreement between United Equities (Commodities) Company and Ecogen Inc. dated August 20, 1998. (Form 8-K filed on September 2, 1998)* 10.135 Registration Rights Agreement between United Equities (Commodities) Company and Ecogen Inc., dated August 20, 1998. (Form 8-K filed on September 2, 1998)* 10.136 Loan and Security Agreement between Congress Financial Corporation and Ecogen Inc., dated August 20, 1998. (Form 8-K filed on September 2, 1998)* - ------------------
* These items are hereby incorporated by reference from the exhibits of the filing or report indicated (except where noted, Commission File No. 1-9579, File No. 33-14119 in the case of the Form S-1 Registration Statement and File No. 33-40319 in the case of the Form S-1 Registration Statement filed on May 1, 1991, as amended) and are made part of this Report. 4 Exhibit No. Description - ----------- ----------- 10.137 Guarantee by Ecogen Investments Inc., Ecogen Technologies I Incorporated, Ecogen-Bio Inc., Ecoresearch Mildew I Inc., Ecoresearch Harvest Rot II Inc., Ecoresearch Corn Borer III Inc., Ecoresearch Nematodes IV Inc., Ecoresearch Rootworm V Inc. and Ecoresearch Turf VI Inc. to Congress Financial Corporation, dated August 20, 1998. (Form 8-K filed on September 2, 1998)* 10.138 Pledge and Security Agreement by Ecogen Inc. in favor of Congress Financial Corporation, dated August 20, 1998. (Form 8-K filed on September 2, 1998)* 10.139 Pledge and Security Agreement by Ecogen Technologies I Incorporated in favor of Congress Financial Corporation dated August 20, 1998. (Form 8-K filed on September 2, 1998)* 10.140 Amended and Restated Convertible Preferred Stock Purchase Agreement between Ecogen Inc. and KA Investments LDC dated as of June 5, 1998. (Form S-3 Registration Statement filed on September 14, 1998)* 10.141 Warrant Agreement between Ecogen Inc. and KA Investments LDC dated June 5, 1998. (Form S-3 Registration Statement filed on September 14, 1998)* 10.142 Amended and Restated Registration Rights Agreement between Ecogen Inc. and KA Investments LDC dated as of June 5, 1998. (Form S-3 Registration Statement filed on September 14, 1998)* 10.143 Stock Award Agreement between Ecogen Inc. and James P. Reilly, Jr. dated September 23, 1998.* 10.145 Amended and Restated Stock Award Agreement between Ecogen Inc. and James P. Reilly, Jr. dated as of April 9, 1999 (Form 10-Q for fiscal quarter ended April 30, 1999)* 10.146 Warrant Agreement between Ecogen Inc. and KA Investments LDC dated May 12, 1999 (Form 10-Q for fiscal quarter ended April 30, 1999)* 10.147 Convertible Preferred Stock Purchase Agreement between Ecogen Inc. and KA Investments LDC dated May 12, 1999 (Form 10-Q for fiscal quarter ended April 30, 1999)* 10.148 Registration Rights Agreement between Ecogen Inc. and KA Investments LDC dated May 12, 1999 (Form 10-Q for fiscal quarter ended April 30, 1999)* 10.149 Restated Severance Compensation Agreement, dated December 9, 1999, between Ecogen Inc, a Delaware corporation and James P. Reilly, Jr. 10.150 Term Loan and Security Agreement, dated as of December 23, 1999, between Ecogen Inc. and The Berkshire Bank. - ------------------------ * These items are hereby incorporated by reference from the exhibits of the filing or report indicated (except where noted, Commission File No. 1-9579, File No. 33-14119 in the case of the Form S-1 Registration Statement and File No. 33-40319 in the case of the Form S-1 Registration Statement filed on May 1, 1991, as amended) and are made part of this Report. 10.151. 5 Exhibit No. Description - ----------- ----------- 10.151 Warrant Agreement between Ecogen Inc. and Momar Corporation dated December 23, 1999 10.152 Amendment No. 2 to Lease Agreement, dated December 17, 1999 by and between Brandywine Realy and Ecogen Inc. 21. List of Subsidiaries 24. Consent of KPMG LLP 25. Powers of attorney executed by certain officers of the Company and the individual members of the Board of Directors authorizing certain officers of the Company to file amendments to the Company's annual report on Form 10-K are located on the signature page to such Form 10-K. 27. Financial Data Schedule. (b) Reports on Form 8-K. A Current Report on Form 8-K was filed on August 11, 1999 with respect to the sale of 500,000 shares of common stock to an accredited investor at a purchase price of $3.09 per share. - ----------------------------- * These items are hereby incorporated by reference from the exhibits of the filing or report indicated (except where noted, Commission File No. 1-9579, File No. 33-14119 in the case of the Form S-1 Registration Statement and File No. 33-40319 in the case of the Form S-1 Registration Statement filed on May 1, 1991, as amended) and are made part of this Report. 6 SIGNATURE In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ECOGEN INC. By:/s/ James P. Reilly, Jr. ------------------------------------- James P. Reilly, Jr. Chairman and Chief Executive Officer Date: February 18, 2000 The Exhibits that have been filed herewith this Form 10-K/A are summarized as follows:
Exhibit No. Description - ----------- ----------- 3.6 Certificate of Designations, Preferences and Rights of Series 2000-A Convertible Preferred Stock. 4.3 Ecogen Inc. Stock Option Plan, as amended. 4.4 Ecogen Inc. 1998 Stock Option Plan, as amended. 4.5 Ecogen Inc. 1999 Stock Option Plan, as amended. 10.149 Restated Severance Compensation Agreement, dated December 9, 1999, between Ecogen Inc, a Delaware corporation and James P. Reilly, Jr. 10.150 Term Loan and Security Agreement, dated as of December 23, 1999, between Ecogen Inc. and The Berkshire Bank 10.151 Warrant Agreement between Ecogen Inc. and Momar Corporation dated December 23, 1999 10.152 Amendment No. 2 to Lease Agreement, dated December 17, 1999 by and between Brandywine Realy and Ecogen Inc. 21. List of Subsidiaries 24. Consent of KPMG LLP 27. Financial Data Schedule.
EX-3.6 2 CERTIFICATE OF DESIGNATIONS 1 EXHIBIT 3.6 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES 2000-A CONVERTIBLE PREFERRED STOCK OF ECOGEN INC. *** Ecogen Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: That, pursuant to authority conferred upon the Board of Directors by the Certificate of Incorporation (as amended) of said corporation, and pursuant to the provisions of Section 151 of Title 8 of the Delaware Code of 1953, said Board of Directors, adopted a resolution, which resolution is as follows: RESOLVED, that a series of the Company's Preferred Stock consisting of 30,000 shares of Preferred Stock, be and hereby is, designated as "7% Series 2000-A Convertible Preferred Stock", par value $.01 per share (the "Series A Preferred Stock"), and that the Series A Preferred Stock shall have the designations, powers, preferences, rights and qualifications, limitations and restrictions as set forth in the Certificate of Designations, Preferences and Rights of Series 2000-A Convertible Preferred Stock (the "Series A Certificate") attached as Exhibit A. That said Series A Certificate states that the Board of Directors does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and qualifications, limitations and restrictions thereof as follows (all terms used herein which are defined in the Certificate of Incorporation shall be deemed to have the meanings provided therein). Section 1. Designation, Amount and Par Value. The series of preferred stock shall be designated as 7% Series 2000-A Convertible Preferred Stock (the "Preferred Stock") and the number of shares so designated shall be 30,000 (which shall not be subject to increase without the consent of the holders of the Preferred Stock (each, a "Holder" and collectively, the "Holders")). Each share of Preferred Stock shall have a par value of $.01 and a stated value of $100.00 (the "Stated Value"). Of the designated shares of Preferred Stock, 15,000 shares of Preferred Stock are being issued initially, and up to 15,000 shares 1 2 of Preferred Stock are being authorized for payment of dividends in shares of Preferred Stock when, as and if, declared by the Board of Directors. Section 2. Dividends. (a) Holders of Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, and the Company shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) equal to 7% per annum (the "Dividend Rate"), payable on a quarterly basis on March 31, June 30, September 30 and December 31 of each year during the term hereof (each a "Dividend Payment Date"), commencing on March 31, 2000, in cash or shares of Preferred Stock (the "Preferred Dividend"), provided, that in connection with a conversion of the Preferred Stock, the Company shall be entitled to pay dividends in the form of Common Stock, subject to the terms and conditions set forth herein, at the option of the Company. Dividends on the Preferred Stock shall be calculated on the basis of a 360-day year, shall accrue daily commencing on the Original Issue Date (as defined in Section 8), and shall be deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. Any dividends not paid on any Dividend Payment Date shall continue to accrue and shall be due and payable upon conversion of the Preferred Stock. A party that holds shares of Preferred Stock on a Dividend Payment Date will be entitled to receive such dividend payment and any other accrued and unpaid dividends which accrued prior to such Dividend Payment Date, without regard to any sale or disposition of such Preferred Stock subsequent to the applicable record date. Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued on account of Preferred Stock, such payment shall be distributed ratably among the Holders based upon the number of shares held by each Holder. The Company shall provide the Holders notice of its intention to pay dividends in cash or shares of Preferred Stock not less than ten (10) Business Days prior to any Dividend Payment Date for as long as shares of Preferred Stock are outstanding. If dividends are paid in the form of Preferred Stock, the number of shares of Preferred Stock issuable on account of such dividend shall equal the cash amount of such dividend on such Dividend Payment Date divided by the Stated Value. If dividends are paid in shares of Common Stock, the number of shares of Common Stock issuable on account of such dividend shall equal the cash amount of such dividend on such Dividend Payment Date divided by the Conversion Price (as defined below) on such date. The Company shall not be required to issue stock certificates representing fractions of shares of Preferred Stock and shall make a cash payment in respect of any final fraction of a share based on the product of such fractional share and the Stated Value. (b) Notwithstanding anything to the contrary contained herein, the Company may not pay dividends in the form of Preferred Dividends or in shares of Common Stock and must deliver cash in respect thereof if on the Dividend Payment Date: 2 3 (i)(A) the number of shares of Preferred Stock at the time authorized for issuance for the payment of Preferred Dividends on such Dividend Payment Date, together with the number of shares held as treasury stock, is insufficient to satisfy the Company's then existing obligations to issue shares of Preferred Stock for the payment of such Preferred Dividends on such Dividend Payment Date, or (B) the sum of (i) the number of shares of Common Stock at the time reserved for issuance upon conversion of (x) the shares of Preferred Stock outstanding on such Dividend Payment Date, and (y) the Preferred Dividends on such Dividend Payment Date, (ii) the number of authorized but unissued shares of Common stock not reserved for any purpose, and (iii) the number of shares held as treasury stock, is insufficient to satisfy the Company's then existing conversion and other obligations to issue shares of Common Stock for all purposes; (ii) the Common Stock is not then listed on the Nasdaq National Market ("NASDAQ"), the NASDAQ SmallCap Market or other national securities exchange; or (iii) the Company has failed to timely satisfy its conversion obligations hereunder. (c) So long as any Preferred Stock shall remain outstanding, neither the Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 8), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution upon, nor shall any distribution be made in respect of, any Junior Securities, nor shall any moneys be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities, except for repurchases effected by the Company on the open market, pursuant to a direct stock purchase plan or in connection with the Company's 401(k) plan. Section 3. Voting Rights. Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights. However, so long as any shares of Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Holders of all of the shares of the Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock, (b) alter or amend this Certificate of Designations, (c) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 4) senior to the Preferred Stock, except for any series of Preferred Stock issued and sold in accordance with the Purchase Agreement, (d) increase the authorized number of shares of Preferred Stock or (e) enter into any agreement with respect to the foregoing. Section 4. Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or 3 4 surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid dividends per share, whether declared or not, before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders of Preferred Stock shall be distributed among the Holders of Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Section 5. The Company shall mail written notice of any such Liquidation, not less than forty-five (45) days prior to the payment date stated therein, to each record Holder of Preferred Stock. Section 5. Conversion. (a) (i) Each share of Preferred Stock shall be convertible into shares of Common Stock (subject to limitation or reduction pursuant to Sections 5(a)(ii) and (a)(iii) hereof) at the Conversion Ratio (as defined in Section 8) at the option of the Holder, at any time and from time to time, from and after the date (the "Initial Conversion Date") which is the earlier of (i) the date the Underlying Securities Registration Statement (as defined in Section 8) is declared effective by the Commission, or (ii) the 120th day following the Original Issue Date; provided, that, (A) on and after the Initial Conversion Date, the Holders shall only be entitled to convert up to (i) 25% of the number of shares of Preferred Stock originally issued on the Original Issue Date, and (ii) any Preferred Dividends issued on such shares of Preferred Stock, (B) on and after the first month anniversary of the Initial Conversion Date, the Holders shall only be entitled to convert up to (i) 50% of the number of shares of Preferred Stock originally issued on the Original Issue Date, and (ii) any Preferred Dividends issued on such shares of Preferred Stock, (C) on and after the second month anniversary of the Initial Conversion Date, the Holders shall only be entitled to covert up to (i) 75% of the number of shares of Preferred Stock, originally issued on the Original Issue Date, and (ii) any Preferred Dividends issued on such shares of Preferred Stock, and (D) on and after the third month anniversary of the Initial Conversion Date, the Holders shall be entitled to convert all of the shares of Preferred Stock originally issued on the Original Issue Date, together with all Preferred Dividends issued on such shares of Preferred Stock. Holders shall effect conversions by surrendering the certificate or certificates representing the shares of Preferred Stock to be converted to the Company, together with the form of conversion notice attached hereto as Annex I (a "Conversion Notice"). Each Conversion Notice shall specify the number of shares of Preferred Stock to be converted and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Conversion Notice to the Company by facsimile (the "Conversion Date"). If no Conversion Date is specified in a Conversion Notice, the Conversion Date shall be the 4 5 date that the Conversion Notice is deemed delivered to the Company hereunder. If the Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates tendered by the Holder with the Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Company shall promptly deliver to such Holder (in the manner and within the time set forth in Section 5(b)) a certificate for such number of shares as have not been converted. (ii)(1) A Holder may not convert shares of Preferred Stock (including, without limitation, shares of Preferred Stock issued as payment of dividends hereunder) or receive shares of Common Stock in payment of dividends hereunder to the extent such conversion or receipt would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act (as hereinafter defined) and the rules thereunder) in excess of 4.999% of the then issued and outstanding shares of Common Stock. The Holder shall have the sole authority and obligation to determine whether the restriction contained in this Section applies and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which shares of Preferred Stock are convertible shall be in the sole discretion of the Holder, and the Company shall have no obligation to verify or confirm the accuracy of any such determination. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 75 days prior notice to the Company, and the provisions of this Section shall continue to apply until such 75th day (or later, if stated in the notice of waiver). Other Holders shall be unaffected by any such waiver. (2) A Holder may not convert shares of Preferred Stock (including, without limitation, shares of Preferred Stock as payment of dividends hereunder) or receive shares of Common Stock in payment of dividends hereunder to the extent such conversion or receipt would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock. The Holder shall have the sole authority and obligation to determine whether the restriction contained in this Section applies and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which shares of Preferred Stock are convertible shall be in the sole discretion of the Holder and the Company shall have no obligation to verify or confirm the accuracy of any such determination. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 75 days prior notice to the Company (or later, if stated in the notice of waiver). Other Holders shall be unaffected by any such waiver. (iii) At no time while the Common Stock is listed for trading on the NASDAQ or the Nasdaq SmallCap Market shall the Company issue on conversions of Preferred Stock an aggregate number of shares of Common Stock that, when added to the number of shares underlying the Trigger Warrants (as hereinafter defined) if the same were to be issued at such time, would equal or exceed 20% of the number of shares of Common 5 6 Stock issued and outstanding on the Original Issue Date unless the Company shall have theretofore (A) obtained the vote of shareholders ("Shareholder Approval"), if any, as may be required by the rules and regulations of the Nasdaq Stock Market (or successor thereto) applicable to approve the issuance of Common Stock in excess of the Issuable Maximum in a private placement whereby shares of Common Stock are deemed to have been issued at a price that is less than the greater of book or fair market value of the Common Stock, or (B) obtained an exemption from the requirement for Shareholder Approval from The Nasdaq Stock Market (a "Nasdaq Exemption"). The maximum number of shares of Common Stock that can be issued on conversions of Preferred Stock under this Section 5(a)(iii) is referred to as the "Issuable Maximum." At such time as the Company has issued, on conversions of Preferred Stock, a number of shares of Common Stock equal to the Issuable Maximum and has not theretofore obtained Shareholder Approval or a Nasdaq Exemption (the "Trigger Date"), the Company shall either (i) redeem all outstanding shares of Preferred Stock and Preferred Dividends at a price equal to the Optional Redemption Price (as defined in Section 6(c) hereof) pursuant to the terms and conditions of Section 6(c) hereof (the "Initial Optional Redemption"), provided, that the conditions listed in Section 6(a)(i)-(iii) shall not apply to the Initial Optional Redemption, or (ii) within a period of 75 days from the Trigger Date (the "Trigger Period") obtain Shareholder Approval or a Nasdaq Exemption. On the Trigger Date, if the Company has not exercised its right to effect the Initial Optional Redemption, the Company shall issue to the Holders (and distribute pro rata among the Holders based on the relative number of shares of Preferred Stock held) warrants (the "Trigger Warrants") to purchase a number of shares of Common Stock equal to 15% of the quotient obtained by dividing (x) the Stated Value of the Excess Preferred Stock (as defined below) by (y) the lower of the Per Share Market Value on the Trigger Date or on the date such warrants are actually distributed to the Holders (the Trigger Date or such other date, as applicable, is referred to as the "Measurement Date"). Such warrants shall be substantially in the form attached as Exhibit B to the Purchase Agreement and shall entitle the holders thereof to purchase shares of Common Stock at any time during the five year period following the date on which such warrants are actually distributed to the Holders at an exercise price per share equal to 101% of the Per Share Market Value on the Measurement Date. From and after the Trigger Date until the earlier of (I) the date on which a Shareholder Approval or a Nasdaq Exemption has been obtained, and (II) the expiration of the Trigger Period, the Dividend Rate shall be increased to 16% per annum. From and after the expiration of the Trigger Period, if the Company shall not have theretofore obtained either the Shareholder Approval or a Nasdaq Exemption, and until such date, if any, as the Company obtains Shareholder Approval or a Nasdaq Exemption, the Dividend Rate shall be increased to 20% per annum and the Optional Redemption Price (as defined in Section 6(c)) with respect to any redemption taking place thereafter shall be equal to the Redemption Amount (as defined in Section 8). Unless the Company shall have theretofore obtained Shareholder Approval or a Nasdaq Exemption, (I) if any Holder delivers a Conversion Notice as a result of which such Holder would be entitled to a number of shares of Common Stock that would result in the issuance of a number of shares of Common Stock in excess of the Issuable Maximum, then the Company shall issue in connection with such conversion such number of shares of 6 7 Common Stock as would not result in the aggregate issuances exceeding the Issuable Maximum; (II) if more than one Holder has delivered a Conversion Notice at the same time as a result of which such Holders would be entitled to a number of shares of Common Stock that would result in the issuance of a number of shares of Common Stock in excess of the Issuable Maximum, then the Company shall issue the maximum number of shares of Common Stock permissible to such Holders pro rata in accordance with the number of shares of Preferred Stock submitted for conversion; and (III) if at any time the Conversion Price is such that if all then outstanding and unconverted shares of Preferred Stock were converted into Common Stock the number of shares of Common Stock that would be issued would equal or exceed 85% of the Issuable Maximum, the Company shall give prompt notice thereof to all Holders. For purposes of Shareholder Approval, the Company shall not count any vote of the Holders with respect to shares of Common Stock issued in connection with a conversion of the Preferred Stock and held by the Holders. (iv) Notwithstanding anything herein to the contrary set forth herein, unless the Company shall have previously either (A) received the shareholder approval as may be required under Rule 4310(H)(i)(b) of the NASDAQ Stock Market or (B) obtained an exemption from the requirement from the NASDAQ Stock Market for such shareholder approval, a Holder shall not convert shares of Preferred Stock (including, without limitation, shares of Preferred Stock issued as payment of dividends hereunder) to the extent such conversion would result in such Holder holding in excess of 25% of the number of shares of Common Stock outstanding on the Original Issue Date. (b) (i) Not later than three (3) Business Days after any Delivery Date (as hereinafter defined), the Company will deliver to the Holder (i) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1(b) of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock (subject to limitation and reduction pursuant to Sections 5(a)(ii) and (a)(iii)), and (ii) one or more certificates representing the number of shares of Preferred Stock not converted. The Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any shares of Preferred Stock until certificates evidencing such shares of Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Preferred Stock or Common Stock, or the Holder of such Preferred Stock notifies the Company that such certificates have been lost, stolen or destroyed and provides a bond (or other adequate security) reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith, and the Company shall not be required to deliver certificates evidencing the shares of Common Stock to an address outside the United States. The date such certificates or affidavit are delivered is referred to as the "Delivery Date." If the Delivery Date has not occurred on or prior to the tenth (10th) Business Day following the Conversion Date, then the Company may, on notice to the Holder, rescind the conversion. The Company shall, upon request of the Holder, if available, use its reasonable best efforts to deliver any certificate or certificates required to be delivered by the 7 8 Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. If in the case of any Conversion Notice such certificate or certificates, including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, are not delivered to or as directed by the applicable Holder by the fifth (5th) Trading Day after the Delivery Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion. (ii) If the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, prior to the fifth (5th) Trading Day after the Delivery Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each day after such fifth (5th) Trading Day until such certificates are delivered. Nothing herein shall limit a Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon damages for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holders from seeking to enforce damages pursuant to any other Section hereof or under applicable law. Further, if the Company shall not have delivered any cash due in respect of conversions of Preferred Stock or as payment of dividends thereon by the fifth (5th) Trading Day after the Conversion Date, the Holder may, subject to Sections 5(a)(ii) and (a)(iii), by notice to the Company, require the Company to issue Underlying Shares pursuant to Section 5(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such Underlying Shares will be subject to the provision of this Section. (iii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, prior to the fifth (5th) Trading Day after the Delivery Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company (A) shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the 8 9 aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either return the shares of Preferred Stock for which such conversion was not honored or deliver to such Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its conversion and delivery obligations under Section 5(b)(i). For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to which the market price of the Underlying Shares on the date of conversion totaled $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder requires the Company to make payment in respect of a Buy-In for the failure to timely deliver certificates hereunder and the Company timely pays in full such payment, the Company shall not be required to pay such Holder liquidated damages under section 5(b)(ii) in respect of the certificates resulting in such Buy-In. (iv) The provisions of clauses (ii) and (iii) of this Section 5(b) shall not apply if the Company is not required to honor a Conversion Notice other than by reason of a breach by the Company of the terms hereof, of the Purchase Agreement or of the Registration Rights Agreement. (c) (i) The conversion price for each share of Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall be the lesser of (1) 120% of the average of the Per Share Market Values for the ten (10) Trading Days immediately preceding the Original Issue Date (the "Initial Conversion Price"), and (b) 95% of the average of the three (3) lowest Per Share Market Values during the twenty (20) consecutive Trading Day period immediately preceding the applicable Conversion Date; provided, however, that such twenty (20) Trading Day period shall be extended for the number of Trading Days during such period in which (A) trading in the Common Stock was suspended from the NASDAQ or such other national securities exchange or market on which the Common Stock is then listed, or (B) after the date of effectiveness, the Underlying Securities Registration Statement ceases to be effective, or (C) after the date of effectiveness, the Prospectus included in the Underlying Securities Registration Statement may not be used by the Holder for the resale of Underlying Shares. If: (a) the Underlying Securities Registration Statement is not filed on or prior to the Filing Date (as defined in the Registration Rights Agreement (if the Company files such Underlying Securities Registration Statement without affording the Holder the opportunity to review and comment on the same as required by Section 3(a) of the Registration Rights Agreement, the Company shall be in violation of this clause (a)), or (b) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within five (5) days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that an Underlying Securities Registration 9 10 Statement will not be "reviewed," or will not be subject to further review, or (c) the Underlying Securities Registration Statement is not declared effective by the Commission on or prior to the 120th day after the Original Issue Date, or (d) such Underlying Securities Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective as to all Registrable Securities (as such term is defined in the Registration Rights Agreement) at any time prior to the expiration of the "Effectiveness Period" (as such term is defined in the Registration Rights Agreement), without being succeeded within ten (10) Business Days by a subsequent Underlying Securities Registration Statement filed with and declared effective by the Commission, (e) trading in the Common Stock shall be suspended from the NASDAQ (other than temporary suspensions of less than one day pending release of material information by the Company), or (f) if the conversion rights of the Holders are suspended for any reason (any such failure or breach being referred to as an "Event," and for purpose of clauses (a), (c), (e) and (f) the date on which such Event occurs, or for purposes of clause (b) the date on which such five (5) day period is exceeded, or for purposes of clause (d) the date which such 10 Trading Day-period is exceeded, being referred to as "Event Date"), the Company shall, on the Event Date and on the first day of each monthly anniversary of the Event Date until such time as the applicable Event is cured, pay to the Holder 2.5% of the aggregate Stated Value of the shares of Preferred Stock then held by such Holder, in cash, as liquidated damages and not as a penalty. The provisions of this Section are not exclusive and shall in no way limit the Company's obligations under the Registration Rights Agreement. (ii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities or pari passu securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Initial Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of subdivision, combination or reclassification. (iii) If the Company, at any time while any shares of Preferred Stock are outstanding, shall issue rights, warrants or options to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value at the record date mentioned below, then the Initial Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, warrants or options, plus the number of shares of Common Stock which the aggregate 10 11 offering price of the total number of shares so offered would purchase at such Per Share Market Value, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock offered for subscription or purchase. