<PAGE> 1
Page 1 of ___ pages
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )<F*>
-----------
Ecogen Inc.
- ------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value
- ------------------------------------------------------------------------------
(Title of Class of Securities)
278864 20 2
------------------------------------
(CUSIP Number)
Karl R. Barnickol, 800 N. Lindbergh Boulevard, St. Louis, Missouri 63167,
- ------------------------------------------------------------------------------
(314)694-1000
- ------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
January 24, 1996
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /X/. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
[FN]
<F*>The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
<PAGE> 2
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SCHEDULE 13D
CUSIP NO. 278864 20 2
-----------------
- -----------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Monsanto Company: 43-0420020
- -----------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
n/a
- ----------------------------------------------------------------------------'
3. SEC USE ONLY
- -----------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
- -----------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
n/a
- -----------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 943,397
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY
EACH n/a
REPORTING -------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH
943,397
-------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
n/a
- -----------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
943,397
- -----------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
n/a
- -----------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.5%
- -----------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------
<PAGE> 3
Page 3 of ___ Pages
Item 1. Security and Issuer.
- ----------------------------
This statement relates to the Common Stock, par value $.01 per
share (the "Common Stock"), of Ecogen Inc., a Delaware corporation
(the "Issuer"). The Issuer's executive offices are located at 2005
Cabot Boulevard West, Langhorne, Pennsylvania 19047.
Item 2. Identity and Background.
- --------------------------------
This statement is filed by Monsanto Company (the "Company"),
a Delaware corporation, whose principal business is the worldwide
manufacture and sale of a widely diversified line of agricultural
products; chemical products, including plastics and manufactured
fibers; pharmaceuticals; and food products, including low-calorie
sweeteners. The Company's principal business and principal office
are located at 800 North Lindbergh Boulevard, St. Louis, Missouri
63167.
During the last five years, neither the Company nor any of its
executive officers, directors or controlling persons, has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
During the last five years, neither the Company nor any of its
executive officers, directors or controlling persons, has been, and
is not now (a) subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or (b) a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction finding any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ----------------------------------------------------------
The amount and source of funds used by the Company to purchase
the shares of Common Stock are Ten Million Dollars ($10,000,000),
from the Company's current working capital.
Item 4. Purpose of Transaction.
- -------------------------------
The Company entered into an Investment Agreement by and
between the Company and the Issuer dated as of January 24, 1996
(the "Investment Agreement") and thereby agreed to invest Ten
Million Dollars ($10,000,000) in the Issuer through the purchase of
shares of Common Stock, to provide the Issuer with capital to fund
(a) research and development on Bacillus thuringiensis technology
and (b) other general corporate purposes. On January 24, 1996, the
Company acquired 3,450,000 shares of Common Stock, pursuant to the
terms and conditions of the Investment Agreement. As a result of
this initial acquisition, the shares of Common Stock owned by the
Company represented 10.28% of the 33,559,781 total shares of Common
Stock issued and outstanding as of the date of the Investment
Agreement. On January 29, 1996, the stockholders of the Issuer, by
special meeting, approved a one-for-five reverse stock split (the
"Reverse Stock Split") of all of the outstanding shares of Common
Stock such that the 33,559,781 shares outstanding on that date
became 6,711,956 shares, and the 3,450,000 shares purchased by
Monsanto became 690,000 shares. There was no change in the par
value of the Common Stock. The Issuer then effected the Reverse
Stock Split and immediately thereafter, the Company acquired an
additional 253,397 shares of Common Stock
<PAGE> 4
Page 4 of ___ Pages
pursuant to the terms of the Investment Agreement. As a result of (i)
the Reverse Stock Split and (ii) the acquisitions of shares of Common
Stock by the Company pursuant to the Investment Agreement, the Company
now owns 943,397 shares of Common Stock, representing 13.54% of the
6,965,353 total shares of Common Stock issued and outstanding as of
January 29, 1996.
The Company has acquired such shares of Common Stock solely
for investment purposes.
Item 5. Interest in Securities of the Issuer.
- ---------------------------------------------
(a) As determined in accordance with Rule 13d-3, the Company is
the beneficial owner of 943,397 shares of Common Stock,
representing approximately 13.54% of the total issued and
outstanding Common Stock.
(b) As determined in accordance with Rule 13d-3, the Company has
sole voting power and sole dispositive power with respect to
943,397 shares of Common Stock.
(c) Except as set forth in this Schedule 13D, no transactions have
been effected by the Company during the past sixty (60) days with
respect to any shares of Common Stock.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings, or Relationships
- ------------------------------------------------------------------
with Respect to Securities of the Issuer.
- ----------------------------------------
On January 24, 1996, the Company entered into the Investment
Agreement with the Issuer, pursuant to which the Company agreed to
invest Ten Million Dollars ($10,000,000) in the Issuer through the
purchase of shares of Common Stock, to provide the Issuer with
capital to fund (a) research and development on Bacillus
thuringiensis technology and (b) other general corporate purposes.
The Company has acquired such shares of Common Stock solely for
investment purposes.
Under the terms of the Investment Agreement, the Company may
not directly or indirectly offer for sale, or transfer any of the
shares of Common Stock acquired pursuant to the Investment
Agreement at any time during the term of that certain Research and
Development Agreement dated as of January 24, 1996, by and between
the Company and the Issuer. This limitation on transfer terminates
upon the earlier of (i) the termination of such Research and
Development Agreement or (ii) the occurrence of any one of the
events enumerated in Section 5.5(a) of the Investment Agreement.
Pursuant to the Investment Agreement, the Issuer has agreed to
register, under the Securities Act of 1933, as amended, the shares
of Common Stock acquired by the Company upon demand by the Company
and upon the terms and conditions described in the Investment
Agreement, to facilitate the Company's ultimate disposition of such
shares of Common Stock. No such demand has been made by the
Company.
<PAGE> 5
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Item 7. Material to be Filed as Exhibits
- -----------------------------------------
1. Investment Agreement by and between Monsanto Company and
Ecogen Inc. dated as of January 24, 1996.
2. Research and Development Agreement by and between
Monsanto Company and Ecogen Inc. dated as of January 24, 1996.
Signature
---------
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Date: February 5, 1996 MONSANTO COMPANY, a Delaware corporation
By: /s/ Karl R. Barnickol
-------------------------------------
Name: Karl R. Barnickol
---------------------------------
Title: Assistant Secretary
--------------------------------
<PAGE> 6
Page 6 of ___ Pages
EXHIBIT INDEX
Exhibit Page Number
- ------------------------------------------------------------------------------
1. Investment Agreement by and between Monsanto Company and
Ecogen Inc. dated as of January 24, 1996.
2. Research and Development Agreement by and between Monsanto
Company and Ecogen Inc. dated as of January 24, 1996.
<PAGE> 1
INVESTMENT AGREEMENT
BY
AND BETWEEN
MONSANTO COMPANY
AND
ECOGEN INC.
DATED AS OF JANUARY 24, 1996
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 2
Annual Proxy Statement. . . . . . . . . . . . . . . . . . 2
Assignment Agreement. . . . . . . . . . . . . . . . . . . 2
Audited Financial Statements. . . . . . . . . . . . . . . 2
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . 2
Balance Sheet Date. . . . . . . . . . . . . . . . . . . . 3
Bt Technology . . . . . . . . . . . . . . . . . . . . . . 3
Business Day. . . . . . . . . . . . . . . . . . . . . . . 3
Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3
Commission. . . . . . . . . . . . . . . . . . . . . . . . 3
Common Stock. . . . . . . . . . . . . . . . . . . . . . . 3
Control Securities. . . . . . . . . . . . . . . . . . . . 3
Ecogen. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Ecogen Securities . . . . . . . . . . . . . . . . . . . . 3
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements. . . . . . . . . . . . . . . . . . . 3
hereto. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Holder. . . . . . . . . . . . . . . . . . . . . . . . . . 4
HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 4
Indemnified Party . . . . . . . . . . . . . . . . . . . . 4
Indemnifying Party. . . . . . . . . . . . . . . . . . . . 4
knowledge . . . . . . . . . . . . . . . . . . . . . . . . 4
Monsanto. . . . . . . . . . . . . . . . . . . . . . . . . 4
Other Selling Stockholders. . . . . . . . . . . . . . . . 5
Person. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Preliminary Prospectus. . . . . . . . . . . . . . . . . . 5
Pre-Offering Percentage . . . . . . . . . . . . . . . . . 5
Price Per Share . . . . . . . . . . . . . . . . . . . . . 5
Prospectus. . . . . . . . . . . . . . . . . . . . . . . . 5
Proxy Statements. . . . . . . . . . . . . . . . . . . . . 5
Purchase Price. . . . . . . . . . . . . . . . . . . . . . 5
Purchased Shares. . . . . . . . . . . . . . . . . . . . . 6
Register. . . . . . . . . . . . . . . . . . . . . . . . . 6
Registration Statement. . . . . . . . . . . . . . . . . . 6
Registrable Securities. . . . . . . . . . . . . . . . . . 6
Registration Expenses . . . . . . . . . . . . . . . . . . 6
Requesting Holder . . . . . . . . . . . . . . . . . . . . 6
Research and Development Agreement. . . . . . . . . . . . 7
Restricted Payments . . . . . . . . . . . . . . . . . . . 7
Restricted Securities . . . . . . . . . . . . . . . . . . 7
i
<PAGE> 3
SEC Documents . . . . . . . . . . . . . . . . . . . . . . 7
Securities Act. . . . . . . . . . . . . . . . . . . . . . 7
Selling Expenses. . . . . . . . . . . . . . . . . . . . . 7
Special Proxy Statement . . . . . . . . . . . . . . . . . 7
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . 7
13D Group . . . . . . . . . . . . . . . . . . . . . . . . 8
Unaudited Balance Sheet . . . . . . . . . . . . . . . . . 8
Unaudited Financial Statements. . . . . . . . . . . . . . 8
ARTICLE II. PURCHASE AND SALE OF COMMON STOCK
2.1 Common Stock . . . . . . . . . . . . . . . . . . . . 8
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . 8
2.3 Stock Certificate. . . . . . . . . . . . . . . . . . 9
2.4 Closing. . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III. REPRESENTATIONS AND WARRANTIES
3.1 Organization, Subsidiaries . . . . . . . . . . . . . 10
3.2 Authorization and Binding Effect . . . . . . . . . . 11
3.3 Consolidated Financial Statements: Other
Information. . . . . . . . . . . . . . . . . . . . . 12
3.4 Litigation . . . . . . . . . . . . . . . . . . . . . 13
3.5 Material Contracts . . . . . . . . . . . . . . . . . 14
3.6 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Capitalization . . . . . . . . . . . . . . . . . . . 15
3.8 Compliance With Instruments, Laws; Governmental
Authorizations . . . . . . . . . . . . . . . . . . . 16
3.9 Patents and Technology Rights. . . . . . . . . . . . 17
3.10 Certain Transactions . . . . . . . . . . . . . . . . 17
3.11 Absence of Changes . . . . . . . . . . . . . . . . . 18
3.12 Restrictions on Personnel. . . . . . . . . . . . . . 19
3.13 Certain Payments . . . . . . . . . . . . . . . . . . 19
3.14 Disclosure . . . . . . . . . . . . . . . . . . . . . 20
3.15 Brokers. . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV. CONDITIONS PRECEDENT TO PURCHASE AND SALE OF
COMMON STOCK
(a) Opinion of Counsel . . . . . . . . . . . . . . . . . 20
(b) Representations and Warranties True and Correct. . . 21
(c) Closing Certificates . . . . . . . . . . . . . . . . 21
(d) Proceedings Satisfactory to Monsanto . . . . . . . . 21
(e) Approvals. . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V. RIGHT OF FIRST REFUSAL AND LIMITATIONS ON
OWNERSHIP
5.1 Right of First Refusal . . . . . . . . . . . . . . . 24
5.2 Private Offering . . . . . . . . . . . . . . . . . . 24
5.3 Public Offering. . . . . . . . . . . . . . . . . . . 25
5.4 Limitations. . . . . . . . . . . . . . . . . . . . . 26
5.5 Limitations on Monsanto's Ownership. . . . . . . . . 26
ii
<PAGE> 4
ARTICLE VI. LIMITATION ON TRANSFER
6.1 Limitation on Transfer . . . . . . . . . . . . . . . 28
ARTICLE VII. REGISTRATION RIGHTS
7.1 Requested Registration . . . . . . . . . . . . . . . 28
7.2 Ecogen Registration. . . . . . . . . . . . . . . . . 32
7.3 Expenses of Registration . . . . . . . . . . . . . . 34
7.4 Registration Procedures. . . . . . . . . . . . . . . 34
7.5 Indemnification. . . . . . . . . . . . . . . . . . . 36
7.6 Information by Holder. . . . . . . . . . . . . . . . 38
7.7 Rule 144 Reporting . . . . . . . . . . . . . . . . . 39
7.8 Transfer of Registration Rights. . . . . . . . . . . 39
7.9 Limitations on Subsequent Registration Rights. . . . 40
7.10 "Market Stand-off" Agreement . . . . . . . . . . . . 40
7.11 Termination of Registration Rights . . . . . . . . . 40
ARTICLE VIII. REPRESENTATIONS OF MONSANTO
8.1 Investment Purpose . . . . . . . . . . . . . . . . . 41
8.2 Accredited Investor. . . . . . . . . . . . . . . . . 41
8.3 Access to Information. . . . . . . . . . . . . . . . 41
8.4 Due Diligence. . . . . . . . . . . . . . . . . . . . 41
8.5 Restricted Securities. . . . . . . . . . . . . . . . 41
8.6 Exemption Reliance . . . . . . . . . . . . . . . . . 42
8.7 Authorization and Binding Effect . . . . . . . . . . 42
8.8 Brokers. . . . . . . . . . . . . . . . . . . . . . . 42
8.9 Stock Legend . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX. MISCELLANEOUS
9.1 Survival of Representations and Warranties . . . . . 43
9.2 Assignment . . . . . . . . . . . . . . . . . . . . . 43
9.3 Notice . . . . . . . . . . . . . . . . . . . . . . . 43
9.4 Governing Law. . . . . . . . . . . . . . . . . . . . 44
9.5 Validity of Agreement. . . . . . . . . . . . . . . . 45
9.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 Entire Agreement . . . . . . . . . . . . . . . . . . 45
9.8 Headings and References; Incorporation of
Schedules. . . . . . . . . . . . . . . . . . . . . . 45
9.9 Counterparts . . . . . . . . . . . . . . . . . . . . 46
9.10 No Presumption Against Drafter, Qualifications on
Schedules. . . . . . . . . . . . . . . . . . . . . . 46
Schedule and Exhibits
- ---------------------
Schedule 3.1 Subsidiaries
Schedule 3.4 Litigation
Schedule 3.7 Outstanding Options, Warrants or other Rights
Schedule 3.9 Patents, Trademarks and Technology Rights
Schedule 3.11 Absence of Changes
Exhibit 3.3(d) Unaudited Balance Sheet
Exhibit 4.1(a) Form of Opinion of Ecogen's Counsel
</TABLE>
iii
<PAGE> 5
INVESTMENT AGREEMENT
This Investment Agreement is made as of the 24th day of
January, 1996 by and between MONSANTO COMPANY, a Delaware
corporation with its general offices at 800 North Lindbergh
Blvd., St. Louis, Missouri 63167 ("Monsanto"), and ECOGEN INC., a
Delaware corporation with its general offices at 2005 Cabot
Boulevard West, Langhorne PA 19047 ("Ecogen").
