Document:

exv10w27

 

Exhibit 10.27

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (this “Agreement”) is made as of December 3, 2003, by and
between Entrx Corporation, a Delaware corporation (“Entrx” or “Pledgor”), and
Pandora Select Partners L.P., a British Virgin Islands limited partnership, as
secured party (the “Pledgee”).

RECITALS

A.     Entrx and Pledgee have entered into a Purchase Agreement of this date,
pursuant to which Pledgee has agreed to purchase a $1,300,000 face amount
promissory note from Entrx (the “Note”) in consideration of a $1,300,000 loan
by Pledgee (the “Loan”);

B.     The Note is convertible into shares of Entrx Common Stock (the “Common
Stock”) and Entrx may repay a portion of the Note by issuance of additional
shares of its Common Stock;

C.     As a further condition of making the Loan, the Pledgee has required Entrx’s
Chief Executive Officer, Wayne W. Mills (“Mills”) to personally guarantee
Entrx’s payment and obligations under the foregoing (the “Mills Guaranty”);
and

D.     As a condition of making the Loan, the Pledgee has required Entrx to (i)
issue the Pledgee a warrant of this date to purchase additional shares of Entrx
Common Stock (the “Warrant”), (ii) agree to register the shares of Common Stock
issuable upon exercise of the Warrant and upon conversion of the Note or in
payment thereof pursuant to a Registration Rights Agreement of this date (the
"Registration Rights Agreement”) and (iii) to pledge certain third party
securities as described on Exhibit A hereto (together with the rights described
herein, the “Collateral”) as security for the due and prompt payment of all
amounts under the Note and the due and prompt performance of all obligations
under the Warrant, the Registration Rights Agreement and the Mills Guaranty;
NOW, THEREFORE, in consideration of the agreements herein and in reliance upon
the representations and warranties set forth herein and therein, the parties
agree as follows:

ARTICLE 1.

DEFINED TERMS

     1.1 DEFINITIONS. Unless otherwise defined herein or unless the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Uniform Commercial Code in effect
in the State of Minnesota (the “UCC”). In addition, the following terms when
used in this Agreement, including its preamble and recitals, shall have the
following meanings:

     “Loan Documents” means the Note, the Warrant, the Registration Rights
Agreement, the Mills Guaranty and this Agreement.

     “Obligations” means the payment and other performance obligations under
the Note.

ARTICLE 2.

PLEDGE

     2.1 GRANT OF SECURITY INTEREST. To secure the timely payment and
performance in full of the Obligations, Pledgor does hereby assign, grant and
pledge to Pledgee, all the estate, right, title and interest of Pledgor in, to
and under the equity interests in each of the entities (each a “Pledged
Entity”) described on Exhibit A hereto, whether now owned or later acquired or
created (collectively, the “Pledged Equity Interests”), including Pledgor’s
share of:

          (a) all rights to receive income, gain, profit, dividends and other
distributions allocated or distributed to Pledgor in respect of or in exchange
for all or any portion of such Pledged Equity Interests;

          (b) all of Pledgor’s capital or ownership interest, including capital
accounts, in each Pledged Entity, and all accounts, deposits or credits of any
kind with each Pledged Entity;

 

 

          (c) all of Pledgor’s voting rights in or rights to control or direct the
affairs of each Pledged Entity;

          (d) all of Pledgor’s rights, title and interest, as a member or
shareholder of each Pledged Entity, in, to or under any and all of each Pledged
Entity’s assets or properties;

          (e) all other rights, title and interest in or to each Pledged Entity
derived from the Pledged Equity Interests;

          (f) all indebtedness or other obligations of each Pledged Entity owed to
Pledgor;

          (g) all claims of Pledgor for damages arising out of, or for any breach or
default relating to, any of the Pledged Equity Interests;

          (h) all rights of Pledgor to terminate, amend, supplement, modify, or
cancel, the governing documents of any Pledged Entity, to take all actions
thereunder and to compel performance and otherwise exercise all remedies
thereunder;

          (i) all securities, notes, certificates and other instruments representing
or evidencing any of the foregoing rights and interests or the ownership
thereof and any interest of Pledgor reflected in the books of any financial
intermediary pertaining to such rights and interests and all non-cash
dividends, cash, options, warrants, stock splits, reclassifications, rights,
instruments or other investment property and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such rights and interests; and

          (j) all proceeds of the foregoing Collateral, whether cash or non-cash;

(all of the property above shall be collectively referred to as the
"Collateral”).

     2.2 DELIVERY OF CERTIFICATES. All certificates, notes and other
instruments representing or evidencing any Collateral (including the
certificates representing the Pledged Equity Interests described on Exhibit A
hereto) shall be delivered to and held by or on behalf of Pledgee, or its
designee pursuant hereto, in the manner set forth in Section 4.6 (Delivery of
Collateral; Proxy).

     2.3 FINANCING STATEMENTS.

          (a) Pledgor hereby authorizes Pledgee to file all financing statements,
continuation statements, assignments, certificates, and other documents and
instruments with respect to the Collateral pursuant to the UCC and otherwise as
may be necessary or reasonably requested by Pledgee to perfect or from time to
time to publish notice of, or continue or renew the security interests granted
hereby (including, such financing statements, continuation statements,
certificates, and other documents as may be necessary or reasonably requested
to perfect a security interest in any additional property or rights hereafter
acquired by Pledgor or in any replacements, products or proceeds thereof), in
each case in form and substance satisfactory to Pledgee.

          (b) Pledgee will pay the cost of filing the same in all public offices
where filing is necessary or reasonably requested by Pledgee and will pay any
and all recording, transfer or filing taxes that may due in connection with any
such filing. Pledgor grants Pledgee the right, at any time and at Pledgee’s
option to file any or all such financing statements, continuation statements,
and other documents pursuant to the UCC and otherwise as Pledgee reasonably may
deem necessary or desirable.

 

 

          (c) Pledgor hereby authorizes the filing of any financing statements or
continuation statements, and amendments to financing statements, or any similar
document in any jurisdictions and with any filing offices as Pledgee may
reasonably determine are necessary or advisable to perfect the security
interest granted to Pledgee. Such financing statements may describe the
Collateral in the same manner as described herein or may contain an indication
or description of collateral that describes such property in any other manner
as Pledgee may reasonably determine is necessary, advisable or prudent to
ensure the perfection of the security interest in the Collateral granted to
Pledgee herein.

     2.4 PLEDGOR REMAINS LIABLE.

          (a) Anything herein contained to the contrary notwithstanding, Pledgor
shall remain liable under the applicable articles or certificate of
incorporation, bylaws, operating or shareholder agreement or other constituent
documents (together, the “Constituent Documents”), to perform all of the
obligations undertaken by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and, except as may be provided in the
agreements identified on Exhibit B hereto, Pledgee shall have no obligation or
liability under the such agreement by reason of or arising out of this
Agreement, nor, except as may be provided in the agreements identified on
Exhibit B hereto, shall Pledgee be required or obligated in any manner to
perform or fulfill any obligations of Pledgor thereunder or to make any
payment, or to make any inquiry as to the nature or sufficiency of any payment
received by it, or present or file any claim, or take any action to collect or
enforce the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.