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right, warrant or option to purchase shares of Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant or option shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration shall be recomputed and effective immediately upon such expiration shall be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section 5 upon the issuance of other rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, warrants, or options been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, warrants or options actually exercised. (iv) If the Company or any subsidiary thereof, as applicable with respect to Common Stock Equivalents (as defined below), at any time while any shares of Preferred Stock are outstanding, shall issue shares of Common Stock or rights, warrants, options, or other securities or debt that is convertible into or exchangeable for shares of Common Stock ("Common Stock Equivalents") entitling any Person to acquire shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of shares of Common Stock or such Common Stock Equivalents plus the number of shares of Common Stock which the offering price for such shares of Common Stock or Common Stock Equivalents would purchase at the Conversion Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of Common Stock so issued or issuable, provided, that for purposes hereof, all shares of Common Stock that are issuable upon exercise or exchange of Common Stock Equivalents shall be deemed outstanding immediately after the issuance of such Common Stock Equivalents. Such adjustment shall be made whenever such shares of Common Stock or Common Stock Equivalents are issued. (v) If the Company, at any time while shares of Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 5(c)(ii)-(iv) above), then in each such case the Initial Conversion Price at which each share of Preferred Stock shall thereafter be convertible shall be determined by multiplying the Initial Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled 11 12 to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, if the Holders of a majority in interest of the Preferred Stock dispute such valuation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "Appraiser") selected in good faith by the Holders of a majority in interest of the shares of Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (vi) All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (vii) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(ii), (iii), (iv), or (v) the Company shall promptly mail to each Holder, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (viii) In case of any reclassification of the Common Stock, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control Transactions), the Holders of the Preferred Stock then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification or share exchange, and the Holders of the Preferred Stock shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of the Common Stock of the Company into which such shares of Preferred Stock could have been converted immediately prior to such reclassification or share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges. 12 13 (ix) If (a) the Company shall declare a dividend (or any other distribution) on its Common Stock, (b) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock, (c) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (d) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property, or (e) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Preferred Stock, and shall cause to be mailed to the Holders of Preferred Stock at their last addresses as they shall appear upon the stock books of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert shares of Preferred Stock during the 20 day period commencing the date of such notice to the effective date of the event triggering such notice. (x) No adjustment in the Conversion Price under Sections 5(c)(ii), (iii), (iv) or (v) shall be required to be made if such adjustment would result in a change of less than $.10 in the Conversion Price, but any adjustments not made by reason of this clause (x) shall be carried forward and shall be made at the time of and together with the next subsequent adjustment(s) which, together with any adjustment(s) so carried forward, shall require an increase or decrease of at least $.10 in the Conversion Price then in effect. (d) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Preferred Stock and Preferred Dividends (assuming payment of all dividends in the form of Preferred Dividends in accordance with the terms hereof), each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Preferred Stock, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into 13 14 account the adjustments and restrictions of Section 5(a) and Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock and payment of dividends hereunder (assuming payment of all dividends in shares of Preferred Stock in accordance with the terms hereof). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and freely tradeable, subject to the legend requirements of Section 3.1(b) of the Purchase Agreement. (e) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. (f) The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (g) Shares of Preferred Stock converted into Common Stock shall be canceled. The Company may not reissue any shares of Preferred Stock. (h) Any and all notices or other communications or deliveries to be provided by the Holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to the attention of the Chief Executive Officer of the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service, addressed to each Holder of Preferred Stock at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via confirmed facsimile at the facsimile telephone number 14 15 specified in this Section prior to 8:00 p.m. (Eastern Standard Time), (ii) the date after the date of transmission, if such notice or communication is delivered via confirmed facsimile at the facsimile telephone number specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) upon receipt, if sent by a nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. Section 6. Optional Redemption. (a) The Company shall have the right, exercisable at any time upon not less than ten (10) Trading Days notice (an "Optional Redemption Notice") to the Holders of the Preferred Stock given at any time after the Original Issue Date, to redeem all or any portion of the shares of Preferred Stock which have not previously been converted or redeemed, at a price equal to the Optional Redemption Price (as defined below), provided, that the Company shall not be entitled to deliver an Optional Redemption Notice to the Holders if: (i) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes is insufficient to satisfy the Company's conversion obligations of all shares of Preferred Stock then outstanding, or (ii) the shares of Common Stock issuable upon conversion of shares of Preferred Stock then outstanding (x) are not registered for resale pursuant to an effective registration statement that names the Holders as selling stockholders thereunder or (y) may not be sold without volume restrictions pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent in the form and substance acceptable to the Holders and such transfer agent, or (iii) the Common Stock is not then listed on the NASDAQ. The entire Optional Redemption Price shall be paid in cash. Holders of Preferred Stock may convert (and the Company shall honor such conversions in accordance with the terms hereof) any shares of Preferred Stock, including shares subject to an Optional Redemption Notice, during the period from the date thereof through the 10th Trading Day after the receipt of an Optional Redemption Notice. (b) If any portion of the Optional Redemption Price shall not be paid by the Company within seven (7) calendar days after the tenth (10th) Trading Day after the delivery of an Optional Redemption Notice, interest shall accrue thereon at the rate of 15% per annum until the Optional Redemption Price plus all such interest is paid in full. In addition, if any portion of the Optional Redemption Price remains unpaid for more than seven (7) calendar days after the date due, the Holder of the Preferred Stock subject to such redemption may elect, by written notice to the Company given at any time thereafter, to either (i) demand conversion of all or any portion of the shares of Preferred Stock for which such Optional Redemption Price, plus accrued liquidated damages, has not been paid in full (the "Unpaid Redemption Shares"), in which event the Conversion Price for such shares shall be the lower of the Conversion Price calculated on the date the Optional Redemption Price was originally due and the Conversion Price as of the Holder's written demand for conversion, or (ii) invalidate ab initio such redemption, notwithstanding anything herein 15 16 contained to the contrary. If the Holder elects option (i) above, the Company shall within three (3) Trading Days of its receipt of such election deliver to the Holder the shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares subject to such Holder conversion demand and otherwise perform its obligations hereunder with respect thereto; or, if the Holder elects option (ii) above, the Company shall promptly, and in any event not later than three (3) Trading Days from receipt of Holder's notice of such election, return to the Holder all of the Unpaid Redemption Shares. (c) The "Optional Redemption Price" shall, except as provided in Section 5(a)(iii), equal the sum of (i) 125% of the Stated Value of the shares of Preferred Stock subject to redemption hereunder and all accrued but unpaid dividends per share of Preferred Stock subject to redemption hereunder, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such shares of Preferred Stock. Section 7. Triggering Events. (a) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all other rights it may have hereunder or under applicable law), have the right, exercisable at the sole option of such Holder, to require the Company to purchase all or a portion of the Preferred Stock then held by such Holder for a redemption price, in cash, equal to the sum of (i) the Payment Amount plus (ii) the product of (A) the number of Underlying Shares issued in respect of conversions hereunder and then held by the Holder and (B) the Per Share Market Value on the date such purchase is demanded or the date the redemption price hereunder is paid in full, whichever is greater. If the Company fails to pay the redemption price hereunder in full pursuant to this Section within seven (7) days after the date of a demand therefor, the Company will pay interest thereon at a rate of 15% per annum, accruing daily from such seventh day until the redemption price, plus all such interest thereon, is paid in full. For purposes of this Section, a share of Preferred Stock is outstanding until such date as the Holder shall have received Underlying Shares upon a conversion (or attempted conversion) thereof. (b) A "Triggering Event" means any one or more of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgement, decree or order of any court, or any order, rule or regulation of any administrative or governmental body); (i) the failure of the Company to use its best efforts to cause an Underlying Securities Registration Statement to be declared effective by the Commission on or prior to the 180th day after the Original Issue Date and such failure is not cured within five (5) days after notice from a Holder; (ii) if, during the Effectiveness Period, the effectiveness of the Underlying Securities Registration Statement lapses for any reason for more than ten (10) 16 17 consecutive Business Days or more than fifteen (15) Business Days in any 12-month period, or the Holder shall have been advised by the Company that is not permitted to resell Registrable Securities under the Underlying Securities Registration Statement for more than ten (10) consecutive Business Days or more than fifteen (15) Business Days in any 12-month period, in each case other than (A) as a result of a stop order or similar order issued by the Commission not at the request of the Company; or (B) solely as a result of actions taken by the Holder. (iii) the Company shall fail for any reason to deliver certificates representing Underlying Shares issuable upon a conversion hereunder that comply with the provisions hereof prior to the 20th day after the Delivery Date or the Company shall provide notice to any Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any Preferred Stock in accordance with the terms hereof; (iv) the Company shall be a party to any Change of Control Transaction which has been approved by the Board of Directors of the Company, and a Holder shall have given notice to the Company of its intention that such Change of Control transaction be a Triggering Event; (v) the Company shall fail to make any payments required to be made under Sections 5(b)(ii), 5(b)(iii) or 5(c)(i) within thirty (30) days after the same are due and such failure is not cured within five (5) days after notice from a Holder; (vi) the Company shall fail for any reason to pay all amounts required pursuant to a Buy-In within seven (7) days after notice is deemed delivered hereunder and such failure is not cured within five (5) days after notice from a Holder; or (vii) the Company shall fail to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to such Holder upon a conversion hereunder. Section 8. Definitions. For the purposes hereof, the following terms shall have the following meanings: "Business Day" means any day except Saturday, Sunday and any day which shall be a Federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close. "Change of Control Transaction" means the occurrence of any of: (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 50% of the voting securities of the Company, (ii) a sale or other disposition via a single transaction or series of 17 18 related transactions by the Company or any of its subsidiaries of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, other than a sale to a wholly owned subsidiary of the Company; (iii) the merger or consolidation of the Company with or into another entity, if the stockholders of the Company immediately before such merger or consolidation do not own, directly or indirectly, immediately following such merger or consolidation, more than 50% of the combined voting power of the resulting outstanding voting securities in substantially the same proportion as their pre-merger or pre-consolidation ownership, or sale of all or substantially all of the assets of the Company in one or a series of related transactions or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii). "Common Stock" means the Company's common stock, $.01 par value, and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Ratio" means, at any time, a fraction, of which the numerator is Stated Value plus accrued and unpaid dividends but only to the extent not theretofore paid in shares of Preferred Stock in accordance with the terms hereof, and of which the denominator is the Conversion Price at such time. "Junior Securities" means the Common Stock and all other equity securities of the Company which are junior in rights to dividends or liquidation preference to the Preferred Stock. "Original Issue Date" shall mean the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock. "Payment Amount" for each share of Preferred Stock means the sum of (i) the greater of (A) 130% of the Stated Value and all accrued dividends with respect to such share, and (B) the product of (a) the Per Share Market Value on the Trading Day immediately preceding (x) the date of the Triggering Event or the Conversion Date, as the case may be, or (y) the date of payment in full by the Company of the applicable redemption price, whichever is greater, and (b) the Conversion Ratio calculated on the date of the Triggering Event, or the Conversion Date, as the case may be, and (ii) all other amounts, costs, expenses and liquidated damages due in the respect of such shares of Preferred Stock. "Per Share Market Value" means on any particular date (a) the closing bid price per share of the Common Stock on such date on the NASDAQ or the Nasdaq SmallCap Market, as the case may be, or any other stock exchange or quotation system on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price on such exchange or quotation system on which the Common Stock is listed for trading on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the NASDAQ or the Nasdaq SmallCap Market or any stock exchange or quotation system, the closing bid 18 19 price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an appraiser selected in good faith by the Holders of a majority in interest of the shares of the Preferred Stock and approved by the Company. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Purchase Agreement" means the Convertible Preferred Stock Purchase Agreement, dated as of the February 10, 2000, among the Company and the original Holder of the Preferred Stock, as amended, modified or supplemented from time to time. "Redemption Amount" for each share of Preferred Stock means the greater of (A) the Optional Redemption Amount, or (B) the sum of (i) 116% (the "Percentage") of the Stated Value and all accrued dividends with respect to such share, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such share of Preferred Stock, provided, that, if any redemption pursuant to Section 5(a)(iii) occurs after the first anniversary of the Original Issue Date but prior to the second anniversary of the Original Issue Date, the Percentage shall increase to 132% for any such redemption occurring during such period, thereafter, on each subsequent yearly anniversary of the Original Issue Date, the Percentage shall be increased by an additional 16% for any such redemption occurring during such yearly period (e.g., the Percentage shall be 148% for such redemption occurring after the second anniversary of the Original Issue Date and prior to the third anniversary of the Original Issue Date). "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the February 10, 2000, by and among the Company and the original Holder of the Preferred Stock, as amended, modified or supplemented from time to time. "Trading Day" means (a) day on which the Common Stock is traded on the NASDAQ or the Nasdaq SmallCap Market as the case may be, or other securities market or exchange on which the Common Stock has been listed, or (b) if the Common Stock is not 19 20 listed on the NASDAQ or the Nasdaq SmallCap Market or on any exchange or market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Underlying Securities Registration Statement" means a registration statement that meets the requirement of the Registration Rights Agreement and registers the resale of all Underlying Shares by the recipient thereof, who shall be named as a "selling stockholder" thereunder. "Underlying Shares" means, collectively, the shares of Common Stock into which the shares of Preferred Stock are convertible in accordance with the terms hereof. 20 21 IN WITNESS WHEREOF, said Ecogen Inc. has caused this certificate to be signed by James P. Reilly, Jr., as Chairman and Chief Executive Officer, and attested by Mary E. Paetzold, as Secretary, this 10th day of February, 2000. ECOGEN INC. By: -------------------------------- Name: James P. Reilly, Jr. Title: Chairman and Chief Executive Officer ATTEST: - -------------------------- Name: Mary E. Paetzold Title: Secretary 21 22 ANNEX I NOTICE OF CONVERSION [To be Executed by the Registered Holder in order to Convert shares of Preferred Stock] The Holder written below hereby elects to convert the number of shares of 7% Series 2000-A Convertible Preferred Stock indicated below, into shares of Common Stock, $.01 par value (the "Common Stock"), of Ecogen Inc. (the "Company") according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than the name of the Holder written below such Holder will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. Conversion calculations: ---------------------------------------------------- Date to Effect Conversion Number of shares of Preferred Stock to be Converted Number of shares of Common Stock to be Issued Applicable Conversion Price Name of Holder Address Signature 22 EX-4.3 3 ECOGEN INC. STOCK OPTION PLAN OCTOBER 1987 1 Exhibit 4.3 ECOGEN INC. STOCK OPTION PLAN October, 1987 1. Purpose. The purpose of this plan (the "Plan") is to secure for ECOGEN INC. (the "Company") and its stockholders the benefits arising from capital stock ownership by directors and key employees of the Company and its parent and subsidiary corporation, if any, who are expected to contribute to the Company's future growth and success. 2. Types of Options and Administration. (a) Types of Options. Options granted pursuant to the Plan shall be authorized by action of the Board of Directors of the Company (or a Committee designated by the Board of Directors) and may be either incentive stock options ("Incentive Stock Options") meeting the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code") or non-statutory options which are not intended to meet the requirements of Code Section 422A. (b) Administration. The Plan will be administered by the Board of Directors of the Company, whose construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. Except as provided in subsection 2(c) below, the Board of Directors may in its sole discretion grant options to purchase shares of such options as provided in the Plan. The Board shall have authority, subject to the express provisions of the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective option agreements, which need not be identical, to advance the lapse of any waiting or installment periods and exercise dates, and to make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole final judge of such expediency. No director shall be liable for any action or determination taken or made under or with respect to the Plan or any option in good faith. The Board of Directors may, to the full extent permitted by law, delegate any or all of its powers under the Plan to a committee (the "Committee") appointed by the Board of Directors, and if the Committee is so appointed all references to the Board of Directors in the Plan shall mean and relate to such Committee. (c) Grant of Options to Directors. Options may be granted to directors of the Company, and the terms and provisions of such options may be determined, only by the Committee and only if the Committee consists entirely of persons who have not been eligible to participate in the Plan at any time within one year prior to their appointment to the Committee. 2 3. Eligibility. Options shall be granted only to persons who are, at the time of grant, officers, employees or directors (provided, in the case of Incentive Stock Options, such directors or officers are then also employees) of the Company or of any Parent Corporation or Subsidiary (as defined in Section 18 hereof). Directors who are members of the Committee or who have waived their right to receive options shall be ineligible to receive options under this Plan. No person shall be granted any Incentive Stock Option under the plan who, at the time such option is granted, owns, directly or indirectly, Common Stock of the Company possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent Corporation or Subsidiary, unless the requirements of paragraph (b) of Section 11 are satisfied. A person who has been granted an option may, if he or she is otherwise eligible, be granted an additional option or options if the Board of Director shall so determine. 4. Stock Subject to Plan. Subject to adjustment as provided in Section 14 and 15 below, the maximum number of shares of Commons Stock of the Company which may be issued and sold under the Plan is 750,000 shares. Such shares may be authorized and unissued shares or may be shares issued and thereafter acquired by the Company. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such option shall again be available for subsequent option grants under the Plan. Stock issuable upon exercise of an option granted under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Board of Directors. 5. Forms of Options Agreements. As a condition to the grant of an option under the Plan, each recipient of an option shall execute an option agreement, substantially in the form of Exhibit A to the Plan (in the case of Incentive Stock Options) or Exhibit B to the Plan (in the case of non-statutory options) or in such other form not inconsistent with the Plan as shall be specified by the Board of Directors at the time such option is authorized to be granted. 6. Purchase Price The purchase price per share of stock deliverable upon the exercise of an option shall be determined by the Board of Directors on the date such option is authorized to be granted, provided, however, that in the case of an Incentive Stock Option, the exercise price shall not be less than 100% of the fair market value of such stock, as determined by the Board of Directors, at the grant of such option, or less than 110% of such fair market value in the case of options described in paragraph (b) of Section 11. Payment of the exercise price of an option shall be in cash or, in the sole discretion of the Board of Directors, in capital stock of the Company, by purchase money 2 3 note bearing interest at a rate and coming due in installments determined by the Board of Directors at the time the option is granted, or by any other lawful means. 7. Option Period. Each option and all rights thereunder shall be expressed to expire on such date as the Board of Directors shall determine on the date such option is authorized to be granted, but in no event after the expiration of ten years from the day on which the option is granted (or five years in the case of options described in paragraph (b) of Section 11), and shall be subject to earlier termination as provided in the Plan. 8. Exercise of Options. Each option granted under the Plan shall be exercisable either in full or in installments at such time or times and during such period as shall be set forth in the agreement evidencing such option; provided, however, that no option granted under the Plan shall have a term in excess of ten years from the date of grant (or five years in the case of options described in paragraph (b) of Section 11). 9. Nontransferability of Options. No option granted under the Plan shall be assignable or transferable by the person to whom it is granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution. During the life of the recipient, the option shall be exercisable only by or on behalf of such person. 10. Effect of Termination of Employment. No option may be exercised unless, at the time of such exercise, the optionee is, and has been continuously since the date of grant of his or her option, employed by one or more of the Company, a Parent Corporation or a Subsidiary, except that if and to the extent the option agreement or instrument so provides: (a) the option may be exercised within the period of three months after the date the optionee ceases to be an employee of any of the foregoing entities (or within such lesser period as may be specified in the option agreement or instrument); (b) if the optionee dies while in the employ of the Company, a Parent Corporation or a Subsidiary or within three months after the optionee ceases to be such an employee, the option may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the option agreement or instrument); and 3 4 (c) if the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code) while in the employ of the Company, a Parent Corporation or a Subsidiary, the option may be exercised within the period of one year after the date the optionee ceases to be an employee of any of the foregoing entities because of such disability (or within such lesser period as may be specified in the option agreement or instrument); provided, however, that in no event may any option be exercised after the expiration date of the option. For all purposes of the Plan and any option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). 11. Incentive Stock Options. Options granted under the Plan which are intended to be Incentive Stock Options shall be specifically designated as Incentive Stock Options and shall be subject to the following additional terms and conditions: (a) Dollar Limitation. (i) The aggregate fair market value (determined as of the respective date or dates of grant) of the Common Stock with respect to which Incentive Stock Options granted to any employee under the Plan (and under any other incentive stock option plans of the Company, and any Parent Corporation and Subsidiary) are exercisable for the first time shall not exceed $100,000 in any one calendar year. (ii) In the event that Section 422A of the Code is amended to alter the limitation set forth therein so that following such amendment such limitation shall differ from the limitation set forth in this paragraph (a), the limitation of this paragraph (a) shall be automatically adjusted accordingly. (b) 10% Stockholder. If any employee to whom an Incentive Stock Option is to be granted under the Plan is at the time of the grant of such option the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent Corporation or any Subsidiary, then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (i) The purchase price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the fair market value of one share of Common Stock at the time of grant; and (ii) The option exercise period shall not exceed five years from the date of grant. Except as modified by the preceding provisions of this Section 11, all the provisions of the Plan shall be applicable to Incentive Stock Options granted hereunder. 4 5 12. General Restrictions. (a) Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. (b) Compliance With Securities Laws. Each option shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 13. Rights as Stockholder. The holders of an option shall have no rights as a stockholder with respect to any shares covered by the option for such shares. Except as otherwise expressly provided in the Plan, no adjustments shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 14. Recapitalization. In the event that the outstanding shares of Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, stock dividend, combination or subdivision, appropriate adjustment shall be made in the number and kind of shares available under the Plan and under any options granted under the Plan. Such adjustment to outstanding options shall be made without change in the total price applicable to the unexercised portion of such options, and a corresponding adjustment in the applicable option price per share shall be made. No such adjustment shall be made which would, within the meaning of any applicable provisions of the Code, constitute a modification, extension or renewal of any option or a grant or additional benefits to the holder of an option. 5 6 15. Reorganization or Change in Control of the Company. (a) Reorganization. In case (i) the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, (ii) all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other corporation or (iii) of a reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, shall, as to outstanding options, either (x) make appropriate provision for the protection of any such outstanding options by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect of the shares of Common Stock of the Company, provided that no additional benefits shall be conferred upon optionees as a result of such substitution, and the excess of the aggregate fair market value of the shares subject to the options immediately after such substitution over the purchase price thereof is not more than the excess of the aggregate fair market value of the shares subject to the option immediately before such substitution over the purchase price thereof, or (y) upon written notice to the optionees, provide that all unexercised options must be exercised within a specified number of days of the date of such notice or they will be terminated. In any such case, the Board of Directors may, in its discretion, accelerate the exercise dates of outstanding options; provided, however, that paragraph (b) below shall govern acceleration of options with respect to the events described in clauses (i), (ii) and (iii) of such paragraph. (b) Change in Control. In case of (i) any merger or consolidation (an "Event") involving the Company, if the shareholders of the Company immediately before such Event do not own, directly or indirectly, immediately following such Event, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such Event in substantially the same proportion as their ownership of the shares of Common Stock immediately before such Event; (ii) any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company or assets representing over 50% of the operating revenue of the Company; or (iii) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who was not, on December 2, 1998, a "controlling person" (as defined in Rule 405 under the Securities Act of 1933, as amended) (a "Controlling Person") of the Company shall become (x) the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of over 50% of the combined voting power of the Company's then outstanding voting securities entitled to vote generally or (y) a Controlling Person of the Company, all outstanding Options, regardless of the date of such Options, shall immediately become exercisable with respect to 100% of the Common Stock subject to such Options. 16. No Special Employment Rights. 6 7 Nothing contained in the Plan or in any option granted under the Plan shall confer upon any option holder any right with respect to the continuation of his or her employment by the Company (or any Parent Corporation or Subsidiary) or interfere in any way with the right of the Company (or any Parent Corporation or Subsidiary), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the option holder from the rate in existence at the time of the grant of an option. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination or cessation of employment for purposes of this Plan shall be determined by the Board of Directors. 17. Other Employee Benefits. The amount of any taxable income deemed to be received by an employee as a result of the exercise of an option or the sale of shares received upon such exercise will not constitute "earnings" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, profit sharing, life insurance or salary continuation plan. 18. Definition of Subsidiary and Parent Corporation. (a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (b) Parent Corporation. The term "Parent Corporation" as used in the Plan shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock in one or the other corporations in such chain. 