RECITALS
--------
1. Ecogen is engaged, among other things, in activities to
develop and commercialize certain valuable Bacillus thuringiensis
("Bt") technology and owns or controls certain patents and patent
applications related thereto.
2. Pursuant to a Technology Assignment Agreement dated as
of the date hereof among Monsanto, Ecogen, and Ecogen-Bio Inc., a
Delaware corporation ("Ecogen-Bio"), (the "Assignment
Agreement"), Monsanto will purchase from Ecogen and Ecogen-Bio
certain technology and other rights relating to the Bt technology
of Ecogen and Ecogen-Bio including, without limitation, (a)
certain of Ecogen's Bt strain library, (b) certain of Ecogen's
crystal protein gene library, (c) certain of Ecogen's
intellectual property rights regarding protein engineering of Bt
crystal proteins, including, without limitation, certain patents
and patent applications, (d) certain of Ecogen's intellectual
property rights associated with the Bt strains and genes being
sold to Monsanto, including, without limitation, certain patents
and patent applications, and (e) research records relating to the
foregoing as set forth in the Assignment Agreement.
3. Pursuant to a Research and Development Agreement dated
as of the date hereof between Monsanto and Ecogen (the "Research
and Development Agreement"), Ecogen will perform research and
development on the Bt Technology.
1
<PAGE> 6
4. Monsanto desires to invest in Ecogen to provide capital
to fund (a) research and development on the Bt Technology and (b)
other general corporate purposes.
NOW THEREFORE, in consideration of the promises and mutual
covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have
the meanings specified below:
"Affiliate" with respect to a specified Person is
---------
another Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the specified Person. For purposes of this
definition, the term "control" (including the terms "controlled
by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Investment Agreement, as
---------
amended from time to time.
"Annual Proxy Statement" has the meaning set forth in
----------------------
Section 3.3(c) hereof.
"Assignment Agreement" has the meaning set forth in the
--------------------
Recitals hereto.
"Audited Financial Statements" has the meaning set
----------------------------
forth in Section 3.3(a) hereof.
"Balance Sheet" shall mean the October 31, 1994 balance
-------------
sheet of Ecogen.
2
<PAGE> 7
"Balance Sheet Date" shall mean October 31, 1994.
------------------
"Bt Technology" shall have the meaning set forth in the
-------------
Assignment Agreement.
"Business Day" shall mean any day of the week except
------------
Saturday, Sunday and any legal holiday observed by a national
banking association or one of the parties.
"Closing" shall mean the closing of the transactions
-------
contemplated by this Agreement.
"Commission" shall mean the Securities and Exchange
----------
Commission, or any other federal agency at the time administering
the Securities Act.
"Common Stock" shall mean the shares of common stock,
------------
par value $.01 of Ecogen.
"Control Securities" means securities of Ecogen, other
------------------
than Restricted Securities, owned by a Holder at the time such
Holder would be deemed to be an Affiliate of Ecogen.
"Corporate Approval" shall have the meaning set forth
------------------
in Section 3.2.
"Ecogen" shall mean Ecogen Inc., a Delaware
------
corporation.
"Ecogen Securities" has the meaning set forth in
-----------------
Section 5.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended, or any similar Federal statute, and the
rules and regulations of the Commission issued under such Act, as
they each may, from time to time, be in effect.
"Financial Statements" has the meaning set forth in
--------------------
Section 3.3(b) hereof.
3
<PAGE> 8
"hereto", "hereunder", "herein", "hereof" and the like
------ --------- ------ ------
mean and refer to this Agreement as a whole and not merely to the
specific article, section, paragraph or clause in which the
respective word appears.
"Holder" means Monsanto and, subject to Section 7.8
------
hereof, any subsequent holder of outstanding shares of the Common
Stock purchased under the terms of this Agreement.
"HSR" has the meaning set forth in Section 4.1(e)
---
hereof.
"Indebtedness" of any Person shall mean all obligations
------------
of such Person which in accordance with generally accepted
accounting principles are normally classified upon a balance
sheet of such Person as liabilities of such Person, and in any
event shall include all (a) obligations of such Person for
borrowed money or which have been incurred in connection with the
acquisition of property, assets or services, (b) obligations
secured by any lien or other charge upon property or assets owned
by such Person, even though such Person has not assumed or become
liable for the payment of such obligations, (c) obligations
created or arising under any conditional sale, or other title
retention agreement with respect to property where remedies of
the seller, lender or lessor under such agreement in the event of
default are limited to repossession or sale of property and (d)
capitalized rentals.
"Indemnified Party" has the meaning set forth in
-----------------
Section 7.5(c) hereof.
"Indemnifying Party" has the meaning set forth in
------------------
Section 7.5(c) hereof.
"Knowledge" with respect to Ecogen means the actual
---------
knowledge of an officer of Ecogen.
"Monsanto" shall mean Monsanto Company, a Delaware
--------
corporation.
4
<PAGE> 9
"Other Selling Stockholders" has the meaning set forth
--------------------------
in Section 7.1(c) hereof.
"Person" shall mean a corporation, association,
------
partnership, limited liability company, individual, trust,
unincorporated organization, a government agency or political
subdivision thereof, or any other entity.
"Preliminary Prospectus" means a preliminary prospectus
----------------------
as contemplated by Rule 430 or 430A under the Securities Act
included at any time in a Registration Statement.
"Pre-Offering Percentage" has the meaning set forth in
-----------------------
Section 5.1 hereof.
"Price Per Share" has the meaning set forth in Section
---------------
2.2.
"Prospectus" means (i) a prospectus as first filed with
----------
the Commission pursuant to Rule 424(b) under the Securities Act
or, (ii) if no such filing is required, the form of final
prospectus included in a Registration Statement at the effective
date thereof or (iii) if a Term Sheet or Abbreviated Term Sheet
(as such terms are defined in Rule 434(b) and 434(c),
respectively, under the Securities Act) is filed with the
Commission pursuant to Rule 424(b)(7) under the Securities Act,
the Term Sheet or Abbreviated Term Sheet and the last Preliminary
Prospectus filed with the Commission prior to the time the
Registration Statement became effective, taken together
(including, in each case, the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Securities
Act), together with any supplement to any of the foregoing.
"Proxy Statements" has the meaning set forth in
----------------
Section 3.3(e) hereof.
"Purchase Price" has the meaning set forth in
--------------
Section 2.2 hereof.
5
<PAGE> 10
"Purchased Shares" shall mean the shares of Common
----------------
Stock of Ecogen issued to Monsanto pursuant to this Agreement in
an amount equal to the nearest whole number derived by dividing
(a) the Purchase Price by (b) the Price Per Share.
"Register", "Registered" and "Registration", whether or
-------- ---------- ------------
not capitalized, mean and refer to a registration effected by
preparing and filing a Registration Statement in compliance with
the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness
of such Registration Statement.
"Registration Statement" means any registration
----------------------
statement of Ecogen filed under the Securities Act which covers
any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus relating thereto and all
amendments and supplements to such registration statement,
including post-effective amendments, all exhibits and all
material incorporated or deemed to be incorporated by reference
in such registration statement.
"Registrable Securities" means shares of Common Stock
----------------------
and all such other securities of Ecogen acquired by Monsanto and
any subsequent Holder.
"Registration Expenses" means all expenses incurred by
---------------------
Ecogen in compliance with Article VII, including, without
limitation, all registration fees, qualification fees, filing
fees, advertising and road show expenses (excluding advertising
and road show expenses incurred by a Holder), printing expenses,
escrow fees, fees and disbursements of counsel for Ecogen, 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 Ecogen, which shall be
paid in any event by Ecogen).
"Requesting Holder" means a Holder requesting any
-----------------
registration pursuant to Section 7.1 hereof.
6
<PAGE> 11
"Research and Development Agreement" shall have the
----------------------------------
meaning set forth in the Recitals hereto.
"Restricted Payments" shall mean dividends or other
-------------------
distributions in respect of the stock of Ecogen or any Subsidiary
(except intercorporate dividends and dividends payable solely in
stock of Ecogen) and purchases, redemptions and other
acquisitions, direct or indirect, of stock of Ecogen or any
Subsidiary.
"Restricted Securities" means the securities of Ecogen
---------------------
acquired by a Holder from Ecogen or an Affiliate of Ecogen
otherwise than pursuant to a public offering.
"Reverse Stock Split" shall mean a one-for-five reverse
-------------------
stock split of the outstanding shares of Common Stock of Ecogen
which stock split is the subject of a special proxy statement
prepared in connection with a stockholders' meeting called on
January 29, 1996.
"SEC Documents" has the meaning set forth in
-------------
Section 3.3 hereof.
"Securities Act" shall mean the Securities Act of 1933,
--------------
as amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
"Selling Expenses" means all underwriting discounts and
----------------
selling commissions applicable to the sale of Registrable
Securities.
"Special Proxy Statement" has the meaning set forth in
-----------------------
Section 3.3(e) hereof.
"Subsidiary" shall mean a subsidiary more than 50
----------
percent of whose outstanding securities representing the right,
other than as affected by events of default, to vote for the
election of directors, is owned by the applicable party and/or
one or more of
7
<PAGE> 12
such party's other majority-owned Subsidiaries. Subsidiaries of
Ecogen shall also include the entities set forth in Schedule 3.1
hereto.
"13D Group" has the meaning set forth in Section 5.5
---------
hereof.
"Unaudited Balance Sheet" has the meaning set forth in
-----------------------
Section 3.3(d) hereof.
"Unaudited Financial Statements" has the meaning set
------------------------------
forth in Section 3.3(b) hereof.
ARTICLE II.
PURCHASE AND SALE OF COMMON STOCK
---------------------------------
2.1 Common Stock. Subject to the terms and conditions
------------
set forth in this Agreement Ecogen will issue and sell, and
Monsanto will purchase the Purchased Shares. On the Closing
Date, Ecogen will issue and sell, and Monsanto will purchase
3,450,000 of the Purchased Shares at the Price Per Share. From
time to time after the Closing and subject to the provisions of
Section 2.4(b), Ecogen will issue and sell, and Monsanto will
purchase, the remainder of the Purchased Shares; provided that
after July 31, 1996, Monsanto shall have no further obligation to
purchase any of the Purchased Shares then unpurchased.
2.2 Purchase Price. The aggregate purchase price of
--------------
the Purchased Shares shall be $10,000,000 United States dollars
(the "Purchase Price") payable in increments with respect to the
shares being purchased by Monsanto at the Closing or on any
subsequent date pursuant to Section 2.4(b) thereafter. The
Purchase Price shall be paid in immediately available funds by
bank wire transfer to the account designated by Ecogen. The
price per share shall be the greater of (a) $2.12 or (b) 85% of
the average of the last reported sales price of Ecogen's common
stock on the NASDAQ National Market on each of the last sixty
(60) trading days immediately preceding January 24, 1996 (the
"Price Per Share"), provided, however, in the event that the
Closing shall occur after the effective date of the Reverse Stock
Split, the Price Per Share shall be adjusted to reflect the
Reverse Stock Split. For
8
<PAGE> 13
purposes of this Section 2.2, a "trading day" shall mean a day
that the NASDAQ National Market is open for trading. The
aggregate number of Purchased Shares shall be the number, rounded
to the nearest whole number, determined by dividing the Purchase
Price by the Price Per Share.
2.3 Stock Certificate. At the Closing, and upon each
-----------------
subsequent purchase thereafter, and upon payment of the Purchase
Price with respect to Purchased Shares then purchased, Ecogen
shall deliver to Monsanto a stock certificate or certificates in
the name of Monsanto representing the number of shares of Common
Stock then purchased by Monsanto.
2.4 Closing.
-------
(a) The Closing of this Agreement (the "Closing")
shall take place on January 24, 1996 at 10:00 a.m. EST provided
all of the conditions to Closing stated in Article IV of this
Agreement have been satisfied or waived on or before such date;
provided further, however, that Monsanto and Ecogen each
acknowledge that the Closing will occur prior to the effective
date of the Reverse Stock Split and that Ecogen will not have
sufficient authorized and unreserved shares of Common Stock to
issue all of the Purchased Shares. Accordingly, at the Closing
Ecogen will issue and sell, and Monsanto will purchase, 3,450,000
of the Purchased Shares. In the event that all of the conditions
to Closing stated in Article IV of this Agreement shall not have
been satisfied or waived on or before January 24, 1996, such
Closing shall take place as soon as practicable (but not later
than the third Business Day) after the satisfaction or waiver of
such conditions and in no event later than July 31, 1996.
Monsanto and Ecogen shall use their best efforts to cause the
satisfaction of such conditions. If such conditions of Closing
have not been satisfied or waived, and if Closing shall not have
occurred, on or before July 31, 1996, then this Agreement shall
be terminated. The Closing shall take place at the offices of
Ecogen or such other place as the parties may agree.
(b) The remaining number of Purchased Shares not
purchased pursuant to Section 2.4(a) (the "Additional Shares")
shall be issued and sold by Ecogen and
9
<PAGE> 14
purchased and paid for by Monsanto immediately following the
special stockholders' meeting called on January 29, 1996, provided
that the Reverse Stock Split is approved by the stockholders of
Ecogen at such meeting. The purchase price per share for such
Additional Shares shall be the Per Share Price determined pursuant
to Section 2.2. Monsanto's obligation to purchase the Additional
Shares shall be subject to the prior Closing of the transactions
contemplated under this Agreement pursuant to Section 2.4(a), to
the delivery by Ecogen to Monsanto of a certificate in the name of
Monsanto for such Additional Shares, and to the representations
and warranties contained in Sections 3.1 and 3.2 being true on
such date as if made on such date or to receipt of an opinion of
counsel of Ecogen reasonably acceptable to Monsanto to the effect
that such Additional Shares are duly authorized and validly
issued. If the Reverse Stock Split is not approved by the
stockholders of Ecogen, the Additional Shares shall be issued and
sold by Ecogen and purchased and paid for by Monsanto from time to
time, as shares become available or authorized for issuance and
upon at least five (5) days prior notice, in increments of at
least 50,000 shares, subject to the conditions set forth in the
prior sentence; provided, however, that Monsanto shall have no
obligation to purchase any Additional Shares after July 31, 1996.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Monsanto to purchase the Purchased Shares
described in Article II, Ecogen represents and warrants to
Monsanto as follows:
3.1 Organization, Subsidiaries. Ecogen is a
--------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all necessary
corporate power and authority to carry on its business as now
conducted and as proposed to be conducted and to own or lease and
operate its properties. Ecogen's only Subsidiaries are set forth
on Schedule 3.1 hereto. Each Subsidiary is duly organized,
------------
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and
authority to carry on its business as now conducted and as
proposed to be conducted and to own, lease and operate its
properties. Except as set forth in Schedule
--------
10
<PAGE> 15
3.1 hereof, Ecogen either directly, or indirectly through the
- ---
Subsidiaries, owns all of the issued and outstanding stock of each
of its Subsidiaries free and clear of all liens, claims, security
interests or encumbrances. Ecogen and its Subsidiaries are duly
licensed or qualified to do business and are in good standing in
every jurisdiction in which the nature of its business or the
ownership of their properties require such qualification except
where such failure to so qualify would not have a material adverse
effect on the business of Ecogen. Except for cash equivalents and
marketable securities held for investment purposes, Ecogen does
not control, or have any contract or commitment to own or
control, any capital stock, bonds or other securities of, and
does not have a proprietary interest in, any Person other than
the Subsidiaries. Ecogen and each of its Subsidiaries have
delivered to Monsanto complete and correct copies of their
Certificates of Incorporation and By-Laws as amended and in
effect on the date hereof.