          (b) If any default by Pledgor under any Constituent Document shall occur,
Pledgee shall, at its option, be permitted (but shall not be obligated) to
remedy any such default by giving written notice of such intent to Pledgor and
to the parties to such agreement. Any cure by Pledgee of Pledgor’s default
under such agreement shall not be construed as an assumption by Pledgee of any
obligations, covenants or agreements of Pledgor under the Constituent Document,
and Pledgee shall not incur any liability to Pledgor or any other Person as a
result of any actions undertaken by Pledgee in curing or attempting to cure any
such default. This Agreement shall not be deemed to release or to affect in
any way the obligations of Pledgor under any Constituent Document.

     2.5 RETENTION OF CERTAIN RIGHTS. So long as Pledgee has not exercised
remedies with respect to the Collateral under and in accordance with this
Agreement, upon the occurrence and during the continuance of an Event of
Default, Pledgor reserves the right to exercise all voting rights with respect
to the Collateral; provided, that no vote shall be cast, right exercised or
other action taken which could materially impair the Collateral.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF PLEDGOR

Pledgor makes the following representations and warranties to and in favor of
Pledgee as of the date hereof. All of these representations and warranties
shall survive the execution and delivery of this Agreement:

3.1 ORGANIZATION. Entrx:

          (a) is a corporation duly incorporated and validly existing and in good
standing under the laws of the State of Delaware;

          (b) is duly qualified, authorized to do business as a foreign corporation
in each jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary; and

          (c) has the corporate power (A) to enter into the Loan Documents and to
perform its obligations thereunder and to consummate the transactions
contemplated thereby (other than as to the Mills Guaranty), (B) to carry on its
business as now being conducted and as proposed to be conducted by it, (C) to
execute, deliver and perform this Agreement, (D) to take all action as may be
necessary to consummate the transactions contemplated hereunder and (E) to
grant the liens and security interest provided for in this Agreement.

 

 

     3.2 OFFICES, LOCATION OF COLLATERAL. The chief executive office or chief
place of business of Entrx is located at 800 Nicollet Mall, Suite 2690,
Minneapolis, Minnesota 55402.

     3.3 TITLE AND LIENS. The Pledged Equity Interests owned by Pledgor (a)
have been duly authorized and validly issued and (b) are fully paid and
non-assessable. Pledgor has good, valid, and marketable title to, the
Collateral, free from all liens and encumbrances of any kind, except as
described on the attached Exhibit B. As a result of this Agreement, Pledgee
will have a first priority security interest in the Collateral.

     3.4 UCC ARTICLE 8. All membership interests or shares in each Pledged
Entity that constitute Pledged Equity Interests are securities governed by
Article 8 of the UCC.

     3.5 AUTHORIZATION; NO CONFLICT. Pledgor has duly authorized, executed and
delivered this Agreement and Pledgor’s execution and delivery hereof and its
consummation of the transactions contemplated hereby and the compliance with
the terms thereof:

          (a) does not or will not contravene the Constituent Documents of any
Pledged Entity or any other legal requirements applicable to or binding on
Pledgor which could reasonably be expected to have a material adverse effect
upon the Collateral or Pledgee’s rights therein;

          (b) does not or will not contravene or result in any breach of or
constitute any default, or result in or require the creation of any lien upon
any of Pledgor’s property, under any agreement or instrument to which Pledgor
is a party or by which it or any of its properties may be bound or affected;
and

          (c) does not or will not require the consent or approval of any third
party which has not already been obtained.

     3.6 ENFORCEABILITY. This Agreement is a legal, valid and binding
obligation of Pledgor, enforceable against Pledgor in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors’ rights or by the effect of general
equitable principles.

ARTICLE 4.

COVENANTS OF PLEDGOR

Pledgor covenants to and in favor of Pledgee as follows:

     4.1 COMPLIANCE WITH OBLIGATIONS. Pledgor shall perform and comply in all
material respects with all obligations and conditions on its part to be
performed with respect to the Collateral.

     4.2 INFORMATION CONCERNING COLLATERAL. Pledgor shall, promptly upon
request, provide to Pledgee all information and evidence it may reasonably
request concerning the Collateral to enable Pledgee to enforce the provisions
of this Agreement.

     4.3 DEFENSE OF COLLATERAL. Pledgor shall defend its title to the
Collateral and the interest of Pledgee in the Collateral pledged hereunder
against the claims and demands of all third parties whomsoever.

     4.4 MAINTENANCE OF COLLATERAL. Pledgor shall not (i) take any action to
terminate, modify or amend any Constituent Document of any Pledged Entity, (ii)
fail to deliver to Pledgee a copy of each demand or notice received or given by
it relating to any Constituent Document of any Pledged Entity which could
reasonably be expected to have a material adverse effect upon the Collateral or
Pledgee’s rights therein or (iii) sell, contract to sell, assign, transfer or
dispose of any of the Collateral.

 

 

     4.5 EVENTS OF DEFAULT. Pledgor shall give to Pledgee prompt notice of any
material default under any Constituent Document of any Pledged Entity of which
Pledgor has knowledge or has received notice.

     4.6 DELIVERY OF COLLATERAL; PROXY. All certificates or instruments
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of Pledgee pursuant hereto. All such certificates or instruments
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance acceptable to Pledgee. Subject to its obligations as may be provided
in the agreements identified on Exhibit B hereto, Pledgee shall have the right,
at any time in its discretion and without prior notice to Pledgor, following
the occurrence and during the continuation of an Event of Default, to transfer
to or to register in the name of Pledgee or any of its nominees any or all of
the Collateral and to exchange certificates or instruments representing or
evidencing Collateral for certificates or instruments of smaller or larger
denominations; provided, however, that once such Event of Default has been
cured, Pledgee will promptly transfer to or register in the name or cause its
nominees to transfer to or register in the name of Pledgor all such Collateral.
In furtherance of the foregoing, Pledgor shall further execute and deliver to
Pledgee as to each of the Pledged Equity Interests a proxy in the form attached
hereto as Exhibit C.

     4.7 PRESERVATION OF VALUE; LIMITATION OF LIENS. Pledgor shall not take
any action in connection with the Collateral which would impair in any material
respect the interests or rights of Pledgee therein or with respect thereto,
except as expressly permitted hereby; provided, however, that nothing in this
Agreement shall prevent Pledgor, prior to the exercise by Pledgee of any rights
pursuant to the terms hereof, from undertaking Pledgor’s operations in the
ordinary course of business. Pledgor shall not directly or indirectly create,
incur, assume or suffer to exist any liens on or with respect to all or any
part of the Collateral (other than the lien created by this Agreement).
Pledgor shall at its own cost and expense promptly take such action as may be
necessary to discharge any such liens.

     4.8 NO OTHER FILINGS. Pledgor shall not file or authorize or permit to be
filed in any jurisdiction any financing statements under the UCC or any like
statement relating to the Collateral.

     4.9 MAINTENANCE OF RECORDS. Pledgor shall, at all times, keep accurate
and complete records of the Collateral. Pledgor shall permit representatives
of Pledgee, upon reasonable prior notice, at any time during normal business
hours of Pledgor to inspect and make abstracts from Pledgor’s books and records
pertaining to the Collateral. Upon the occurrence and during the continuation
of any Event of Default, at Pledgee’s request, Pledgor shall promptly deliver
copies of any and all such records to Pledgee.

     4.10 PAYMENT OF TAXES. Pledgor shall pay or cause to be paid, before any
fine, penalty, interest or cost attaches thereto, all taxes, assessments and
other governmental or non-governmental charges or levies (other than those
taxes that it is contesting in good faith and by appropriate proceedings, and
in respect of which it has established adequate reserves for such taxes) now or
hereafter assessed or levied against the Collateral pledged by it hereunder and
shall retain copies of, and, upon request, permit Pledgee to examine receipts
showing payment of any of the foregoing.