19. Amendment of the Plan. The Board of Directors may at any time and from time to time modify or amend the Plan in any respect, except that without the approval of the stockholders of the Company, the Board of Directors may not (a) materially increase the benefits accruing to individuals who participate in the Plan, (b) materially increase the maximum number of shares which may be issued under the Plan (except for permissible adjustments provided in the Plan), or (c) materially modify the requirements as to eligibility for participation in the Plan. The termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his or her rights under an option affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or 7 8 modify the terms and provisions of the Plan and of any outstanding Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422A of the Code. 20. Withholding. The Company's obligation to deliver shares upon the exercise of any option granted under the Plan shall be subject to the option holder's satisfaction of all applicable federal, state and local income and employment tax withholding requirements. 21. Effective Date and Duration of the Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors, but no Incentive Stock Option granted under the Plan shall become exercisable unless and until the Plan shall have been approved by the Company's stockholders. If such stockholder approval is not obtained within twelve months after the date of the Board's adoption of the Plan, any Incentive Stock Options previously granted under the Plan shall terminate and no further Incentive Stock Options shall be granted. Subject to this limitation, options may be granted under the Plan at any time after the effective date and before the date fixed for termination of the Plan. (b) Termination. The Plan shall terminate upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the exercise or cancellation of options granted under the Plan. If the date of termination is determined under (i) above, then options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options. Adopted by the Board of Directors on October 7, 1987; and hereby, as amended on December 9, 1999 (no shareholder action required). 8 EX-4.4 4 1998 STOCK OPTION PLAN (NON-STATUTORY) 1 ECOGEN INC. 1998 STOCK OPTION PLAN (NON-STATUTORY) 1. Purpose. The purpose of this plan (the "Plan") is to secure for ECOGEN INC. (the "Company") and its stockholders the benefits arising from capital stock ownership by employees of the Company (and its parent and subsidiary corporations) who are expected to contribute to the Company's future growth and success. 2. Authorization and Administration. (a) Authorization. Options granted pursuant to the Plan shall be authorized by action of the Board of Directors of the Company (or a Committee, as defined in Section 2(b) below, designated by the Board of Directors). (b) Administration. Except as provided in Section 2(c) below, the Plan will be administered by the Board of Directors of the Company, whose construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. The Board of Directors may in its sole discretion grant options to purchase shares of the Company's Common Stock, par value .01 per share ("Common Stock") and authorize the Company to issue shares upon exercise of such options as provided in the Plan. The Board of Directors shall have authority, subject to the express provisions of the Plan, to construe the respective option agreements and the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective option agreements, which need not be identical, to advance the lapse of any waiting or installment periods and exercise dates, and to make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director shall be liable for any action or determination taken or made under or with respect to the Plan or any option in good faith. The Board of Directors may, to the full extent permitted by law, delegate any or all of its powers under the Plan to a committee (the "Committee") of two or more directors each of whom is a Non-Employee Director (as hereinafter defined) appointed by the Board of Directors, and if the Committee is so appointed all references to the Board of Directors in the Plan as may pertain to the powers so delegated shall mean and relate to the Committee. For the purposes of the Plan, a director or member of such Committee shall be deemed to be a "Non-Employee Director" only if such person qualifies as a "Non-Employee Director" within the meaning of paragraph (b)(3) of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (or any successor rule). (c) Non-Officer Employee Administration. Notwithstanding paragraph (b) of this Section 2, the Chief Executive Officer ("CEO") may, in his sole discretion, grant options to purchase 2 shares of Common Stock under the Plan to non-officer employees. The CEO will have authority, subject to the express provisions of the Plan, (i) to determine which non-officer employees of the Company will receive such stock options, (ii) to determine the number of shares of Common Stock issuable upon the exercise of any such stock options, and (iii) to determine the terms and provisions of each stock option grant. 3. Eligibility. Options shall be granted only to persons who are, at the time of grant, officers, directors, employees of, or consultants or advisors to the Company or of any Parent Corporation or Subsidiary (as defined in Section 17 hereof). 4. Stock Subject to Plan. Subject to adjustment as provided in Sections 15 and 16 below, the maximum number of shares of Common Stock of the Company which may be issued and sold under the Plan is 1,500,000 shares. Such shares may be authorized and unissued shares or may be shares issued and thereafter acquired by the Company. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such option shall again be available for subsequent option grants under the Plan. Stock issuable upon exercise of an option granted under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Board of Directors. 5. Option Agreements. As a condition to the grant of an option under the Plan, each recipient of an option shall execute an option agreement not inconsistent with the Plan as the Board of Directors shall determine at the time such option is authorized to be granted. Such agreements need not be identical but shall comply with, and be subject to, the terms and conditions set forth herein. 6. Purchase Price. The purchase price per share of stock deliverable upon the exercise of an option shall be determined by the Board of Directors on the date such option is authorized to be granted. Payment of the exercise price of an option shall be in cash or, in the sole discretion of the Board of Directors, in capital stock of the Company, by the surrender of other options to purchase capital stock of the Company, by purchase money note bearing interest at a rate and coming due in installments determined by the Board of Directors at the time the option is granted, or by any other lawful means. 7. Option Period. Each option and all rights thereunder shall be expressed to expire on such date as the Board of Directors shall determine on the date such option is authorized to be granted, but in no event after the expiration of ten years from the day on which the option is granted and shall be 3 subject to earlier termination as provided in the Plan. Notwithstanding the foregoing, if at any time during the last six (6) months of the term of any option granted under the Plan, the holder thereof is precluded from selling shares of Common Stock underlying such option solely by reason of the application to such optionee of the Company's policy regarding "Material Insider Information and Insider Trading" (or similar successor policy), the term of such option shall be deemed automatically extended by a period equal to six (6) months beginning with the first day during which such optionee shall no longer be so precluded. 8. Exercise of Options. Each option granted under the Plan shall be exercisable either in full or in installments at such time or times and during such period as shall be set forth in the agreement evidencing such option; provided, however, that, subject to Section 7, (i) no option granted under the Plan shall have a term in excess of ten years from the date of grant, and (ii) the periods of time following the optionee's cessation of employment with the Company or service as an Outside Director (as hereinafter defined) of or consultant or advisor to the Company, or the optionee's death or disability, during which an option may be exercised, as provided in paragraphs (a), (b) and (c) of Section 10, shall not be included for purposes of determining the number of shares of Common Stock with respect to which an option granted under the Plan may be exercised. An Outside Director is a director who is not an employee of the Company or of any Parent Corporation or Subsidiary. 9. Nontransferability of Options. Except as otherwise approved by the Board of Directors, no option granted under the Plan shall be assignable or transferable by the person to whom it is granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution. Subject to the preceding sentence, during the life of the recipient, the option shall be exercisable only by or on behalf of such person. 10. Effect of Termination of Employment or Cessation of Services. Notwithstanding anything contained in this Plan to the contrary, no option may be exercised unless, at the time of such exercise, the optionee is, and has been continuously since the date of grant of his or her option, employed by or serving as an Outside Director of one or more of the Company, a Parent Corporation or a Subsidiary, except that if and to the extent the option agreement or instrument so provides: (a) if the optionee ceases to be employed by or serve as an Outside Director of or consultant or advisor to any of the foregoing entities for any reason other than death or disability, the right to exercise the option shall terminate three months after such cessation (or at such earlier date as may be specified in the option agreement or instrument); (b) if the optionee dies while in the employ of or while serving as an outside Director of or consultant or advisor to any of the foregoing entities or within three months after the optionee 4 ceases to be such an employee or director, the option may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the option agreement or instrument); and (c) if the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code) while in the employ of or while serving as an Outside Director of or consultant or advisor to any of the foregoing entities, the option may be exercised within the period of one year after the date the optionee ceases to be such an employee, Outside Director, consultant or advisor because of such disability (or within such lesser period as may be specified in the option agreement or instrument); provided, however, that in no event may any option be exercised after the expiration date of the option. For all purposes of the Plan and any option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). 11. General Restrictions. (a) Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. (b) Compliance With Securities Laws. Each option shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 12. Rights as a Stockholder. The holder of an option shall have no rights as a stockholder with respect to any shares covered by the option until the date of issue of a stock certificate to him or her for such shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 13. Recapitalization. In the event that the outstanding shares of Common Stock of the Company are changed 5 into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, stock dividend, combination or subdivision, appropriate adjustment shall be made in the number and kind of shares available under the Plan and under any options granted under the Plan. Such adjustment to outstanding options shall be made without change in the total price applicable to the unexercised portion of such options, and a corresponding adjustment in the applicable option price per share shall be made. No such adjustment shall be made which would, within the meaning of any applicable provisions of the Code, constitute a modification, extension or renewal of any option or a grant of additional benefits to the holder of an option. 14. Reorganization or Change in Control of the Company. (a) Reorganization. In case (i) the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, (ii) all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other corporation or (iii) of a reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, shall, as to outstanding options, either (x) make appropriate provision for the protection of any such outstanding options by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect of the shares of Common Stock of the Company, provided that no additional benefits shall be conferred upon optionees as a result of such substitution, and the excess of the aggregate fair market value of the shares subject to the options immediately after such substitution over the purchase price thereof is not more than the excess of the aggregate fair market value of the shares subject to the option immediately before such substitution over the purchase price thereof, or (y) upon written notice to the optionees, provide that all unexercised options must be exercised within a specified number of days of the date of such notice or they will be terminated. In any such case, the Board of Directors may, in its discretion, accelerate the exercise dates of outstanding options; provided, however, that paragraph (b) below shall govern acceleration of options with respect to the events described in clauses (i), (ii) and (iii) of such paragraph. (b) Change in Control. In case of (i) any merger or consolidation (an "Event") involving the Company, if the shareholders of the Company immediately before such Event do not own, directly or indirectly, immediately following such Event, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such Event in substantially the same proportion as their ownership of the shares of Common Stock immediately before such Event; (ii) any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company or assets representing over 50% of the operating revenue of the Company; or (iii) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who was not, on December 2, 1998, a "controlling person" (as defined in Rule 405 under the Securities Act of 1933, as amended) (a "Controlling Person") of the Company shall become (x) the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of over 50% of the combined voting power of the Company's then outstanding voting securities entitled 6 to vote generally or (y) a Controlling Person of the Company, all outstanding Options, regardless of the date of such Options, shall immediately become exercisable with respect to 100% of the Common Stock subject to such Options." 15. No Special Employment Rights. Nothing contained in the Plan or in any option granted under the Plan shall confer upon any option holder any right with respect to the continuation of his or her employment by the Company (or any Parent Corporation or Subsidiary) or interfere in any way with the right of the Company (or any Parent Corporation or Subsidiary), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the option holder from the rate in existence at the time of the grant of an option. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination or cessation of employment for purposes of this Plan shall be determined by the Board of Directors. 16. Other Employee Benefits. The amount of any taxable income deemed to be received by an employee as a result of the exercise of an option or the sale of shares received upon such exercise will not constitute "earnings" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, profit sharing, life insurance or salary continuation plan. 17. Definition of Subsidiary and Parent Corporation. (a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (b) Parent Corporation. The term "Parent Corporation" as used in the Plan shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in such chain. 18. Amendment of the Plan. The Board of Directors may at any time and from time to time modify, amend or terminate the Plan in any respect, except to the extent stockholder approval is required by law. The termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his or her rights under an option previously granted to him or her. With the consent of the optionee affected, the Board of Directors may amend outstanding option 7 agreements in a manner not inconsistent with the Plan. 19. Withholding. The Company's obligation to deliver shares upon the exercise of any option granted under the Plan shall be subject to the option holder's satisfaction of all applicable federal, state and local income and employment tax withholding requirements. 20. Effective Date and Duration of the Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors. (b) Termination. Unless earlier terminated by the Board of Directors, the Plan shall terminate upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the exercise or cancellation of options granted under the Plan. If the date of termination is determined under (i) above, then options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options. EX-4.5 5 ECOGEN STOCK OPTION PLAN 1999 1 Exhibit 4.5 Ecogen Inc. 1999 STOCK OPTION PLAN 1. Purpose. The purpose of this plan (the "Plan") is to secure for Ecogen Inc. (the "Company") and its stockholders the benefits arising from capital stock ownership by employees, advisors, consultants, and members of the Board of Directors of the Company and its parent and subsidiary corporations, if any, who are expected to contribute to the Company's future growth and success. 2. Types of Options and Administration. (a) Types of Options. Options granted pursuant to the Plan shall be authorized by action of the Board of Directors of the Company (or a Committee designated by the Board of Directors) and may be either incentive stock options ("Incentive Stock Options") meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-statutory options which are not intended to meet the requirements of Code Section 422. (b) Administration. (i) Board of Directors. The Plan will be administered by the Board of Directors of the Company, whose construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. The Board of Directors may in its sole discretion grant options to purchase shares of the Company's Common Stock, par value $.01 per share ("Common Stock"), and authorize the Company to issue shares upon exercise of such options as provided in the Plan. The Board shall have the authority, subject to the express provisions of the Plan, to construe the respective option agreements and the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective option agreements, which need not be identical, to advance the lapse of any waiting or installment periods and exercise dates, and to make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director shall be liable for any action or determination taken or made under or with respect to the Plan or to the grant of any option in good faith. (ii) Committee. The Board of Directors may, to the full extent permitted by law, delegate any or all of its powers under the Plan to a committee (the "Committee") of two or more directors each of whom is a Non-Employee Director (as hereinafter defined), and if the Committee is so appointed all references to the Board of Directors 2 in the Plan shall mean and relate to such Committee. For the purposes of the Plan, a director or member of such Committee shall be deemed to be a "Non-Employee Director" only if such person qualifies as a "Non-Employee Director" within the meaning of paragraph (b)(3) of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (or any successor rule). (iii) Chief Executive Officer. Notwithstanding anything contained in this Section 2 to the contrary, the Board of Directors may, to the full extent permitted by law, delegate the power under the Plan to grant options to persons who are, at the time of grant, non-officer employees, advisors and consultants of the Company or of any Parent Corporation or Subsidiary (provided, however, that no such person at the time of grant is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") in accordance with Rule 16a-2 promulgated under the Exchange Act), to the Chief Executive Officer, and if the Chief Executive Officer is so appointed, to the extent necessary to give effect to such appointment, all references to the Board of Directors in the Plan shall mean and relate to such Chief Executive Officer. 3. Eligibility. Options shall be granted only to persons who are, at the time of grant, employees, advisors, consultants, or directors (provided, in the case of Incentive Stock Options, such directors are then also employees) of the Company or of any Parent Corporation or Subsidiary (as defined in Section 19 hereof). A person who has been granted an option may, if he or she is otherwise eligible, be granted an additional option or options if the Board of Directors shall so determine. 4. Stock Subject to Plan. Subject to adjustment as provided in Sections 15 and 16 below, the maximum number of shares of Common Stock of the Company which may be issued and sold pursuant to options granted under the Plan is 1,500,000 shares. Such shares may be authorized and unissued shares or may be shares issued and thereafter acquired by the Company. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such option shall again be available for subsequent option grants under the Plan. Stock issuable upon exercise of an option granted under the Plan may be subject to transfer restrictions, repurchase rights or other restrictions as shall be determined by the Board of Directors. 5. Option Agreements. As a condition to the grant of an option under the Plan, each recipient of an option shall execute an option agreement not inconsistent with the Plan in such form as the Board of Directors shall determine at the time such option is authorized to be granted. Such agreements need not be identical but shall comply with, and be subject to, the terms and conditions set forth herein. 3 6. Purchase Price. (a) The purchase price per share of Common Stock deliverable upon the exercise of an option shall be not less than the fair market value of the Common Stock as determined by the Board of Directors on the date such option is authorized to be granted. (b) Payment of the exercise price of an option shall be in cash or, in the sole discretion of the Board of Directors, in capital stock of the Company, by the surrender of other options to purchase capital stock of the Company or by any other lawful means. 7. Option Term. Each option and all rights thereunder shall expire on such date as the Board of Directors shall determine on the date such option is authorized to be granted, but in no event after the expiration of ten years from the day on which the option is granted (or five years in the case of options described in paragraph (b) of Section 11), and shall be subject to earlier termination as provided in the Plan. Notwithstanding the foregoing, except as provided under or pursuant to the Code with respect to Incentive Stock Options, if at any time during the last six (6) months of the term of any option granted under the Plan, the holder thereof is precluded from selling shares of Common Stock underlying such option solely by reason of the application to such optionee of the Company's "Material Inside Information and Insider Trading Policy" (or similar successor policy), the term of such option shall be deemed automatically extended by a period equal to six (6) months beginning with the first day during which such optionee shall no longer be so precluded. 8. Exercise of Options. Each option granted under the Plan shall be exercisable either in full or in installments at such time or times during such period as shall be set forth in the agreement evidencing such option; provided, however, that, subject to Section 7, (i) no option granted under the Plan shall have a term in excess of ten years from the date of grant (or five years in the case of options described in paragraph (b) of Section 11) and (ii) the periods of time following the optionee's cessation of employment with the Company or service as an advisor, consultant, or Outside Director of the Company, or the optionee's death or disability, during which an option may be exercised, as provided in paragraphs (a), (b) and (c) of Section 10, shall not be included for purposes of determining the number of shares of Common Stock with respect to which an option granted under the Plan may be exercised. 9. Transfer Restrictions. Except as otherwise approved by the Board of Directors, no option granted under the Plan shall be assignable or transferable by the person to whom it is granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution. Except as otherwise approved by the Board of Directors and subject to the preceding sentence, during the life of the recipient, the option shall be exercisable only by or on behalf of such person. 4 10. Effect of Termination of Employment. Notwithstanding anything contained in this Plan to the contrary, no option may be exercised unless, at the time of such exercise, the optionee is, and has been continuously since the date of grant of his or her option, employed by one or more of the Company, a Parent Corporation or a Subsidiary, except that if and to the extent the option agreement or instrument so provides: (a) the option may be exercised within the period of three months after the date the optionee ceases to be employed by or to serve as an advisor, consultant, or Outside Director of the Company, a Parent Corporation or a Subsidiary(or within such lesser period as may be specified in the option agreement or instrument) for any reason other than death or disability; (b) if the optionee dies while in the employ of or serving as an advisor, consultant, or Outside Director of the Company, a Parent Corporation or a Subsidiary or within three months after the optionee ceases to be such an employee, advisor, consultant, or director, the option may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the option agreement or instrument); and (c) if the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code) while in the employ of or while serving as an advisor, consultant, or Outside Director of the Company, a Parent Corporation or a Subsidiary, the option may be exercised within the period of one year after the date the optionee ceases to be an employee, advisor, consultant, or director of any of the foregoing entities because of such disability (or within such lesser period as may be specified in the option agreement or instrument); provided, however, that in no event may any option be exercised after the expiration date of the option. For all purposes of the Plan and any option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). 11. Incentive Stock Options. Options granted under the Plan which are intended to be Incentive Stock Options shall be specifically designated as Incentive Stock Options and shall be subject to the following additional terms and conditions: (a) Dollar Limitation. The aggregate fair market value (determined as of the respective date or dates of the grant) of the Common Stock with respect to which Incentive Stock Options granted to any employee under the Plan (and under any other incentive stock option plans of the Company, and any Parent Corporation and Subsidiary) are exercisable for the first time shall not exceed $100,000 in any one calendar year. In the event that Section 422 of the Code is amended to alter the limitation set forth therein so that following such amendment such 5 limitation shall differ from the limitation set forth in this paragraph (a), the limitation of this paragraph (a) shall be automatically adjusted accordingly. (b) 10% Stockholder. If any employee to whom an Incentive Stock Option is to be granted under the Plan is at the time of the grant of such option the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent Corporation or any Subsidiary, then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (i) The purchase price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the fair market value of one share of Common Stock at the time of grant; and (ii) The option exercise period shall not exceed five years from the date of grant. Except as modified by the preceding provisions of this Section 11, all the provisions of the Plan shall be applicable to Incentive Stock Options granted hereunder. 12. Annual Automatic Grants of Options to Outside Directors. (a) Annual Automatic Grants of Options to Outside Directors. Each director of the Company who is not an employee of the Company or of any Parent Corporation or Subsidiary (each, an "Outside Director") shall be granted under the Plan (i) on the date of his or her first election to the Board of Directors of the Company, non-statutory options to purchase up to 10,000 shares of Common Stock and (ii) on the date of each annual meeting of the Company's stockholders (beginning with the Company's Annual Meeting of Stockholders in 2000) at which such Outside Director is re-elected to the Board of Directors, non-statutory options to purchase up to 10,000 shares of Common Stock. (b) Terms and Conditions of Options. Any option granted to an Outside Director pursuant to this Section 12 shall be exercisable over a two year period, one half on each of the first two anniversaries of the date of grant, in each case at a purchase price equal to the fair market value of such Common Stock, as defined in Section 6 above, on the date of grant. Each such option shall expire ten years after the date of grant and shall be subject to earlier termination as provided in the Plan. Notwithstanding the foregoing, if at any time during the last six (6) months of the term of any option granted pursuant to this Section 12, the holder thereof is precluded from selling shares of Common Stock underlying such option solely by reason of the application to such Outside Director of the Company's "Material Inside Information and Insider Trading Policy" (or any similar successor policy), the term of such option shall be deemed automatically extended by a period equal to six (6) months beginning with the first day during which such Outside Director shall no longer be so precluded. (c) Plan Applicable. Except as set forth in this Section 12, all the provisions of the Plan shall be applicable to options granted to Outside Directors hereunder. 6 13. General Restrictions. (a) Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. (b) Compliance With Securities Laws. Each option shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 14. Rights as a Stockholder. The holder of an option shall have no rights as a stockholder with respect to any shares covered by the option until the date of issue of a stock certificate to him or her for such shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 15. Recapitalization. In the event that the outstanding shares of Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, stock dividend, combination or subdivision, appropriate adjustment shall be made in the number and kind of shares available under the Plan and under any options granted under the Plan. Such adjustment to outstanding options shall be made without change in the total price applicable to the unexercised portion of such options, and a corresponding adjustment in the applicable option price per share shall be made. No such adjustment shall be made which would, within the meaning of any applicable provisions of the Code, constitute a modification, extension or renewal of any option or a grant of additional benefits to the holder of an option. 16. Reorganization or Change in Control of the Company. (a) Reorganization. In case (i) the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, (ii) all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other corporation or (iii) of a reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations 7 of the Company, shall, as to outstanding options, either (x) make appropriate provision for the protection of any such outstanding options by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect of the shares of Common Stock of the Company, provided that no additional benefits shall be conferred upon optionees as a result of such substitution, and the excess of the aggregate fair market value of the shares subject to the options immediately after such substitution over the purchase price thereof is not more than the excess of the aggregate fair market value of the shares subject to the option immediately before such substitution over the purchase price thereof, or (y) upon written notice to the optionees, provide that all unexercised options must be exercised within a specified number of days of the date of such notice or they will be terminated. In any such case, the Board of Directors may, in its discretion, accelerate the exercise dates of outstanding options; provided, however, that paragraph (b) below shall govern acceleration of options with respect to the events described in clauses (i), (ii) and (iii) of such paragraph. (b) Change in Control. In case of (i) any merger or consolidation (an "Event") involving the Company, if the shareholders of the Company immediately before such Event do not own, directly or indirectly, immediately following such Event, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such Event in substantially the same proportion as their ownership of the shares of Common Stock immediately before such Event; (ii) any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company or assets representing over 50% of the operating revenue of the Company; or (iii) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who was not, on December 2, 1998, a "controlling person" (as defined in Rule 405 under the Securities Act of 1933, as amended) (a "Controlling Person") of the Company shall become (x) the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of over 50% of the combined voting power of the Company's then outstanding voting securities entitled to vote generally or (y) a Controlling Person of the Company, all outstanding Options, regardless of the date of such Options, shall immediately become exercisable with respect to 100% of the Common Stock subject to such Options. 