3.2 Authorization and Binding Effect. The execution
--------------------------------
and delivery of this Agreement and the performance by Ecogen of
its obligations hereunder are within Ecogen's corporate power,
have been duly authorized by proper corporate action on the part
of Ecogen, are not in violation of, or constitute a default under
any applicable existing law, rule or regulation of any
governmental agency or authority, any order or decision of any
court, the Certificate of Incorporation or By-Laws of Ecogen or
the terms of any agreement, restriction or undertaking to which
Ecogen is a party or by which it is bound, except violations or
defaults which would not, individually or in the aggregate, have
a material adverse effect on Ecogen, and do not require the
approval or consent of the shareholders of Ecogen, any
governmental body, agency or authority or any other person or
entity that has not been obtained; except (i) the filing of any
notice subsequent to Closing which may be required by applicable
state or federal securities laws and (ii) stockholder approval
required for the Reverse Stock Split or other corporate action
necessary to increase the number of shares of Common Stock
available for issuance under the Agreement if the Reverse Stock
Split is not approved ("Corporate Approval").
11
<PAGE> 16
3.3 Consolidated Financial Statements: Other
----------------------------------------
Information. Ecogen has previously delivered to Monsanto true,
- -----------
accurate and complete copies of the following documents, includ-
ing, the exhibits and schedules thereto:
(a) Annual Report on Form 10-K for the transition
period ended October 31, 1994, as filed with the Commission,
which contains the audited consolidated balance sheets of Ecogen
as of December 31, 1993, and October 31, 1994, and audited
consolidated statements of operations, cash flows and
stockholders' equity for the years ended December 31, 1992 and
1993 and the ten (10) months ended October 31, 1994, certified by
KPMG Peat Marwick LLP and heretofore furnished to Monsanto
(together the "Audited Financial Statements");
(b) Quarterly Reports on Form 10-Q for the three
months ended January 31, 1995, April 30, 1995 and July 31, 1995,
as filed with the Commission (the "Unaudited Financial
Statements" and, together with the Audited Financial Statements,
the "Financial Statements");
(c) Proxy statement in definitive form for its
1995 annual meeting of stockholders as filed with the Commission
(the "Annual Proxy Statement");
(d) Unaudited Consolidated Balance Sheet, dated
October 31, 1995 (the "Unaudited Balance Sheet") attached hereto
as Exhibit 3.3(d); and
(e) Proxy Statement in definitive form for a
Special Meeting of Shareholders scheduled for January 29, 1996
(the "Special Proxy Statement" and, together with the Annual
Proxy Statement, the "Proxy Statements").
Except for Current Reports on Form 8-K dated November 7,
1995 and November 24, 1995 and the Special Proxy Statement dated
December 18, 1995, Ecogen has filed no other reports or
registration statements with the Commission since July 31, 1995.
Since January 1, 1994, Ecogen has filed all reports, schedules,
forms, statements and other documents
12
<PAGE> 17
required to be filed by it with the Commission pursuant to the
requirements of the Exchange Act and the Securities Act,
including, without limitation, all of the documents listed in
paragraphs (a), (b), (c) and (e) above (all of the foregoing filed
prior to the date hereof being hereinafter referred to as the "SEC
Documents"). Ecogen has delivered to Monsanto true and complete
copies of the SEC Documents. As of their respective dates, the
SEC Documents (as the same may have been amended) complied in all
material respects with the requirements of the Exchange Act and
the Securities Act and the rules and regulations of the Commission
promulgated thereunder applicable to such SEC Documents, and, as
of their respective dates, none of the SEC Documents (when read
together with all exhibits included therein and financial
statement schedules thereto and documents incorporated by
reference) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Financial Statements were prepared in accordance with generally
accepted accounting principles consistently applied throughout
the periods involved except as may be otherwise indicated in such
financial statements or the notes thereto, and are correct and
complete and fairly present in all material respects the
consolidated financial condition of Ecogen and its Subsidiaries,
as of those dates and the results of their operations for the
periods then ended.
3.4 Litigation. Except as set forth in Ecogen's
----------
October 31, 1994 Annual Report on Form 10-K and in Ecogen's
Quarterly Reports on Form 10-Q provided to Monsanto pursuant to
Section 3.3(b) and except as disclosed on Schedule 3.4 hereto,
------------
there are no judicial or administrative actions, suits,
proceedings or investigations pending or, to the best of Ecogen's
knowledge, threatened against Ecogen or any of its Subsidiaries
or which question the validity of this Agreement or of any action
taken or to be taken pursuant to or in connection with the
provisions of this Agreement, and to the best of Ecogen's
knowledge, no facts exist which would constitute a basis for any
such action, suit, proceeding or investigation, which if
concluded adversely against Ecogen would have a materially
adverse effect on the business or financial condition of Ecogen
and its Subsidiaries taken as a whole.
13
<PAGE> 18
3.5 Material Contracts. The contracts listed as
------------------
Exhibits 10.1 - 10.119 on the list of exhibits under Part IV,
Item 14(a)(3) of the October 31, 1994 Form 10-K, and filed (or
incorporated by reference) as Exhibits 10.1 - 10.119 to the
October 31, 1994 Form 10-K, were all of the contracts required to
be listed pursuant to the Commission's instructions for the
completion of Form 10-K and filed as exhibits pursuant to Item
601(b)(10) of the Commission's Regulation S-K. Except as
disclosed in Ecogen's January 31, 1995, April 30, 1995 or July
31, 1995 Form 10-Q and in Ecogen's Current Reports on Form 8-K
dated November 7, 1995 and November 24, 1995, neither Ecogen nor
any of its Subsidiaries has entered into any contract since
October 31, 1994 which is required to be filed as an exhibit to a
quarterly report on Form 10-Q or an annual report on Form 10-K.
All of those contracts filed as exhibits to the October 31, 1994
Form 10-K or disclosed in Ecogen's January 31, 1995, April 30,
1995 or July 31, 1995 Form 10-Q or in Ecogen's Current Reports on
Form 8-K dated November 7, 1995 and November 24, 1995 which are
material to the business and operations of Ecogen as presently
conducted are in full force and effect and, to the best of
Ecogen's knowledge, all parties to such contracts have performed
in all material respects all obligations required to be performed
by them to date, are not in default and do not have a right of
rescission. Neither Ecogen nor any of its Subsidiaries has any
outstanding powers of attorney, except routine powers of attorney
relating to representation before governmental agencies or given
in connection with qualification to conduct business in another
jurisdiction. No employees of Ecogen or any of its Subsidiaries
are covered by any collective bargaining agreement.
3.6 Taxes. Ecogen and each of its Subsidiaries has
-----
filed when due all federal, state and local income and other tax
returns, reports and declarations which are required to have been
filed by it and has, to the best of Ecogen's knowledge, paid all
taxes which have become due pursuant thereto and all other taxes,
assessments and other governmental charges imposed by law upon it
or any of its properties, assets, income, receipts, payrolls,
transactions, capital, net worth or franchises other than those
not delinquent except where the failure to file or pay would not
have a material adverse effect on the business of Ecogen. All
such tax returns are complete and correct in all material
respects as filed. To the best of Ecogen's knowledge, there is
no tax lien upon any property or asset
14
<PAGE> 19
of Ecogen, whether owned or leased, except for liens for taxes not
yet payable and liens which do not have a material adverse effect
on the business of Ecogen. To the extent that tax liabilities
have accrued on or before the Balance Sheet Date but have not
become payable, to the best of Ecogen's knowledge, they have been
adequately reflected as liabilities on the Balance Sheet and
adequate provision for payment thereof has been made. There have
been no examinations by any state or federal taxing authority of
the books and financial statements of Ecogen or any of its
Subsidiaries. The accruals and reserves for federal, state or
local taxes, as shown on the Balance Sheet are adequate in the
opinion of Ecogen. Neither Ecogen nor any of its Subsidiaries has
granted any waiver of any statute of limitation with respect to,
or any extension of a period for the assessment of, any federal,
state or local tax. To the best of Ecogen's knowledge, Ecogen has
withheld and duly paid to the appropriate governmental authority
all taxes required to be withheld by it pursuant to any ordinance,
statute or other law except where the failure to withhold or pay
would not have a material adverse effect on the business of
Ecogen.
3.7 Capitalization. Prior to the Reverse Stock Split,
--------------
the authorized capital stock of Ecogen consists of (i) 42,000,000
shares of common stock, par value $.01 per share, of which
29,996,287 shares were issued and outstanding at December 8,
1995, and no additional shares have subsequently been issued
except upon exercise of options, warrants or convertible
securities outstanding as of December 8, 1995; and (ii) 7,500,000
shares of preferred stock, par value $.01 per share, issuable in
series, of which 350,000 shares have been designated Series B
convertible preferred stock and 23,334 shares of which are issued
and outstanding at December 8, 1995, and of which 160,000 shares
have been designated Series C Convertible Preferred Stock, and
122,000 shares of which are issued and outstanding as of
December 8, 1995. After the consummation of the reverse stock
split described in the Special Proxy Statement, the authorized
capital stock of Ecogen will consist of (i) 42,000,000 shares of
common stock, par value $.01 per share of which approximately
5,990,000 shall be issued and outstanding; and (ii) 7,500,000
shares of preferred stock, par value $.01 per share with no
change in the designated preferred or the issued and outstanding
shares of preferred stock. The issued and outstanding shares of
Ecogen have been duly and validly issued and are fully paid and
nonassessable, and the Purchased Shares, when issued,
15
<PAGE> 20
will be duly and validly issued and fully paid and nonassessable.
Except for 180,778 shares of common stock, Ecogen holds no shares
of its common stock or preferred stock in its treasury. Except as
disclosed in Schedule 3.7, there are no outstanding options,
------------
warrants or other rights in existence, other than under this
Agreement and under the Warrant Agreement dated as of November 2,
1995 between Monsanto and Ecogen, to acquire from Ecogen any of
its shares of capital stock. Since the Balance Sheet Date there
have been no dividends, Restricted Payments or other
distributions declared or paid in respect of the shares of
capital stock of Ecogen.
3.8 Compliance With Instruments, Laws; Governmental
-----------------------------------------------
Authorizations. Neither Ecogen nor any of its Subsidiaries is
- --------------
(i) in violation of any term or provision of its Certificate of
Incorporation or By-Laws or, to the best of Ecogen's knowledge,
any governmental license or permit; (ii) in violation or default
under any material contract, agreement or other instrument; or
(iii) in violation of any statute, law, ordinance, rule,
regulation, judgment, order, decree, permit, concession, grant,
franchise, license or other governmental authorization or
approval which is material to its business or operations. All
material permits, concessions, grants, franchises, licenses and
other governmental authorizations and approvals necessary for the
conduct of the business of Ecogen and its Subsidiaries have been
duly obtained and are in full force and effect, and there are no
proceedings pending or, to the best of Ecogen's knowledge,
threatened which may result in the revocation, cancellation or
suspension, or any adverse modification, of any permit,
concession, grant, franchise, license or other governmental
authorization which would have a material adverse effect on the
business or financial condition of Ecogen and its Subsidiaries
taken on a whole. There have been no citations, fines or
penalties heretofore assessed against Ecogen or any of its
Subsidiaries and, to the best of Ecogen's knowledge, Ecogen and
each of its Subsidiaries have complied with in all material
respects any and all federal, state or local laws, including but
not limited to laws relating to air or water pollution, solid
waste disposal or other environmental protection matters, or
relating to occupation, health or safety, and no such citations,
fines or penalties have been assessed or, to the best of Ecogen's
knowledge, have been threatened since the Balance Sheet Date or
are now being threatened. There exists no default nor has any
act or omission occurred which, with the
16
<PAGE> 21
giving of notice or the passage of time, would constitute a
default under the provisions of any instrument evidencing
Indebtedness or liability or any agreement relating thereto or any
other agreement or instrument to which Ecogen is a party, and
which would have a material adverse effect on the business or
financial condition of Ecogen.
3.9 Patents and Technology Rights.
-----------------------------
(a) Except as set forth in Schedule 3.9 hereof
and except with respect to bioinsecticide product supply,
manufacturing, distributor and marketing agreements to which
Ecogen is a party, to the best of Ecogen's Knowledge, Ecogen and
its Subsidiaries and their successors and assigns have a right
(1) to practice all processes and process steps as now practiced
or planned to be practiced by Ecogen and its Subsidiaries, and
(2) to make, use and sell throughout the world, products now
made, used or sold or planned to be made, used or sold by Ecogen
and its Subsidiaries without substantial risk of infringement of
any right, interest, or patent of any third party.
(b) Ecogen and each of its Subsidiaries owns and
possesses, or is licensed or is otherwise entitled to use, all
patents, trademarks, copyrights and such pending applications
therefor and trade secrets, technologies, know-how, processes and
other proprietary rights necessary for conducting its business
operations; provided, however, that certain intellectual property
rights will be sold by Ecogen to Monsanto pursuant to the
Assignment Agreement.
(c) Except as set forth in Schedule 3.9 hereof,
to the best of Ecogen's Knowledge, there exists no contest,
litigation, infringement, fraud, misappropriation, or misuse by
Ecogen, pending or threatened in respect of, any patent or
application therefor, or any license or agreement of a third
party which is necessary for the conduct of Ecogen's business or
the business of any of its Subsidiaries.
3.10 Certain Transactions. No Affiliate of Ecogen that
--------------------
is not a Subsidiary of Ecogen owns or controls, directly or
indirectly, in whole or in part, any property, asset or
17
<PAGE> 22
right, tangible or intangible (including but not limited to, any
patent, trademark, service mark, trade name, brand name,
copyright, or pending application for any patent, trademark,
service mark, or copyright, invention, process, know-how, formula,
design or trade secret), which Ecogen or any of its Subsidiaries
is presently operating or using or the use of which is necessary
for its business.
3.11 Absence of Changes. Since the Balance Sheet
------------------
Date, except as disclosed on Ecogen's January 31, 1995, April 30,
1995 and July 31, 1995 Form 10-Qs, the Unaudited Balance Sheet,
the Current Report on Form 8-K dated November 7, 1995, the
Current Report on Form 8-K dated November 29, 1995, or as
specified in Schedule 3.11 hereto, Ecogen and its Subsidiaries
-------------
have not:
(a) undergone any changes in its condition,
properties, assets, liabilities, business or operations which are
in the aggregate materially adverse except for net losses of
$20,834,022 for the nine months ended July 31, 1995 and a
continuation of operating losses and a liquidity position similar
to that reported in the July 31, 1995 Form 10-Q;
(b) declared, set aside, made or paid any
Restricted Payment;
(c) incurred any Indebtedness or issued or sold
any debt securities except for Indebtedness incurred in
connection with the purchase or lease of property in the ordinary
course of business which in the aggregate is not materially
adverse to Ecogen and Indebtedness to Monsanto;
(d) mortgaged, pledged, licensed, sublicensed or
subjected to any lien, lease, security interest or other charge
or encumbrance any of its properties or assets, tangible or
intangible which in the aggregate materially adversely affect the
financial condition, property, assets, business, or operations of
Ecogen and its Subsidiaries taken as a whole, other than liens
and security interests in favor of Monsanto;
18
<PAGE> 23
(e) acquired or disposed of any assets or
properties (except for common stock of Ecogen) in any transaction
with any officer or director or with any shareholder owning more
than 5% of the outstanding common stock except for transactions
that have a value of less than $60,000;
(f) forgiven or cancelled any debts or claims, or
waived any rights having a value of more than $60,000 except in
the ordinary course of business which in the aggregate is not
materially adverse to Ecogen;
(g) suffered any damage, destruction or loss
(whether or not covered by insurance) which in the aggregate
materially adversely affects the financial condition, properties,
assets, business or operations of Ecogen and its Subsidiaries; or
(h) incurred other than in the ordinary course of
business any liability or obligation (whether absolute, accrued,
contingent or otherwise), exceeding $1,000,000 other than
liabilities and obligations to Monsanto.