     4.11 NAME; JURISDICTION OF ORGANIZATION. Pledgor shall give Pledgee at
least 30 days prior written notice before Pledgor changes its name,
jurisdiction of organization or entity type and shall at the expense of Pledgor
execute and deliver such instruments and documents as may be required by
Pledgee or applicable legal requirements to maintain a first perfected security
interest in the Collateral.

     4.12 PROCEEDS OF COLLATERAL. Pledgor shall, at all times, keep pledged to
Pledgee pursuant hereto all Collateral and all dividends, distributions,
interest, principal and other proceeds received by Pledgee with respect
thereto, and all other Collateral and other securities, instruments, proceeds
and rights from time to time received by or distributable to Pledgor in respect
of any Collateral and shall not permit any issuer of such Collateral

 

 

to issue any shares of stock or other equity interests which shall not
have been immediately duly pledged to Pledgee hereunder.

ARTICLE 5.

RIGHTS AND REMEDIES

     5.1 EVENT OF DEFAULT DEFINED. Any event of default under the Note shall
constitute an “Event of Default” hereunder.

     5.2 REMEDIES UPON EVENT OF DEFAULT.

          (a) During any period during which an Event of Default shall have occurred
and be continuing, Pledgee may (but shall be under no obligation to), directly
or by using agent or broker:

                    (i) in connection with any acceleration and foreclosure, vote or exercise
any and all of Pledgor’s rights or powers incident to its ownership of the
Pledged Equity Interests, including any rights or powers to manage or control
the Pledged Entity;

                    (ii) proceed to protect and enforce the rights vested in it by this
Agreement and under the UCC;

                    (iii) cause all moneys and other property pledged as security to be paid
and/or delivered directly to it, and demand, sue for, collect and receive any
such moneys and property;

                    (iv) cause any action at law or suit in equity or other proceeding to be
instituted and prosecuted to collect or enforce any Obligations of Pledgor or
rights included in the Collateral, or for specific enforcement of any covenant
or agreement contained herein, or in aid of the exercise of any power therein
or herein granted, or for any foreclosure hereunder and sale under a judgment
or decree in any judicial proceeding, or to enforce any other legal or
equitable right vested in it by this Agreement or by law;

                    (v) foreclose or enforce any other agreement or other instrument by or
under or pursuant to which the Obligations of Pledgor are issued or secured;

                    (vi) subject to Section 5.2(b), sell, lease or otherwise dispose of any or
all of the Collateral, in one or more transactions, at such prices as Pledgee
may deem best, and for cash or on credit or for future delivery, without
assumption of any credit risk, at any broker’s board or at public or private
sale, without demand of performance or notice of intention to sell, lease or
otherwise dispose of, or of time or place of disposition (except such notice as
is required by applicable statute and cannot be waived), it being agreed that
Pledgee may be a purchaser or lessee on its own behalf at any such sale and
that Pledgee or anyone else who may be the purchaser, lessee or recipient for
value of any or all of the Collateral so disposed of shall, upon such
disposition, acquire all of the Pledgor’s rights therein. Pledgee may adjourn
any public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the same, and such sale may,
without further notice or publication, be made at any time or place to which
the same may be so adjourned. If Pledgee sells any of the Collateral upon
credit, Pledgor will be credited only with payments actually made by the
purchaser, received by Pledgee and applied to the indebtedness of the
purchaser. In the event the purchaser fails to pay for the Collateral, Pledgee
may resell the Collateral and the Pledgor shall be credited with the proceeds
of the sale;

                    (vii) incur expenses, including reasonable attorneys’ fees, consultants’
fees, and other costs appropriate to the exercise of any right or power under
this Agreement;

 

 

                    (viii) perform any obligation of Pledgor hereunder and make payments,
purchase, contest or compromise any encumbrance, charge, or lien, and pay taxes
and expenses;

                    (ix) make any reasonable compromise or settlement deemed desirable with
respect to any or all of the Collateral and extend the time of payment, arrange
for payment installments, or otherwise modify the terms of, any or all of the
Collateral;

                    (x) secure the appointment of a receiver of any or all of the Collateral;

                    (xi) exercise any other or additional rights or remedies granted to
Pledgee under any other provision of this Agreement or exercisable by a secured
party under the UCC, whether or not the UCC applies to the affected Collateral,
or under any other applicable law and take any other action which Pledgee deems
necessary or desirable to protect or realize upon its security interest in the
Collateral or any part thereof; and/or

                    (xii) appoint a third party (who may be an employee, officer or other
representative of Pledgee) to do any of the foregoing, or take any other action
permitted hereunder, on behalf of Pledgee.

          (b) If, pursuant to any law, prior notice of any action described in
Section 5.2(a) is required to be given to Pledgor, Pledgor hereby acknowledges
that the minimum time required by such law, or if no minimum is specified, ten
days, shall be deemed a reasonable notice period.

          (c) Reserved.

          (d) Any action or proceeding to enforce this Agreement may be taken by
Pledgee either in Pledgor’s name or in Pledgee’s name, as Pledgee may deem
necessary.

          (e) All rights of marshaling of assets of Pledgor, including any such
right with respect to the Collateral, are hereby waived by Pledgor.

          (f) Pledgee shall incur no liability as a result of the sale of any or all
of the Collateral at any private sale pursuant to Section 5.2(a) conducted in a
commercially reasonable manner. Pledgor hereby waives any claims against
Pledgee arising by reason of the fact that the price at which any or all of the
Collateral may have been sold at such a private sale was less than the price
that might have obtained at a public sale or was less than the aggregate amount
of the Obligations, even if Pledgee accepts the first offer received and does
not offer the Collateral to more than one offeree.

     5.3 ATTORNEY-IN-FACT. Upon the occurrence and during the continuation of
an Event of Default, Pledgor hereby irrevocably constitutes and appoints
Pledgee its true and lawful attorney-in-fact to enforce all rights of Pledgor
with respect to the Collateral, including the right to give appropriate
receipts, releases and satisfactions for and on behalf of and in the name of
Pledgor or, at the option of Pledgee, in the name of Pledgee, with the same
force and effect as Pledgor could do if this Agreement had not been made. If
Pledgee shall so elect after the occurrence and during the continuation of an
Event of Default hereunder, Pledgee shall have the right at all times to
settle, compromise, adjust, or liquidate all claims or disputes directly with
Pledgor or any obligor of Pledgor upon such terms and conditions as Pledgee may
determine in its sole discretion, and to charge all costs and expenses thereof
(including reasonable attorneys’ fees and charges) to Pledgor’s account and to
add them to the Obligations whereupon such costs and expenses shall be and
become part of the Obligations. This power of attorney is a power coupled with
an interest and shall be irrevocable.

     5.4 EXPENSES; INTEREST. All costs and expenses (including reasonable
attorneys’ fees and expenses) incurred by Pledgee in connection with exercising
any actions taken under Article 5, together with interest

 

 

thereon (to the extent permitted by law) computed at a rate of 18% per
annum (or if less, the maximum rate permitted by law) from the date on which
such costs or expenses are payable to the date of payment thereof, shall
constitute part of the Obligations secured by this Agreement and shall be paid
by Pledgor to Pledgee within ten (10) days after written demand.