17. No Special Employment Rights. Nothing contained in the Plan or in any option granted under the Plan shall confer upon any option holder any right with respect to the continuation of his or her employment by the Company (or any Parent Corporation or Subsidiary) or interfere in any way with the right of the Company (or any Parent Corporation or Subsidiary), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the option holder from the rate in existence at the time of the grant of an option. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination or cessation of employment for purposes of this Plan shall be determined by the Board of Directors. 18. Other Employee Benefits. 8 The amount of any compensation deemed to be received by an employee as a result of the exercise of an option or the sale of shares received upon such exercise will not constitute "earnings" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, profit sharing, life insurance or salary continuation plan. 19. Definition of Subsidiary and Parent Corporation. (a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. For purposes of grants of non-statutory stock options only, the term "Subsidiary" shall also mean any partnerships or limited partnerships for which the Company or any Subsidiary controls 50% or more of the voting power of such partnership or limited partnership, or any corporation in an unbroken chain of Subsidiaries if each of the Subsidiaries other than the last Subsidiary in the unbroken chain either owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations or controls 50% or more of the voting power of any such partnership or limited partnership in such chain. (b) Parent Corporation. The term "Parent Corporation" as used in the Plan shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in such chain. 20. Amendment of the Plan. The Board of Directors may at any time and from time to time modify, amend or terminate the Plan in any respect, except to the extent stockholder approval is required by law. The termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his or her rights under an option previously granted to him or her. With the consent of the optionee affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or modify the terms and provisions of the Plan and of any outstanding Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code. 21. Withholding. The Company's obligation to deliver shares upon the exercise of any option granted under the Plan shall be subject to the optionee's satisfaction of all applicable federal, state and local income and employment tax withholding requirements. 9 22. Effective Date and Duration of the Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors and approved by the Company's stockholders and shall not be effective unless and until so adopted and approved. Upon the effectiveness of the Plan, additional grants of options may not be made under the Company's 1998 Stock Option Plan. (b) Termination. Unless earlier terminated by the Board of Directors, the Plan shall terminate upon the earlier of (i) the close of business on March 10, 2009 or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the exercise or cancellation of options granted under the Plan. If the date of termination is determined under (i) above, then options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options. Adopted on December 2, 1998 by the Board of Directors of Ecogen Inc.; amended on June 22, 1999 (no shareholder action required); and further amended on December 9, 1999 (no shareholder action required). EX-10.149 6 AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEM 1 AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEMENT AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEMENT (the "Agreement"), dated December 9, 1999, between ECOGEN INC., a Delaware corporation (the "Company") and JAMES P. REILLY, JR. (the "Executive"). The Company's Board of Directors has determined that it is important to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties. Therefore, the Company is providing the Executive the benefits set forth in this Agreement in the event the Executive's employment with the Company is terminated in certain circumstances. 1. Termination. (a) If the Executive's employment with the Company is terminated by the Company or by the Executive at any time, the Company shall pay the Executive the compensation set forth in Section 2, unless such termination is a result of (i) the Executive's death, (ii) the Executive's Disability (as defined below), (iii) the Executive's Retirement (as defined below), (iv) Cause (as defined below) or (v) the Executive's termination of the Executive's employment other than for Good Reason (as defined below) within six months of the event constituting Good Reason. (b) "Disability" means the Executive's incapacity due to physical or mental illness, as evidenced by the Executive being absent from the Executive's duties with the Company for a period of six months within any 12-month period and, within 30 days after written notice of termination is thereafter given by the Company, not returning immediately to the performance of the Executive's duties. For the purposes of this Agreement, the Executive's "absence" shall include the inability of the Executive to perform the Executive's duties substantially on a full-time basis. (c) "Retirement" means termination by the Company or the Executive of the Executive's employment on account of the Executive's having reached age 65 or such other age as shall have been fixed in any retirement arrangement established with the Executive's consent with respect to the Executive. (d) "Cause" means (i) any felony conviction or admission of guilt of a felony, (ii) any breach or nonobservance by Employee of the Company's employee policies, (iii) any willful, intentional or deliberate disobedience or neglect by Employee of the lawful and reasonable orders or directions of the Board of Directors; provided that the Board of Directors has given Employee written notice of such disobedience or neglect and Employee has failed to cure such disobedience or neglect within a period reasonable under the circumstances, or (iv) any willful neglect or deliberate misconduct by Employee that is materially injurious to the Company. 2 (e) "Good Reason" means (without the Executive's prior express written consent): (i) responsibilities or status with the Company or any removal of the Executive from, or any failure to reelect the Executive to, any position consistent with the Executive's duties, responsibilities and status except in connection with the termination of the Executive's employment (x) for Disability, Retirement or Cause, (y) as a result of the Executive's death or (z) by the Executive other than for Good Reason; or (ii) a reduction by the Company in the Executive's salary; or (iii) any failure by the Company to permit the Executive to participate in any benefit plan or arrangement which is generally available to employees of the Company (hereinafter, "Benefit Plans"); or (iv) any change in any incentive, bonus or compensation plan or other arrangement which is likely to materially reduce, in the aggregate, the total compensation payable to the Executive; or (v) a relocation of the Company's principal executive offices to a location which is greater than twenty-five miles from the Company's current place of business or the Company's relocation of the Executive to a place other than the Company's principal executive offices; or (vi) any material breach by the Company of this Agreement or violation of law in respect of the executive's employment; or (vii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (viii) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 1(f); or (ix) any Change in Control (as defined below). 2 3 (f) "Change in Control" means: (i) any consolidation or merger involving the Company if the shareholders of the Company immediately before such merger or consolidation do not own, directly or indirectly, immediately following such merger or consolidation, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the shares of common stock immediately before such merger or consolidation; (ii) any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company or assets representing over 50% of the operating revenue of the Company; or (iii) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who was not, on December 2, 1998, a "controlling person" (as defined in Rule 405 under the Securities Act of 1933, as amended) (a "Controlling Person") of the Company shall become (x) the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of over 50% of the combined voting power of the Company's then outstanding voting securities entitled to vote generally or (y) a Controlling Person of the Company. (g) Any termination by the Company pursuant to Section 1(b), 1(c) or, 1(d) shall be communicated by a Notice of Termination. A "Notice of Termination" means a written notice indicating the specific provisions in this Agreement relied upon and, in reasonable detail, the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (h) "Date of Termination" means (i) if this Agreement is terminated by the Company for Disability, 30 days after Notice of Termination is given to the Executive, provided that the Executive shall not have returned to the performance of the Executive's duties on a full-time basis during such 30-day period, (ii) if the Executive's employment is terminated by the Company for any other reason, the date on which a Notice of Termination is given or (iii) if the Executive gives notice of such termination, immediately upon the giving of such notice. 2. Compensation. If the requirements of Section 1 are fulfilled, the Company shall continue to pay to the Executive, as severance pay, the Executive's base salary for a period of two years following the Termination Date and shall, for such period, continue to (a) cover the Executive and the Executive's family on all life insurance, health insurance, hospitalization, dental, drug prescription, disability and accidental death and dismemberment plans and policies of the Company that the Executive and the Executive's family are participating in at the time of termination on the same basis of participation as applied prior to termination, to the extent such plans and 3 4 policies permit non-employees to participate therein and subject to any other terms and conditions of such plans and policies and (b) provide the Executive with other standard benefits available at the time to the Company's executive officers, such as automobile privileges; provided, however, if any of the plans described in clause (a) above do not permit the participation therein of persons who are not employees of the Company, the Company shall endeavor, in lieu thereof, to replace such benefit for the Executive with a substantially equivalent benefit to the extent such benefit may be obtained on commercially reasonable terms. 3. Mitigation; Other Contractual Rights. (a) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the Date of Termination or otherwise. (b) This Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights or rights that would accrue solely as a result of the passage of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment agreement or other contract, plan or arrangement. 4. Successors. (a) The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment for Good Reason. "Company" means, as used throughout this Agreement, the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Section or that otherwise becomes bound by this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to the Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee, or, if there be no such designee, to the Executive's estate. 4 5 5. Golden Parachute Excise Tax. To the extent that, as a result of a Change in Control, the Executive receives the compensation set forth in Section 2, the Company shall pay to Executive an amount equal to (i) any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), on any portion of the increased value accruing to Executive in connection with such compensation set forth in Section 2 plus (ii) any other excise taxes imposed by the Code or under federal, state or local law on the payments provided for in this Agreement. It being understood that in connection with the payment by the Company to Executive of the amounts set forth in the immediately preceding sentence the Company will reimburse Executive's tax cost relating to such payments, including by providing for an appropriate gross-up to ensure that Executive bears no federal (including, without limitation, Medicare taxes), state and local income taxes (the foregoing taxes are hereinafter collectively referred to as "Income Taxes") with respect to such payments. The amount of the taxes provided for in the first sentence of this Section shall be determined by KPMG LLP or another national accounting firm selected by the Company. Any amounts payable by the Company to Executive pursuant to this Section shall be paid to Executive no later than five (5) business days before Executive is obligated to pay any taxes to the Internal Revenue Service or the appropriate state and local revenue authorities. The amounts payable to Executive by the Company pursuant to this Section shall be in addition to, and not in limitation of, the amounts payable to, or on behalf of Executive by the Company pursuant to Section 2 hereof. 6. Term. This Agreement shall terminate, except to the extent that any obligation of the Company hereunder remains unpaid, upon the termination of the Executive's employment with the Company on account of death, Disability, Retirement or Cause or by the Executive other than for Good Reason. 7. Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Ecogen Inc. 2005 Cabot Boulevard West Langhorne, Pennsylvania 19047 Attention: James P. Reilly, Jr. Chief Executive Officer If to the Executive: James P. Reilly, Jr. 16 Inlet Terrace Belmar, New Jersey 07719 5 6 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 10. Legal Fees and Expenses. The Company shall pay all legal fees and expenses that the Executive may incur as a result of the Company's contesting the validity, enforceability or the Executive's interpretation of, or determinations under, this Agreement. 11. General. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 6 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ECOGEN INC. By ----------------------------- Name: Title: ------------------------------ Name: James P. Reilly, Jr. Title: Chairman and Chief Executive Officer 7 EX-10.150 7 TERM LOAN AND SECURITY AGREEMENT 1 TERM LOAN AND SECURITY AGREEMENT BETWEEN ECOGEN INC. AND THE BERKSHIRE BANK DATED AS OF DECEMBER 23, 1999 2 TABLE OF CONTENTS PAGE ARTICLE 1. DEFINITIONS.......................................................1 1.01. Defined Terms.................................................1 1.02. Accounting Terms..............................................7 1.03. UCC Terms.....................................................7 ARTICLE 2. THE LOAN..........................................................8 2.01. General Terms.................................................8 2.02. The Note......................................................8 2.03. Repayment of the Loan.........................................8 2.04. Payment of Interest...........................................8 2.05. Lawful Interest...............................................8 2.06. Facility Fee..................................................8 2.07. Closing Expenses..............................................8 2.08. Optional Prepayment of the Loan...............................9 2.09. Payments to the Bank..........................................9 2.10. Interest on Overdue Obligations...............................9 ARTICLE 3. CONDITIONS PRECEDENT..............................................9 3.01. Conditions Precedent to the Closing...........................9 3.02. Additional Conditions Precedent to the Loan..................12 3.03. Closing Fees.................................................13 3.04. Post Closing Conditions......................................13 ARTICLE 4. COLLATERAL SECURITY..............................................13 4.01. Composition of the Collateral................................13 4.02. Security Agreement...........................................13 4.03. Perfection and Maintenance of Security Interest..............14 4.04. Provisions Relating to Receivables...........................15 4.05. Provisions Relating to Inventory.............................15 4.06. Provisions Relating to Machinery and Equipment...............16 4.07. Provisions Relating to Intellectual Property.................16 4.08. Provisions Relating to the Monsanto Royalty..................16 4.09. Priority of Security Interests...............................17 ARTICLE 5. REPRESENTATIONS AND WARRANTIES...................................17 5.01. Inducing Representations and Warranties......................17 5.02. Survival.....................................................21 ARTICLE 6. RESERVED.........................................................21 ARTICLE 7. FINANCIAL REPORTING..............................................21 7.01. Financial Statements.........................................21 7.02. GAAP Reporting...............................................22 7.03. Communications with Accountants..............................22 ARTICLE 8. COVENANTS........................................................22 8.01. Affirmative Covenants........................................22 8.02. Negative Covenants...........................................26 ARTICLE 9. DEFAULT..........................................................28 9.01. Events of Default............................................28 9.02. Remedies.....................................................30 9.03. UCC Remedies.................................................30 3 9.04. Right of Set-off.............................................31 9.05. Discretion to Apply the Collateral...........................32 9.06. Rights and Remedies Cumulative; Waivers......................32 9.07. Injunctive Relief............................................32 9.08. Loan by Bank for Borrower Expenses...........................32 9.09. Power of Attorney............................................33 9.10. Actions......................................................33 ARTICLE 10. MISCELLANEOUS...................................................33 10.01. Construction..............................................33 10.02. Further Assurances........................................34 10.03. Preferences...............................................34 10.04. Indemnification...........................................34 10.05. Reimbursement for Bank Expenses...........................34 10.06. Strict Enforcement by the Bank............................35 10.07. Notices...................................................35 10.08. Bank Participations.......................................35 10.09. Assignments by the Borrower...............................36 10.10. Continuing Obligation.....................................36 10.11. Superseding Agreement.....................................36 10.12. Amendments and Waivers in Writing.........................36 10.13. Severability..............................................36 10.14. Governing Law.............................................36 10.15. Consent to Jurisdiction; Waiver of Trial by Jury..........36 10.16. Headings..................................................37 10.17. Counterparts..............................................37 Exhibit A Form of Note Exhibit B Form of Guarantee Exhibit C Form of Intercreditor Agreement Exhibit D Locations of Inventory Exhibit E Locations of Machinery and Equipment Exhibit F Places of Business Exhibit G Consents and Approvals 4 TERM LOAN AND SECURITY AGREEMENT THIS TERM LOAN AND SECURITY AGREEMENT, dated as of December 23, 1999, between ECOGEN INC., a Delaware corporation (the "BORROWER"), and THE BERKSHIRE BANK, a New York banking corporation (the "BANK"), WITNESSETH: In consideration of the mutual covenants made herein and other good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS. 1.01. DEFINED TERMS. As used herein: "ADJUSTED BASE RATE" shall mean a fluctuating rate of interest equal to the Base Rate plus two percent (2%) per annum; provided, however, that upon the occurrence and during the continuation of an Event of Default, such rate shall be equal to the Base Rate plus six percent (6%) per annum. "AFFILIATE" shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, said Person. For the purposes of this Agreement, the term "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through ownership of common stock, by contract or otherwise. "AGREEMENT" shall mean this Term Loan and Security Agreement, as the same may, from time to time, be amended or supplemented. "BANK" shall mean The Berkshire Bank, a bank organized under the laws of the State of New York, and its successors and assigns. "BASE RATE" shall mean a fluctuating interest rate per annum which for each day shall equal the rate of interest announced publicly by the Bank, from time to time, as the Bank's base rate (it being understood and agreed that such rate shall not necessarily be the lowest rate of interest available to the most preferred customers of the Bank), with each change in such rate to be effective for purposes hereof on the day on which such change is so reported, and if not so reported, as determined by the Bank in good faith by the best means available to it. 5 "BANKING DAY" shall mean any day other than a Saturday, a Sunday or any other day in which commercial banks in New York City and Pennsylvania are required or authorized to be closed. "BORROWER" shall mean Ecogen Inc., a Delaware corporation, and its successors and assigns. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day in which commercial banks in New York City and Pennsylvania are required or authorized to be closed. "CLOSING" has the meaning given to such term in Section 3.01 hereof. "CLOSING DATE" shall mean the date of the Closing. "COLLATERAL" has the meaning given to such term in Section 4.01 hereof. "COMMITMENT" shall mean $1,500,000. "DEFAULT" shall mean the occurrence of any of the events set forth in Section 9.01 hereof which after the giving of notice, the passage of time, or both, would become an Event of Default. "EVENT OF DEFAULT" has the meaning provided in Section 9.01 hereof. "LOAN" shall have the meaning set forth in Section 2.01 hereof. "GAAP" shall mean United States generally accepted accounting principles consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of the Borrower and any predecessor, as reflected on the historical and pro-forma financial statements referred to in Article 7 hereof, except for changes mandated by the Financial Accounting Standards Board or any similar accounting authority of comparable standing and except for changes concurred with by a firm of independent certified public accountants reasonably acceptable to the Bank. "GENERAL INTANGIBLES" shall mean and include all of the general intangibles of the Borrower, whether now existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, all choses in action, causes of action, corporate or other business records, inventions, designs, patents, patent applications, trademarks, trademark applications, trade names, trade secrets, goodwill, registrations, copyrights, licenses, franchises, customer lists, tax refunds, tax refund claims, rights and claims against carriers and shippers, leases, rights to indemnification and all other intangible personal property of every kind and nature (other than Receivables). -2- 6 "GOVERNMENTAL AUTHORITY" shall mean the United States, the States of Delaware and Pennsylvania, or any other political subdivision in which the Borrower owns any property or conducts any business, or any other political subdivision, agency, authority, board, bureau, commission, court, arbitrator or arbitration board, department, or instrumentality properly exercising jurisdiction over the Borrower. "GUARANTEE" means the Guarantee, dated as of the date hereof, executed by the Guarantor , in substantially the form of Exhibit B hereto. "GUARANTOR" means Momar Corporation, a Maryland corporation. "INDEBTEDNESS" shall mean without duplication: (a) all indebtedness of such Person for borrowed money, but excluding obligations to trade creditors incurred in the ordinary course of business that are not overdue by more than six (6) months unless being contested in good faith; (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured; (c) all obligations evidenced by notes, bonds, debentures or similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default is limited to repossession or sale of such property); (e) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person even though such Person has not assumed or become liable for the payment of such Indebtedness; (f) intercompany loans with Subsidiaries (other than the Principal Subsidiaries) made in the normal course of business; (g) All indebtedness guaranteed, directly or indirectly, in any manner, or endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse by the Borrower; (h) All indebtedness guaranteed by the Borrower, directly or indirectly, through agreements, contingent or otherwise: (1) to purchase such indebtedness; or (2) to purchase, sell, or lease (as lessee or lessor) property, products, materials, or supplies or to purchase or sell services, primarily for the -3- 7 purpose of enabling the debtor to make payment of such indebtedness or to insure the owner of the indebtedness against loss; or (3) to supply funds to, or in any other manner invest in, the debtor; (i) All indebtedness secured by (or for which the holder of such indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance upon property owned or acquired subject thereto whether or not the liabilities secured thereby have been assumed; and (j) the Obligations. "INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement, dated as of the date hereof, among the Borrower, the Bank and Congress Financial Corporation, in substantially the form attached hereto as Exhibit C. "INTELLECTUAL PROPERTY" means (i) all patents, patent applications, patent rights, inventions and improvements, shop rights, processes and formulae, trade secrets, proprietary technical information, technology and know-how, (ii) all trademarks, service marks, trade names, label designs and other trade dress (including the goodwill of the business associated therewith) and copyrights and (iii) all transferable rights under license agreements with respect to any of the foregoing. "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "INVENTORY" shall mean and include all of the inventory of the Borrower, whether now existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights, (i) including, without limitation, goods held by the Borrower for sale or lease or to be furnished under any contract of service, or so furnished by the Borrower, and all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in the business of the Borrower or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, all returned or repossessed goods now, or at any time or times hereafter, in the possession or under the control of the Borrower or the Bank, and all documents of title or documents representing the same, and (ii) excluding any of such items as set forth in (i) herein to the extent the Borrower does not have an ownership interest in such items. "LAWS" shall mean all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any government or political subdivision or agency thereof, or any court or similar entity established by any thereof. "LOAN" shall mean the loan under the Loan by the Bank to or for the account of the Borrower pursuant to Article 2 hereof. -4- 8 "MACHINERY AND EQUIPMENT" shall mean and include all of the equipment and fixtures of the Borrower, whether now existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, furniture, machinery, vehicles (but excluding titled vehicles) and trade fixtures, together with any and all accessories, accessions, parts and appurtenances thereto, substitutions therefor and replacements thereof. "MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 5.01(d) hereof. "MATURITY DATE" shall mean June 23, 2001. "MONSANTO ACCOUNT" has the meaning set forth in Section 4.08 hereof. "MONSANTO INSTRUCTIONS" has the meaning set forth in Section 4.08 hereof. "MONSANTO ROYALTY" shall mean all Gene Success Fees and Commercialization Success Fees payable at any time to Borrower or any of its subsidiaries by Monsanto Company pursuant to the Technology Assignment Agreement dated as of January 24, 1996, as amended, by and among Monsanto Company, Borrower, and Ecogen-Bio, Inc. "NOTE" shall mean the promissory note referred to in Section 2.02 hereof. "OBLIGATIONS" shall mean: (a) the obligations of the Borrower to pay the principal of, and interest on, the Note in accordance with the terms thereof and to satisfy all of its other liabilities to the Bank hereunder, under the Note, and under any of the other Related Documents, whether now existing or hereafter incurred, matured or unmatured, direct or contingent, joint or several, including any extensions, modifications, renewals thereof, and substitutions therefor; (b) the obligations of the Borrower to repay to the Bank hereunder, under the Note and under any of the other Related Documents, all amounts advanced by the Bank on behalf of the Borrower, including, but without limitation, advances for principal or interest payments to prior secured parties, mortgagees, or lienors, or for taxes, levies, insurance, rent, or repairs to, or maintenance of the Collateral; (c) all advances, liabilities, obligations, covenants and duties, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, which are owing by the Borrower to the Bank and arise under this Agreement or any Related Document, whether or not for the payment of money, whether direct or indirect, absolute or contingent, or due or to become due; and -5- 9 (d) the obligations of the Borrower to reimburse the Bank on demand, for all of the Bank's out-of-pocket expenses and costs, including the reasonable fees and expenses of its counsel, in connection with the preparation, amendment, modification, or enforcement of this Agreement and the documents required hereunder, and in connection with any proceeding brought, or threatened, to enforce payment of any of the obligations referred to in the foregoing paragraphs (a), (b) and (c). "OBLIGOR" shall mean any Person that is an obligor on a Receivable. "OUTSTANDING AMOUNT" shall mean, from time to time, the principal amount outstanding under the Loan. "PARTICIPATING BANK" shall mean any participating or co-lending bank with which, pursuant to Section 10.08 hereof, the Bank may enter into a participation or co-lending agreement. "PERMITTED ENCUMBRANCES" shall mean (A) the security interest of Congress Financial Corporation granted pursuant to the Loan and Security Agreement, dated August 20, 1998, as amended, between Congress Financial Corporation and the Borrower, (B) liens for taxes not yet subject to penalties or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provision (in the opinion of an authorized financial officer of the Bank) shall have been established on the books of the Borrower, (C) pledges or deposits made under workmen's compensation, unemployment insurance, social security and similar legislation, or in connection with appeal or surety bonds incident to litigation, or to secure statutory obligations, (D) mechanics', repairmen's, materialmen's, warehousemen's, and other like liens with respect to liabilities which are not yet due or which are being contested in good faith, (E) encumbrances on assets that are not Collateral and are not used to secure any Indebtedness of the Borrower, (F) purchase money security interests in Machinery and Equipment (including capital leases) not to exceed $925,000 in the aggregate at any time outstanding so long as such security interests do not apply to any property of the Borrower or any of its Subsidiaries other than the Machinery and Equipment so acquired and the Indebtedness secured thereby does not exceed the cost of the Machinery and Equipment so acquired and the Indebtedness secured, (G) liens and security interests of the Bank and (H) such other minor defects of title which in the opinion of counsel acceptable to the Bank will not materially impair the value of, or the Bank's security interest in, the Collateral for any reasonable use or the ability of the Bank to realize the value of, or its security interest in, the Collateral. "PERSON" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, joint venture, court, or government or political subdivision or agency thereof. -6- 10 "PREFERRED DIVIDENDS" shall mean the dividends provided under the Series 1999A Convertible Preferred Stock and the Series 1998C Convertible Preferred Shares. "PRINCIPAL SUBSIDIARIES" shall mean Ecogen-Bio Inc., Ecogen Investments Inc., Ecogen Technologies I Incorporated, Ecosearch Mildew I Inc., Ecoresearch Harvest Rot II Inc., Ecoresearch Corn Borer III Inc., Ecoresearch Nematodes IV Inc., Ecoresearch Rootworm V Inc. and Ecoresearch Turf VI Inc. "RECEIVABLES" shall mean and include, with respect to the Borrower, all of the accounts, contract rights, chattel paper and instruments of the Borrower, whether now existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, all present and future rights to payments for goods, merchandise or Inventory sold or leased or for services rendered, whether or not represented by instruments or chattel paper, and whether or not earned by performance; proceeds of any letter of credit on which the Borrower is beneficiary; and all forms of obligations whatsoever owing to the Borrower, together with all instruments and documents of title representing any of the foregoing, all rights in any goods, merchandise or Inventory which any of the foregoing may represent, all rights in any returned or repossessed goods, merchandise or Inventory, and all rights, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit. "RECORDS" shall mean correspondence, memoranda, tapes, discs, papers, books, and other documents, or transcribed information of any type, whether expressed in ordinary or machine language, wheresoever the same may be located, and whether or not the same are in the possession of the Borrower or another Person. "RELATED DOCUMENTS" shall mean the documents, whether deliverable at or after the Closing, required under Section 3.01 hereof. "SUBSIDIARY" shall mean, with respect to the Borrower, any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation is at the time directly or indirectly owned or controlled by the Borrower or by one or more Subsidiaries. "TRANSACTION DOCUMENTS" has the meaning set forth in Section 5.01(b) hereof. 