3.12 Restrictions on Personnel. To the best of
-------------------------
Ecogen's Knowledge, no officer or employee of Ecogen or any of
its Subsidiaries has entered into any agreement which is now in
effect with any Person other than Ecogen or its Subsidiaries (a)
requiring such officer or employee to assign any interest in any
invention or trade secrets developed while employed by Ecogen or
any of its Subsidiaries or (b) containing any prohibition or
restriction of competition or solicitation of customers which if
enforced against such officer or employee would have a material
adverse effect on the business or financial condition of Ecogen
or any of its Subsidiaries.
3.13 Certain Payments. Neither the Internal Revenue
----------------
Service, the Commission nor any other federal, state, local or
foreign government agency or entity has initiated or, to the best
of Ecogen's knowledge, threatened any investigation of any
payments made by Ecogen and alleged to have been of the type
covered by Section 162(c) of the Internal Revenue Code.
19
<PAGE> 24
3.14 Disclosure. Neither this Agreement nor any
----------
exhibit or schedule hereto, nor any statement, list or
certificate delivered to Monsanto pursuant to this Agreement
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained herein and therein in the context in which they were
made not misleading.
3.15 Brokers. This Agreement was not induced or
-------
incurred through any person, firm or corporation acting as a
broker or finder, other than Len Bogner, for whose fees Ecogen
shall be responsible. Ecogen agrees to hold Monsanto harmless
from any loss, damage, cost or expense resulting from any claim
by any person, firm or corporation based upon any such person,
firm or corporation having acted as a broker or finder for Ecogen
or any other Person in connection with the transactions
contemplated by this Agreement, the Assignment Agreement and/or
the Research and Development Agreement.
ARTICLE IV.
CONDITIONS PRECEDENT TO PURCHASE AND SALE OF COMMON STOCK
---------------------------------------------------------
4.1 Conditions to Monsanto Obligations. The
----------------------------------
obligation of Monsanto to purchase the Purchased Shares described
in Article II is subject to the satisfaction of the following
conditions each of which may be waived in writing by an
authorized representative of Monsanto:
(a) Opinion of Counsel. Monsanto shall have
------------------
received an opinion addressed to Monsanto and dated as of the
Closing, of Dechert, Price & Rhoads, counsel for Ecogen,
satisfactory in substance and form to Monsanto and its counsel
and substantially in the form attached hereto as Exhibit 4.1(a).
--------------
In rendering such opinion, counsel may rely to the extent deemed
appropriate on the certificates of officers or employees of
Ecogen and of public officials as to matters of fact and authen-
ticity of documents and on opinions of counsel in other states as
to questions under the laws of such states.
20
<PAGE> 25
(b) Representations and Warranties True and
---------------------------------------
Correct. The representations and warranties in Article III hereof
- -------
shall be true and correct on the date of Closing. Monsanto shall
have received from the President of Ecogen an officer's
certificate to the foregoing effect dated as of the Closing.
(c) Closing Certificates. Monsanto shall have
--------------------
received copies, certified by the Secretary or Assistant
Secretary of Ecogen to be true and correct and in full force and
effect, of (i) the Certificate of Incorporation and By-Laws of
Ecogen; (ii) resolutions of the Board of Directors of Ecogen
authorizing the issuance of the Purchased Shares, the execution
and delivery of this Agreement and any other documents to be
executed by or on behalf of Ecogen pursuant to this Agreement;
and (iii) a statement containing the names and titles of the
officer or officers of Ecogen authorized to sign this Agreement
and other documents required by this Agreement, together with
true signatures of such officers.
(d) Proceedings Satisfactory to Monsanto. All
------------------------------------
proceedings taken in connection with the transaction contemplated
by this Agreement and all instruments, authorizations and other
documents applicable thereto shall be reasonably satisfactory in
form and content to Monsanto and Monsanto shall have received
copies of all such documents reasonably required by it.
(e) Approvals. The pre-transaction filing and
---------
waiting period requirements applicable to the transactions
contemplated by this Agreement, the Assignment Agreement and the
Research and Development Agreement under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended ("HSR"), shall have
expired or shall have been terminated, and any necessary foreign
approvals shall have been obtained, and there shall not be
pending or threatened any governmental litigation or proceeding
which restrains, prohibits or prevents or in the reasonable
opinion of counsel presents a significant risk of restraining,
prohibiting or preventing, or changing the terms of, or obtaining
material damages in connection with, the transactions
contemplated by this Agreement, the Assignment Agreement or the
Research and Development Agreement.
21
<PAGE> 26
(f) Research and Development Agreement. Ecogen
----------------------------------
shall have executed and delivered the Research and Development
Agreement.
(g) Assignment Agreement. The transactions
--------------------
contemplated under the Assignment Agreement shall have been
closed simultaneously with the Closing hereunder.
4.2 Conditions to Ecogen's Obligation. The obligation
---------------------------------
of Ecogen to sell the Purchased Shares described in Article II is
subject to the satisfaction of the following conditions each of
which may be waived in writing by an authorized representative of
Ecogen.
(a) At Closing, Monsanto shall have delivered the
Purchase Price with respect to those Shares purchased at Closing.
(b) Closing Certificate. Ecogen shall have
-------------------
received a Certificate, dated as of the Closing Date and executed
by an officer of Monsanto to the effect that the representations
and warranties of Monsanto contained in this Agreement are true
and correct in all respects on and as of the Closing as though
made on and as of such date.
(c) Representations, Warranties and Covenants.
-----------------------------------------
(i) All representations and warranties of
Monsanto made in this Agreement, or in any Exhibit or
certificate delivered pursuant hereto shall be true and
complete in all material respects on and as of the Closing
Date with the same force and effect as if made on and as of
that date.
(ii) All terms, covenants, and conditions to
be complied with and performed by Monsanto on or prior to
the Closing Date shall have been complied with or performed
in all material respects.
22
<PAGE> 27
(d) Adverse Proceedings. No suit, action or
-------------------
governmental proceeding shall have been instituted or threatened
against and no order, decree, or judgment of any court, agency,
or other governmental authority shall have been rendered against
Monsanto which it is reasonably believed would render it
unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms.
(e) HSR Act Approval. The applicable HSR Waiting
----------------
Period shall have expired or shall have been terminated and any
necessary foreign approvals shall have been obtained and there
shall not be pending or threatened any governmental litigation
proceeding which restrains, prohibits, or prevents or in the
reasonable opinion of counsel presents a significant risk of
restraining, prohibiting or preventing, or changing the terms of,
or obtaining material damages in connection with the transactions
contemplated by this Agreement, the Assignment Agreement or the
Research and Development Agreement.
(f) Research and Development Agreement. Monsanto
----------------------------------
shall have executed and delivered the Research and Development
Agreement.
(g) Assignment Agreement. The transactions
--------------------
contemplated under the Assignment Agreement shall have been
closed simultaneously with the Closing hereunder.
(h) Senior Promissory Note. Monsanto shall have
----------------------
delivered to Ecogen, marked paid, the original of the Senior
Promissory Note dated November 2, 1995 in the face amount of
$2,000,000 and payable to Monsanto.
(i) Security Agreement. Monsanto shall have
------------------
executed and delivered such documents required to terminate the
security interest granted pursuant to the Security Agreement
dated as of November 2, 1995 by and between Monsanto and Ecogen.
(j) Warrant Agreement. Monsanto shall have
-----------------
delivered to Ecogen, marked cancelled, the original of the
Warrant to Purchase Two Million Shares of Common
23
<PAGE> 28
Stock dated November 2, 1995 granted pursuant to the Warrant
Agreement by and between Monsanto and Ecogen dated November 2,
1995.
ARTICLE V.
RIGHT OF FIRST REFUSAL AND LIMITATIONS ON OWNERSHIP
---------------------------------------------------
5.1 Right of First Refusal. If during the term of the
----------------------
Research and Development Agreement and for 2 years following its
termination Ecogen agrees to sell shares of its common stock or
other voting securities ("Ecogen Securities") in a private or
public offering other than (i) Ecogen Securities issued to Ecogen
employees or directors pursuant to Ecogen's stock option plans,
or to members of Ecogen's Scientific Advisory Board, or issued in
connection with any stock options, warrants or other rights in
existence as of the Closing Date, (ii) upon the conversion or
exchange of convertible or exchangeable securities outstanding as
of the date of this Agreement, (iii) an equity investment in
Ecogen by the other party to, or partner in, any license
agreement, research and development agreement, distribution
agreement, joint-venture or other similar corporate alliance,
provided that such equity investment is made as a condition to
Ecogen's good faith agreement to enter into such license
agreement, research and development agreement, distribution
agreement, joint-venture or other similar corporate alliance,
(iv) in connection with a merger or acquisition, or (v) to any
underwriter, placement agent or financial advisor in connection
with any financing or other transaction by Ecogen, and provided
Monsanto still owns all of the Purchased Shares at the time of
such private or public offering, Monsanto shall have the right,
but not the obligation, to acquire upon the same terms and
conditions applicable to such private or public offering all or
any portion of such Ecogen Securities sufficient for Monsanto to
maintain after the offering the same percentage of ownership of
issued and outstanding Ecogen Securities that Monsanto possessed
immediately prior to the offering (the "Pre-Offering
Percentage").
5.2 Private Offering. With respect to a private
----------------
offering, Ecogen shall no later than five (5) Business Days after
the execution of any agreement entered into in connection with
such private offering notify Monsanto in writing of the proposed
offering (a
24
<PAGE> 29
"Notice") which Notice shall include the description of the
securities proposed to be issued by Ecogen and specify the
number, price and payment and other terms, together with any
letter of intent and the final contract, if available. Monsanto
shall have twenty (20) Business Days from the date of receipt of
Ecogen's notice in which to advise Ecogen whether Monsanto elects
to exercise its rights under Section . If Monsanto does not
respond, or if Monsanto indicates that it will not exercise its
rights, Monsanto shall be considered irrevocably to have waived
its rights under Section 5.1 with respect to the private
offering. If Monsanto timely advises Ecogen that Monsanto will
exercise its rights under Section 5.1, Monsanto shall have the
right to acquire all or any portion of the necessary amount of
the Ecogen Securities to maintain Monsanto's Pre-Offering
Percentage at the price and upon the terms (other than any
registration rights which are on terms different than those
granted hereunder) specified in the Notice. Closing shall be in
accordance with the terms of the private offering agreement,
provided, however, that if such agreement provides for the
payment of consideration other than cash, Monsanto shall have the
right to purchase its Pre-Offering Percentage of shares for the
cash equivalent amount of such other consideration. Monsanto
shall make such investment representations to Ecogen and shall
provide Ecogen with such other documentation at closing as is
reasonably required by Ecogen to comply with applicable
securities laws. The cash equivalent amount referred to above
shall be determined by an independent third party reasonably
agreed to by Monsanto and Ecogen (the costs and expenses of which
shall be paid by Ecogen).
5.3 Public Offering. With respect to a public
---------------
offering, Ecogen shall notify Monsanto no later than five (5)
Business Days after Ecogen has entered into a letter of intent
with its underwriters, and shall provide Monsanto with a copy of
any letter of intent with its underwriters. Monsanto shall have
twenty (20) Business Days from the date of receipt of Ecogen's
notice in which to advise Ecogen whether Monsanto elects to
exercise its rights under Section 51. If Monsanto does not
respond or if Monsanto indicates that it will not exercise its
rights, Monsanto shall be considered irrevocably to have waived
its rights under Section 5.1 with respect to the public offering.
If Monsanto timely advises Ecogen that Monsanto desires to retain
its rights under Section 5.1, then when Ecogen files a
registration statement containing a preliminary prospectus with
the Commission, Ecogen shall provide
25
<PAGE> 30
Monsanto with copies of the preliminary prospectus and all
subsequent amendments. Monsanto shall have twenty (20) Business
Days from its receipt of the preliminary prospectus in which to
exercise its rights under Section 5.1 by making an offer to
acquire all or any portion of the necessary amount of Ecogen
Securities to maintain Monsanto's Pre-Offering Percentage based on
the price and the other terms contained in the final prospectus,
except that the price to be paid by Monsanto shall be net of any
underwriting discount and selling commissions. No such offer to
buy shall be accepted prior to the time that the registration
statement becomes effective. The registration statement shall
indicate that Monsanto has anti-dilution rights to purchase Ecogen
Securities on the terms offered to the public.
5.4 Limitations. Notwithstanding the preceding
-----------
provisions of this Article V, Ecogen shall not be required to
issue any fractional shares as a result of Monsanto's exercise of
its rights under Section 5.1. Ecogen shall not be required to
transfer any Ecogen Securities to Monsanto under this Article V,
if to do so would result in the violation of any applicable law,
rule or regulation.
5.5 Limitations on Monsanto's Ownership. Except for
-----------------------------------
purchases of Ecogen Securities made in accordance with this
Article V, prior to the third anniversary of the Closing, neither
Monsanto nor any of its Affiliates shall directly or indirectly
acquire any Ecogen Securities (except by way of stock dividends,
stock splits, or similar events affecting holders of Ecogen
Securities generally) if the effect of the acquisition would be
to increase the aggregate voting power in the election of
directors of all Ecogen Securities owned by Monsanto and its
Affiliates to more than twenty-five percent (25%) of the total
combined voting power of all Ecogen Securities then outstanding;
provided, however, that nothing contained in this Agreement shall
be deemed to prohibit Monsanto and its Affiliates from acquiring
Ecogen Securities (through open market purchases or otherwise) so
long as the effect of such acquisitions does not increase the
aggregate voting power in the election of directors of all Ecogen
Securities owned by Monsanto and its Affiliates to more than
twenty-five percent (25%) of the total combined voting power of
all Ecogen Securities then outstanding. Notwithstanding the
foregoing limitation:
26
<PAGE> 31
(a) Monsanto or any of its Affiliates may acquire
an unlimited percentage of Ecogen Securities prior to the third
anniversary of the Closing if any of the following events occur:
(i) A tender or exchange offer is made by
any Person or 13D Group (other than an Affiliate of or
Person acting in concert with Monsanto) to acquire Ecogen
Securities and/or other securities of Ecogen that, if added
to the Ecogen Securities and other securities of Ecogen
already owned by that Person or 13D Group, would represent
more than thirty percent (30%) of the total combined voting
power or profit and loss participation of all Ecogen
Securities and other securities of Ecogen issued and
outstanding;
(ii) There is public disclosure that Ecogen
Securities and/or other securities of Ecogen representing
more than thirty percent (30%) of the total combined voting
power or profit and loss participation of all Ecogen
Securities and other securities of Ecogen issued and
outstanding have been acquired or are proposed to be
acquired by any Person or 13D Group (other than an Affiliate
of or Person acting in concert with Monsanto);
(iii) Any Person or 13D Group (other than
an Affiliate of or Person acting in concert with Monsanto)
shall beneficially own Ecogen Securities representing more
than thirty percent (30%) of the total combined voting power
of all issued and outstanding Ecogen Securities;
(iv) At any election or series of elections,
persons not proposed for nomination or nominated by the
management of Ecogen are elected as directors of Ecogen, and
together constitute fifty percent (50%) or more of Ecogen's
Board of Directors; or
(v) Any Person or 13D Group (other than an
Affiliate of or Person acting in concert with Monsanto)
solicits or receives valid proxies for the
27
<PAGE> 32
election of Ecogen's Board of Directors representing an
aggregate of thirty percent (30%) or more of the total
combined voting power of all Ecogen Securities issued and
outstanding.