     5.5 NO IMPAIRMENT OF REMEDIES. If under applicable law, Pledgee proceeds
by either judicial foreclosure or by non-judicial sale or enforcement, Pledgee
may, at its sole option, determine which of its remedies or rights to pursue
without affecting any of its rights and remedies under this Agreement. If, by
exercising any right and remedy, Pledgee forfeits any of its other rights or
remedies, including any right to enter a deficiency judgment against Pledgor or
any third party (whether because of any applicable law pertaining to “election
of remedies” or the like), Pledgor nevertheless hereby consents to such action
by Pledgee. To the extent permitted by applicable law, Pledgee also waives any
claim based upon such action, even if such action by Pledgee results in a full
or partial loss of any rights of subrogation, indemnification or reimbursement
which Pledgor might otherwise have had but for such action by Pledgee or the
terms herein. Any election of remedies which results in the denial or
impairment of the right of Pledgee to seek a deficiency judgment against any
third party shall not, to the extent permitted by applicable law, impair
Pledgor’s obligations hereunder. If Pledgee bids at any foreclosure or
trustee’s sale or at any private sale permitted by law or this Agreement,
Pledgee may bid all or less than the amount of the Obligations. To the extent
permitted by applicable law, the amount of the successful bid at any such sale,
whether Pledgee or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations.

ARTICLE 6.

CERTAIN WAIVERS

     6.1 MODIFICATION OF OBLIGATIONS. Pledgor’s liability hereunder shall not
be reduced, limited, impaired, discharged or terminated if Pledgee at any time
with Pledgor’s consent (or, to the extent permissible by the terms of the Loan
Documents and law, without notice to or demand of the Pledgor):

          (a) renews, extends, accelerates, increases the rate of interest on, or
otherwise changes the time, place, manner or terms, or otherwise modifies any
of the Obligations (including any payment terms);

          (b) extends or waives the time for Pledgor’s performance of, or compliance
with, any term, covenant or agreement on its part to be performed or observed
under the Loan Documents, or waives such performance or compliance or consent
to a failure of, or departure from, such performance or compliance;

          (c) settles, compromises, releases or discharges, or accepts or refuses
any offer of performance with respect to, or substitutions for, any of the
Obligations or any agreement relating thereto and/or subordinates the payment
of the same to the payment of any other obligations;

          (d) requests and accepts other guaranties of any of the Obligations and
takes and holds security for the payment hereof or any of the Obligations;

          (e) releases, surrenders, exchanges, substitutes, compromises, settles,
rescinds, waives, alters, subordinates or modifies, with or without
consideration, any security for payment of any of the Obligations, any other
guaranties of any of the Obligations, or any other obligation of any third
party with respect to any of the Obligations, including the Mills Guaranty;

          (f) to the extent permitted by law, enforces and applies any security, if
any, now or hereafter held by or for the benefit of Pledgee in respect hereof
or any of the Obligations and directs the order or manner of sale thereof, or
exercises any other right or remedy that Pledgee may have against any such
security, in each case as

 

 

Pledgee in its discretion may determine, including foreclosure on any
collateral pursuant to one or more judicial or nonjudicial sales, whether or
not every aspect of any such sale is commercially reasonable; or

          (g) exercise any other rights available to it under any of the Loan
Documents, at law or in equity.

     6.2 SECURITY INTEREST ABSOLUTE. All rights of Pledgee and the security
interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:

          (a) any failure or omission to assert or enforce or agreement or election
not to assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any claim or
demand or any right, power or remedy (whether arising under any Loan Document,
at law, in equity or otherwise) with respect to any of the Obligations or any
agreement relating thereto, or with respect to any other guaranty of or
security for the payment of any of the Obligations;

          (b) any rescission, waiver, amendment or modification of, or any consent
to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, in any other Loan Document or any
agreement or instrument executed pursuant thereto, or of any other guaranty or
security for any of the Obligations, in each case, whether or not in accordance
with the terms hereof or any other Loan Document or any agreement relating to
such other guaranty or security;

          (c) any of the Obligations, or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect;

          (d) the application of payments received from any source (other than
payments received from the proceeds of any security for any of the Obligations,
except to the extent such security also serves as collateral for indebtedness
other than the Obligations) to the payment of indebtedness other than the
Obligations, even though Pledgee might have elected to apply such payment to
any part or all of the Obligations;

          (e) Pledgee’s consent to the change, reorganization or termination of the
corporate structure or existence of Pledgor or any Pledged Entity and to any
corresponding restructuring of any of the Obligations;

          (f) any defenses, set-offs or counterclaims which the Pledgor may allege
or assert against Pledgee in respect of any of the Obligations, including
failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction and usury; and

          (g) any other act or thing or omission, or delay to do any other act or
thing, which may or might in any manner or to any extent vary the risk of
Pledgor as an obligor in respect of any of the Obligations.

     6.3 CERTAIN WAIVERS. Pledgor hereby waives any and all defenses afforded
to a surety, including promptness, diligence, notice of acceptance and any
other notice with respect to any of the Obligations and this Agreement and any
requirement that Pledgee protect, secure, perfect or insure any security
interest or lien, or any property subject thereto, or exhaust any right or take
any action against Pledgor or any other third party (including Mills or any
other guarantor) or entity or any collateral securing any of the Obligations,
as the case may be.

     6.4 POSTPONEMENT OF SUBROGATION. Pledgor agrees that it will not exercise
any rights which it may acquire by way of rights of subrogation under this
Agreement, by any payment made hereunder or otherwise, while this Agreement is
in effect. Any amount paid to Pledgor on account of any such subrogation
rights prior to such time shall be held in trust for Pledgee and shall
immediately be paid to Pledgee and credited and

 

 

applied against the Obligations. Any time after this Agreement has
terminated and if Pledgor has made payment to Pledgee of all of the
Obligations, then, at Pledgor’s request, Pledgee will execute and deliver to
Pledgor appropriate documents (without recourse and without representation or
warranty) necessary to evidence the transfer by subrogation to Pledgor of an
interest in the Obligations resulting from such payment by Pledgor.

ARTICLE 7.

MISCELLANEOUS

     7.1 NOTICES. Any communications, including notices and instructions,
between the parties hereto or notices provided herein to be given may be given
to the following addresses:

If to Pledgee, in care of:

	 	 	Whitebox Advisors, LLC

3033 Excelsior Boulevard, Suite 300

Minneapolis, Minnesota 55416

Attention: Jonathon Wood, Chief Financial Officer

Facsimile: (612) 253-6151

If to Pledgor:

	 	 	Entrx Corporation

800 Nicollet Mall, Suite 2690

Minneapolis, Minnesota 55402

Attention: Wayne W. Mills, Chief Executive Officer

Facsimile: (612) 338-7332

     All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be considered as properly given (a) if
delivered in person, (b) if sent by overnight delivery service (including
Federal Express, UPS, ETA, Emery, DHL, AirBorne and other similar overnight
delivery services), (c) in the event overnight delivery services are not
readily available, if mailed by first class United States mail, postage
prepaid, registered or certified with return receipt requested, (d) if sent by
telecopy or (e) if delivered by other electronic means (including electronic
mail) confirmed by telecopy or telephone. Any party shall have the right to
change its address for notice hereunder to any other location within the
continental United States by giving of 10 days’ notice to the other parties in
the manner set forth hereinabove.