1.02. ACCOUNTING TERMS. Accounting terms used and not otherwise defined in this Agreement have the meanings determined by GAAP, and all calculations with respect to accounting or financial matters unless otherwise provided herein shall be computed in accordance with GAAP. 1.03. UCC TERMS. All terms used herein that are defined in the Uniform Commercial Code of the applicable jurisdiction (the "UCC") and are not otherwise defined herein shall have the meanings assigned to such terms in the UCC. -7- 11 ARTICLE 2. THE LOAN. 2.01. GENERAL TERMS. Subject to the provisions of this Agreement, the Bank hereby establishes a term loan facility for the account of the Borrower, under which the Bank agrees to make a term loan to the Borrower (the "LOAN") on the Closing Date in a principal amount equal to the Commitment. 2.02. THE NOTE. On the Closing Date, the Borrower shall execute and deliver a promissory note to the Bank (the "NOTE"), which Note shall be in the form of Exhibit A hereto. The Note shall be in the principal amount of the Commitment. 2.03. REPAYMENT OF THE LOAN. An amount of principal on the Loan equal to $500,000 shall be due and payable on June 23, 2000 and the Outstanding Amount shall be due and payable on the Maturity Date. 2.04. PAYMENT OF INTEREST. Interest for the Loan shall be payable by the Borrower at the Adjusted Base Rate monthly in arrears on the first day of each month, calculated on the basis of a 360-day year for actual days elapsed. 2.05. LAWFUL INTEREST. Nothing contained in this Agreement or in the Note or in any other agreement or instrument evidencing or relating to the Obligations shall be construed to permit the Bank to receive at any time interest, fees or other charges in excess of the amounts which the Bank is legally entitled to charge and receive under any law to which such interest, fees or charges are subject. In no contingency or event whatsoever shall the compensation payable to the Bank by the Borrower, howsoever characterized or computed, hereunder or under the Note or under any other agreement or instrument evidencing or relating to the Obligations exceed the highest rate permissible under any law to which such compensation is subject. There is no intention that the Bank shall contract for, charge or receive compensation in excess of the highest lawful rate, and, in the event it should be determined that the Bank has contracted for any rate of interest in excess of the highest lawful rate, then ipso facto such rate shall be reduced to the highest lawful rate so that no amounts shall be charged which are in excess thereof, and, in the event it should be determined that any excess over such highest lawful rate has been charged or received, the Bank shall promptly refund such excess to the Borrower; provided, however, that, if lawful, any such excess shall be paid by the Borrower to the Bank as additional interest (accruing at a rate equal to the maximum legal rate minus the rate provided for hereunder) during any subsequent period when regular interest is accruing hereunder at less than the maximum legal rate. 2.06. FACILITY FEE. On the Closing Date, the Borrower shall pay to the Bank a facility fee in the amount of $7,500. 2.07. CLOSING EXPENSES. On the Closing Date, the Borrower shall reimburse the Bank for the reasonable fees and disbursements of counsel to the Bank, and all other -8- 12 out-of-pocket fees and expenses incurred by the Bank referred to in Section 10.05 hereof relating to the Loan. 2.08. OPTIONAL PREPAYMENT OF THE LOAN. Upon one (1) Business Day's notice to the Bank, or upon same day notice received by the Bank prior to 12:00 noon (New York time), the Borrower may prepay the Outstanding Amount of the Loan in whole or, from time to time, in part, without premium or penalty, any partial payment to be made in integral multiples of $100,000; provided, however, that any such prepayment shall be applied solely to principal due under the Loan. 2.09. PAYMENTS TO THE BANK. (a) All payments of interest on, and principal of, the Loan, all fees, and all other sums payable to the Bank shall be paid directly to the Bank, at its address set forth in Section 10.07 hereof, or such other place as the Bank shall by written notice to the Borrower designate, in immediately available funds on the dates specified hereunder, or if any such date is not a Business Day, then on the next succeeding Business Day, in such currency of the United States of America as is, at the time of payment, legal tender for the payment of public and private debts. Except as otherwise provided in this Agreement, the Bank shall send the Borrower statements of all amounts due hereunder for interest, principal, and fees, which statements shall be considered correct and presumptively binding on the Borrower unless the Borrower notifies the Bank to the contrary within thirty (30) days of its receipt of any statement which it deems to be incorrect. (b) All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed by any country (or by any political subdivision or taxing authority thereof or therein) excluding income and franchise taxes now or hereafter imposed on the Bank. 2.10. INTEREST ON OVERDUE OBLIGATIONS. Except as otherwise expressly provided herein, the Borrower agrees to pay to the Bank interest at the Adjusted Base Rate on all Obligations which are due hereunder and unpaid from the due date to the date of payment by the Borrower. ARTICLE 3. CONDITIONS PRECEDENT. The obligation of the Bank to make the Loan is subject to the following: 3.01. CONDITIONS PRECEDENT TO THE CLOSING. The Borrower shall have delivered to the Bank, prior to December 23, 1999 (the date upon which all of the following have been delivered to the Bank to be defined as the "CLOSING DATE"), the following: (a) the Note, duly executed by the Borrower; -9- 13 (b) the Guarantee, duly executed by the Guarantor; (c) the Intercreditor Agreement, duly executed by the Borrower and Congress Financial Corporation; (d) a list of insurance policies complying with Section 8.01(k) hereof and a copy of the certificate of insurance with respect to each such policy, and, with respect to casualty insurance policies, loss payable endorsements naming the Bank as loss payee, together with evidence that all premiums that are due have been paid on each such policy; (e) the written consent of Congress Financial Corporation to this Agreement and the transactions contemplated hereby; (f) such Uniform Commercial Code filings as are necessary in the Commonwealth of Pennsylvania to perfect the security interests of the Bank in the Collateral; (g) a copy of the certificate of incorporation of the Borrower, certified as of a current date by the Secretary of State of Delaware; (h) a good standing certificate for the Borrower, issued as of a current date by the Secretary of State of Delaware; (i) a certificate or certificates issued as of a current date by the Secretary of Commonwealth of Pennsylvania, or other evidence acceptable to the Bank in its sole discretion, stating that the Borrower is qualified to do business in, and is in good standing as a foreign corporation doing business in, the Commonwealth of Pennsylvania; (j) a certificate of the secretary of the Borrower certifying (i) that attached thereto is a true and complete copy of the bylaws of the Borrower as in effect on the date of such certification, (ii) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the Borrower authorizing the execution, delivery and performance of this Agreement and each of the other Related Documents to which it is a party, and (iii) as to the incumbency and genuineness of the signature of each officer of the Borrower executing this Agreement; (k) a certificate signed by the president of the Borrower attesting to such factual matters as shall be requested by the Bank, including that (i) the representations and warranties set forth in Article 5 hereof (as they relate solely to the transactions contemplated by the Closing) are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date, (ii) the Borrower is on such date in compliance with all the terms and -10- 14 provisions set forth in this Agreement and the other Related Documents (each, as they relate solely to the transactions contemplated by the Closing) on its part to be observed or performed, and (iii) on such date, and after giving effect to the consummation of the transactions contemplated by this Agreement, no Default or Event of Default nor any event or condition which with the making of the Loan, the consummation of such transactions or any combination thereof would constitute such a Default or Event of Default, has occurred and is continuing; (l) a written opinion of Paul, Hastings, Janofsky & Walker LLP, counsel to the Borrower, dated the Closing Date and addressed to the Bank, in form satisfactory to the Bank, to the effect that: (1) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the power to own its assets and to transact the business in which it is engaged, (2) the Borrower has the power to execute, deliver and perform the Borrower's obligations under the Transaction Documents and the shareholders and the board of directors of the Borrower have taken all necessary action required under the certificate of incorporation and bylaws of the Borrower to authorize the execution and delivery by the Borrower of, and performance of the Borrower's obligations under, the Transaction Documents, (3) the execution and delivery by the Borrower of, and performance by the Borrower of the Borrower's obligations under, the Transaction Documents (i) will not violate any provision of any applicable law (including laws relating to usury) or regulation or of any order, writ, judgment, injunction or decree of any governmental authority, (ii) will not violate any provision of the certificate of incorporation or bylaws of the Borrower and (iii) will not violate any provision of, or constitute a default under, or result in the creation or imposition of any prohibited lien on any asset of the Borrower pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking known to such counsel to which the Borrower is a party or which is binding upon the Borrower or upon any of its assets, (4) the Transaction Documents have been duly executed and delivered by the Borrower, and constitute the legal, valid and binding obligations of the Borrower, subject to bankruptcy, insolvency, moratorium, or other similar laws affecting creditors' rights generally and to principles of equity, (5) with respect to the Commonwealth of Pennsylvania, all financing statements necessary or desirable to be filed in connection with -11- 15 the perfection of the security interests in the Collateral granted hereunder and under the Related Documents have been duly filed and no other filing or recording is required (other than that, prior to the expiration of five years from the date of the initial filing, the filing of continuation statements shall be required) and the foregoing are effective to create a valid and perfected security interest in the Collateral in favor of the Bank securing the Obligations, and (6) to the knowledge of such counsel, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body pending or threatened in writing against or affecting the Borrower wherein an unfavorable decision, ruling or finding would materially, adversely affect the transactions contemplated by this Agreement or any of the obligations of the Borrower; (m) a copy of the Monsanto Instructions with evidence of the mailing thereof to Monsanto Company by certified mail; and (n) such other documents, instruments, agreements and opinions as the Bank may reasonably request. In addition, the Borrower shall have delivered or caused the Guarantor to deliver to the Bank, prior to the Closing Date: (i) a copy of the certificate of incorporation of the Guarantor, certified as of a current date by the Secretary of State of Maryland; (ii) a good standing certificate for the Guarantor, issued as of a current date by the Secretary of State of Maryland; and (iii) a certificate of the president of the Guarantor certifying (i) that attached thereto is a true and complete copy of the bylaws of the Guarantor as in effect on the date of such certification, (ii) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the Guarantor authorizing the execution, delivery and performance of the Guarantee, and (iii) as to the incumbency and genuineness of the signature of each officer of the Guarantor executing the Guarantee. 3.02. ADDITIONAL CONDITIONS PRECEDENT TO THE LOAN. Notwithstanding any other provision of this Agreement, the Bank shall have no obligation to make the Loan unless and until the following conditions have been met with respect to the Borrower: (a) Immediately before and after the Loan, no Event of Default (other than as set forth in Section 5.01(o) hereof) shall have occurred and be continuing; and -12- 16 (b) The representations and warranties of the Borrower contained in this Agreement shall be true as if made on and as of the date of the Loan. 3.03. CLOSING FEES. In addition to the conditions set forth in Sections 3.01 and 3.02 hereof, it shall be a condition precedent to the Closing that the Borrower shall have paid to the Bank the facility fee provided for in Section 2.06 hereof plus the fees and expenses of the Bank related to the Closing which are provided for in Section 2.07 hereof. 3.04. POST CLOSING CONDITIONS. The Borrower shall deliver to the Bank, prior to January 17, 1999, the following: (a) a UCC search report reflecting that such personal property security interests constitute valid and perfected first priority security interests (except for Permitted Encumbrances), duly recorded in the appropriate recording or filing offices with all recording or filing fees and taxes, if any, paid thereof; and (b) termination statements executed by any creditors holding security interests, if any, which are not Permitted Encumbrances in any of the Collateral. ARTICLE 4. COLLATERAL SECURITY. 4.01. COMPOSITION OF THE COLLATERAL. The property in which a security interest is granted pursuant to the provisions of Section 4.02 is herein collectively called the "COLLATERAL." The Collateral, together with all other property of the Borrower of any kind held by the Bank shall stand as one general, continuing collateral security for all Obligations and may be retained by the Bank as collateral security until all Obligations have been satisfied in full. 4.02. SECURITY AGREEMENT. As security for all Obligations, the Borrower grants to the Bank (in addition to any collateral security in which a security interest is granted pursuant to any of the other Related Documents) a security interest (subject to Permitted Encumbrances) in and assignment of: (a) all of the Borrower's Receivables; (b) all of the Borrower's Machinery and Equipment; (c) all of the right, title and interest of the Borrower in and to any agreements or contracts for the sale of goods and services, and other miscellaneous agreements and contracts as such agreements may be amended or otherwise modified from time to time herein including without limitation: (i) all rights of the Borrower to receive moneys due and to become due under or pursuant to such agreements or contracts, (ii) all rights of the Borrower to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the -13- 17 agreements or contracts, (iii) claims of the Borrower for damages arising out of or for breach of or default under the agreements or contracts and (iv) the right of the Borrower to terminate the agreements or contracts, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder. (d) all of the Borrower's General Intangibles; (e) all of the Borrower's Inventory; (f) all of the Borrower's goods, chattels, business Records, contracts, documents of title, fixtures, insurance policies and proceeds, licenses, licensing fees, permits, approvals, consents, certificates, stock, surveys, engineering reports, tools, landscaping, all other equipment and machinery, furniture, furnishings, business machines, appliances, deposits, security deposits, money, securities, claims, demands, causes of action, refunds, rebates, income and all other tangible and intangible real, personal or mixed property whether now owned or hereafter acquired; and (g) all proceeds, products, additions to, replacements of, substitutions for and accessions of any and all Collateral described in subparagraphs (a), (b), (c), (d), (e) and (f) above. 4.03. PERFECTION AND MAINTENANCE OF SECURITY INTEREST. Until all Obligations have been fully satisfied, the Bank's security interest in the Collateral, and all products and proceeds thereof, whether such goods and rights are now owned or hereafter acquired, shall continue in full force and effect. The Borrower shall perform or cause to be performed any and all steps requested by the Bank to perfect, maintain and protect the Bank's security interest in the Collateral, including, without limitation, executing and filing financing or continuation statements, or amendments thereof, in form and substance satisfactory to the Bank, maintaining a perpetual inventory and complete and accurate stock records, delivering to the Bank any warehouse receipts not pledged to a secured party under any Permitted Encumbrance covering that portion of the Collateral, if any, located in warehouses or storage facilities and for which negotiable warehouse receipts are issued, or taking such other steps as are deemed necessary by the Bank to maintain the Bank's control of the Inventory. The Bank may file one or more financing statements disclosing the Bank's security interest under this Agreement without the Borrower's signature appearing thereon or may execute any such financing statement on behalf of the Borrower and the Borrower shall pay the reasonable costs of, or incidental to, any recording or filing of any financing statements concerning the Collateral; provided, however, that the Bank shall give prompt notice in writing to the Borrower of any such action. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall, upon the Bank's Request, perform or cause to be performed the transferring of Inventory to warehouses or storage facilities designated by the Bank. If any Inventory is in the possession or control of any warehouseman or of the agents or bailees of the Borrower, the Borrower shall notify such agents or bailees of the Bank's security interest in such Inventory and, upon the occurrence and during the continuance -14- 18 of an Event of Default, instruct them to hold all such Inventory for the Bank's account and subject to the Bank's instructions. From time to time, the Borrower shall, upon the Bank's request, execute and deliver or cause to be executed and delivered confirmatory written instruments pledging to the Bank the Inventory described in any such written instruments or otherwise; provided, however, that no failure of the Borrower to execute and deliver such confirmatory instruments shall affect or limit the Bank's security interest or other rights in and to the Inventory. 4.04. PROVISIONS RELATING TO RECEIVABLES. The following provisions relating to Receivables shall be applicable to the Borrower during the term hereof: (a) Without the prior written consent of the Bank, which will not be unreasonably withheld, in each case, the Borrower will not redate any invoice or sale or make sales on extended dating beyond that customary in its industry or materially change the terms of sale customarily offered to its customers. (b) If the Borrower becomes aware of anything materially detrimental to the credit of any Obligor that owes the Borrower more than $100,000, it will promptly advise the Bank thereof. (c) During the term of this Agreement, the Borrower shall not sell or assign or grant any security interest in any Receivables to anyone other than the Bank or to holders of Permitted Encumbrances. (d) The Bank may, at all times after the occurrence and during the continuance of an Event of Default, settle or adjust disputes and claims directly with the Obligors for amounts and upon terms which the Bank considers advisable, subject to the consent of holders of Permitted Encumbrances. (e) The Borrower agrees, represents and warrants that each Receivable will be owned by the Borrower free and clear of any liens, claims or encumbrances except in favor of the Bank and the holders of Permitted Encumbrances and will cover a bona fide sale and delivery of Inventory usually dealt in by the Borrower, or the provision by the Borrower of services to the Obligors in the ordinary course of business. (f) Upon the occurrence and during the continuance of an Event of Default, the Bank or its designee may notify the Obligors at any time that Receivables have been assigned to the Bank or of the Bank's security interest therein, collect them directly and charge the collection costs and expenses to the Borrower's loan account. 4.05. PROVISIONS RELATING TO INVENTORY. The Borrower represents, warrants and covenants that all the Inventory is and will be owned by the Borrower free of all liens and encumbrances other than the Bank's security interest hereunder and except for Permitted Encumbrances, and shall be kept by the Borrower at the locations set forth on Exhibit D -15- 19 hereto, and that the Borrower shall not (without the Bank's prior written approval) remove the Inventory therefrom except for the purposes of sale in the regular course of its business and except as required by the holders of Permitted Encumbrances. Except for sales of Inventory made in the ordinary course of business, the Borrower shall not sell, encumber or dispose of or permit the sale, encumbrance or disposal of any Inventory without the Bank's prior written consent. 4.06. PROVISIONS RELATING TO MACHINERY AND EQUIPMENT. The Borrower shall keep and maintain its Machinery and Equipment in good operating condition and repair and shall make all necessary replacements thereof so that the value and operating efficiency thereof shall at all times be maintained and preserved, and shall not permit any such items to become a fixture to real estate or accession to other personal property unless the Bank has a security interest in such real estate or other personal property subject only to Permitted Encumbrances. The Borrower shall, immediately on demand therefor by the Bank, deliver to the Bank any and all evidence of ownership of any of the Machinery and Equipment. The Machinery and Equipment shall be maintained at locations specified in Exhibit E hereto. The Borrower shall not sell, lease, grant a security interest in or otherwise dispose of or encumber the Machinery and Equipment, or any part thereof (except that the Borrower may sell and replace obsolete Machinery and Equipment in the ordinary course of business), other than with Permitted Encumbrances. 4.07. PROVISIONS RELATING TO INTELLECTUAL PROPERTY. The Borrower and each Subsidiary has good and valid title to, or has all necessary rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other intellectual property rights (collectively, the "Intellectual Property Rights") which the Borrower reasonably believes are necessary for use in connection with its business and the business of each Subsidiary, and which the failure to so have would have a Material Adverse Effect. To the best knowledge of the Borrower, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights that is reasonably likely to have a Material Adverse Effect. 4.08. PROVISIONS RELATING TO THE MONSANTO ROYALTY. The Borrower shall establish an account with the Bank (the "MONSANTO ACCOUNT") which shall be used for the sole purpose of receiving payments on the Monsanto Royalty. The Borrower shall instruct Monsanto Company in writing (the "MONSANTO INSTRUCTIONS") to make all payments on the Monsanto Royalty to the Bank for deposit into the Monsanto Account, which instructions shall provide that the Monsanto Instructions may not be modified or rescinded without the written consent of the Bank. Amounts on deposit in the Monsanto Account may be applied, during the continuance of an Event of Default, to the payment of regularly scheduled payments of principal and interest on the Loan. Any amounts on deposit in the Monsanto Account not currently required to make payments on the Loan as aforesaid shall be paid to the Borrower, but only with the consent of the Bank, which consent shall not be unreasonably withheld; provided, however, that the Bank shall not withhold its consent with respect to any amounts in excess of the unpaid principal balance of the Loan. -16- 20 4.09. PRIORITY OF SECURITY INTERESTS. The Borrower warrants that the security interests of the Bank in the Collateral shall be perfected security interests, subject only to Permitted Encumbrances. ARTICLE 5. REPRESENTATIONS AND WARRANTIES. 5.01. INDUCING REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter into this Agreement and to make the Loan, the Borrower represents and warrants to the Bank that (where appropriate, giving effect to the consummation of the transactions contemplated by this Agreement) as of the Closing Date: (a) Organization and Qualification. The Borrower and each Subsidiary (as defined below) is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Ecogen Investments Inc., a Delaware corporation ("E-Investments"), Ecogen-Bio Inc., a Delaware corporation ("E-Bio") and Ecogen Technologies I Incorporated, a Delaware corporation ("Etech"), comprise all of the entities which would be deemed "significant subsidiaries" of the Borrower, as such term is defined in Rule 1-02(w) of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Borrower is the owner of all of the issued and outstanding capital stock of E-Investments and E-Bio, and is the owner of no less than 70% of the issued and outstanding common stock of Etech, free and clear of any and all liens, charges or encumbrances or rights of first refusal of any nature whatsoever. (b) Authority. The Borrower has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the other agreements and instruments executed and delivered by it pursuant hereto (collectively, the "Transaction Documents") and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Borrower and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Borrower and no further action is required by the Borrower. Each of the Transaction Documents has been duly executed by the Borrower and, when delivered (or filed, as the case may be) in accordance with the terms hereof, will constitute the valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. Neither the Borrower nor any Subsidiary is in violation of any of the provisions of its respective certificate of incorporation, by-laws or other charter documents. -17- 21 (c) Due Authorization. The execution, delivery and performance of this Agreement and each of the other Related Documents to which the Borrower is a party and the creation of the security interests and liens provided for under this Agreement have been duly authorized by all necessary or proper action on the part of the Borrower, including the consent of its shareholders where required. (d) Noncontravention. The execution, delivery and performance of the Transaction Documents by the Borrower and the consummation by the Borrower of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its certificate of incorporation, bylaws or other charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in a loss of contractual benefits under any agreement, credit facility, indenture or instrument (evidencing a Borrower debt or otherwise) to which the Borrower or any Subsidiary is party or by which any property or asset of the Borrower or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or Governmental Authority to which the Borrower or any Subsidiary is subject or by which any property or asset of the Borrower or any Subsidiary is bound or affected, except in the case of each of clauses (ii) and (iii), as is not reasonably likely to, individually or in the aggregate, (x) have or result in a material adverse effect on the business, operations, property, assets, liabilities (financial or otherwise) or prospects of the Borrower and the Subsidiaries, taken as a whole, or (y) adversely impair the Borrower's ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (x) or (y), being a "Material Adverse Effect"). (e) Valid and Binding Obligations. This Agreement, the Note and each of the other Related Documents to which the Borrower is a party are, or upon delivery thereof to the Borrower will be, the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally and to principles of equity affecting the enforcement of contractual obligations generally. (f) Corporate and Fictitious Names. During the five (5) years preceding the date of this Agreement, neither the Borrower nor any predecessor of the Borrower has been known as or used any corporate or fictitious name other than its current corporate name. (g) Places of Business. The Borrower's chief executive offices and principal place of business, and the place where the Borrower maintains all records relating to the Collateral, is at the address set forth in Section 10.07 -18- 22 hereof. The Borrower has no other place of business, except as specified in Exhibit F hereto and the Borrower maintains Collateral at no other locations, except as specified in Exhibits D, E and F hereto. (h) Title to Assets. The Borrower has good, indefeasible, and merchantable title to and ownership of the Collateral, free and clear of all liens, claims, security interests and encumbrances other than Permitted Encumbrances. (i) Governmental Authorizations to Conduct Business. Each of the Borrower and its Subsidiaries possesses all permits and other governmental authorizations that are material to the conduct of its business. Such licenses, permits and other governmental authorizations are valid and sufficient for the business presently carried on by the Borrower and its Subsidiaries, and neither the execution, delivery or performance of this Agreement or the Related Documents nor the consummation of the transactions contemplated hereby will affect the validity thereof or require consent with respect thereto, and, to the best of the knowledge of the Borrower, there is no threat of suspension or cancellation of any such license, permit or governmental authorization. Neither the business of the Borrower or any of its Subsidiaries is being conducted in violation of any law, ordinance or regulation of any Governmental Authority, including any filing requirement in respect thereof, except for violations which, individually or in the aggregate, do not and will not have Material Adverse Effect. (j) Consents and Approvals. Except as specifically set forth in Exhibit G neither the Borrower nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or governmental authority or other Person in connection with the execution, delivery and performance by the Borrower of the Transaction Documents. (k) Legal Proceedings. There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any governmental authority pending or, to the best of the Borrower's knowledge, threatened against or affecting the Borrower or any Subsidiary (and to the best of the Borrower's knowledge, there is no basis therefor) (i) wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect. (l) Taxes. Each of the Borrower and its Subsidiaries has filed all federal, state and local tax returns which