(b) Neither Monsanto nor any of its Affiliates
shall be required to dispose of any shares of Ecogen Securities
if their aggregate percentage ownership is increased as a result
of Ecogen's recapitalization or any other action taken by Ecogen.
As used herein, "13D Group" means any group of persons formed for
the purpose of acquiring, holding, voting or disposing of
securities that would be required under Section 13(d) of the
Exchange Act and the related rules and regulations (as now in
effect, and based on present legal interpretations) to file a
statement on Schedule 13D or 13G with the Commission as a
"person" within the meaning of Section 13(d)(3) of the Exchange
Act if the group beneficially owned Ecogen Securities
representing more than five percent (5%) of the total combined
voting power of all Ecogen Securities then issued and
outstanding.
ARTICLE VI.
LIMITATION ON TRANSFER
----------------------
6.1 Limitation on Transfer. During the term of the
----------------------
Research and Development Agreement, Monsanto shall not directly
or indirectly offer for sale, or transfer any Common Stock
acquired by Monsanto pursuant to this Agreement. Notwithstanding
the foregoing, the limitations on transfers set forth in this
Section 6.1 shall terminate upon the occurrence of an event set
forth in Section 5.5(a).
28
<PAGE> 33
ARTICLE VII.
REGISTRATION RIGHTS
-------------------
7.1 Requested Registration.
----------------------
(a) Request for Registration. Subject to Section
------------------------
6.1, Holders of Registrable Securities shall have the right to
request (with such requests in writing and stating the number of
shares of Registrable Securities to be disposed of and the
intended method of disposition of shares by such Holders) up to
two (2) registrations on Form S-3 at Ecogen's expense and an
unlimited number of additional registrations on Form S-3 at the
selling Holder's expense, provided that a request for
registration includes at least fifty percent (50%) of the
aggregate Registrable Securities held on such date and (ii) the
requests for additional registrations are made by Holders of at
least twenty percent (20%) of the Registrable Securities, and
(iii) such Registerable Securities have an aggregate offering
price of at least $1,000,000 or represent all of the Registerable
Securities of the Holders held on such date, subject only to the
following:
(i) Ecogen shall not be required to effect a
registration pursuant to this Section 7.1 prior to the
second anniversary of the Closing unless Monsanto otherwise
has a right hereunder to sell Registrable Securities before
such date.
(ii) Ecogen shall not be required to effect a
registration pursuant to this Section 7.1 within one hundred
eighty (180) days after the effective date of the last such
registration pursuant to this Section 7.1.
(iii) Ecogen shall not be required to
effect a registration in any particular jurisdiction in
which Ecogen would be required to execute a general consent
to service of process in effecting such registration,
qualification or compliance, unless Ecogen is already
subject to service in such jurisdiction and except as may be
required by the Securities Act or applicable rules or
regulations thereunder.
29
<PAGE> 34
(iv) Ecogen shall not be required to effect a
registration for a period of not more than ninety (90) days
immediately following the delivery of a certificate signed
by the President of Ecogen to the Requesting Holders stating
that, in the good-faith judgment of the Board of Directors
of Ecogen, it would be seriously detrimental to Ecogen and
its shareholders for a Registration Statement to be filed on
or before the date filing would otherwise be required
hereunder; provided, however, that Ecogen may not utilize
this right more than once in any twelve (12) month period
and Ecogen may not exercise this right based on the fact
that Ecogen has recently registered any of its securities
for the account of another security holder or holders
exercising their respective demand registration rights.
If Ecogen cannot qualify for registration on Form S-3, then
Ecogen shall effect any registration required or requested
by the Holder on Form S-1, or such other appropriate form,
in which event this Section 7.1 shall apply in all respects
as if the words "Form S-3" were replaced by the words "Form
S-1" or the appropriate designation for such other form.
(b) Notice of Inclusion. Ecogen shall give
-------------------
written notice to all Holders of Registrable Securities of the
receipt of a request for registration pursuant to this Section
7.1 and shall provide a reasonable opportunity for other Holders
to participate in the registration; provided, however, that, if
the registration is for an underwritten offering, then the terms
of Section 7.1(c) hereof shall apply to all participants in such
offering. Subject to the foregoing, Ecogen shall use its best
efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3 to the extent requested by the
Holder or Holders thereof for purposes of disposition.
(c) Underwriting. If the Requesting Holders
------------
intend to distribute the Registrable Securities covered by their
request by means of an underwriting, then they shall so advise
Ecogen as a part of their request made pursuant to this Section
7.1 and Ecogen shall include such information in the written
notice referred to in Section 7.1(b) hereof. The right of any
Holder to registration pursuant to this Section 7.1 shall be
conditioned upon such
30
<PAGE> 35
Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the
extent requested and to the extent provided herein.
Ecogen shall (together with all Holders proposing
to distribute their securities through such underwriting) enter
into an underwriting agreement in customary form with the
representative of the underwriter or underwriters of recognized
national standing, selected for such underwriting by a majority
in interest of the Requesting Holders and reasonably acceptable
to Ecogen. Notwithstanding any other provision of this Section
7.1, if the representative advises the Requesting Holders in
writing that marketing factors require a limitation on the number
of shares to be underwritten, then the Requesting Holders shall
so advise all Holders, and the number of shares of Registrable
Securities that may be included in the registration and
underwriting shall be allocated first among all Holders thereof
in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the
time of filing the Registration Statement. No Registrable
Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such
registration.
If any Holder of Registrable Securities
disapproves of the terms of the underwriting, then such person
may elect to withdraw therefrom by written notice to Ecogen, the
underwriter and the Requesting Holders. The Registrable
Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that, if, by the
withdrawal of such Registrable Securities, a greater number of
Registrable Securities held by other Holders may be included in
such registration (up to the maximum of any limitation imposed by
the underwriters), then Ecogen shall offer to all Holders who
have included Registrable Securities in the registration the
right to include additional Registrable Securities in the same
proportion used to determine the underwriter limitation in this
Section 7.1(c).
If the underwriter has not limited the number of
Registrable Securities to be underwritten, then Ecogen and its
executive officers, and such other Persons as are determined by
the Board of Directors, their successors, and their assigns
("Other Selling
31
<PAGE> 36
Stockholders"), may include securities for their own account in
such registration if the underwriter so agrees and if the number
of Registrable Securities held by the Holders that would otherwise
have been included in such registration and underwriting will not
thereby be limited for any reason, including but not limited to
the price for which the Registrable Securities will be sold. To
the extent that the underwriter wishes to limit the number of
shares to be included in the registration on behalf of Ecogen and
the Other Selling Stockholders, the shares of common stock to be
registered held by the Other Selling Stockholders shall be
excluded from such offering prior to excluding any shares held by
Ecogen and those held by Ecogen shall be excluded prior to
excluding any Registrable Securities held by the Holders.
7.2 Ecogen Registration.
-------------------
(a) Notice and Inclusion. Subject to Section
--------------------
6.1, if, at any time after the Closing until the tenth
anniversary of the Closing, Ecogen shall determine to register
any of its securities for its own account, other than a
registration relating solely to employee benefit plans, or a
registration relating solely to a Commission Rule 145
transaction, Ecogen shall:
(i) promptly give to each Holder written
notice thereof (which shall include a list of the
jurisdictions in which Ecogen intends to attempt to qualify
such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any
related qualification under blue sky laws or other compli-
ance), and in any underwriting involved therein, all
Registrable Securities specified in a written request or
requests, within twenty (20) days after receipt of the
written notice from Ecogen, by any Holder or Holders.
(b) Underwriting. If the registration of which
------------
Ecogen gives notice is for a registered public offering by Ecogen
of its securities through an underwriting, then
32
<PAGE> 37
Ecogen shall so advise the Holders as a part of the written notice
given pursuant to Section 7.2(a)(i) hereof. In such event, the
right of any Holder to registration pursuant to this Section 7.2
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 Ecogen, and all the Other
Selling Stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for
underwriting by Ecogen. Notwithstanding any other provision of
this Section 7.2, if the underwriter determines that marketing
factors require a limitation on the number of shares to be
underwritten, then the underwriter may exclude from such
registration and underwriting some or all of the Registrable
Securities held by the Holders or the stock held by Other Selling
Stockholders in accordance with this Section 7.2(b). Ecogen
shall so advise all Holders and all Other Selling Stockholders
distributing their securities through such underwriting, and (i)
as to the first registration in which Holders are entitled to
participate pursuant to this Section 7.2, the number of
Registrable Securities and other securities that may be included
in the registration and underwriting shall be allocated among all
Holders thereof on the basis that shares held by all the Other
Selling Stockholders who are not Holders shall first be excluded
to the extent required and, if further exclusion is necessary,
shares held by the selling Holders shall then be excluded;
provided, however, that, as among the respective Other Selling
Stockholders as a group on the one hand and the Holders as a
group on the other hand suffering such exclusion, the exclusion
shall be in proportion, as nearly as practicable, to the amount
of securities entitled to inclusion in such registration held by
each of the Other Selling Stockholders as a group and each of the
Holders at the time of filing the Registration Statement; and
(ii) as to all subsequent registrations, the number of shares of
Registrable Securities and other securities that may be included
in the registration and underwriting shall be allocated among all
Other Selling Stockholders and the Holders in proportion, as
nearly as practicable, to the respective amounts of securities
entitled to inclusion in such registration held by all such Other
Selling Stockholders and Holders at the time of filing the
Registration Statement. For purposes of the apportionment
provisions in clause (i) above, for any selling Holder that is a
partnership or corporation, the partners, retired partners, and
shareholders of
33
<PAGE> 38
such Holder, the estate and family members of such partners and
retired partners, and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling Holder,"
and any pro rata reduction with respect to such selling Holder
shall be based upon the aggregate number of shares carrying
registration rights owned by all entities and individuals included
in such "selling Holder," as defined in this sentence. If any
Other Selling Stockholder or Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by
written notice to Ecogen and the underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
7.3 Expenses of Registration. All Registration
------------------------
Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Article VII shall be
borne by Ecogen; provided, however, that the Registration
Expenses for the third and all subsequent registrations under
Section 7.1(a) hereof requested by the Holders shall be borne by
the requesting Holders pro rata on the basis of the number of
their shares so registered. All Selling Expenses relating to the
securities registered by Holders and, if applicable, Other
Selling Stockholders, and fees and disbursements of counsel,
shall be borne by the Holders or the Other Selling Stockholders,
as the case may be, of such securities pro rata on the basis of
the number of their shares so registered.
7.4 Registration Procedures.
-----------------------
(a) Ecogen shall use its best efforts to register
or qualify the Registrable Securities covered by a Registration
Statement under such other securities or blue sky laws of such
United States jurisdictions as Holder shall reasonably request
and do any and all acts and things which may be necessary or
desirable to enable Holder to consummate the public sale or other
disposition in such jurisdictions; provided, however, that Ecogen
shall not be required in connection therewith or as a condition
thereto to qualify to do business or file a general consent to
service of process in any such jurisdictions.
(b) Ecogen represents and warrants that, on the
date of its effectiveness, the Registration Statement will comply
in all material respects with the
34
<PAGE> 39
applicable requirements of the Securities Act and the rules
thereunder, including without limitation Rule 415; on the date of
its effectiveness, the Registration Statement will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements made therein not misleading; provided, however,
that no representation is made by Ecogen with respect to
information relative to any Holder; and the Prospectus will not
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading; provided, however, that no representation is made by
Ecogen with respect to information relative to any Holder.
(c) If, at any time or times while the
Registration Statement is effective, Ecogen notifies Holder that
a development has occurred or is pending which, based upon
consultation with Ecogen's legal counsel, Ecogen reasonably
believes may cause the then current Prospectus not to be in
compliance with applicable securities laws, then Holder shall
refrain from delivering the Prospectus and from making any offers
or sales of Registrable Securities requiring the delivery of the
Prospectus until such time as Ecogen either notifies Holder that
the Prospectus complies with such laws or delivers an amended
Prospectus in replacement of the deficient Prospectus. Ecogen
shall use its reasonable best efforts to minimize the time during
which Holder must so refrain, and no more than one (1) such
period of refrain shall be imposed during any period of one
hundred eighty (180) days.
(d) At least two (2) Business Days prior to the
initial filing of the Registration Statement or Prospectus and no
fewer than two (2) Business Days prior to the filing of any
amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by
reference), Ecogen shall furnish each selling Holder, its legal
counsel and the managing underwriter, if any, copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) shall be
subject to review of such Holder, its legal counsel and such
underwriters, if any, and Ecogen shall cause its officers and
directors and the independent certified public accountants to
Ecogen to respond to such inquiries as shall be necessary, in the
opinion of respective counsel to Ecogen and any such
underwriters, to
35
<PAGE> 40
conduct a reasonable investigation within the meaning of the
Securities Act. Ecogen shall not file any such Registration
Statement or Prospectus or any amendments or supplements thereto
to which a selling Holder, its legal counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis
(i.e., within two (2) Business Days of receipt thereof).
----
(e) Ecogen shall promptly notify each selling
Holder when the Registration Statement is declared effective;
notify Holder of any stop-order or similar proceeding by the
Commission or any state securities authority; and furnish such
number of Prospectuses, Prospectus supplements and other
documents incident thereto as Holder from time to time may
reasonably request.
(f) In the event of any breach by Ecogen of the
provisions of Section 7.1, 7.2, 7.3 or 7.4, the parties agree
that each Holder will suffer irreparable harm. Accordingly, the
parties agree that the provisions of Sections 7.1, 7.2, 7.3 and
7.4 are specifically enforceable by each Holder and that each
Holder shall be entitled to temporary and permanent injunctive
relief against Ecogen and the other rights and remedies to which
each Holder may be entitled to at law, in equity or under this
Agreement for any such breach.
7.5 Indemnification.
---------------
(a) Indemnification by Ecogen. Ecogen shall
-------------------------
indemnify each Holder with respect to which registration,
qualification or compliance has been effected pursuant to
this Article VII, each of its officers, directors,
employees, agents and partners, each Person controlling such
Holder within the meaning of Section 15 of the Securities
Act, 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
36
<PAGE> 41
statement) of a material fact contained in any such
Registration Statement, Prospectus, offering circular or
other document or any amendment or supplement thereto or
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 Ecogen of the Securities Act or any rule
or regulation thereunder applicable to Ecogen and relating to
action or inaction required of Ecogen in connection with any
such registration, qualification or compliance. Ecogen shall
reimburse each such Holder, each of its officers, directors,
employees, agents and partners, and each Person controlling
such Holder, 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 expense,
claim, loss, damage, liability or action; provided, however,
that Ecogen shall not be liable in any such case to the
extent that any such claim, loss, damage, liability, action
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 Ecogen by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use
therein.
(b) Indemnification by the Holders. To the
------------------------------
extent set forth in the second sentence of this Section 7.5(b),
each Holder shall, if Registrable Securities or other securities
held by such Holder are included in the securities as to which
such registration, qualification or compliance is being effected,
indemnify Ecogen, each of its directors, officers, employees and
agents, each underwriter, if any, of Registrable Securities
covered by such a Registration Statement, each Person who
controls Ecogen or such underwriter within the meaning of Section
15 of the Securities Act, each other such Holder, each of such
other Holder's officers, directors, employees, agents and
partners, 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 made
37
<PAGE> 42
by the Holder and contained in any such Registration Statement,
Prospectus, offering circular or other document, or any amendment
or supplement thereto or 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 made by
the Holder and stated therein or necessary to make the statements
therein not misleading or any violation by Ecogen of any rule or
regulation promulgated under the Securities Act applicable to
Ecogen in connection with such registration, qualification or
compliance as a result of any statement (or based on any omission
to state or alleged omission) required to be made by such Holder.