     7.2 DELAY AND WAIVER; REMEDIES CUMULATIVE. No failure or delay by Pledgee in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. Any waiver, permit, consent or approval of any kind or
character on the part of Pledgee of any breach or default under the Agreement
or any waiver on the part of Pledgee of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent in such
writing specifically set forth. No right, power or remedy herein conferred
upon or reserved to Pledgee hereunder is intended to be exclusive of any other
right, power or remedy, and every such right, power and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right,
power and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. Resort to any or all
security now or hereafter held by Pledgee, may be taken concurrently or
successively and in one or several consolidated or independent judicial actions
or lawfully taken nonjudicial proceedings, or both.
ENTIRE AGREEMENT. This Agreement and any agreement, document or
instrument referred to herein integrate all the terms and conditions mentioned
herein or incidental hereto and supersede all oral negotiations and prior
writings in respect of the subject matter hereof.

 

 

     7.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, exclusive of its conflict
of laws rules.

     7.5 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

     7.6 HEADINGS. Paragraph headings have been inserted in this Agreement as
a matter of convenience for reference only and it is agreed that such paragraph
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.

     7.7 WAIVER OF JURY TRIAL. PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF PLEDGEE. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR PLEDGEE TO MAKE THE LOAN.

     7.8 CONSENT TO JURISDICTION. Each party hereto agrees that any legal
action or proceeding with respect to or arising out of this Agreement may be
brought in or removed to the federal or state courts located in Hennepin
County, Minnesota, as Pledgee may elect. By execution and delivery of this
Agreement, each party hereto accepts, for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each of the parties hereto irrevocably consents to the service of
process out of any of the aforementioned courts in any manner permitted by law.
Nothing herein shall affect the right of Pledgee to bring legal action or
proceedings in any other competent jurisdiction. Each party hereto hereby
waives any right to stay or dismiss any action or proceeding under or in
connection with this Agreement brought before the foregoing courts on the basis
of forum non-conveniens.

     7.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

     7.10 COUNTERPARTS. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the parties listed below,
shall constitute a single binding agreement. Delivery of an executed signature
page of this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart thereof.

     7.11 BENEFIT OF AGREEMENT. Nothing in this Agreement, express or implied,
shall give or be construed to give, any Person other than the parties hereto
and their respective permitted successors, transferees and assigns any legal or
equitable right, remedy or claim under this Agreement, or under any covenants
and provisions of this Agreement, each such covenant and provision being for
the sole benefit of the parties hereto and their respective permitted
successors, transferees and assigns.

     7.12 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any departure therefrom
shall be effective unless the same shall be in writing and signed by each of
the parties hereto. Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given.

     7.13 SURVIVAL OF AGREEMENTS. The provisions regarding the payment of
expenses and indemnification obligations shall survive and remain in full force
and effect regardless of the termination of this Agreement pursuant to Section
7.14.

 

 

     7.14 RELEASE AND SATISFACTION. Upon the indefeasible payment (whether in
cash and/or other consideration which is satisfactory to Pledgee in its sole
discretion) and performance in full of the Obligations, (i) this Agreement and
the security interest created hereby shall terminate and (ii) upon written
request of Pledgor, Pledgee shall execute and deliver to Pledgor, at Pledgor’s
expense and without representation or warranty by or recourse to Pledgee,
releases and satisfactions of all financing statements, mortgages, notices of
assignment and other registrations of security.

     7.15 REINSTATEMENT. This Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time any payment
pursuant to this Agreement is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy, reorganization, liquidation of
Pledgor or upon the dissolution of, or appointment of any intervenor or
conservator of, or trustee or similar official for, Pledgor or any substantial
part of Pledgor’s assets, or otherwise, all as though such payments had not
been made.

     7.16 LIMITATION ON DUTY OF PLEDGEE WITH RESPECT TO THE COLLATERAL. The
powers conferred on Pledgee hereunder are solely to protect its interest in the
Collateral and shall not impose any duty on Pledgee or any of its designated
agents to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for monies actually received by
it hereunder, Pledgee shall have no duty with respect to any Collateral and no
implied duties or obligations shall be read into this Agreement against
Pledgee. Pledgee shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment that is substantially equivalent to that which Pledgee
accords its own property, it being expressly agreed, to the maximum extent
permitted by applicable law, that Pledgee shall have no responsibility for (a)
taking any necessary steps to preserve rights against any parties with respect
to any Collateral or (b) taking any action to protect against any diminution in
value of the Collateral, but, in each case, Pledgee may do so and all expenses
reasonably incurred in connection therewith shall be part of the Obligations.

     IN WITNESS WHEREOF, the undersigned have hereunto affixed their
signatures.

	 	 	 	 	 	 	 
	Pledgor:	 	Pledgee:
	 
	 	 	 	 	 	 
	Entrx Corporation	 	Pandora Select Partners L.P.
	 
	 	 	 	 	 	 
	By

	 	 
	 	By	 	 
	

	 	 	 	 	

	 
	 	 	 	 	 	 
	Its

	 	 	 	Its	 	 
	

	 	 	 	 	

 

 

EXHIBIT A

PLEDGED EQUITY INTERESTS

33,800 shares of Series C Preferred Stock, no par value, of Catalytic
Solutions, Inc. and represented by Certificate Nos. C101 (10,000 shares), C102
(10,000 shares), C103 (10,000 shares), C104 (3,000 shares) and C107 (800
shares).

249,200 shares of Series A Preferred Stock of NextNet Wireless, Inc. and
represented by Certificate Nos. PA-53 (100,000 shares), PA-54 (100,000 shares),
PA-59 (20,000 shares), PA-60 (20,000 shares), PA-61 (5,000 shares) and PA-64
(4,200 shares).

 

 

EXHIBIT B

ENCUMBRANCES ON COLLATERAL

As to shares of NextNet Wireless, Inc.

	 	 	Right of First Refusal Agreement dated September 21, 1998

Series A Preferred Stock Purchase Agreement dated September 21, 1998

Amended and Restated Investors’ Rights Agreement dated July 10, 2000

Amended and Restated Voting Agreement dated July 10, 2000

As to shares of Catalytic Solutions, Inc.

	 	 	Amended and Restated Shareholders’ Agreement dated May 15, 2003

 

 

EXHIBIT C

IRREVOCABLE PROXY

     The undersigned hereby appoints                   
(“Pledgee”), as Proxy with full power of substitution, and hereby authorizes
Pledgee to represent and vote (or to execute a consent in lieu of voting) all
33,800 shares of Series C Preferred Stock, no par value, of Catalytic
Solutions, Inc. as represented by Certificate Nos. C101 (10,000 shares), C102
(10,000 shares), C103 (10,000 shares), C104 (3,000 shares) and C107 (800
shares) (together with any other shares or securities issued pursuant to a
stock split or dividend, reorganization or other event affecting or relating to
any of the foregoing shares), owned by the undersigned on the date of exercise
hereof during the continuance of an Event of Default under, and as defined in,
that certain Pledge Agreement dated as of December 3, 2003 by and among the
undersigned and Pledgee at any meeting or at any other time chosen by Pledgee
in its sole discretion.