are required to be filed, and has paid, or made provision for the payment of, all taxes which have become due pursuant to said returns or pursuant to any statement, it any, received by the Borrower or any Subsidiary. The income tax returns filed by each of the Borrower and its Subsidiaries properly reflect the income and taxes of the Borrower and its Subsidiaries and for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit, and having no Material Adverse Effect. -19- 23 (m) SEC Documents; Financial Statements. The Borrower has previously furnished the Purchaser with true and correct copies of all documents which have been filed by the Borrower with the Commission pursuant to the Exchange Act since October 31, 1998 (collectively, the "SEC Documents"). The SEC Documents constitute all reports and other documents the Borrower was required to file under the Exchange Act since October 31, 1998. At the time of filing with the Commission, the SEC Documents were prepared in all material respects in accordance with the applicable requirements of the Exchange Act and the rules and regulations thereunder, did not contain any untrue statement of a material fact, and did not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited and unaudited consolidated financial statements contained in the SEC Documents present fairly the consolidated financial condition and results of operations and changes in stockholders' equity and cash flows of the Borrower and its consolidated subsidiaries as of the dates and for the periods indicated, in each case in accordance with GAAP consistently applied during the periods presented, except as may otherwise be stated in such financial statements. For purposes of this Agreement, all financial statements of the Borrower shall be deemed to include the notes to such financial statements. Neither the Borrower nor any Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on, or reserved against in, a consolidated balance sheet of the Borrower or in the notes thereto, prepared in accordance with GAAP consistently applied except for (A) liabilities or obligations that were reserved on or reflected in the consolidated balance sheet of the Borrower at October 31, 1998 (and notes thereto) included in the SEC Documents, (B) liabilities or obligations arising in the ordinary course of business since October 31, 1998, (C) liabilities or obligations which are not, individually or in the aggregate, material to the Borrower and its Subsidiaries taken as a whole, or (D) liabilities and obligations described in the SEC Documents. Except as described in the SEC Documents, since October 31, 1998, there has not been any material adverse change in the condition (financial or otherwise) results of operations, business, assets, liabilities or prospects of the Borrower and the Subsidiaries, taken as a whole. (n) Violations of Law. The Borrower is not in violation of any applicable statute, regulation or ordinance of any Governmental Authority, in any respect materially and adversely affecting the Collateral or the business, property, assets, operations or condition of the Borrower, financial or otherwise. (o) No Default or Violation. Neither the Borrower nor any Subsidiary (i) is in default under or in violation of (and no event has occurred which has not been waived which, with notice or lapse of time or both, would result in a default by the Borrower or any Subsidiary under), nor has the Borrower or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any -20- 24 indenture, loan or credit agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties is bound, except that the Borrower is in default of the provisions contained in Sections 9.14 and 9.15 of the Loan and Security Agreement, dated August 20, 1998, between the Borrower and Congress Financial Corporation (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any statute, rule or regulation of any governmental authority, except as is not reasonably likely, individually or in the aggregate, to have or result in a Material Adverse Effect. (p) Certain Fees. No fees or commissions will be payable by the Borrower to any broker, financial advisor or consultant, finder, placement agent, investment banker, or bank with respect to the transactions contemplated by this Agreement. (q) Delivery of Information. Neither any Related Document nor any document, report, notice, lease, operating agreement, schedule, certificate, statement or other writing (collectively, the "DOCUMENTS") furnished or caused to be furnished by the Borrower to the Bank contains, to the best of the Borrower's knowledge, any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein not misleading in light of the circumstances under which they were made. To the best of the Borrower's knowledge, there is no fact which could materially adversely affect the Borrower or its ability to meet its obligations under this Agreement or any Related Document. To the best of the Borrower's knowledge, since the furnishing of the Documents, there has been no change or any development or event involving a prospective change with respect to the Borrower which would render any of the Documents untrue or misleading in any material respect. (r) Investment Company. The Borrower is not, and is not an Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment company" within the meaning of the investment Company Act of 1940, as amended. 5.02. SURVIVAL. All of the representations and warranties set forth in Section 5.01 shall survive until all Obligations are satisfied in full, and there remain no outstanding commitments hereunder. ARTICLE 6. RESERVED. ARTICLE 7. FINANCIAL REPORTING. 7.01. FINANCIAL STATEMENTS. During the term of this Agreement, the Borrower shall deliver to the Bank: -21- 25 (a) Quarterly Statements. Within fifty (50) days after the end of each of the first three fiscal quarters, a copy of the unaudited consolidated quarterly financial statements of the Borrower, consisting of a balance sheet and statements of income for the quarter and year-to-date period then ended, prepared by the Borrower (subject to normal year-end audit adjustments); and (b) Annual Audit Report. Within one-hundred five (105) days after the close of each fiscal year of the Borrower, (i) a copy of the consolidated annual financial statements of the Borrower, consisting of a balance sheet and statements of income and cash flows for the fiscal year then ended, accompanied by the unqualified report of the independent certified public accountants regularly retained by the Borrower and acceptable to the Bank (the "Annual Audit Report"). 7.02. GAAP REPORTING. All financial information required to be furnished to the Bank under this Article 7 shall be prepared in accordance with GAAP. 7.03. COMMUNICATIONS WITH ACCOUNTANTS. In the event that the Bank determines that it has not received the Annual Audit Report from the Borrower, the Borrower authorizes the Bank to communicate directly with its independent public accountants, and authorizes those accountants to disclose to the Bank any and all financial statements and other information of any kind that they may have with respect to the Borrower and its Subsidiaries and their respective businesses and financial affairs. The Borrower shall upon the request of the Bank deliver a letter addressed to such accountants instructing them to comply with the provisions of this paragraph upon request therefor by the Bank. ARTICLE 8. COVENANTS. 8.01. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees with the Bank that, so long as any of the Obligations remain unsatisfied or any commitments hereunder remain outstanding, it will comply at all times with the following affirmative covenants unless the Bank shall have otherwise agreed in writing: (a) Use of Proceeds. The proceeds of the Loan will be used by the Borrower only for working capital; (b) Reports and Notices. The Borrower shall furnish to the Bank: (1) Place of Business. Promptly, notice of any change in the location of the Borrower's principal place of business or chief executive office or of any change in the location or the Borrower's books and Records; -22- 26 (2) Events of Default. As soon as possible and in any event within ten (10) days after the Borrower obtains actual knowledge of the occurrence and continuance of any Default, Event of Default or any event of default under the Loan and Security Agreement, dated August 20, 1998, between the Borrower and Congress Financial Corporation, as amended, modified, supplemented, extended, renewed, restated or replaced, a statement setting forth details of such default and the action which the Borrower proposes to take with respect thereto, other than those defaults disclosed in Section 5.01(o) hereof; (3) Litigation and Labor Disputes. Immediately, notice of (1) any litigation or proceeding in which the Borrower is a party if an adverse decision therein would require it to pay more than $50,000 or deliver assets the value of which could have a Material Adverse Effect (whether or not the claim is considered to be covered by insurance); (2) the institution of any other suit or proceeding involving the Borrower that might materially and adversely affect its operations, financial condition, property or business prospects; and (3) any labor dispute to which the Borrower may become a party which may, if unfavorably resolved, have a material financial impact on it, any strikes, walkouts or work stoppages having a duration of more than one week, and the expiration of any labor contract to which it is a party or by which it is bound; (4) Material Adverse Changes. Immediately, notice of any material adverse change in the business prospects, financial condition or results of operations of the Borrower of which it becomes aware; (5) Bankruptcy Proceedings. Immediately, notice of the commencement of any proceedings by or against the Borrower under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for the Borrower; (6) Regulatory Supervision or Penalty. Immediately, notice of the receipt of notice from any agency or governmental body having authority over the conduct of the Borrower's business that (A) the Borrower is being placed under regulatory supervision if such regulatory supervision is likely to, in the aggregate, have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower taken as a whole, (B) any license, permit, charter, membership or registration material to the conduct of the Borrower's business is to be suspended or revoked, or (C) the Borrower is to cease and desist any practice, procedure or policy employed by the Borrower in the conduct of its business, and such cessation would have a material adverse effect upon the value of the Collateral or upon the -23- 27 Borrower's ability to perform its obligations under this Agreement or any Related Document; and (7) Other Information. Promptly upon the request of the Bank, such other documents and information with respect to the Collateral, to the Borrower and the compliance by the Borrower with the requirements of the Transaction Documents as the Bank may from time to time reasonably request. Each notice given pursuant to this subsection (B) shall be accompanied by a statement of the Borrower setting forth details of the occurrence referred to therein and stating what action, if any, the Borrower proposes to take with respect thereto; (c) Financial Records. The Borrower shall keep adequate Records and books of account with respect to its business activities in which proper entries are made and all Annual Audit Reports required to be furnished to the Bank shall be prepared in accordance with GAAP reflecting all its financial transactions; (d) Asset Records. The Borrower shall keep accurate and complete Records of its Receivables, Inventory, Machinery and Equipment, and General Intangibles consistent with sound business practices; (e) Access to Premises and Records. The Bank may at all times have access to, inspect, audit and make extracts from all of the books and Records of the Borrower. Such inspections shall be conducted upon reasonable notice during normal business hours and shall not unreasonably disrupt the business of the Borrower; (f) Taxes. The Borrower shall file all federal, state and local tax returns and other reports as the Borrower is required by law to file, maintain adequate reserves for the payment of all taxes, assessments, governmental charges, and levies imposed upon it, its income, or its profits, or upon any property belonging to it, and pay and discharge all such taxes, assessments, governmental charges and levies prior to the date on which penalties attach thereto, except where the same may be contested in good faith by appropriate proceedings and appropriate reserves have been established with respect thereto; provided, however, that the Borrower shall pay or cause to be paid all such taxes, assessments, charges, or levies forthwith whenever foreclosure on any lien that may have attached (or security therefor) appears imminent; (g) Observance of Laws. The Borrower shall duly observe and conform to all laws, rules and regulations made by any Governmental Authority, and all valid requirements of any regulatory body which may acquire jurisdiction, which apply to the Borrower, including, without limitation, any environmental, pollution or toxic or hazardous waste law, except where the failure to duly -24- 28 observe and conform is not reasonably likely to, in the aggregate, have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower taken as a whole; (h) Maintain Corporate Existence, Etc. The Borrower shall preserve and maintain its separate corporate existence and all rights, privileges, and franchises in connection therewith, and maintain its qualification and good standing in all states in which such qualification is necessary in order for the Borrower to conduct its business in such states; (i) Maintain Licenses. The Borrower shall maintain in full force and effect all licenses, permits, charters and registrations which are material to the conduct of its business; (j) Maintenance. The Borrower shall keep and maintain or cause to be kept and maintained its inventory, equipment, fixtures and all buildings, structures and improvements in good repair, working order and condition; (k) Insurance. The Borrower shall keep all of its property insured by insurance companies licensed to do business in the State of New York and the states in which such property is located against loss or damage by fire, flood or other risk usually insured against under extended coverage endorsement and theft, burglary and pilferage, and such other hazards, each as shall be customary in the Borrower's industry and location, in amounts reasonably satisfactory to the Bank. The Borrower shall deliver to the Bank, on or before the Closing Date, and annually thereafter on the anniversary thereof, a list of all such insurance policies in effect and certificates of insurance with respect to all such policies. All insurance shall contain endorsements, in form reasonably satisfactory to the Bank, providing that the insurance shall not be cancelable, except upon thirty (30) days prior written notice to the Bank (unless such insurance policies are cancelled for nonpayment of premium, in which case the Bank shall receive ten (10) days prior written notice) and showing the Bank as a loss payee, subordinate to any holders of any Permitted Encumbrances. The Borrower agrees to make all such policies of insurance available for inspection by the Bank at any time during regular business hours; (l) Payment of Indebtedness. The Borrower shall pay when due (or within applicable grace periods) all of its other Indebtedness due third Persons, except when the amount thereof is being contested in good faith by appropriate proceedings and with adequate reserves therefor being set aside on its books; and (m) Further Assurances. The Borrower, at the request of the Bank, shall provide and, if necessary, execute, deliver and file such further instruments, and shall take such further actions as may be reasonably necessary in the Bank's reasonable judgment to effectuate the provisions of the Transaction Documents. -25- 29 8.02. NEGATIVE COVENANTS. The Borrower hereby covenants and agrees with the Bank that, so long as any of the Obligations remain unsatisfied or any commitments hereunder remain outstanding, it will comply at all times with the following negative covenants, unless the Bank shall have otherwise agreed in writing: (a) Disposal of Assets. The Borrower shall not, and shall not permit any Subsidiary to, sell, lease, transfer, assign, or otherwise dispose of any of its assets, including the Collateral, other than in the ordinary course of business; provided, however, that the Borrower may sell Machinery and Equipment in an aggregate market value not greater than $75,000 for all such sales in one calendar year; (b) Liens and Encumbrances.(1) The Borrower shall not, and shall not permit any Subsidiary to, mortgage, pledge, grant, or permit to exist a security interest in, or a lien or encumbrance upon, any of its assets of any kind, including the Collateral, now owned or hereafter acquired, except for Permitted Encumbrances; (2) the Borrower shall not enter into any other Agreement with any other Person which shall contain a covenant substantially similar to that set forth in clause (1) of this Section 8.02(b), except under Permitted Encumbrances; (d) Corporate and Fictitious Names. The Borrower shall not use any corporate name (other than its own) or any fictitious name, except for names disclosed in writing to the Bank prior to the use thereof; (e) New Places of Business. The Borrower shall not transfer its executive offices, or open new facilities, or transfer existing facilities, or maintain Records with respect to accounts, at any locations other than those at which the same are presently kept or maintained except with the Bank's prior written consent (which shall not be unreasonably withheld or delayed) and after the delivery to the Bank of financing statements, if required by the Bank, in form satisfactory to the Bank; (f) Guaranties. Except for guaranties in effect on the date hereof, the Borrower shall not, and shall not permit any Subsidiary to, become liable directly or indirectly, as guarantor or otherwise for any obligation of any other Person, except for endorsement for deposit or collection in the ordinary course of the Borrower's business; (g) Indebtedness. The Borrower shall not, and shall not permit any Subsidiary to, incur, create, assume, or permit to exist any Indebtedness except for (i) the Loan, (ii) Indebtedness secured by Permitted Encumbrances, (iii) trade payables or other obligations incurred in the ordinary course of business and (iv) intercompany debt incurred among the Company and its Principal Subsidiaries in the ordinary course of business consistent with past practices and pursuant to the reasonable requirements of its business; -26- 30 (h) Mergers. The Borrower shall not merge with or into or consolidate with any other Person unless (i) the Borrower is the corporation surviving such consolidation or merger, or the corporation surviving such consolidation or merger, if not the Borrower, assumes the obligations of the Borrower hereunder in a writing acceptable to the Bank and (ii) in each case, after giving effect thereto, no Default shall have occurred and be continuing; (i) Subsidiaries. The Borrower shall not create any direct or indirect Subsidiary not currently in existence or divest itself of any material assets by transferring them to any Subsidiary or enter into any partnership, joint venture or similar arrangement, or make any material change in its capital structure; (j) Loans to Shareholders and Employees. The Borrower shall not, and shall not permit any Subsidiary to, make any loan or advance to any shareholder or employee of the Borrower, except (i) for business travel and similar temporary advances in the ordinary course of business; (ii) other loans or advances in the ordinary course of business, not to exceed $50,000 individually or $100,000 in the aggregate principal amount at any one time outstanding; and (iii) loans provided for in any existing employment agreement disclosed to the Bank; (k) Dividends. The Borrower shall not pay any dividends, except for Preferred Dividends, make any capital distribution, or redeem or retire any capital stock or take any action which would have an effect equivalent to any of the foregoing, other than (A) cash dividends in an amount not to exceed (i) ten percent (10%) of the Borrower's net income plus (ii) all sums required to pay in full the federal, state and local income taxes of shareholders of the Borrower attributable to the taxable net income of the Borrower and (B) repurchases or redemptions of minority stock interests which would require an expenditure by the Borrower in excess of $100,000 in the aggregate; (l) Transactions with Affiliates. The Borrower shall not, and shall not permit any Subsidiary to, enter into, or be a party to, any transaction with any of its Affiliates or enter into any partnership, joint venture or operating management agreement with any of its Affiliates, except for transactions that are (1) in the ordinary course of business consistent with past practices and pursuant to the reasonable requirements of its business or (2) upon fair and reasonable terms which are, upon a request by the Bank to disclose all such transactions, fully disclosed to the Bank and are no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not its Affiliate; (m) Loans to Affiliates. The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly make any loan or advance monies to any Affiliate (other than intercompany debt incurred among the Company and its Principal Subsidiaries in the ordinary course of business consistent with past practices and pursuant to the reasonable requirements of its business) in a sum or sums greater than $100,000 in the aggregate outstanding at any one time without -27- 31 the prior written consent of the Bank and any such loan or advance consented to by the Bank shall be evidenced by a promissory note and shall be pledged to the Bank; (n) Investments. The Borrower shall not, and shall not permit any Subsidiary to, make any loans to, or purchase any debt or equity securities of, or otherwise make any investment in, any Person, and will not purchase or otherwise invest in, directly or indirectly, any nonoperating real estate or nonoperating assets, except (1) direct obligations of the United States of America, or of the Bank, negotiable certificates of deposit and overnight repurchase transactions with the Bank or any bank satisfactory to the Bank, commercial paper rated A-1 or P-1, or other investments approved in advance in writing by the Bank, and (2) operating assets that hereafter become nonoperating assets; (o) Amendments to or Waivers of Related Documents. The Borrower shall not, and shall not permit any Subsidiary to, enter into any contract or agreement the substance of which shall act as an amendment to, or a waiver of any of the provisions of, any of the Related Documents; (p) Untrue Statements or Omissions. The Borrower shall not, and shall not permit any Subsidiary to, willfully furnish or cause to be furnished to the Bank any certificate or other document that will contain any untrue statement of material fact or that will omit to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished; and (q) Margin Stock. The Borrower shall not directly or indirectly apply any part of the proceeds of the Loan to the purchasing or carrying of any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or any regulations, interpretations, or rulings thereunder. ARTICLE 9. DEFAULT. 9.01. EVENTS OF DEFAULT. The occurrence of any one or more of the following events with respect to the Borrower shall constitute an Event of Default hereunder: (a) The Borrower shall fail to pay to the Bank when due any principal payment on the Note or, within ten (10) days from receipt of written notice from the Bank, any other Obligation owing from the Borrower to the Bank, or shall fail to remit or deposit funds as required under this Agreement within 10 days after written notice; (b) The Borrower shall fail to observe or perform any other obligation to be observed or performed by it hereunder or under any of the Related Documents, and such failure shall be willful or shall continue for twenty (20) days after (1) notice of such failure from the Bank; or (2) the Bank is notified of -28- 32 such failure or should have been so notified pursuant to the provisions of Section 8.01(b)(3) hereof, whichever is earlier; (c) Any financial statement, representation, warranty, or certificate made or furnished to the Bank by, or with respect to, the Borrower in connection with this Agreement, or as inducement to the Bank to enter into this Agreement, or in any separate statement or document to be delivered to the Bank hereunder, shall be materially false, incorrect, or incomplete when made; (d) The Borrower or any Subsidiary shall (1) fail to make any payment or payments, equal to or exceeding $100,000 in the aggregate, of any Indebtedness (including any interest or premium thereon) when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness, or (2) fail to perform or observe any term, covenant or condition on its part to be performed or observed under any agreement or instrument (other than, prior to February 14, 2000, a default of the provisions contained in Sections 9.14 and 9.15 of the Loan and Security Agreement, dated August 20, 1998, between the Borrower and Congress Financial Corporation), if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, the maturity of any indebtedness, the unpaid principal amount or amounts of which then equals or exceeds $100,000 in the aggregate; provided, however, that the foregoing shall not apply to any such failure where the Borrower is contesting the existence of the obligation involved by appropriate proceedings, and any reserves required in accordance with GAAP have been established; (e) The Borrower or any Subsidiary shall (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of the Borrower or any Subsidiary or of all or a substantial part of its property, (2) admit in writing its inability, or be generally unable, to pay its debts as such debts become due, (3) make a general assignment for the benefit of its creditors, (4) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (5) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts or (6) take any corrective action for the purposes of effecting any of the foregoing; (f) A proceeding or case shall be commenced, without the application or consent of the Borrower or any Subsidiary, in any court of competent jurisdiction, seeking (1) the liquidation, reorganization, dissolution, winding-up or composition or readjustment of debts of the Borrower or any Subsidiary, (2) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower or any Subsidiary, or of all or any substantial part of its assets, or (3) similar relief in respect of the Borrower or any Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or -29- 33 adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) days from commencement of such proceeding or case, or an order for relief against the Borrower shall be entered in an involuntary case under the Federal Bankruptcy Code; (g) The Borrower or any Subsidiary shall suffer final judgments for payment of money in excess of its insurance coverage and shall not discharge the same within a period of thirty (30) days; (h) A judgment creditor of the Borrower shall obtain possession of any of the Collateral by any means, including (without implied limitation) levy, distraint, replevin, or self-help; (i) The loss of any license, patent, trademark or franchise which has a Material Adverse Effect, unless such franchise was terminated, surrendered or cancelled by the Borrower with the Bank's consent; or (j) The cancellation of any license, permit or other governmental authorization required to be possessed by the Borrower which has a Material Adverse Effect. 9.02. REMEDIES. If an Event of Default shall have occurred then, and in any such event at any time thereafter if such Event of Default is continuing, the Bank may, in its discretion, do any one or more of the following: (a) by notice to the Borrower declare the Note (together with accrued interest thereon and accrued fees) to be, and the Note shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided, that in the case of any of the Events of Default specified in Sections 9.01(e) or (f), without any notice to the Borrower or any other act by the Bank, the Note (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by the Borrower; and (b) exercise any and all other rights and remedies existing at law or in equity or by statute (including, without limitation, the right to proceed by appropriate court action, either in law or in equity, to enforce performance by the Borrower of the applicable representations and warranties and covenants of this Agreement or to recover damages for the breach thereof. 9.03. UCC REMEDIES. Further, upon the occurrence and during the continuance of an Event of Default the Bank shall have, in addition to all other rights provided herein and in each of the Related Documents, the rights and remedies of a secured party under -30- 34 the Uniform Commercial Code of each state in which any of the Collateral is located, and further, the Bank may, without demand and without advertisement, notice or legal process of any kind (except as may be required by law), all of which the Borrower waives, at any time or times, take physical possession of the Collateral, and maintain such possession on the Borrower's premises, without cost to the Bank, or remove the Collateral, or any part thereof, to such other place or places as the Bank may desire, and the Bank may sell and deliver any or all of the Collateral held by or for the Bank at public or private sale, for cash, upon credit or otherwise, at such prices and upon such terms as the Bank deems advisable, at its sole discretion. The Bank or any Affiliate of the Bank may be the purchaser at any such sale, if it is public, free from any right of redemption after such sale, which the Borrower also waives. The Bank may, if it deems it reasonable, postpone or adjourn any sale of the Collateral from time to time by an announcement at the time and place of such postponed or adjourned sale, without being required to give a new notice of sale. The Borrower agrees that the Bank has no obligation to preserve rights to the Collateral against prior parties or to marshall any Collateral for the benefit of any Person. The Bank is hereby granted a license or other right to use, without charge, the Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature as it pertains to the Collateral, and all of the Borrower's licenses and franchise agreements shall inure to the Bank's benefit, for the purposes of completing production or processing of, advertising for sale, and selling any Collateral in the exercise of the Bank's rights and remedies hereunder. In addition thereto, the Borrower further agrees that (a) in the event that notice is necessary under applicable law, written notice mailed to the Borrower in the manner specified in Section 10.07 hereof ten (10) Business Days prior to the date of public sale of any of the Collateral subject to the security interest created herein or prior to the date after which private sale or any other disposition of said Collateral will be made shall constitute reasonable notice, but notice given in any other reasonable manner or at any other time shall be sufficient if actually received; (b) without precluding any other method of sale, the sale of the Collateral shall have been made in a commercially reasonable manner if conducted in conformity with reasonable commercial practices of asset-based lenders disposing of similar property, but in any event the Bank may sell on such terms as the Bank may choose without assuming any credit risk and without any obligation to advertise or give notice of any kind; and (c) the Bank may require the Borrower to assemble the Collateral, taking all necessary or appropriate action to preserve and keep it in good condition, and make such available to the Bank at a place and time convenient to the Borrower and the Bank, all at the Borrower's expense. The proceeds of any such sale or disposition shall be applied first to the satisfaction of the Bank's reasonable attorneys' fees, legal expenses, and other costs and expenses incurred in connection with the taking, re-taking, holding, preparing for sale and selling of the Collateral and second to the payment (in whatever order the Bank elects) of all Obligations. After the application of all such proceeds as aforesaid, the Bank will return any excess to the Borrower. The Borrower shall remain liable to the Bank for any deficiency. 9.04. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Event of Default, the Bank may, and is hereby authorized by the Borrower, at any time -31- 35 and from time to time, to the fullest extent permitted by applicable Laws, without advance notice to the Borrower (any such notice being expressly waived by the Borrower), set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time owing by the Bank to or for the credit or the account of, the Borrower against any or all of the Obligations of the Borrower now or hereafter existing, whether or not such Obligations have matured and irrespective of whether the Bank has exercised any other rights which it has or may have with respect to such Obligations, including, without limitation, any acceleration rights. The Bank agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Bank under this Section 9.04 are in addition to the other rights and remedies (including, without limitation, other rights of set-off) that the Bank may have. 9.05. DISCRETION TO APPLY THE COLLATERAL. The Bank may, in its sole discretion, (i) exchange, enforce, waive or release any security or portion of the Collateral, (ii) apply such security or any proceeds thereof and direct the order or manner of sale thereof as the Bank may, from time to time, determine, and (iii) settle, compromise, collect or otherwise liquidate any such security for the Obligations in any manner following the occurrence and during the continuance of an Event of Default without affecting or impairing the Bank's right to take any other further action with respect to any security for the Obligations or any part thereof. 9.06. RIGHTS AND REMEDIES CUMULATIVE; WAIVERS. The Bank's rights and remedies under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Bank may have. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one default or Event of Default shall not be construed to be a waiver of any subsequent default or Event of Default or impair any remedy, right or power consequent thereon. 9.07. INJUNCTIVE RELIEF. The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Bank; therefore, the Borrower agrees that the Bank, if the Bank so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. 9.08. LOAN BY BANK FOR BORROWER EXPENSES. If the Borrower or any co-tenant of the Borrower fails to pay any taxes, assessments or governmental charges levied or assessed or imposed upon or with respect to it or upon its income or profits, or upon any of its property, or otherwise incurs any lien or encumbrance (other than a Permitted Encumbrance) with respect to any of its property or fails to discharge when due and payable any Indebtedness secured by any encumbrance (whether or not a Permitted Lien) or fails to pay any insurance premium when due, or otherwise fails to pay any amount -32- 36 necessary for the protection and preservation of the Collateral and such event is an Event of Default, the Bank may pay the same, at the Bank's option, together with interest and penalty, and the Borrower agrees to immediately reimburse the Bank for amounts so paid. Additionally, in order to protect any security interest which the Bank is granted hereunder, upon the occurrence and continuation of an Event of Default, the Bank may, in its sole discretion, maintain guards, pay any service bureau or warehouseman, obtain bonds, obtain any record and take any other action which shall be necessary or appropriate, in the Bank's sole discretion, for the protection and preservation of the Collateral and the Borrower agrees to immediately reimburse the Bank upon demand for amounts so paid. 9.09. POWER OF ATTORNEY. The Borrower on behalf of the Borrower hereby appoints the Bank or any other Person whom the Bank may designate as its attorney, with power, following the occurrence and during the continuance of an Event of Default: (a) to endorse the Borrower's name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into the Bank's possession; (b) to sign the Borrower's name on any invoice or bill of lading relating to any accounts, on drafts against customers, on schedules and assignments of accounts, on notices of assignment, financing statements and other public records, on verifications of accounts and on notices to customers; (c) to notify the post office authorities to change the address for delivery of the Borrower's mail to an address designated by the Bank; and to receive, open and remove documents relating to the Collateral from all mail addressed to the Borrower (with all other mail to be returned promptly to the Borrower); (d) to send requests for verification of accounts to customers or account debtors; and (e) to do all things necessary to carry out this Agreement. The Borrower ratifies and approves all acts of such attorney. Neither the Bank nor the attorney will be liable for any acts or omissions or for any error of judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable until the Obligations have been fully satisfied. 9.10. ACTIONS. Following the occurrence and during the continuance of an Event of Default, the Bank may (but shall not be obligated to) commence, appear in, or defend any action or proceeding purporting to affect the Borrower, the Collateral or the respective rights and obligations of the Bank and the Borrower pursuant hereto or to any Related Document. The Bank may (but shall not be obligated to) pay all necessary expenses, including reasonable attorneys' fees and expenses incurred in connection with such proceedings or actions, which the Borrower agrees to repay to the Bank upon demand. ARTICLE 10. MISCELLANEOUS. 10.01. CONSTRUCTION. The provisions of this Agreement shall be in addition to those of the Related Documents, all of which shall be construed as complementary to each other. Nothing herein contained shall prevent the Bank from enforcing any or all the Related Documents in accordance with their respective terms. In the event of any conflict -33- 37 between the terms and provisions of this Agreement and the terms and provisions of any of the Related Documents, the terms and provisions of this Agreement shall prevail. 10.02. FURTHER ASSURANCES. From time to time, the Borrower shall promptly execute and deliver to the Bank such additional documents and will provide such additional information as the Bank may reasonably require to carry out the terms of this Agreement and be informed of the status and affairs of the Borrower. 10.03. PREFERENCES. The Bank shall have the continuing and exclusive right to apply or reverse and re-apply any and all payments to any portion of the Obligations. To the extent that the Borrower makes a payment or payments to the Bank or the Bank receives any payment or proceeds of the Collateral for the Borrower's benefit, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Obligations or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by the Bank. 10.04. INDEMNIFICATION. The Borrower hereby agrees to indemnify and hold harmless the Bank from and against any and all claims, damages, losses, liabilities, reasonable out-of-pocket costs or expenses whatsoever which the Bank may incur (or which may be claimed against the Bank by any person or entity whatsoever) by reason of or in connection with the occurrence of an Event of Default or the pursuit by the Bank of any remedy in connection with an Event of Default; provided, however, that the Borrower shall not be required to indemnify the Bank for claims, damages, losses, liabilities, costs or expenses, to the extent, but only to the extent caused by the willful misconduct or the gross negligence of the Bank. 10.05. REIMBURSEMENT FOR BANK EXPENSES. The Borrower shall reimburse the Bank on demand for all of the reasonable out-of-pocket expenses incurred by the Bank in connection with the negotiation, preparation, execution, delivery, modification and administration of this Agreement, and the Related Documents, including, without limitation, searches, search fees, title insurance premiums, fees for title abstracts, filings, filing fees and taxes, consulting fees, printing expenses, closing costs, recording charges, brokerage fees, compensation and commissions, and the fees and disbursements of counsel to the Bank, Kirkpatrick & Lockhart LLP, and any other counsel retained by the Bank, all printing expenses, communication, closing and publicity expenses, and all reasonable out-of-pocket expenses incurred by the Bank (including, without limitation, reasonable attorney's fees and disbursements) to: (i) commence, defend or intervene in any court proceeding relating to the Collateral or the Related Documents; (ii) file a petition, complaint, answer, motion or other pleadings, or to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) relating to the Collateral or the Related Documents; (iii) protect, collect, lease, sell, take possession of, or liquidate any of the Collateral; (iv) attempt to enforce any lien or security interest in any of the Collateral; (v) cure defaults of the Borrower, perform any covenants of the Borrower, and -34- 38 protect the rights of the Bank under the Related Documents; and (vi) enforce or seek legal advice with respect to the Bank's rights under this Agreement, or any of the Related Documents or any other remedies with respect to collecting the Obligations. The Borrower also agrees to pay, and to save harmless the Bank from any delay in paying, any intangibles, documentary stamp and other taxes, if any, which may be payable in connection with the execution and delivery of any of the Related Documents, or the recording of filing of any thereof, or any modification thereof, except that the Borrower shall not be required to pay any such tax which the Borrower is prohibited from paying under applicable law. 10.06. STRICT ENFORCEMENT BY THE BANK. The Bank shall have the right at all times to enforce the provisions of the Transaction Documents in strict accordance with the terms hereof and thereof, notwithstanding any conduct or custom on the part of the Bank in refraining from so doing at any time or times. The failure of the Bank at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or as having in any way or manner modified or waived the same. 10.07. NOTICES. Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed delivered (i) if delivered in person, when so delivered, (ii) if sent by telecopy, when so sent and confirmed as received by the receiving telecopier, and (iii) if sent by registered mail, postage prepaid, return receipt requested, three (3) Business Days after being sent, as follows, unless such address is changed by written notice hereunder: (A) If to the Borrower: Ecogen Inc. 2000 Cabot Boulevard West Langhorne, Pennsylvania 19047 Attention: President Telecopy: 215-757-3339 (B) If to the Bank: The Berkshire Bank 600 Madison Avenue New York, New York 10022 Attention: President Telecopy: 212-935-7480 10.08. BANK PARTICIPATIONS. Notwithstanding any other provision of this Agreement, the Borrower understands that the Bank may, at its own cost and expense, at any time enter into participation or co-lending agreements with one or more banks or other institutions (each a "PARTICIPATING BANK") whereby the Bank may allocate certain -35- 39 percentages of its commitment to them or allow such Banks to fund a portion of the Loan, but only so long as the Bank remains the servicing agent for the Loan. For purposes of servicing the Loan, the Borrower shall only be required to respond to and communicate with the Bank. The Borrower hereby agrees to execute such other documents as the Bank reasonably may require to facilitate the execution and delivery of, and performance under any participation or co-lending agreements. The Borrower acknowledges that, for the convenience of all parties, this Agreement is being entered into with the Bank only and that the Obligations are undertaken for the benefit of, and as an inducement to, any such Participating Bank as well as the Bank, and the Borrower hereby grants to each such Participating Bank, to the extent of its participation in or funding of the Loan and, to the extent permitted by applicable law, the right to set off deposit accounts maintained by the Borrower with such bank. 10.09. ASSIGNMENTS BY THE BORROWER. The Borrower shall not have the right to assign this Agreement or any interest therein, and hereby agree that no Person other than the Borrower shall have any interest in this Agreement or the proceeds of the Loan. 10.10. CONTINUING OBLIGATION. This Agreement is a continuing obligation and shall be binding upon the Borrower, its successors and assigns and inure to the benefit of and be enforceable by the Bank and its successors, transferees and assigns until all the Obligations shall have been paid in full, whereupon this Agreement shall terminate; provided, however, that the indemnification obligations of the Borrower pursuant to Sections 2.09(b), 10.04 and 10.05 hereof shall survive the termination of this Agreement. 10.11. SUPERSEDING AGREEMENT. This Agreement supersedes any commitment letters or other agreements between the Bank and the Borrower prior to the date hereof relating to the subject matter hereof. 10.12. AMENDMENTS AND WAIVERS IN WRITING. No amendment of this Agreement or waiver of any of the provisions hereof shall be effective unless it is in writing and signed by the party against whom enforcement of such amendment or waiver is sought, and then only to the extent specifically stated. 10.13. SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.14. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, except to the extent that personal property security interests in the Collateral are governed by the law of other jurisdictions. 10.15. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY (I) AGREES THAT ANY SUIT, ACTION OR OTHER -36- 40 LEGAL PROCEEDING ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF RECORD OF THE STATE OF NEW YORK OR THE COURTS OF THE UNITED STATES LOCATED IN THE STATE OF NEW YORK; (II) CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; AND (III) WAIVES ANY OBJECTION WHICH IT MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF SUCH COURTS; AND IN ANY ACTION HEREUNDER THE BORROWER AND THE BANK WAIVE THE RIGHT TO DEMAND A TRIAL BY JURY. 10.16. HEADINGS. Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 10.17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. -37- 41 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. ECOGEN INC. By:__________________________ Name: Title: President THE BERKSHIRE BANK By:__________________________ Name: Moses Krausz Title: President -38- 42 ACKNOWLEDGEMENT STATE OF NEW YORK | | SS: COUNTY OF NEW YORK | On December __, 1999, before me, the undersigned, a Notary Public in and for said State, personally appeared ______________________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and official seal. ______________________________________ Notary Public My commission expires: ______________ 43 EXHIBIT A This instrument and the obligations evidenced hereby are subordinated, in the manner and to the extent set forth in an Intercreditor and Subordination Agreement (the "Subordination Agreement") dated as of December 23, 1999 by and between Congress Financial Corporation and the Payee of this instrument, and the holder of this instrument, by such holder's acceptance hereof, agrees (i) to be bound by the terms of the Subordination Agreement, and (ii) in the event that any conflict exists between the terms of this instrument or any document executed in connection with the delivery of this instrument and the terms of the Subordination Agreement, the terms of such Subordination Agreement shall govern and be controlling. TERM LOAN PROMISSORY NOTE $1,500,000 December 23, 1999 FOR VALUE RECEIVED, the undersigned, ECOGEN INC., a Delaware corporation, with an office at 2000 Cabot Boulevard West, Langhorne, Pennsylvania 19047 (the "Borrower"), promises to pay to the order of THE BERKSHIRE BANK, a New York banking corporation, with an office at 600 Madison Avenue, New York, New York 10022 (hereinafter referred to as the "Bank"; the Bank, and any subsequent holder(s) hereof, being hereinafter referred to collectively as the "Holder"), as set forth below, at the above office of the Bank, or at such other place as the Holder may designate to the Borrower in writing from time to time, such sums as the Holder may advance to the Borrower hereunder, up to the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) in lawful money of the United States of America which shall at the time of payment be legal tender in payment of all debts and dues, public and private, and to pay interest on the unpaid balance of said principal sums from time to time outstanding from the date hereof until payment in full, whether before or after maturity, in like funds and money at said office, payable and computed as provided in the Term Loan and Security Agreement (hereinafter defined), such interest to be payable monthly in arrears on the last day of each month, commencing on January 31, 2000, and on the date the principal of this Note shall be due (at stated maturity, on acceleration, or otherwise). An amount of principal on this Note equal to $500,000 shall be due and payable on June 23, 2000 and the outstanding principal balance of this Note shall be due and payable on June 23, 2001. The unpaid balance of this Note at any time shall be the total amounts loaned or advanced by the Holder hereof, less the amount of payments or prepayments of principal made hereon by or for the account of the Borrower. All payments or prepayments made hereunder on account of principal or interest may be endorsed by the Holder hereof on the Schedule attached hereto and made a part hereof for all purposes. Additional Schedule pages may be attached hereto from time to time by the Holder hereof if more space is necessary. B-1 44 This Note may be prepaid in whole or in part at any time as provided in the Term Loan and Security Agreement. All payments hereon shall be credited first to accrued interest, next to any other sums due hereunder and the remainder to the unpaid principal balance, until all funds due hereunder have been paid in full. Without limiting the right of the Holder to bring any action or proceeding against property of the Borrower arising out of or relating to this Note (an "Action") in the courts of other jurisdictions, the Borrower hereby irrevocably submits to the jurisdiction of any court of New York State or any court of the United States of America sitting in New York City, and the Borrower hereby irrevocably agrees that any Action may be heard and determined in such New York State court or in such United States court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of any Action in any jurisdiction. The Borrower hereby irrevocably agrees that the summons and complaint or any other process in any Action in any jurisdiction may be served by mailing to the address of the Borrower set forth in the Term Loan and Security Agreement or by hand delivery to a person of suitable age and discretion at such address. Such service will be complete on the date such process is so mailed or delivered, and the Borrower will have thirty days from such completion of service in which to respond in the manner provided by law. The Borrower may also be served in any other manner permitted by law, in which event the Borrower's time to respond shall be the time provided by law. Both the Borrower and the Holder hereby irrevocably waive all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to any obligation under this Note. In the event this Note or any part thereof is collected by or through an attorney at law, the Borrower agrees to pay all costs of collection, including but not limited to, reasonable attorney's fees and court costs actually incurred. Time is of the essence of this Note. Presentment for payment, demand, notice of dishonor, protest and all other notices other than as set forth herein or in the Term Loan and Security Agreement and Related Documents are hereby waived by the Borrower. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due installment, or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of the Holder thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or by the laws of the State of New York; and the Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of time for the payment of this Note or any installment due hereunder, made by agreement with any person now B-2 45 or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of the Borrower under this Note, either in whole or in part unless the Holder agrees otherwise in writing. This Note may not be changed orally, but only in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. The Borrower hereby waives and renounces for itself, its successors and assigns, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now provided, or which may hereafter be provided by the Constitution and laws of the United States of America and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note. This Note is issued pursuant to that certain Term Loan and Security Agreement, dated as of December 23, 1999 (the "Term Loan and Security Agreement"), between the Borrower and the Bank, and is one of the Note as defined in the Term Loan and Security Agreement. It is the intention of the parties hereto to conform strictly to applicable usury laws as in effect from time to time. Accordingly, if any transactions contemplated hereby would be usurious under applicable law (including the laws of the United States of America, or of any other jurisdiction whose laws may be mandatorily applicable), then, in that event, notwithstanding anything to the contrary in this Note, or any other agreement entered into in connection with this Note, it is agreed that the aggregate of all consideration that constitutes interest under applicable law that is contracted for, charged, or received under this Note, or under any of the other aforesaid agreements or otherwise in connection with this Note shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited to the Borrower by the Holder that has contracted for, charged, or received such excess interest (or, if such consideration shall have been paid in full, such excess refunded to the Borrower by the Holder). All sums paid, or agreed to be paid, to the Holder for the use, forbearance, and detention of the indebtedness of the Borrower by the Holder shall, to the extent permitted by applicable law, be amortized, pro rated, allocated, and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform, but does not exceed the highest lawful rate, throughout the full term thereof. In the event it should be determined that the Bank has contracted for any rate of interest in excess of the highest lawful rate, then ipso facto such rate shall be reduced to the highest lawful rate so that no amounts shall be charged which are in excess thereof, and, in the event it should be determined that any excess over such highest lawful rate has been charged or received, the Bank shall promptly refund such excess to the Borrower; provided, however, that, if lawful, any such excess shall be paid by the Borrower to the Bank as additional interest (accruing at a rate equal to the maximum legal rate minus the rate provided for hereunder) during any subsequent period when regular interest is accruing hereunder at less than the maximum legal rate. B-3 46 Wherever possible, each provision of this instrument shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this instrument shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this instrument. As used herein the terms "Borrower", "Bank" and "Holder" shall be deemed to include their respective heirs, successors, legal representatives and assigns, whether by voluntary action of the parties or by operation of law. IN WITNESS WHEREOF, the Borrower has executed this Note on the date first above written. ECOGEN INC. By:__________________________ Name: Title: B-4 47 SCHEDULE OF TERM LOAN PAYMENTS OF PRINCIPAL
PRINCIPAL REPAID PRINCIPAL BALANCE REPAYMENT DATE NOTATION BY - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ---------------- - ---------------- ----------------- ---------------- ----------------
B-5 48 ACKNOWLEDGEMENT STATE OF NEW YORK | | SS: COUNTY OF NEW YORK | On December __, 1999, before me, the undersigned, a Notary Public in and for said State, personally appeared ______________________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and official seal. ______________________________________ Notary Public My commission expires: ______________ B-6 EX-10.151 8 WARRANT AGREEMENT ECOGEN $ MOMAR 1 Void after 5:00 P.M. New York Time on December 23, 2004 No. W-1 Warrant to Purchase 200,000 Shares of Common Stock WARRANT TO PURCHASE SHARES OF COMMON STOCK OF ECOGEN INC. THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, MOMAR CORPORATION, a Maryland corporation, or registered assigns (the "Holder"), is entitled to purchase, subject to the provisions of this Warrant, from Ecogen Inc., a Delaware corporation (the "Company"), at the Exercise Price hereinafter set forth, up to 200,000 shares (as adjusted from time to time as provided hereunder) of Common Stock at any time and from time to time on or after the date hereof and not later than 5:00 P.M. New York time on December 23, 2004 (the "Expiration Date"). (a) DEFINITIONS. For the purposes of this Warrant, the following terms shall have the following meanings: (1) "Common Stock" shall mean the Common Stock, $0.01 par value per share, of the Company of the class authorized as of the date hereof and any other class of stock ranking on a parity with such Common Stock. However, subject to the provisions of Section (l) hereof, shares issuable upon exercise hereof shall include only shares of the class designated as Common Stock of the Company as of the date hereof. (2) "Exercise Price" shall mean $1.25 per share, as adjusted from time to time as provided hereunder. (3) "Registry Office" shall mean the principal executive office of the Company at 2000 Cabot Boulevard West, Langhorne, Pennsylvania 19047. (4) "Warrant Stock" shall mean the shares of Common Stock deliverable upon exercise of the Warrants, as adjusted from time to time as provided hereunder. (b) EXERCISE OF WARRANT. Subject to the provisions of this Warrant, the Holder shall have the right to purchase from the Company, and the Company shall be obligated to issue and sell to the Holder, the number of fully paid and nonassessable shares of Warrant Stock purchasable hereunder, free of all preemptive rights of stockholders and all other liens, claims and encumbrances of any nature whatsoever. This Warrant may be exercised in whole or in part at any time or from time to time, but not 2 later than the Expiration Date, or if the Exercise Time is a day on which banking institutions in the Commonwealth of Pennsylvania are authorized by law to close, then on the next succeeding day which shall not be such a day, by presentation and surrender hereof to the Registry Office of the Company, with the form of Election to Purchase annexed hereto duly executed and accompanied by payment of the Exercise Price multiplied by the number of shares specified in such form. Payment of the Exercise Price may be made in cash, or by check, bank draft or postal or express money order payable in United States currency, to the order of the Company. Upon such surrender of this Warrant and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate or certificates for the number of full shares of Common Stock so purchased upon the exercise of this Warrant together with cash as provided in Section (d) in respect of any fraction of a share of Common Stock otherwise issuable upon such surrender. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, promptly execute and deliver to the Holder a new Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this Warrant at the Registry Office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. (c) RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common stock as shall be required for issuance or delivery upon exercise of this Warrant. (d) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant; provided, however, that if more than one Warrant is exercised by the same holder at the same time, fractional shares of all such Warrants shall be consolidated and the holder shall be entitled to purchase the number of whole shares obtained by consolidating such fractional shares. With respect to any remaining fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the excess over the Exercise Price of the current market value of a share of Common Stock determined for all purposes of this Warrant as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange, or is listed on NASDAQ, the current value shall be the last reported sale price of the Common Stock on such exchange or NASDAQ on the last day such exchange was open prior to the date of exercise of this Warrant or, if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange; or -2- 3 (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current value shall be the mean of the last reported bid and asked prices reported by any national stock price quotation service on the last day on which such bid and asked prices were reported prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current value shall be an amount, not less than book value, determined in good faith and in such reasonable manner as may be prescribed by the Board of Directors of the Company, such determination to be final and binding on the Holder. (e) REGISTRATION. The Company shall maintain books for the transfer and registration of the Warrants. Upon the initial issuance of the Warrants, the Company shall issue and register the Warrants in the names of the respective registered holders thereof, and upon subsequent re-issuances of Warrants, such Warrants shall be registered in the names of their respective registered holders. (f) PAYMENT OF TAXES. The Company shall pay all state and federal taxes, if any, attributable to the exercise of this Warrant and to the initial issuance of the Warrant Stock; provided that the Company shall not be required to pay any tax or taxes which may be payable because of the transfer involved in the issue or delivery of any certificates for Warrant Stock in a name other than that of the registered holder of the Warrants being exercised or any income taxes or capital gains tax of the Holder. (g) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option or the Holder, upon presentation and surrender hereof to the Company, alone or with other Warrants with the same Exercise Price, for any other warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder at the same Exercise Price. This Warrant is transferable in the same manner and with the same effect upon payment by the Holder of all federal and state taxes applicable to such transfer, subject to the provisions of Section (o) hereof. Upon surrender of this Warrant to the Company with the form of Assignment annexed hereto duly executed, with funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled. If and when this Warrant is assigned in blank, the Company shall, subject to the provisions of Section (o) hereof, treat the bearer hereof as the absolute owner of this Warrant for all purposes and the Company shall not be affected by any notice to the contrary. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the office or agency of the Company maintained for that purpose, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged, and the term "Holder" -3- 4 as used herein includes any holder of any Warrant into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost or stolen, destroyed or mutilated shall be at any time enforceable by anyone. (h) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. (i) ANTI-DILUTION PROVISIONS. (1) ADJUSTMENTS OF EXERCISE PRICE. If the Company should at any time or from time to time hereafter issue or sell any share of Common Stock (other than the shares which are to be issued upon exercise of the options or warrants described in clause (A), or conversions of the Convertible Securities described in clause (B), of this subsection (i)(1) or the Warrant Stock which may be purchased under the Warrants) without consideration or for a consideration per share less than the greater of (i) the Exercise Price of the Warrant in effect immediately prior to the time of such issue or sale and (ii) the then current market value of a share of Common Stock (such greater amount, the "Floor Amount"), then forthwith upon such issue or sale, the Exercise Price of all Warrants shall be adjusted to a price (computed to the nearest cent) determined by dividing (i) the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the Floor Amount, and (y) the consideration, if any, received by the Company upon such issue or sale, by (ii) the total number of shares of Common Stock outstanding immediately after such issue or sale. For the purposes of this subsection (i)(1), the following provisions (A) through (G) shall also be applicable: (A) OPTIONS AND RIGHTS. In case at any time hereafter the Company shall in any manner grant any right to subscribe for or to purchase, or any option for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being hereinafter referred to as "Convertible Securities") and the minimum price per share for which Common Stock is issuable, pursuant to such rights or options or upon conversion or exchange of such Convertible Securities (determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights and options, plus, in the case of such Convertible -4- 5 Securities, the minimum aggregate amount of additional consideration, if any, payable upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable pursuant to such rights or options or upon the conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such rights or options) shall be less than the highest Exercise Price in effect immediately prior to the time of the granting of such rights or options, then the total maximum number of shares of Common Stock issuable pursuant to such rights or options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such rights or options shall (as of the date of granting of such rights or options) be deemed to be outstanding and to have been issued for said price per share as so determined; provided, however, that no further adjustment of the Exercise Price shall be made upon the actual issue of Common Stock so deemed to have been issued; and, further provided, that, upon the expiration of such rights (including rights to convert or exchange) or options, (a) a number of shares of Common Stock deemed to have been issued and outstanding by reason of the fact that they were issuable pursuant to such rights or options or upon conversion or exchange of Convertible Securities so issuable, which rights or options (including rights to convert or exchange) were not exercised, shall no longer be deemed to be issued and outstanding, and (b) the Exercise Price shall forthwith be adjusted to the price which would have prevailed had all adjustments been made on the basis of the issue only of the shares of Common Stock actually issued upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities. (B) CONVERTIBLE SECURITIES. In case the Company shall hereafter in any manner issue or sell any Convertible Securities other than as described in clause (A) of this Section (i)(1) and the minimum price per share for which Common Stock is issuable upon conversion or exchange of such Convertible Securities (determined by dividing (i) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the highest Exercise Price of any of the Warrants in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for said Price per share as so determined; provided that no further adjustment of the Exercise Price shall be made upon the actual issue of Common Stock so deemed to have been issued; and, further provided, that if any such issue or sale of such Convertible Securities is made upon exercise of any right to subscribe for or to purchase or any option to purchase any such Convertible Securities for which an adjustment of the Exercise -5- 6 Price has been or is to be made pursuant to other provisions of this subsection (i)(1), no further adjustment of the Exercise Price shall be made by reason of such issue or sale; and, further provided, that, upon the termination of the right to convert or to exchange such Convertible Securities for Common Stock, (a) the number of shares of Common Stock deemed to have been issued and outstanding by reason of the fact that they were issuable upon conversion of exchange of any such Convertible Securities, which were not so converted or exchanged, shall no longer be deemed to be issued and outstanding, and (b) the Exercise Price shall forthwith be adjusted to the price which would have prevailed had all adjustments been made on the basis of the issue only of the number of shares of Common Stock actually issued upon conversion or exchange of such Convertible Securities. (C) DISTRIBUTIONS. In case the Company shall, at any time prior to the expiration of this Warrant and prior to the exercise thereof, make any distribution of its assets to holders of its Common Stock as a liquidation or partial liquidation dividend or by way of return of capital, or other than as a dividend payable out of earnings or any surplus legally available for dividends under the laws of the State of Delaware, then the Holder of this Warrant who thereafter exercises the same as herein provided after the date of record for the determination of those holders of Common Stock entitled to such distribution of assets shall be entitled to receive for the purchase price of the shares of Common Stock stated in this Warrant, in addition to the shares of Common Stock, the amount of such assets (or at the option of the Company a sum equal to the value thereof at the time of such distribution to holders of Common Stock as such value is determined by the Board of Directors of the company in good faith), which would have been payable to such Holder had it been the holder of record of such shares of Common Stock, receivable upon the exercise of this Warrant on the record date for the determination of those entitled to such distribution. (D) DISSOLUTION OR LIQUIDATION. In case the Company shall, at any time prior to the expiration of this Warrant and prior to the exercise thereof, dissolve, liquidate or wind up its affairs, the Holder of this Warrant shall be entitled, upon the exercise thereof, to receive, in lieu of the shares of Common Stock of the Company which it would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to it upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock of the Company, had it been the holder of record of such shares of Common Stock receivable upon the exercise of this Warrant on the record date for the determination of those entitled to receive any such liquidation distribution. After any such dissolution, liquidation or winding up which shall result in any cash distribution in excess of the Exercise Price provided for by this Warrant, the Holder of this Warrant may at its option exercise the same without making payment of the Exercise Price and in such case the Company shall upon the distribution to said Warrant Holder consider that said Exercise Price has been paid -6- 7 in full to it and in making settlement to said Warrant Holder, shall deduct from the amount payable to such Holder an amount equal to such Exercise Price. (E) DETERMINATION OF ISSUE PRICE. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such stock or securities shall be issued for cash, the consideration received therefor, after deducting therefrom any commissions or other expenses paid or incurred by the Company for any underwriting of, or otherwise in connection with, the issuance thereof, shall be deemed to be the amount received by the Company therefor. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such stock or securities shall be issued for a consideration, part or all of which shall be other than cash, then, for the purpose of this subsection (i)(1), such Common Stock, Convertible Securities, rights or options shall be deemed to have been issued for an amount of cash equal to the fair market value of such consideration. The reclassification of securities other than Common Stock into securities including Common Stock shall be deemed to involve the issuance for a consideration other than cash of such Common Stock immediately prior to the close of business on the date fixed for the determination of securityholders entitled to receive such Common Stock. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such stock or other securities shall be issued together with other stock or securities or other assets of the Company for a consideration which includes both, the consideration for the issuance of the shares of Common Stock or Convertible Securities or rights or options shall be determined by subtracting the fair market value of the other stock or securities or assets from the total consideration received. (F) DETERMINATION OF DATE OF ISSUE. In case the Company shall take a record of the holders of any Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock or in Convertible Securities, or (ii) to subscribe for or purchase Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (G) TREASURY SHARES. For the purpose of this subsection (i)(1), shares of Common Stock at any relevant time owned or held by or for the account of the Company shall not be deemed outstanding. (2) ADJUSTMENT OF NUMBER OF SHARES. Anything in this Section (i) to the contrary notwithstanding, in case the Company shall any time issue Common Stock or Convertible Securities by way of dividend or other distribution on any stock of the Company or subdivide or combine the outstanding shares of Common Stock, the Exercise -7- 8 Price shall be proportionately decreased in the case of such issuance (on the day following the date fixed for determining shareholders entitled to receive such dividend or other distribution) or decreased in the case of such subdivision or increased in the case of such combination (on the date that such subdivision or combination shall become effective). (3) NO ADJUSTMENTS FOR SMALL AMOUNTS. Anything in this Section (i) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Exercise Price unless and until the net effect of one or more adjustments, determined as above provided, shall have required a change of the Exercise Price by at least 1%, but when the cumulative net effect of more than one adjustment so determined shall be to change the actual Exercise Price by at least 1%, such change in the Exercise Price shall thereupon be given effect. (4) NUMBER OF SHARES ADJUSTED. Upon any adjustment of the Exercise Price, the holder of this Warrant shall thereafter (until another such adjustment) be entitled to purchase, at the new Exercise Price, the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares of Common Stock initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the new Exercise Price. (j) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of Section (i) hereof, the Company shall forthwith file, in the custody of its Secretary or an Assistant Secretary at its Registry Office, an officer's certificate showing the adjusted Exercise Price determined as herein provided and setting forth in reasonable detail the facts requiring such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the Holder. (k) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding and unexercised (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of stock of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then, in any such case, the Company shall cause to be delivered to the Holder, at least ten (10) days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to -8- 9 exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (l) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of an issuance of Common Stock by way of dividend or other distribution or of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company shall cause effective provision to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (l) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in any such capital reorganization or reclassification, consolidation, mergers, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for or of a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of subsection (i)(1) hereof. (m) SECURITIES ACT REGISTRATION. (1) In the event that the Company files a registration statement under the Securities Act of 1933, as amended (the "Act"), which relates to a current offering of securities of the Company for its own account or the account of any of its shareholders, such registration statement and the prospectus included therein shall also, at the written request to the Company by the Holder, relate to, and meet the requirements of the Act with respect to, any public offering of the Warrant Stock so as to permit the public sale thereof in compliance with the Act. The Company shall give written notice to the Holder of its intention to file a registration statement under the Act relating to a current offering of the aforesaid securities of the Company, thirty (30) or more days prior to the filing of such registration statement, and the written request provided for in the first sentence of this subsection (m)(1), shall be made by the Holder fifteen (15) or more days prior to the -9- 10 date specified in the notice as the date on which it is intended to file such registration statement. Neither the delivery of such notice by the Company nor of such request by the Holder shall in any way obligate the Company to file such registration statement and notwithstanding the filing of such registration statement, the Company may, at any time prior to the effective date thereof, determine not to offer the securities to which such registration statement relates, without liability to the Holder, except that the Company shall pay such expenses as are contemplated to be paid by it under subsection (4) of this Section (m). (2) In addition, upon written notice from the Holder that it contemplates the transfer of all or any of its Warrant Stock under such circumstances that a public offering, within the meaning of the Act, of the Warrant Stock will be involved, the Company, as promptly as possible after the receipt of such notice, shall file a new registration statement with respect to the offering and sale or other disposition of the Warrant Stock with respect to which it shall have received such notice; provided, however, that the Company shall not be required to file more than two registration statements pursuant to this Section (m)(2). Notwithstanding the foregoing, the Company shall not be obligated to effect a registration pursuant to this Section (m)(2) if the Company shall furnish to the Holder within ten (10) days of a registration request a certificate signed by the president of the Company stating that in the good faith judgment of the board of directors of the Company it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer the filing of the registration statement for a period of not more than ninety (90) days after the receipt of the request of the Holder. (3) In each instance in which pursuant to subsections (1) and (2) of this Section (m) , the Company shall take any action to permit a public offering and sale or other distribution of Warrant Stock, the Company shall: (A) Supply to the Holder a conformed copy of the new registration statement and of the preliminary, final and other prospectus in conformity with requirements of the Act and the Rules and Regulations and true copies of such other documents as the Holder shall reasonably request; (B) Cooperate in taking such action as may be necessary to register or qualify the Warrant Stock under such other securities acts or blue sky laws of such jurisdictions as the Holder shall reasonably request and do any and all other acts and things which may be necessary or advisable to enable the Holder to consummate such proposed sale or other disposition of the Warrant Stock in any such jurisdiction; provided, however, that in no event shall the Company be obligated, in connection therewith, to qualify to do business or to file a general consent to service of process in any jurisdiction where it shall not then be qualified; -10- 11 (C) Keep effective for a period of 180 days after the initial effectiveness thereof or until all Warrant Stock covered thereby has been sold, whichever is later, all such registrations and qualifications under the Act and state securities and blue sky laws, and do any and all other acts and things for such period as may be necessary to permit the public sale or other disposition of such Warrant Stock by the Holder; and (D) Indemnify and hold harmless the Holder and each underwriter, within the meaning of the Act, who may purchase from or sell for the Holder any Warrant Stock, and their respective officers, directors, partners, stockholders, agents, representatives and controlling persons from and against any and all losses, claims, damages, and liabilities (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing, defending or settling any claim) arising from (i) any untrue or alleged untrue statement of a material fact contained in any registration statement furnished pursuant to clause (A) of this subsection (m)(3), or any prospectus or offering circular included therein or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (unless such untrue statement or omission or such alleged untrue statement or omission was based upon information furnished or required to be furnished in writing to the Company by the Holder or underwriter expressly for use therein), which indemnification shall include each person, if any, who controls the Holder or underwriter within the meaning of the Act; provided, however, that the Company shall not be so obligated to indemnify the Holder or underwriter or controlling person unless the Holder and underwriter shall at the same time indemnify the Company, its directors, each officer signing any registration statement or any amendment to any registration statement and each person, if any, who controls the Company within the meaning of the Act, from and against any and all losses, claims, damages, and liabilities (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing, defending or settling any claim) arising from (a) any untrue or alleged untrue statement of a material fact contained in any registration statement or any amendment to any registration statement or prospectus furnished pursuant to clause (A) of this subsection (m)(3), or (b) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, based upon information furnished, or required to be furnished, in writing to the Company by the Holder or underwriter expressly for use therein. This indemnity agreement shall not inure to the benefit of any such underwriter (or to the benefit of any person who controls such underwriter) on account of any losses, claims, damages, liabilities or actions or proceedings in respect thereof) arising from the sale of any of such Warrant Stock by such underwriter to any person if such underwriter failed to send or give a copy of the prospectus furnished pursuant to clause (A) of this subsection (m)(3), as the same may then be supplemented or amended (if such supplement or amendment shall -11- 12 have been furnished to the Holder pursuant to said clause (A)), to such person with or prior to the written confirmation of the sale involved. (4) The Company shall bear all costs and expenses incurred in connection with the Company's obligations under this Section (m) , including, without limiting the generality of the foregoing, accounting fees, fees and disbursements of counsel for the Company, all costs and expenses incurred in connection with the compliance with state securities or blue sky laws of such jurisdictions as the Holder shall reasonably request, and expenses incurred for preparing, printing and distributing such quantity of prospectuses as the Holder shall reasonably request; provided, however, that any discounts, commissions, broker's fees and similar fees to securities industry professionals, and any transfer taxes relating to the sale of the Warrant Stock shall be paid by the Holder. (5) The Company's obligations under subsections (1) and (2) of this Section (m) shall be conditioned, as to each such public offering, upon a timely receipt by the Company in writing of: (A) Information as to the terms of such public offering furnished by or on behalf of the Holder; and (B) Such other information as the Company may reasonably require from the Holder or any underwriter for inclusion in such registration statement or post-effective amendment. (6) Any notices or certificates by the Company to the Holder and by the Holder to the Company shall be deemed delivered if in writing and delivered personally or sent by certified mail, if to the Holder, addressed to it at its registered address or, if the Holder has designated by notice in writing to the Company any other address, to such other address, and, if to the Company, addressed to it at its Registry Office. The Company may change its Registry Office by written notice to the holders of the Warrants and the Holder may change its address by written notice to the Company. (7) The Company's agreements with respect to registration of the Warrant Stock in this Section (m) shall apply to and continue in effect, regardless of the exercise or surrender of this Warrant; provided, however, that the Company shall have no obligation to register Warrant Stock pursuant hereto if (i) in the written opinion of counsel for the Company, which opinion shall be satisfactory in form and substance to the Holder, the Warrant Stock is freely tradable without the need for such registration, (ii) the Holder is provided with unlegended certificates representing the Warrants or Warrant Stock and (iii) all stop transfer orders on the Warrants and Warrant Stock are removed by the Company (n) GOVERNMENTAL APPROVALS AND STOCK EXCHANGE LISTINGS. The Company shall from time to time take all action which may be necessary to obtain and keep -12- 13 effective any and all permits, consents and approvals of governmental agencies and authorities which may be or become requisite in connection with the issuances, sales, transfer, delivery and exercise of the Warrants by the registered holders thereof, and the issuance, sale, transfer and delivery of the Warrant Stock by such holders, and all action which may be necessary so that such shares of Warrant Stock, immediately upon their issuance pursuant to the exercise of the Warrants, will be listed or entitled to unlisted trading privileges each securities exchange (or on NASDAQ, if applicable) on which Common Stock is then listed or entitled to unlisted trading privileges, and on the identical basis. (o) TRANSFER RESTRICTIONS. (1) This Warrant or the Warrant Stock may not be sold, transferred or otherwise disposed of except as follows: (A) to any person who, in the opinion of counsel provided by the Holder and satisfactory to the Company, is a person to whom this Warrant or such Warrant Stock may legally be transferred without registration and without the delivery of a current prospectus or offering circular under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section (o) with respect to any resale or other disposition of such securities; or (B) with respect to the Warrant Stock, to any person upon delivery of a prospectus then meeting the registration requirements of the Act relating to the Warrant Stock and the offering thereof for such sale or disposition. (2) The Company may cause a legend substantially in the following form to be set forth on each certificate representing Warrant Stock not theretofore distributed to the public or sold to underwriters for distribution to the public pursuant to Section (m) hereof, unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS." (p) APPLICABLE LAW. THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. -13- 14 (q) AMENDMENT. This Warrant may only be amended by a written instrument executed by the Company and the Holder. (r) REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Holder as follows: (i) execution and delivery of this Warrant by the Company has been duly authorized by all necessary corporate action, and this Warrant constitutes the valid and binding obligation of the Company in accordance with its terms; (ii) the Warrant and the Warrant Stock have been duly authorized for issuance, and upon delivery of the Warrant the Holder will have good and valid title thereto, free and clear of any and all liens, claims and encumbrances of any nature whatsoever; (iii) the Warrant Stock has been, and will continue to be, duly reserved for issuance; and (iv) upon exercise of the Warrant in accordance with the terms thereof, the Warrant Stock shall have been duly and validly issued, fully paid and non-assessable. -14- 15 (s) BINDING EFFECT. Subject to the provisions of Sections (g) and (o), this Warrant and the rights evidenced hereby shall inure to the benefit of, and be binding upon, the Company and the Holder and their respective successors and assigns, including any permitted transferee of the Warrant or Warrant Stock. ECOGEN INC. By ____________________________ President Date: ____________________ (SEAL) Attest: __________________________ Secretary -15- 16 ACKNOWLEDGEMENT STATE OF NEW YORK | | SS: COUNTY OF NEW YORK | On December __, 1999, before me, the undersigned, a Notary Public in and for said State, personally appeared _______________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and official seal. ______________________________________ Notary Public My commission expires: ______________ 17 [FORM OF] ELECTION TO PURCHASE Ecogen Inc. 2000 Cabot Boulevard West Langhorne, Pennsylvania 19047 Attention: Treasurer The undersigned registered owner of the within Warrant hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder ______________ shares of the stock provided for therein, and requests that certificates for such shares shall be issued in the name of ________________________________________________________________________________ (Please Print) and be delivered to ____________________________________________________________ at _____________________________________________________________________________ and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant for the balance remaining of the shares purchasable under the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below. Dated: ____________________ Name of Registered Owner: ________________________________________________________________________________ (Please Print) Address: _______________________________________________________________________ Signature: _____________________________________________________________________ Note: The above signature must correspond with the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: ___________________________ 18 [FORM OF] ASSIGNMENT For value received, the undersigned registered owner of the within Warrant ________________________________________________________________________________ does hereby sell, assign and transfer unto ________________________________________________________________________________ the within Warrant, together with all right, title and interest therein, with respect to ___________________ shares of Common Stock, and does hereby irrevocably constitute and appoint ________________________________________________________________________________ attorney, to transfer said Warrant on the books of the within-named Company, with full power of substitution in the premises. Social Security or other identifying number of assignee: ______________________________ Dated: _______________________ Signature: ________________________ Note: The above signature must correspond with the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: ___________________________ EX-10.152 9 SECOND AGREEMENT TO LEASE 1 SECOND AMENDMENT TO LEASE This AMENDMENT TO LEASE, dated as of this 17th day of December 1999, by and between ECOGEN INC., a corporation organized and existing under the laws of the State of Delaware ("Tenant"), and Brandywine Operating Partnership, L.P., a Pennsylvania limited partnership, acting through its Agent, Brandywine Realty Services Corporation ("Landlord"). BACKGROUND WHEREAS, Landlord's predecessor in interest, Advent Realty Limited Partnership, and Tenant, by Lease Agreement dated January 13, 1988, (and an Amendment thereto dated March 31, 1992) leased 14,900 rentable square feet of space, located in that certain Building known as 2000 Cabot Boulevard West, Langhorne, Pennsylvania (said Lease Agreement and Amendment being hereinafter referred to as the "Lease"). WHEREAS, by acquisition of the Land and Building of which the Premises is a part, the Landlord herein has acquired all right, title and interest of said predecessor therein and thereto, including all rights and obligations as Landlord under said Lease and WHEREAS, Landlord and Tenant mutually desire to extend the Term of said Lease, which is currently due to expire on March 31, 2000, and modify certain other provisions thereof all on the terms and conditions as hereinafter provided. NOW THEREFORE, in consideration of the mutual covenants herein set forth, intending to be legally bound hereby, Landlord and Tenant agree as follows: 1. Incorporation; Definitions. The defined terms used in this Second Amendment to Lease shall be deemed to have the meanings ascribed thereto in the Lease or, if defined herein, in this Second Amendment to Lease. The headings of paragraphs are for convenience only and shall not be deemed to enlarge or diminish the provisions of this Second Amendment to Lease. 2. Extension Term. The Term of said Lease is hereby extended for a period of five (5) years from April 1, 2000 to March 31, 2005 (the "New Ending Date of Term"). 3. Tenant Improvements. No improvements to the Premises are required of the Landlord in connection with the extension of the Lease Term provided herein - - the Premises being accepted by Tenant in its current condition, "As-Is". Landlord shall reimburse Tenant up to $20,000 for improvements tenant shall make to the Premises. Landlord shall pay Tenant, within forty five (45) days of Landlord's receipt of invoices, for such improvements, which expenses shall be certified by Tenant as incurred. Tenant shall have one (1) year from, April 1, 2000 to use and request reimbursement for Tenant Improvements. 2 4. Renewal Option. The Option to renew provided for in paragraph (6) of the above mentioned Amendment dated March 31, 1992 (i.e. Lease Extension Agreement) is hereby deleted and shall be of no further force or effect - this Amendment being deemed in lieu thereof. 5. Annual Base Rent. During the extension Term the Annual Base Rent shall be payable by Tenant to Landlord, at the times and in the manner set forth in the Lease, according to the following schedule:
Monthly Period of Installment of Total Annual Base Rent Per Lease Term Base Rent Rent for Period Rentable Square Foot 4/1/00-3/31/01 $15,694.67 $188,336.00 $12.64 4/1/01-3/31/02 $16,005.08 $192,061.00 $12.89 4/1/02-3/31/03 $16,315.50 $195,786.00 $13.14 4/1/03-3/31/04 $16,625.92 $199,511.00 $13.39 4/1/04-3/31/05 $16,936.33 $203,236.00 $13.64
6. Operating Expenses. The parties agree that with respect the Tenants obligations under Articles 4 and 7 of said Lease, same are hereby Amended as follows: Article 4 - Commencing April 1, 2000 and continuing throughout the Extension Term the Tenant shall only be responsible to pay its proportionate share of Real Estate Taxes that are in excess of the Real Estate Taxes allocable to the Base Year 2000 (i.e. calendar year 2000 for County Taxes and 7/1/99 - 6/30/00 - fiscal year for school Taxes). It is anticipated therefore that the billing for Real Estate Taxes for the Extension Term would not occur until after December 31, 2000, whether the billings would be estimated or actual as contemplated in said Article 4. Article 7 - This provision shall during the extension Term be deemed modified to the extent that Landlord shall undertake all services for and make all repairs to the Building and the Premises except that Tenant will continue to be responsible for (a) all interior non structural repairs to Premises and any repairs or replacement necessitated by acts or immersions of Tenant, its agents or employees, (b) the janitorial services to the Premises (c) HVAC maintenance and repair and (d) cost of all services and utilities as contemplated in Lease Article 14. After the commencement of the Extension Term, Landlord will deliver to Tenant a Statement of Expenses covering any unpaid amounts due and owing from Tenant under the Lease for the period ending March 31, 2000. 3 7. Broker. Each party warrants to the others that it has had no dealings with any broker or agent, other than Gola Corporate Real Estate, in connection with the negotiation or execution of this Extension of Term and/or Amendment to Lease. Tenant agrees to indemnify Owner, and Owner agrees to indemnify Tenant, against all costs, expenses, reasonable attorney's fees or other liability for commissions or other compensation or charges claimed by an broker or agent claiming the same by, through or under said indemnifying party. 8. Affirmation and Applicability of Original Lease. Each term, condition and provision of the Lease is in full force and effect as of the date hereof and shall remain in full force and effect as is fully set forth in this Second Amendment to Lease, except as expressly modified and amended by this Second Amendment to Lease. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Lease to be duly executed as of the day and year first written above. ATTEST: TENANT: Ecogen Inc. A Delaware Corporation By: _________________________ By: ________________________________ Authorized Representative By: ________________________________ Please print name and title ATTEST: LANDLORD: Brandywine Operating Partnership, L.P. by its Agent, Brandywine Realty Services Corporation, Landlord By: _________________________ By: ________________________________ Authorized Representative Jeff DeVuono Vice President-Operations EX-21 10 LIST OF SUBSIDIARIES 1 Exhibit 21 LIST OF SUBSIDIARIES* STATE OR OTHER JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION - ------------------ ------------------------------ Ecogen-Bio Inc. Delaware Ecogen Investments Inc. Delaware Ecogen-Jerusalem Inc. Delaware Ecogen-Israel Inc. Delaware Ecogen Technologies I Incorporated Delaware Ecogen-Bio Germany GmbH Germany Ecogen Biotechnologies Israel Ltd. Israel * All of the subsidiaries listed above are wholly-owned subsidiaries with the exception of Ecogen Technologies I Incorporated of which Ecogen Inc. owns approximately 70% of the outstanding common stock. EX-24 11 INDEPENDENT AUDITORS' CONSENT 1 Exhibit 24 INDEPENDENT AUDITORS' CONSENT The Board of Directors Ecogen Inc: We consent to the incorporation by reference in the registration statement (No. 33-23767) on Form S-8/S-3, registration statements (No. 33-39687, No. 33-50478 and No. 33-70538) on Form S-8 and registration statements (No. 33-87510, No. 33-45975, No. 33-48020, No. 33-71854 and No. 333-58535) on Form S-3, of Ecogen Inc. of our report dated December 16, 1999, except as to note 19 which is as of February 15, 2000, relating to the consolidated balance sheets of Ecogen Inc. and subsidiaries as of October 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows and related schedule for each of the years in the three-year period ended October 31, 1999, which report appears in the October 31, 1999 annual report on Form 10-K of Ecogen Inc. KPMG LLP Short Hills, New Jersey February 14, 2000 EX-27 12 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 U.S. DOLLARS YEAR OCT-31-1999 NOV-01-1998 OCT-31-1999 1 0 0 1,814,973 129,023 5,358,017 7,431,010 7,284,090 4,909,628 10,462,272 6,203,265 0 0 474 99,859 922,706 10,462,272 6,566,022 7,242,299 5,975,954 9,469,654 (114,932) 0 522,894 (8,611,271) 0 (8,611,271) 0 0 0 (8,611,271) (1.05) (1.05)
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