Each such Holder shall reimburse Ecogen, such other Holders,
directors, officers, employees, agents, partners, Persons,
underwriters and control Persons for any legal or any other
expenses reasonably incurred in connection with investigating,
preparing or defending any such expense, 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 or other document or any
amendment or supplement thereto in reliance upon and in conformity
with written information furnished by the Holder to Ecogen by an
instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the
obligations of such Holders hereunder shall be limited to an
amount equal to the proceeds to each such Holder of Registrable
Securities sold as contemplated herein in connection with the
particular registration, qualification or compliance involved.
(c) Notice. Each party entitled to
------
indemnification under this Section 7.5 (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, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be
withheld), and that the Indemnified Party may participate in such
defense at its own expense; and provided further that the failure
of any Indemnified Party to give notice as provided herein shall
not relieve
38
<PAGE> 43
the Indemnifying Party of its obligations under this Section 7.5
unless such failure is materially detrimental to the Indemnifying
Party. 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 to
such claim or litigation.
7.6 Information by Holder. Each Holder or Holders of
---------------------
Registrable Securities in any registration shall furnish to
Ecogen such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as Ecogen may
reasonably request in writing but only to the extent as shall be
required in connection with any registration, qualification or
compliance referred to in this Article VII.
7.7 Rule 144 Reporting. With a view to making
------------------
available the benefits of certain rules and regulations of the
Commission which may permit the sale of the Restricted Securities
or Control Securities to the public without registration, Ecogen
agrees to:
(a) Use its best efforts to make and keep public
information available as those terms are understood and defined
in Rule 144 under the Securities Act;
(b) Use its best efforts to file with the
Commission in a timely manner all reports and other documents
required of Ecogen under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting
requirements);
(c) For so long as a Holder owns any Restricted
Securities or Control Securities, furnish to the Holder forthwith
upon request (i) a written statement by Ecogen as to its
compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of Ecogen, and (iii) such other
reports and documents so filed as such Holder may reasonably
request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without
registration; and
39
<PAGE> 44
(d) When any Holder qualifies under Rule 144 for
the unrestricted right of sale under Rule 144, Ecogen shall, upon
written request of such Holder (such request to include
sufficient detail as to establish how the Holder so qualifies
under Rule 144) and an opinion of counsel satisfactory to Ecogen,
promptly remove any restrictive legend that may have been placed
on any Restricted or Control Securities and issue Ecogen
Securities free of such restrictive or other legends.
7.8 Transfer of Registration Rights. Monsanto may
-------------------------------
transfer the rights to cause Ecogen to register the Registrable
Securities under Sections 7.1 and 7.2 hereof to an aggregate of
no more than five Holders and each such Holder may transfer or
assign such rights to a transferee or assignee in connection with
the transfer or assignment of not less than all of the shares of
the Registrable Securities held by such Holder; provided,
however, that Ecogen shall be entitled to notice of any such
transfer of registration rights within thirty (30) days of the
date such transfer is effected.
7.9 Limitations on Subsequent Registration Rights. No
---------------------------------------------
owner or prospective owner of Ecogen Securities or other
securities of Ecogen shall have any registration rights that are
inconsistent with the provisions of this Agreement. Ecogen shall
not, without the prior written consent of the Holders (which
consent shall not be unreasonably withheld) of not less than
sixty-six and two-thirds percent (66-2/3%) of the Registrable
Securities then held by Holders, enter into any agreement with
any owner or prospective owner of any Ecogen Securities or other
securities of Ecogen that would allow such owner or prospective
owner to include such securities in any registration filed under
this Article VII if such inclusion would adversely affect the
rights of any Holder.
7.10 "Market Stand-off" Agreement. Each Holder hereby
----------------------------
agrees that, to the extent requested by Ecogen and an underwriter
of a sale of Ecogen Securities or other securities of Ecogen for
the account of Ecogen and not for the account of a security
holder or holders exercising their respective demand registration
rights, it shall not sell or otherwise transfer or dispose of
(other than to transferees who agree to be similarly bound) any
Registrable Securities during the ninety (90) day period
following the effective date of a
40
<PAGE> 45
registration statement of Ecogen filed under the Securities Act;
provided, however, that all officers and directors of Ecogen, all
Other Selling Stockholders and all other Persons with registration
rights (whether or not pursuant to this Agreement) shall enter
into similar agreements. To enforce the foregoing covenant,
Ecogen may impose stop-transfer instructions with respect to the
Registrable Securities of each Holder (and the shares or
securities of every other Person subject to the foregoing
restriction) until the end of such ninety (90) day period.
7.11 Termination of Registration Rights. The
----------------------------------
registration rights granted pursuant to Section 7.1 shall
terminate as to each Holder on the third anniversary of the
termination or expiration of the term of the Research and
Development Agreement.
ARTICLE VIII.
REPRESENTATIONS OF MONSANTO
---------------------------
To induce Ecogen to sell the Purchased Shares described in
Article II, Monsanto represents and warrants to Ecogen as
follows:
8.1 Investment Purpose. Monsanto is acquiring the
------------------
Purchased Shares issued pursuant to this Agreement for purposes
of investment and for its own account and not with a view to the
sale or other distribution thereof as such terms are defined in
the Securities Act, as amended, and the regulations of the
Commission promulgated thereunder.
8.2 Accredited Investor. Monsanto is an "accredited
-------------------
investor" as defined in Rule 501(a) promulgated under the
Securities Act.
8.3 Access to Information. Monsanto has been given
---------------------
access to all information requested by it regarding Ecogen,
including information requested regarding the current financial
condition of Ecogen and the risks associated therewith.
41
<PAGE> 46
8.4 Due Diligence. Monsanto has made its own due
-------------
diligence investigation of Ecogen and Ecogen's business, and its
own analysis of the merits and risks of the investment made
pursuant to this Agreement, and is not relying on anyone else's
analysis or investigation or Ecogen, its business or the merits
and risks of the purchase of the Purchased Shares other than
professionals employed specifically by Monsanto to assist
Monsanto.
8.5 Restricted Securities. Monsanto understands that
---------------------
the sale of the Purchased Shares hereunder has not been
registered under the Securities Act and that the Purchased Shares
cannot be resold or transferred by Monsanto unless it is
subsequently registered under the Securities Act or unless an
exemption from such registration is available. In this
connection, Monsanto represents that it is familiar with Rule 144
under the Securities Act as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
8.6 Exemption Reliance. Monsanto has been advised
------------------
that the Purchased Shares are not being registered under the
Securities Act or under state securities laws, but are being
offered and sold pursuant to exemptions from such laws, and that
Ecogen's reliance upon such exemptions is predicated in part on
Monsanto's representations contained herein.
8.7 Authorization and Binding Effect. The execution
--------------------------------
and delivery of this Agreement and the performance by Monsanto of
its obligations hereunder are within Monsanto's corporate power,
have been duly authorized by proper corporate action on the part
of Monsanto, are not in violation of, or default under any
existing law, rule or regulation of any governmental agency or
authority, any order or decision of any court, the Certificate of
Incorporation or By-Laws of Monsanto or the terms of any
agreement, restriction or undertaking to which Monsanto is a
party or by which it is bound, and except for the notification
required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the approval of Ecogen's shareholders of
the proposed reverse stock split as described in the Special
Proxy Statement, do not require the approval or consent of the
shareholders of Monsanto, any governmental body, agency or
authority or any other person or entity.
42
<PAGE> 47
8.8 Brokers. This Agreement was not induced or
-------
procured through any person, firm or corporation acting as a
broker or finder for Monsanto. Monsanto agrees to hold Ecogen
harmless from any loss, damage, cost or expense resulting from
any claim by any person, firm or corporation based upon any such
person, firm or corporation having acted as a broker or finder
for Monsanto or any other Person in connection with the
transactions contemplated by this Agreement, the Assignment
Agreement and/or the Research and Development Agreement.
8.9 Stock Legend. Subject to Section 7.7(d) hereof,
------------
certificates representing the Purchased Shares shall bear the
following legend:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or under any state securities law and may not be
sold or offered for sale in the absence of an effective
registration statement under such act and applicable state
securities laws or an opinion of counsel satisfactory to the
Company that such registration is not required. The
securities represented by this certificate are further
subject to certain resale restrictions and entitled to the
benefits set forth in an Investment Agreement dated as of
January 24, 1996 between Ecogen, Inc., a Delaware
corporation, and Monsanto Company, a Delaware corporation
(the "Agreement"). A copy of the Agreement and all
amendments thereto is on file in the office of the Secretary
of the Company."
ARTICLE IX.
MISCELLANEOUS
-------------
9.1 Survival of Representations and Warranties.
------------------------------------------
Ecogen's representations and warranties contained in Article III
hereof and Monsanto's representations and warranties set forth in
Article VIII hereof shall survive the Closing for a period of two
(2) years. Notwithstanding the foregoing, the representations
and warranties set forth in Sections 3.2, 3.3, 3.7 hereof, to the
extent applicable to the shares of Common Stock to be issued to
Monsanto hereunder, shall survive the Closing indefinitely.
43
<PAGE> 48
9.2 Assignment. Except as set forth in Section 7.8,
----------
this Agreement shall not be assigned by either party without the
written consent of the other party. Notwithstanding the
foregoing, either party may assign this Agreement, without such
consent, to the purchaser of all its assets, or of all the assets
of its business to which this Agreement or the Research and
Development Agreement relates, and Monsanto, in addition to its
rights under Section 7.8, may assign this Agreement or its rights
hereunder to any Affiliate.
9.3 Notice. All notices, communications and demands
------
required or permitted to be given or made hereunder or pursuant
hereto shall be in writing and shall be effective when delivered
in person or transmitted by telegram or telecopier (confirmed by
mail), addressed as follows:
If to Monsanto:
Monsanto Company
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
Attention: President, Ceregen
Telecopier Number: 314-694-7771
with a copy to
Monsanto Company
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
Attention: General Counsel
Telecopy Number: 314-694-2594
If to any other Holder, at such address and telecopy number
as such Holder shall have furnished Ecogen in writing.
44
<PAGE> 49
If to Ecogen:
Ecogen Inc.
2005 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: President
Telecopy Number: 215-757-4156
with a copy to:
Dechert, Price & Rhoads
Princeton Park Corporate Center
997 Lenox Drive
Lawrenceville, New Jersey 08648
Attention: James J. Marino, Esq.
Telecopy Number: 609-520-3259
Either party may change the address designated by notice
given by such party. The parties agree to acknowledge in writing
the receipt of any such notice delivered in person.
9.4 Governing Law. This Agreement is deemed to have
-------------
been entered into in the State of Missouri, and its
interpretation, construction, and the remedies for its
enforcement or breach are to be applied pursuant to and in
accordance with the laws of the State of Missouri (without
regarding to the conflict of laws principles thereof).
9.5 Validity of Agreement. If any provision of this
---------------------
Agreement is, becomes, or is deemed invalid or unenforceable in
any jurisdiction, such provision shall be deemed amended to
conform to applicable law so as to be valid, legal and
enforceable in such jurisdiction so deeming. The validity,
legality and enforceability of such provision shall not in any
way be affected or impaired thereby in any other jurisdiction.
If such provision cannot be so amended without materially
altering the intention of the parties, it shall be stricken in
the jurisdiction so deeming, and the remainder of this Agreement
shall remain in full force and effect.
9.6 Waiver. No waiver of any right under this
------
Agreement shall be deemed effective unless contained in a writing
signed by the party charged with such waiver, and no
45
<PAGE> 50
waiver of any right arising from any breach or failure to perform
shall be deemed to be a waiver of any future such right or of any
other right arising under this Agreement.
9.7 Entire Agreement. This Agreement sets forth and
----------------
constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any and all
prior agreements, understandings, promises and representations
made by either party to the other concerning the subject matter
hereof and the terms applicable hereto.
9.8 Headings and References; Incorporation of
-----------------------------------------
Schedules. The headings contained in this Agreement are inserted
- ---------
for convenience of reference only and shall not be a part,
control or affect the meaning hereof. All references herein to
Articles and Sections are to the Articles and Sections of this
Agreement. All references herein to Schedules are to the
Schedules hereto, each of which shall be incorporated into and
deemed a part of this Agreement.
9.9 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original,
but which together shall constitute one and the same instrument.
9.10 No Presumption Against Drafter, Qualifications on
-------------------------------------------------
Schedules. The parties to this Agreement have jointly
- ---------
participated in the negotiation and drafting of this Agreement,
except for the Schedules. In the event an ambiguity or question
of intent or interpretation arises, this Agreement, except for
the Schedules, shall be construed as if drafted jointly by the
parties and no presumptions or burdens of proof shall arise
favoring any party by virtue of the authorship of any of the
provisions of this Agreement. The Schedules have been prepared
by Ecogen and are solely the responsibility of Ecogen even if
Monsanto provided drafts of or information appearing on such
Schedules. Any Schedule which is qualified by "knowledge",
"materiality", or words of similar import which apply to any
representation or warranty which is not similarly qualified shall
be interpreted as if no qualification were stated on the
Schedule.
46
<PAGE> 51
IN WITNESS WHEREOF, the parties hereunto have executed this
Agreement as to be effective as of the date first written above.
MONSANTO COMPANY ECOGEN INC.
By: ----------------------------- By: ----------------------------------
Name: Derek K. Rapp James P. Reilly, Jr.
Title: Director, Commercial Chairman and Chief Executive Officer
Partnerships & Alliances
47
<PAGE> 1
RESEARCH AND DEVELOPMENT
AGREEMENT
This Research and Development Agreement (the
"Agreement") is made as of January 24, 1996, by and between
Monsanto Company, a Delaware corporation, with its general
offices at 800 North Lindbergh Boulevard, St. Louis, Missouri
63167 ("Monsanto"), and Ecogen Inc., a Delaware corporation
having its principal office at 2005 Cabot Boulevard West,
Langhorne, PA 19047 ("Ecogen").
W I T N E S S E T H
WHEREAS, Ecogen owns certain existing Bt strain libraries,
certain crystal protein gene libraries, and certain proprietary
rights regarding protein engineering of Bt crystal proteins;
WHEREAS, Monsanto is acquiring certain of such libraries and
proprietary rights in accordance with the Technology Assignment
Agreement dated as of January 24, 1996 ("Assignment Agreement");
WHEREAS, Monsanto has expertise in the field of plant
biotechnology and Ecogen has expertise in finding, screening and
commercializing compounds, including proteins based on the
bacterium Bacillus thurigiensis ("Bt");
WHEREAS, both Monsanto and Ecogen have research facilities
and are capable of conducting research and development within the
Field of the Agreement;
<PAGE> 2
WHEREAS, Monsanto and Ecogen wish to conduct research and
development which may lead to the commercialization of (i)
improved bioinsecticides, and (ii) plants and/or plant seeds into
the genomes of which Bt genes have been included so that such
plants or plant seeds will express proteins;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, Monsanto and Ecogen agree as follows:
ARTICLE 1 - DEFINITIONS
Capitalized terms not otherwise defined in this Agreement
shall have the same meaning given such terms in the Assignment
Agreement. In addition, the following terms shall have the
meanings set forth below and will include the plural as well as
the singular.
1.1 "Budget Year" shall have the meaning set forth in
Section 3.3.
1.2 "Contract Year" shall mean the year beginning on
January 24, 1996 and ending on January 23, 1997 and each
anniversary thereafter until such time as the Agreement is no
longer in force.
1.3 "Date of this Agreement" shall mean the date first
written above.
1.4 "Ecogen" shall mean Ecogen and its Subsidiaries.