	 	 	 	 	 	 	 
	Date: December 3, 2003	 	 	 	Entrx Corporation
	 
	 	 	 	 	 	 
	 

	 	 
	 	By	 	 
	 	 	 	 	 	

	 
	 	 	 	 	 	 
	 

	 	 	 	Its	 	 
	 	 	 	 	 	

 

 

IRREVOCABLE PROXY

     The undersigned hereby appoints                   
(“Pledgee”), as Proxy with full power of substitution, and hereby authorizes
Pledgee to represent and vote (or to execute a consent in lieu of voting) all
249,200 shares of Series A Preferred Stock of NextNet Wireless, Inc. as
represented by Certificate Nos. PA-53 (100,000 shares), PA-54 (100,000 shares),
PA-59 (20,000 shares), PA-60 (20,000 shares), PA-61 (5,000 shares) and PA-64
(4,200 shares) (together with any other shares or securities issued pursuant to
a stock split or dividend, reorganization or other event affecting or relating
to any of the foregoing shares), owned by the undersigned on the date of
exercise hereof during the continuance of an Event of Default under, and as
defined in, that certain Pledge Agreement dated as of December 3, 2003 by and
among the undersigned and Pledgee at any meeting or at any other time chosen by
Pledgee in its sole discretion.

	 	 	 	 	 	 	 
	Date: December 3, 2003	 	 	 	Entrx Corporation
	 
	 	 	 	 	 	 
	 

	 	 
	 	Byexv10w28

 

Exhibit 10.28

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement") is entered into as of
December 3, 2003, by and among Entrx Corporation, a Delaware corporation (the
“Company"), and Pandora Select Partners L.P., a British Virgin Islands limited
partnership (the “Investor").

R E C I T A L S :

     WHEREAS, the Company has entered into that certain Purchase Agreement,
dated as of the date hereof (the “Purchase Agreement") with the Investor
pursuant to which the Company has agreed to issue and sell to the Investor a
promissory note (the “Note”) convertible into shares of the Company’s Common
Stock, $0.10 par value per share (the “Common Stock”) and a warrant to purchase
additional shares of Common Stock (the “Warrant”);

     WHEREAS, the Company may make certain principal and interest payments on
the Note by issuance of additional shares of its Common Stock;

     WHEREAS, the Company has agreed to grant certain registration rights with
respect to the shares of the Company’s Common Stock issuable as payments under
the Note, upon conversion of the Note or upon exercise of the Warrant;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

     As used herein, the following terms shall have the following respective
meanings:

1.1 “Commission” shall mean the U.S. Securities and Exchange Commission or any
other successor federal agency at the time administering the Securities Act.

1.2 “Common Stock” shall mean the Company’s common stock, $0.10 par value per
share.

1.3 “Exchange Act” shall mean the Securities and Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

1.4 “Holders” shall mean and include the Investor and any transferee thereof
who holds Registrable Securities of record.

1.5 “Register,” “registered” and “registration” refer to a registration
effected by preparing and filing with the Commission a registration statement
in compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.

1.6 “Registrable Securities” means any and all shares of Common Stock: (i)
issued or issuable as payments under the Note, upon conversion of the Note or
upon exercise of the Warrant or (ii) issued or issuable with respect to the
Common Stock upon any stock split, stock dividend, recapitalization,
reclassification, merger, consolidation or other similar event; excluding in
all cases, however, Registrable Securities sold by a Holder to the public
pursuant

 

 

to a registered offering or pursuant to Rule 144 promulgated under the
Securities Act or sold in a private transaction in which the Holder’s
registration rights under this Agreement are not assigned.

1.7 “Registration Expenses” shall mean all expenses incurred by the Company in
complying with Articles 2 and 3 hereof, including, without limitation, all
registration, qualification and Commission, National Association of Securities
Dealers, Inc., stock exchange and other filing fees, printing expenses, escrow
fees, fees and disbursements of legal counsel for the Company, blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).

1.8 “Securities Act” shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

1.9 “Selling Expenses” shall mean all underwriting fees, discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities
registered by the Holders and the fees and expenses of any special counsel
engaged by the Holders.

1.10 “Underwriter” shall mean (whether or not the term is capitalized) a
broker-dealer engaged by the Company to distribute Registrable Securities as
principal or agent.

1.11 “Underwriting” or “Underwritten” shall mean (whether or not the term is
capitalized) a method of publicly distributing securities through an
Underwriter.

ARTICLE 2

REQUIRED REGISTRATION

2.1 Required Registration. Not later than April 15, 2004 (unless a majority in
interest of the Holders request a delay of the Company for up to an additional
90 days in writing and in such case, upon expiration of this requested delaying
period), the Company will prepare and file with the Commission a registration
statement under the Securities Act (currently expected to be on Form S-2)
covering all of the Registrable Securities and use its best efforts to obtain
the effectiveness of such registration as soon as practicable as would permit
or facilitate the original issuance or subsequent resale and distribution of
all of such Registrable Securities. The Company’s failure to obtain
effectiveness of this registration statement by June 1, 2004 (subject to an
extension of such date to correspond to a filing date extension, if any,
granted by the Holders above, and subject to delays incurred by any Holder’s
failure to comply with the provisions of Section 5(b) below) will commence the
running of the first “Failure Term” as defined in Section 5(e) of the Warrant
and will also constitute an event of default under this Agreement.

2.2 Underwriting.

     (a) The resale distribution of the Registrable Securities covered by the
registration statement referred to in Section 2.1 above shall be effected by
means of the method of distribution selected by the Holders holding a majority
of the Registrable Securities covered by such registration. The Holders
holding a majority of the Registrable Securities may also change the resale
distribution method from time to time (subject to amendment of the registration
statement as required to describe such changes). If such distribution is
effected by means of an underwriting, the right of any Holder to registration
pursuant to this Article 2 shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting (unless otherwise agreed by the
Initiating Holders) to the extent provided herein.

     (b) If such distribution is effected by means of an underwriting, the
Company (together with all Holders proposing to distribute their securities
through such underwriting) shall enter into an underwriting agreement in
customary form with a managing underwriter of nationally recognized standing
selected for such

 

 

underwriting by a majority in interest of the Holders and approved by the
Company, which approval shall not be unreasonably withheld.

     (c) If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the other Holders. The Registrable Securities and/or
other securities so withdrawn shall also be withdrawn from registration.

     2.3 Inclusion of Shares by the Company. If the resale distribution of
Registrable Securities is being effected by means of an underwriting and if the
managing underwriter will not limit the number of Registrable Securities to be
underwritten, the Company may include securities for its own account or for the
account of others in such registration if the managing underwriter so agrees.
The inclusion of such shares shall be on the same terms as the registration of
shares held by the Holders. In the event that the underwriters exclude some of
the securities to be registered, the securities to be sold for the account of
the Company and any other holders shall be excluded in their entirety prior to
the exclusion of any Registrable Securities.

ARTICLE 3

COMPANY REGISTRATION

3.1 Notice of Registration to Holders. If at any time or from time to time
commencing after the date hereof, the Company shall determine to register any
of its securities, either for its own account or the account of a security
holder or holders, other than (i) a registration relating solely to employee
benefit plans on Form S-8 (or any successor form) or (ii) a registration
relating solely to a Commission Rule 145 transaction on Form S-4 (or any
successor form), the Company will:

     (a) promptly give to each Holder written notice thereof and

     (b) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made
within 30 days after receipt of such written notice from the Company described
in Section 3.1(a), by any Holder or Holders, but only to the extent that (i) if
the proposed registration under this Article 3 is not an underwritten offering,
the original issuance or resale distribution of such Registrable Securities is
not already covered by an effective registration statement under Article 2
above or (ii) if the proposed registration under this Article 3 is an
underwritten offering, such Registrable Securities are not then being offered
in a separate underwritten offering under Article 2 above.

3.2 Underwriting. If the registration of which the Company gives notice is for
an offering involving an underwriting, the Company shall so advise the Holders
as a part of the written notice given pursuant to Section 3.1(a). In such
event, the right of any Holder to registration pursuant to this Article 3 shall
be conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company.

     (a) Notwithstanding any other provision of this Article 3, if the managing
underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may exclude some or all
Registrable Securities from such registration and underwriting. The Company
shall so advise all Holders of Registrable Securities, and the number of shares
of Common Stock to be included in such registration shall be allocated as
follows: first, for the account of the Company, all shares of Common Stock
proposed to be sold by the Company; and second, for the account of the Holders
and any other shareholders of the Company participating in such registration,
the number of shares of Common Stock requested to be included in the
registration by the Holders and such other shareholders in proportion, as
nearly as practicable, to the respective amounts of Registrable

 

 

Securities that are proposed to be offered and sold by the Holders and
such other shareholders of Registrable Securities at the time of filing the
registration statement. No Registrable Securities excluded from the
underwriting in this Article 3 by reason of the underwriters’ marketing
limitation shall be included in such registration.

     (b) The Company shall so advise all Holders and the other holders
distributing their securities through such underwriting of any such limitation,
and the number of shares of Registrable Securities held by Holders that may be
included in the registration. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, but
the Holder shall continue to be bound by the terms hereof.

     (c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Article 3 prior to the effectiveness of
such registration, whether or not a Holder has elected to include Registrable
Securities in such registration.

ARTICLE 4

EXPENSES OF REGISTRATION

     All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Articles 2 and 3 hereof shall be borne
by the Company. All Selling Expenses relating to Registrable Securities
registered by the Holders shall be borne by the Holders of such Registrable
Securities pro rata on the basis of the number of shares so registered.

ARTICLE 5

REGISTRATION PROCEDURES

     (a) In the case of each registration effected by the Company pursuant to
this Agreement, the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. The Company
agrees to use its best efforts to effect or cause such registration to permit
the sale of the Registrable Securities covered thereby by the Holders thereof
in accordance with the intended method or methods of distribution thereof
described in such registration statement. In connection with any registration
of any Registrable Securities, the Company shall, as soon as reasonably
possible:

     (i) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its efforts to cause
such registration statement filed to become effective;

     (ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to effect and maintain the effectiveness of
such registration statement as may be required by the applicable rules
and regulations of the Commission and the instructions applicable to the
form of such registration statement (provided, however, that the Company
shall not be obliged to maintain the effectiveness of the registration
statement described in Article 2 longer than through the earlier of (A)
seven years from the date hereof or, if earlier, the second anniversary
of the date on which the last of the Registrable Securities are issued or
issuable as payment under the Note, upon conversion of the Note or upon
exercise of the Warrant, (B) the date on which the Holder may sell all
Registrable Securities then held by the Holder, or which may become
issuable as payment under the Note, upon conversion of the Note or upon
exercise of the Warrant, without restriction by the volume limitations of
Rule 144(e) of the Securities Act or (C) such time as all Registrable
Securities held by such Holder, or which may become issuable as payment
under the Note, upon conversion of the Note or upon exercise of the
Warrant, have been sold pursuant to a registration statement), and
furnish to the holders of the Registrable Securities covered thereby
copies of any such supplement or amendment prior to this being used
and/or filed with the Commission;

 

 

     (iii) promptly notify the Holders of Registrable Securities to be
included in a registration statement hereunder, the sales or placement
agent, if any, therefor and the managing underwriter of the securities
being sold, and confirm such advice in writing, (A) when such
registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of the
issuance by the Commission of any stop order suspending the effectiveness
of such registration statement or the initiation of any proceedings for
that purpose, (C) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose or (D) if, to the Company’s knowledge,
it shall be the case, at any time when a prospectus is required to be
delivered under the Securities Act, that such registration statement or
prospectus, or any document incorporated by reference in any of the
foregoing, contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing;

     (iv) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto or of any order suspending or preventing
the use of any related prospectus or suspending the qualification of any
Registrable Securities included in such registration statement for sale
in any jurisdiction at the earliest practicable date;

     (v) furnish to each Holder of Registrable Securities to be included
in such registration statement hereunder, each placement or sales agent,
if any, therefor and each underwriter, if any, thereof a conformed copy
of such registration statement, each such amendment and supplement
thereto (in each case excluding all exhibits and documents incorporated
by reference) and such number of copies of the registration statement
(excluding exhibits thereto and documents incorporated by reference
therein unless specifically so requested by such holder, agent or
underwriter, as the case may be) of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the
Securities Act, as such Holder, agent, if any, and underwriter, if any,
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Holder sold by such agent or
underwritten by such underwriter and to permit such Holder, agent and
underwriter to satisfy the prospectus delivery requirements of the
Securities Act;

     (vi) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such registration statement under such other
securities laws or blue sky laws of such states of the United States or the
District of Columbia to be designated by the Holders of a majority of such
Registrable Securities participating in such registration and each placement
or sales agent, if any, therefor and underwriter, if any, thereof, as any
Holder and each underwriter, if any, of the securities being sold shall
reasonably request (provided, that the Company shall not be required to use
its best efforts to register or qualify the Registrable Securities in more
than 10 such jurisdictions unless the expenses thereof are borne by the
Holders requesting such efforts), (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit, as to a
registration statement filed under Article 2 above, the continuance of
offers, sales and dealings therein in such jurisdictions for the same period
after the initial effective date of the registration statement filed under
the Securities Act as described in Section 5(a)(ii) above or, as to a
registration statement filed under Article 3 above, for a period of 90 days
after the effective date of the registration statement, or if underwritten,
as long as may be necessary to enable the underwriter to complete its
distribution of the Registrable Securities pursuant to such registration
statement and (C) take any and all such actions as may be reasonably
necessary or advisable to enable such Holder, agent, if any, and underwriter
to consummate the disposition in such jurisdictions of such Registrable
Securities; provided, however, that in order to fulfill the foregoing
obligations under this Section 5(a)(vi), the Company shall not (unless
otherwise required to do so in any

 

 

jurisdiction) be required to (1) qualify generally to do business as a
foreign company or a broker-dealer, (2) execute a general consent to service
of process or (3) subject itself to taxation; and

     (vii) furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities
are being sold through underwriters, or, if such securities are not being
sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated
as of such date, of the counsel representing the Company for the purposes
of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any,
and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.

     (b) The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such Holder and such Holder’s method of distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing. Each such Holder agrees to notify the Company as promptly
as practicable of any inaccuracy or change in information previously furnished
by such Holder to the Company or of the occurrence of any event in either case
as a result of which any prospectus relating to such registration contains or
would contain an untrue statement of a material fact regarding such Holder or
the distribution of such Registrable Securities or omits to state any material
fact regarding such Holder or the distribution of such Registrable Securities
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such Holder or the distribution of such Registrable
Securities, an untrue statement or a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.

     (c) Each of the Holders will comply with the provisions of the Securities
Act with respect to disposition of the Registrable Securities to be included in
any registration statement filed by the Company.