2
<PAGE> 3
1.5 "Field of the Agreement" shall mean research and
development in finding, discovering, screening and developing new
proteins and genes.
1.6 "Initial Term of the Agreement" shall mean the period
beginning on the Date of this Agreement and ending on the fourth
anniversary thereof.
1.7 "In Planta Application" means (i) use, development, or
commercialization of transgenic plants, seeds, cells or
components thereof (collectively "Plants") or (ii) use,
development, or commercialization of genetic material used so
that Plants express a new material or an existing material at
levels different from the levels that such Plants otherwise
would.
1.8 "Intellectual Property Rights" means (i) all patent
rights and all right, title and interest in and to all letters
patent and applications for letters patent, and other government
issued or granted indicia of invention ownership including any
substitutions, extensions, reissues, divisions, continuations or
continuations-in-part or applications thereof or therefor
throughout the world; (ii) all rights, title and interest in and
to all trade secrets and trade secret rights arising under the
common law, state law, federal law and laws of foreign countries;
(iii) all copyright rights, and all other literary property and
author rights whether or not copyrightable; and all rights, title
and interest in and to all copyrights, copyright registrations,
certificates of copyright and copyrighted interests throughout
the world; (iv) all rights, title and interest in and to all
know-how whether or not protectable by patent, copyright or trade
secret law; and (v) all goodwill associated with any of the
foregoing; provided, however, that the term "Intellectual
Property Rights" shall not include any trademarks, trade names or
service marks, whether
3
<PAGE> 4
registered or arising under the common law, state law, federal law
or the laws of foreign countries or any registrations thereof or
interests therein.
1.9 "Microbial Applications" shall mean use, development or
commercialization of insecticidal, bacterial, fungicidal,
pesticidal, medical, veterinary, scientific, nutritional, food
additive or preservative, materials, textiles, and similar
products; provided, however, that such products shall not include
any product for an In Planta Application.
1.10 "Naturally Occurring Genes" shall mean genes expressed
by Bt that produce proteins without genetic engineering or
protein engineering.
1.11 "R&D Technology" shall mean the Bt strains or genes
discovered or developed pursuant to the Research Program and the
Intellectual Property Rights arising pursuant to the performance
of the parties' obligations under this Agreement.
1.12 "Research Budget" shall mean the forecast of expenses
and expenditures set by Monsanto from time to time for each
Budget Year for that part of the Research Program undertaken by
Ecogen, which may be revised based on the recommendation of the
Supervisory Committee; provided, however the Research Budget
shall not include the cost or expenses of filing, prosecution or
maintenance of patent applications or issued patents.
1.13 "Research Plan" shall mean the Research and Development
Plan as may be amended from time to time, a preliminary draft of
which is attached hereto as Exhibit A, and which Plan shall
include a specific schedule for work, resources to be allocated
by each party,
4
<PAGE> 5
the identification of target pests, personnel requirements,
capital needs, and a schedule for the duplication and transfer to
Monsanto of copies of all strains and genes developed under the
Research Program. The selection of projects within the Research
Plan is to be determined by Monsanto, with Ecogen having the right
to object to any project which is inconsistent with the practices
and procedures of Ecogen.
1.14 "Research Program" shall mean all research,
experimentation or development relating to the projects to be
conducted or conducted by the parties hereto under the terms of
the Research Plan, including decisions regarding the filing,
prosecution and maintenance of patent applications and issued
patents.
1.15 "Subsidiary" shall mean a subsidiary more than 50
percent of whose outstanding securities representing the right,
other than as affected by events of default, to vote for the
election of directors, is owned by the applicable party and/or
one or more of such party's other majority-owned Subsidiaries.
Subsidiaries of Ecogen shall also include the entities set forth
in Schedule 3.01 to the Investment Agreement signed
contemporaneously herewith.
1.16 "Supervisory Committee" shall mean the Committee
described in Article 2 hereof.
1.17 "Third Party" shall mean any entity other than
Monsanto, Ecogen and/or Subsidiaries or Affiliates.
5
<PAGE> 6
ARTICLE 2 - RESEARCH COLLABORATION
2.1 Research Plan. During the term of this Agreement and
-------------
subject to its terms and conditions, Monsanto and Ecogen shall
use all commercially reasonable efforts to undertake their
respective obligations under the Research Program in accordance
with the Research Plan. The Research Plan shall be updated in
writing and revised from time to time upon mutual written
agreement of the parties upon the recommendation of the
Supervisory Committee. Ecogen agrees to diligently pursue each
project covered by the Research Program and to assign the
appropriate number of personnel required to carry out the
Research Program, each of whom shall be qualified to perform
his/her assigned duties. The parties acknowledge that Ecogen
makes no representation or assurance whatsoever that the Research
Program will be successfully completed or result in the
development of products with any technical or commercial value.
2.2 Research Funding. Monsanto shall be responsible for
----------------
providing all funding necessary for both parties to undertake
their respective duties and obligations under the Research
Program and all other costs and expenses related thereto.
Transfers of funds to Ecogen under the Research Budget during the
Initial Term of this Agreement shall be in accordance with the
terms of Article 3 hereof.
2.3 Supervisory Committee.
---------------------
(a) Collaboration between the parties shall be
determined by a Supervisory Committee of four (4) people; two (2)
people appointed by each party. The Chairman of the Supervisory
Committee shall be appointed by Monsanto.
6
<PAGE> 7
(b) It is the intent of the parties that information
related to the Research Program be shared with one another in an
open manner. For this purpose, the Supervisory Committee shall
meet periodically and no less than once a quarter to review the
status of the Research Program at mutually convenient locations.
It is contemplated, however, that the parties may meet as
frequently as weekly at Ecogen's facility to review results of
the Research Program. At such meetings the implementation of the
Research Program, including insectary services, insect targets
and sources of insecticidal or other biocidal proteins, shall be
discussed and mutually agreed upon. Each of the parties hereto
shall provide to the Supervisory Committee quarterly written
summaries of data and the status of its work under the Research
Program in such form as such party routinely uses for the summary
of similar research work for its own purposes. Modifications to
the Research Program may be made by the Supervisory Committee as
collaboration progresses in accordance with this Agreement. In
the event that the Supervisory Committee cannot reach a decision
regarding the Research Program, the issue shall be referred for
resolution to a senior business executive of each party
responsible for the Research Program. In the event that the
parties continue to have a good faith dispute, the issue will be
resolved by the Monsanto business executive.
2.4 Continuity of Supervisory Committee. Each party shall
-----------------------------------
attempt in good faith to maintain continuity in the identity of
its representatives to the Supervisory Committee.
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ARTICLE 3 - COSTS
3.1 Minimum Payment During Initial Term. Monsanto shall
-----------------------------------
provide a minimum of $10 Million for the funding of the Research
Program during the Initial Term of the Agreement in accordance
with the timing set out in Sections 3.2 and 3.3 herein.
3.2 Initial Payment. Monsanto shall transfer to Ecogen the
---------------
sum of $3 Million upon execution of the Assignment Agreement;
provided, however, that Monsanto shall be entitled to receive a
credit in the amount of $2 Million against payment of this $3
Million for the loans made pursuant to the Senior Promissory Note
dated November 2, 1995 from Ecogen to Monsanto. Such Note shall
be cancelled and returned to Ecogen at the Closing of the
transactions contemplated pursuant to the terms of the Assignment
Agreement and Ecogen shall have no further obligations with
respect to such Note.
3.3 Research Budget. On or before thirty (30) days after
---------------
the Date of this Agreement, Monsanto will develop, with input
from the Supervisory Committee, and present to the Supervisory
Committee a Research Budget for the period beginning on the Date
of this Agreement and ending on October 31, 1996. At least
ninety (90) days prior to November 1, 1996, Monsanto will present
to the Supervisory Committee a Research Budget developed by
Monsanto for the year beginning on November 1, 1996 and ending on
October 31, 1997 taking into consideration the recommendations
made by the Supervisory Committee. This period and each yearly
period ending on October 31 of the applicable year thereafter
shall be designated as a "Budget Year". The Research Budget
shall include, to the extent practicable, a break-down of the
budget by "Budget Year" quarters. Monsanto will present to the
Supervisory Committee
8
<PAGE> 9
at least 90 days prior to the beginning of any Budget Year a
Research Budget developed by Monsanto for each of the following
Budget Years taking into consideration the recommendations made by
the Supervisory Committee. In any given Contract Year Monsanto
shall spend not less than $1.5 Million under that part of the
Research Program undertaken by Ecogen. In no event shall Monsanto
transfer to Ecogen less than $1.5 Million in any one Contract
Year. Monsanto shall transfer to Ecogen such amounts as are
sufficient to ensure that Ecogen prior to the beginning of each
quarter of the Budget Year has funds available from Monsanto in an
amount equal to the expenses set forth in the Research Budget for
the then current Budget Year quarter. Such amount shall be
adjusted for the difference, if any, between (i) actual expenses
and expenditures incurred by Ecogen in prior quarters under the
Research Program and (ii) the cash transfers made by Monsanto to
Ecogen with respect to such previous quarters.
3.4 Allocated Researchers and Equipment Purchases. In
---------------------------------------------
establishing the Research Budget, each researcher employed by
Ecogen shall be included in the Research Budget at an annual rate
of $250,000, which annual rate shall include all costs and
expenses for personnel, supplies, existing equipment, and
overhead with respect to such researcher and shall include the
cost of any new equipment required to be purchased hereunder the
individual cost of which is less than $50,000. If any piece of
equipment purchased pursuant to the Research Budget costs $50,000
or more, Monsanto shall pay the entire cost of such piece of
equipment. Any such payment for new equipment will be paid to
Ecogen within fifteen (15) days of delivery to Monsanto of an
invoice from the vendor. Any payments for new equipment shall be
credited against Monsanto's obligations under Section 3.1 and 3.3
hereof. Any new equipment purchased pursuant to the Research
Program shall be owned by Ecogen as long as the cost of such
equipment is credited against Monsanto's obligations under
Sections 3.1 and 3.3 hereof. Any
9
<PAGE> 10
payments to Third Party consultants shall be approved in advance
by the Supervisory Committee and shall be included in the Research
Budget for which Monsanto shall receive a credit against
Monsanto's obligations under Section 3.1 and 3.3 hereof.
3.5 Payments Upon Termination. Upon termination of this
-------------------------
Agreement for any reason other than the termination of this
Agreement by Monsanto pursuant to an Event of Default by Ecogen
occurring under the provisions of Section 5.3, Monsanto shall
promptly pay to Ecogen an amount equal to the difference between
$10 Million and all amounts previously paid to Ecogen pursuant to
Article 3 of this Agreement. In the event that Monsanto has
funded at least $10 Million under this Agreement, upon
termination of the Agreement, any amounts transferred to Ecogen
by Monsanto under this Agreement (i) which have not been spent or
(ii) for which expenses have not been incurred by Ecogen prior to
such termination, shall be returned to Monsanto within ninety
(90) days of such termination.
ARTICLE 4 - INVENTIONS, LICENSES AND PATENTS
4.1 License Grant for Intellectual Property Arising Under
-----------------------------------------------------
Agreement. Ecogen shall have a worldwide, perpetual, exclusive,
- ---------
fully paid up, royalty-free, transferable license to the R&D
Technology to make, have made, offer for sale, import, use or
sell products solely for Microbial Applications. The rights
granted in this Agreement include the right to grant sublicenses.
In addition, Ecogen shall have a perpetual and permanent right to
hold and possess Bt strains and genes discovered or developed
hereunder, solely for Microbial Applications. Licenses granted
pursuant to this Section during the term of this Agreement shall
survive the termination or expiration of this Agreement for any
reason.
10
<PAGE> 11
4.2 Rights of Monsanto: Other Than Microbial Applications.
-----------------------------------------------------
The rights to any (i) invention related to the Field of the
Agreement, conceived during the performance under this Agreement,
and not related solely to Microbial Applications
(ii) applications for a patent for the aforesaid invention,
(iii) patent granted on such application, and (iv) all other
Intellectual Property Rights in the Field of the Agreement
arising from the performance under this Agreement and not related
solely to Microbial Applications shall be owned by Monsanto.
4.3 Rights of Ecogen: Solely Microbial Applications. The
-----------------------------------------------
rights to any (i) invention related to the Field of the Agreement
conceived during the performance under this Agreement and which
is related solely to Microbial Applications (ii) applications for
a patent for the aforesaid invention, (iii) patent granted on
such application, and (iv) all other Intellectual Property Rights
in the Field of the Agreement arising from the performance under
this Agreement related solely to Microbial Applications shall be
owned by Ecogen.
4.4 Patent Applications by Monsanto.
-------------------------------
(a) From time to time, not less than quarterly, the
Supervisory Committee shall make a determination if any patent
applications should be filed to protect inventions conceived in
accordance with this Agreement and if so the countries in which
such patent applications should be filed. In the event that the
Supervisory Committee has decided that one or more patent
applications should be filed regarding an invention that has in
whole or part In Planta Applications, Monsanto shall be
responsible for the filing, prosecution and maintenance of patent
applications (and related issued patents) directed to such
rights, including all costs, expenses and taxes associated
therewith. Monsanto shall include in such patent applications
such
11
<PAGE> 12
claims, including without limitation claims relating solely or in
part to Microbial Applications as Ecogen shall reasonably request.
Monsanto shall remain responsible for the filing, prosecution and
maintenance of all claims (and related patent applications and
issued patents) that are submitted in such patent applications
whether or not such claims relate solely to Microbial Applications
and whether or not such claims become the subject of divisional
applications, continuation applications or otherwise related
applications directed solely to Microbial Applications.
(b) Ecogen and Monsanto shall cooperate with one
another as to the preparation and prosecution thereof, including,
without limitation, the claim language. Monsanto shall allow
Ecogen, at Ecogen's own expense, to participate to the extent
requested in the preparation and prosecution of such patent
applications including, without limitation, (i) the receipt of
copies of all correspondence to or from the United States Patent
and Trademark Office or foreign patent offices, and (ii) the
participation in all communications and/or meetings with the
United States Patent and Trademark Office or foreign patent
offices.
4.5 Abandonment by Monsanto. Monsanto may decide to allow
-----------------------
any patent application or patent directed in whole or in part to
In Planta Applications that was filed pursuant to Section 4.4
hereof to go abandoned and/or patent to lapse, and, in such
event, Monsanto may also allow any patent application, divisional
application, continuation application or patent directed solely
to Microbial Applications related (as described in the fourth
sentence of Section 4.4) to such patent application or patent to
go abandoned or to lapse; provided, however, Monsanto shall have
first provided Ecogen with adequate opportunity to prosecute
and/or maintain any patent application, divisional application,
continuation application or patent that Monsanto has decided
12
<PAGE> 13
to go abandoned or to lapse. In the event Ecogen elects to
prosecute and/or maintain any such patent application, divisional
application, continuation application or patent, then Monsanto
shall assign all of its rights thereto to Ecogen and Monsanto
shall have no license thereto or to any resulting patents;
provided, however, Ecogen shall not have any rights to In Planta
Applications thereunder nor shall Ecogen have the right to grant
rights to In Planta Applications thereunder to any Third Party.
4.6 Countries Where Patent Applications Are Not Prosecuted.
------------------------------------------------------
In the event the Supervisory Committee shall determine not to
file a patent application in any country with respect to an
invention conceived in accordance with this Agreement, Ecogen may
decide to file, prosecute and maintain such a patent application
at its own expense and in its own name after notifying Monsanto
of such decision. Upon receipt of notice of such decision
Monsanto shall assign its rights to such invention in such
country to Ecogen and Monsanto shall have no rights with respect
to such patent application or related patent in such country
unless Monsanto shall reimburse Ecogen for all of Ecogen's out-
of-pocket costs incurred after such notice including, without
limitation, prosecuting the patent application, maintaining the
patent application and resulting patent or any other
administrative or legal proceeding. Upon receipt of such
reimbursement Ecogen shall grant to Monsanto a royalty-free,
worldwide, perpetual exclusive license with the right to
sublicense under such patent solely for In Planta Applications.