ARTICLE 6

INDEMNIFICATION

6.1 The Company will indemnify each Holder, each of its officers, directors and
partners, and such Holder’s legal counsel and independent accountants, if any,
and each person controlling any such persons within the meaning of Section 15
of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on 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, or any violation by
the Company of any rule or regulation promulgated under the Securities Act or
any state securities laws applicable to the Company and relating to action or
inaction by the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners and such Holder’s legal counsel and independent
accountants, and each person controlling any such

 

 

persons, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder,
officers, directors, partners, legal counsel, accountants, underwriter or
controlling persons, and expressly intended for use in such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof.

6.2 Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter,
if any, of the Company’s securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers, directors, partners, legal counsel and independent accountants, if
any, and each person controlling such Holder within the meaning of Section 15
of the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance or based on 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, and will
reimburse the Company, such Holders, such directors, officers, partners, legal
counsel, independent accountants, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, other document or
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Holder and expressly intended for
use in such registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereof; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
proceeds to such Holder of Registrable Securities sold as contemplated herein.

6.3 Each party entitled to indemnification under this Section 6 (the
“Indemnified Party") shall give notice to the party required to provide
indemnification (the “Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such
defense at such party’s expense; provided, however, that the Indemnifying
Party shall bear the expense of such defense of the Indemnified Party if
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicts of interest. The failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Agreement, unless such failure is
prejudicial to the ability of the Indemnifying Party to defend the action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.

6.4 If the indemnification provided for in Section 6.1 or 6.2 is unavailable or
insufficient to hold harmless an Indemnified Party, then each Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of the expenses, claims, losses, damages or liabilities (or actions
or proceedings in respect thereof) referred to in Section 6.1 or 6.2, in such
proportion as is appropriate to reflect the relative fault of the Company on
the one hand and the sellers of Registrable Securities on the other hand in
connection with statements or omissions

 

 

which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) or expenses, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the sellers of Registrable
Securities and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Holders agree that it would not be just and equitable if
contributions pursuant to this Section 6.4 were to be determined by pro rata
allocation (even if all Sellers of Registrable Securities were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the first sentence
of this Section 6.4. The amount paid by an Indemnified Party as a result of
the expenses, claims, losses, damages or liabilities (or actions or proceedings
in respect thereof) referred to in the first sentence of this Section 6.4 shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any claim,
action or proceeding which is the subject of this Section 6.4. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The obligations of sellers of
Registrable Securities to contribute pursuant to this Section 6.4 shall be
several in proportion to the respective amount of Registrable Securities sold
by them pursuant to a registration statement.

ARTICLE 7

RULE 144 REPORTING

     With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration, the Company
agrees to use its best efforts to:

7.1 Make and keep public information available as those terms are understood
and defined in Rule 144 under the Securities Act, at all times after the date
hereof; and

7.2 File with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act.

ARTICLE 8

TRANSFER OF REGISTRATION RIGHTS

     The rights to cause the Company to register Registrable Securities under
this Agreement may be assigned by a Holder to Whitebox Advisors, LLC
(“Whitebox") or to a transferee or assignee of Registrable Securities that (i)
is a subsidiary, parent or affiliated entity, general partner or limited
partner, member or retired partner or member of a Holder or of Whitebox, (ii)
is an affiliated fund, a follow-on fund or predecessor fund of a Holder or a
related fund or of Whitebox, (iii) is a Holder’s family member or trust for the
benefit of an individual Holder or (iv) acquires at least 50,000 shares of
Registrable Securities (as adjusted for stock splits, stock dividends, stock
combinations, reclassifications, recapitalizations, mergers, consolidations or
other similar events); provided, however, (A) the transferor shall, within ten
days before such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (B) such transferee shall
agree in writing to be subject to all restrictions set forth in this Agreement.
In each case, such rights may only be transferred together with the underlying
Registrable Securities in a transfer permitted by the Securities Act and
applicable state securities laws. Any such transferee or assignee shall be
deemed a Holder hereunder.

ARTICLE 9

LIMITATIONS ON REGISTRATION RIGHTS GRANTED TO OTHER SECURITIES

 

 

     From and after the date of this Agreement, the Company shall not without
the prior written consent of the holders of a majority of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company providing for the grant to
such holder of registration rights superior to those granted herein.

ARTICLE 10

MISCELLANEOUS

10.1 Governing Law. The laws of the state of Minnesota shall govern the
interpretation, validity and performance of the terms of this agreement,
regardless of the law that might be applied under principles of conflicts of
law.

10.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

10.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.

10.4 Termination. The obligations of the Company to register Registrable
Securities under this Agreement shall terminate on the tenth anniversary of the
date of this Agreement. In addition, the right of any Holder to request
inclusion in any registration under Article 3 shall terminate on the date
hereafter when (i) such Holder (together with its affiliates, partners, members
and former partners and members) holds less than 1% of the Company’s
outstanding Common Stock and (ii) all Registrable Securities held by or
issuable to such Holder (and its affiliates, partners, members and former
partners and members) as payment under the Note, upon conversion of the Note or
upon exercise of the Warrant may be sold under Rule 144 during any 90 day
period.

10.5 Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and
received when delivered in person or by national overnight courier service or
by certified or registered mail, return receipt requested, or by telecopier,
addressed as follows:

     (a) if to the Company, at

	 	 	 	 	 
	 	 	Entrx Corporation
	

	 	 	 	800 Nicollet Mall, Suite 2690
	

	 	 	 	Minneapolis, Minnesota 55402

	

	 	 	 	Attention: Wayne W. Mills, Chief Executive Officer

	

	 	 	 	Facsimile: (612) 338-7332

	 	 	 	 	 
	

	 	 	 	with a copy to:
	 
	 	 	 	 
	

	 	 	 	Felhaber, Larson, Fenlon &Vogt, P.A.
	

	 	 	 	601 Second Avenue South, Suite 4200
	

	 	 	 	Minneapolis, Minnesota 55402
	

	 	 	 	Attention: Roger H. Frommelt, Esq.
	

	 	 	 	Facsimile: (612) 338-4608

     (b) if to the Investor, in care of:

	 	 	 	 	 
	

	 	 	 	Whitebox Advisors, LLC
	

	 	 	 	3033 Excelsior Boulevard, Suite 300

 

 

	 	 	 	 	 
	

	 	 	 	Minneapolis, Minnesota 55416
	

	 	 	 	Attention: Jonathon Wood, Chief Financial Officer
	

	 	 	 	Facsimile: (612) 253-6151
	 
	 	 	 	 
	

	 	 	 	with a copy to:
	 
	 	 	 	 
	

	 	 	 	Messerli & Kramer P.A.
	

	 	 	 	150 South Fifth Street, Suite 1800
	

	 	 	 	Minneapolis, Minnesota 55402
	

	 	 	 	Attention: Jeffrey C. Robbins, Esq.
	

	 	 	 	Facsimile: (612) 672-3777

     (c) if to any other Holder, to the address reflected on the records of the
Company, or such other address or addresses as shall have been furnished in
writing by such party to the Company and to the other parties to this
Agreement.

10.6 Severability. The invalidity, illegality or unenforceability of one or
more of the provisions of this Agreement in any jurisdiction shall not affect
the validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this
Agreement, including any such provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.

10.7 Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

10.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized officers or
representatives as of the date first written above.

	 	 	 	 	 
	 	 	ENTRX CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Wayne W. Mills, Chief Executive Officer
	 
	 	 	 	 
	 	 	PANDORA SELECT PARTNERS L.P.
	 
	 	 	 	 
	

	 	By:
	 	

	 
	 	 	 	 
	

	 	Its:

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