4.7 Patent Applications by Ecogen. Ecogen shall be
-----------------------------
responsible for the filing and prosecution of patent applications
directed solely to its rights under Section 4.2 hereof including
all costs, expenses and taxes associated therewith. Ecogen may
decide to allow any such patent application or resulting patent
to go abandoned and/or to lapse; provided, however, Ecogen shall
13
<PAGE> 14
have first provided Monsanto with adequate opportunity to
prosecute and/or maintain any such patent application or
resulting patent. In the event Monsanto elects to prosecute
and/or maintain any such patent application or resulting patent,
Ecogen shall assign all of its rights thereto to Monsanto and
Ecogen shall have the rights set forth in Section 4.1 hereof with
respect to such patent application and resulting patent.
4.8 No Warranty. Neither Monsanto nor Ecogen warrants to
-----------
the other that any patent obtained is valid or enforceable.
4.9 Other Ecogen Programs.
---------------------
(a) Ecogen shall offer (the "Offer") Monsanto the
opportunity to participate in each of Ecogen's own research and
development programs in existence or commenced during the term of
the Agreement (the "Ecogen Programs"), other than Excluded
Technology, which are not part of the Research Program for which
in Ecogen's good faith judgment there is a reasonable expectation
that the Ecogen Program will result in technology applicable to
the Field of the Agreement for In Planta Applications. Such
Offer shall be in writing and in reasonable detail and shall be
made as soon as Ecogen has a reasonable expectation that the
technology will be applicable to the Field of the Agreement.
Each such Ecogen Program shall be called a "Designated Program."
Such Offer shall be made prior to initiation of the Designated
Program. For Designated Programs already under way as of the
Date of this Agreement, Ecogen shall inform Monsanto of the
existence of these Designated Programs at or before the first
meeting of the Supervisory Committee. Ecogen shall have no duty
to present to Monsanto an Offer for
14
<PAGE> 15
any Ecogen Programs funded by a Third Party and Monsanto shall
have no rights to such Ecogen Programs.
(b) Should Monsanto desire to have a Designated
Program become subject to this Agreement, it shall notify Ecogen
of that decision within thirty (30) days from Monsanto's receipt
of the Offer. The parties shall negotiate in good faith to
modify the Research Program and increase the Budget, if
necessary, to account for the Designated Program.
(c) If Monsanto decides not to have a Designated
Program become subject to this Agreement the results and
Intellectual Property arising from the Designated Program
corresponding to the Offer shall be owned solely by Ecogen and
Monsanto shall have no rights thereto.
(d) If Ecogen has not offered an Ecogen Program to
Monsanto and such Ecogen Program results during the term of this
Agreement and within 3 months thereafter in technology applicable
to the target pests in the Research Program, then Monsanto shall
have the option to acquire a license, on the same terms and
conditions of the Monsanto License Agreement dated of even date
herewith, for such technology for In Planta Applications by
reimbursing Ecogen for Ecogen's cost in developing such
technology based upon the costs and expenses per year per
researcher as if the technology were developed pursuant to this
Agreement and Monsanto had paid the costs of such researcher
pursuant to the terms of Section 3.4.
4.10 Genes Discovered by Ecogen. All genes or strains
--------------------------
discovered by Ecogen in Ecogen's research outside the Research
Program shall be owned solely by Ecogen; provided,
15
<PAGE> 16
however, that Ecogen shall license to Monsanto Naturally Occurring
Genes applicable to the target pests of the Research Program that
are discovered by Ecogen to the extent Ecogen then has the right
to do so. In that event such a license shall be deemed to be part
of the Research Program.
4.11 Other Research by Monsanto. It is envisioned that in
--------------------------
the course of this Agreement, evaluation of useful Bt Genes by
Monsanto will create research at Monsanto that will have
application to Ecogen's performance of its obligations under this
Agreement. Manipulation of Bt Genes in microorganisms with
application to gene discovery expression and protein stability
will be shared with Ecogen for purposes of enhancing gene
discovery, expression and protein stability in connection with
Ecogen's performance of its obligations under this Agreement.
Use of such manipulation techniques for the development of
microbial pesticides shall be licensed to Ecogen in paid-up,
royalty-free worldwide license, with the right to sublicense, for
use solely in Microbial Applications.
4.12 During the term of this Agreement, each party shall
notify the other of the existence of an infringement of which
such party becomes aware of an invention or other Intellectual
Property Right conceived during or arising from the performance
under this Agreement.
4.13 If the infringement referred to in Section 4.12 relates
to an application solely for Microbial Applications, then Ecogen
shall be solely responsible in its sole discretion for the
abatement of the infringement including settlement and the
bringing of a lawsuit and all costs and expenses of such lawsuit,
provided, however, that no settlement shall impose any
affirmative
16
<PAGE> 17
obligation or obligation of payment on Monsanto without Monsanto's
prior written consent given in Monsanto's sole discretion.
Monsanto shall provide all reasonable nonmonetary assistance
requested by Ecogen and agrees to be named in the lawsuit if
required by law as a necessary or indispensable party. All
recoveries and damages obtained by Ecogen shall be owned
solely by Ecogen. In the event there is a counterclaim regarding
the validity or enforceability of an Intellectual Property Right,
Monsanto shall be permitted to join in the action at its own
expense, in which case any recovery obtained or damages awarded
shall be first used to reimburse Ecogen's reasonable attorneys'
fees and other out-of-pocket costs in bringing the lawsuit, then
reimbursing Monsanto's reasonable attorneys' fees and other out-
of-pocket costs in joining the action, and then all remaining
recovery and damage award to Ecogen.
4.14 If the infringement referred to in Section 4.12 relates
to an application other than solely for Microbial Applications,
then Monsanto shall be solely responsible in its sole discretion
for the abatement of the infringement including settlement and
the bringing of a lawsuit and all costs and expenses of such
lawsuit, provided, however, that no settlement shall impose any
affirmative obligation or obligation of payment on Ecogen without
Ecogen's prior written consent given in Ecogen's sole discretion.
Ecogen shall provide all reasonable nonmonetary assistance
requested by Monsanto and agrees to be named in the lawsuit if
required by law as a necessary or indispensable party. All
recoveries and damages obtained by Monsanto shall be owned solely
by Monsanto. In the event there is a counterclaim regarding the
validity or enforceability of an Intellectual Property Right,
Ecogen shall be permitted to join in the action at its own
expense, in which case any recovery obtained or damages awarded
shall be first used to reimburse Monsanto's reasonable attorneys'
fees and other out-of-pocket costs in bringing the
17
<PAGE> 18
lawsuit, then reimbursing Ecogen's reasonable attorneys' fees and
other out-of-pocket costs in joining the action, and then all
remaining recovery and damage award to Monsanto.
ARTICLE 5 - TERM AND TERMINATION
5.1 Initial Term. The Initial Term of the Agreement shall
------------
be four (4) years from the Date of this Agreement, after which
this Agreement shall automatically be renewed for successive one
(1) year terms (each a "Renewal Term") unless terminated by
either party's providing two (2) years notice to the other party
prior to the end of the Initial Term or the then current Renewal
Term; provided, however, a party may terminate the Agreement at
the end of a Renewal Term upon at least one year notice any time
on or after the fifth anniversary of the date of this Agreement.
5.2 Survival of Licenses. Any license which has been
--------------------
granted to Ecogen pursuant to this Agreement, including one which
has been granted under Section 4.1 hereof, shall survive any
termination of this Agreement, including a termination caused by
an Event of Default.
5.3 Events of Default. Each of the following shall be
-----------------
deemed an "Event of Default":
(a) a petition is filed against either party under any
bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and the party, as applicable,
is not diligently prosecuting a dismissal of such petition and
such petition is not dismissed within 90 days after its filing;
18
<PAGE> 19
(b) either party files a petition in voluntary
bankruptcy or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction
whether now or hereafter in effect, or consents to the filing of
any petition against it under any such law;
(c) a party admits insolvency or bankruptcy or its
inability to pay its debts as they become due or is generally not
paying its debts as such debts become due, or becomes insolvent
or bankrupt or makes an assignment for the benefit of creditors,
or a custodian (including without limitation a receiver,
liquidator or trustee) of the party or any of its property is
appointed by court order or takes possession thereof;
(d) other than a failure by Monsanto to transfer funds
to Ecogen under the Research Budget in accordance with the terms
of Article 3 hereof, a party shall fail to perform any of its
material obligations hereunder for a period of 90 days after
written notice, specifying such failure and requesting that it be
remedied is given to such breaching party by the nonbreaching
party; provided, however, if such default is such that it can be
corrected but cannot be corrected within such 90-day period, it
shall not constitute an Event of Default if corrective action is
instituted by the breaching party within such 90-day period and
diligently pursued until the default is corrected. No such
default shall remain uncured 120 days after written notice.
(e) a failure on Monsanto's part to transfer funds to
Ecogen under the Research Budget in accordance with the terms of
Article 3 hereof for a period of 30 days after
19
<PAGE> 20
written notice from Ecogen, specifying such failure and requesting
that such funds be transferred;
5.4 Notice of Default. Each party agrees to give the other
-----------------
prompt written notice if any petition referred to in Section
5.3(a) or 5.3(b) is filed by or against it or of the occurrence
of any other event or condition which constitutes an Event of
Default immediately upon becoming aware of the existence thereof.
5.5 Termination of Agreement in Event of Default. Subject
--------------------------------------------
to the provisions of Section 3.5, if an Event of Default shall
have occurred and shall be continuing, the nonbreaching party
shall have the right to terminate this Agreement effective upon
written notice of such termination from the nonbreaching party.
5.6 Suspension of Payments During Cure Period. Not
-----------------------------------------
withstanding the period in which Ecogen has to cure a breach of
this Agreement and prior to the time in which such breach would
constitute an Event of Default, Monsanto shall have the right to
suspend transfers of funds to Ecogen under the Research Budget
during the applicable cure period and prior to Monsanto's
exercise of its right to terminate this Agreement: (i) if
Monsanto has in good faith given notice to Ecogen of Ecogen's
failure to perform any of its material obligations hereunder
pursuant to Section 5.3(d); or (ii) if any petition referred to
in Section 5.3(a) is filed against Ecogen.
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ARTICLE 6 - CONFIDENTIALITY
6.1 Confidentiality. Confidential Information shall be
---------------
treated by the parties in accordance with the Confidentiality
Agreement executed simultaneously herewith.
ARTICLE 7 - LIABILITY; INDEMNITY;
PATENT INFRINGEMENT; SEVERABILITY
7.1 Limitation of Liability. It is understood and agreed
-----------------------
that the furnishing of any chemicals, samples or any information
(including Confidential Information) by either party pursuant to
this Agreement is not to be construed as a recommendation by that
party to use the same. FURTHERMORE, WITH RESPECT TO SUCH
INFORMATION, MATERIALS, PRODUCTS, PROCESS INFORMATION, PROCESSES,
ADVICE, CONSULTATIONS, ASSISTANCE, SERVICES, LICENSES AND RIGHTS
PROVIDED HEREUNDER, AND ANY MATERIALS OR PRODUCTS MADE USING
SUCH, NEITHER PARTY MAKES ANY REPRESENTATION, WARRANTY OR
GUARANTEE OF ANY KIND, EXPRESSED OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR PARTICULAR A PURPOSE, SATISFACTORY
RESULTS BASED UPON USE THEREOF OR RELIANCE THEREON, OR OTHERWISE,
AND NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY LOSS OR
DAMAGE RESULTING FROM THE RELIANCE AND/OR USE THEREOF.
7.2 Indemnification. Notwithstanding the foregoing
---------------
Section, each of the parties agrees to hold the other party
harmless from and against any and all demands, claims, penalties,
liabilities, causes of action, suits, damages, judgments, losses,
costs and expenses (including cost
21
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of defense, settlement and reasonable attorneys' fees and
expenses) arising out of injury to any employee of such party
resulting from or in any way connected with the performance of
this Agreement, unless arising from the other party's negligence
or willful misconduct.
7.3 Limitation on Infringement. Neither of the parties to
--------------------------
this Agreement shall be liable to the other party in any way for
Third Party patent infringement by said other party arising out
of the use of any information furnished to such other party
pursuant to this Agreement.
ARTICLE 8 - MISCELLANEOUS
8.1 Severability. If any provision of this Agreement is
------------
found to be unenforceable under any law applicable thereto, then
that provision shall be deemed to have been severed from the
Agreement in that jurisdiction, but all other provisions of the
Agreement shall remain in full force and effect.
8.2 No Partnership Created. The parties acknowledge that
----------------------
this Agreement does not constitute nor does it create any
partnership or joint venture between Monsanto and Ecogen.
8.3 Governing Law. This Agreement shall be governed by and
-------------
shall be construed to take effect according to the laws of the
State of Missouri, United States of America.
22
<PAGE> 23
8.4 Notices. All notices or other communications which any
-------
party to this Agreement may desire or be required to give
hereunder shall be in writing and, except for notices of meetings
of the Supervisory Committee which shall be given as reasonably
agreed among the members of such Committee, shall be given by
personal delivery, by mailing the same by registered or certified
mail, postage prepaid, return receipt requested, or by telefax
followed up by a nationally recognized overnight carrier,
addressed:
(a) If to Monsanto:
Monsanto Company
Ceregen Group
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attn: President
Telefax Number: 314-694-7771
with a copy to:
Monsanto Company
Ceregen Group
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attn: Intellectual Property Counsel
Telefax Number: 314-537-6047
and (b) if to Ecogen:
Ecogen Inc.
2005 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Attention: President
Telecopy Number: 215-757-4156
with a copy to:
Dechert, Price & Rhoads
Princeton Park Corporate Center
997 Lenox Drive
Lawrenceville, New Jersey 08648
Attention: James J. Marino, Esq.
Telecopy Number: 609-520-3259
23
<PAGE> 24
Notices given by personal delivery shall be deemed given when
delivered, otherwise notices shall be deemed given when sent.
8.5 Survival. The provisions of Articles 4 and 6 shall
--------
survive any termination of this Agreement.
8.6 Counterparts. This Agreement may be signed in
------------
counterparts, both of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
8.7 Entire Agreement. This Agreement represents the entire
----------------
understanding of the parties hereto with respect to research and
development in the Field of the Agreement and supersedes all
other and prior memoranda and agreements between the parties
hereto, other than documents executed or delivered at the Closing
of this Agreement or the Assignment Agreement.
8.8 Amendment. No amendment, modification or waiver of
---------
any term or condition of this Agreement shall be valid or of any
force or effect unless made by written instrument signed by the
parties hereto, specifying the exact nature of such amendment,
modification or waiver. Any waiver by any party of any provision
of this Agreement shall not imply a subsequent waiver of that or
any other provision.
8.9 Assignment. Neither party shall assign its rights or
----------
delegate its performance under this Agreement without the prior
written consent of the other, other than the licenses granted
hereunder, which shall be transferable without the prior written
consent of the other party.
8.10 Section Headings. The section captions and headings
----------------
in this Agreement are for convenience and reference purposes only
and should not affect in any way the meaning or interpretation of
this Agreement.
8.11 No Presumption Against Drafter, Qualifications on
-------------------------------------------------
Schedules. The parties to this Agreement have jointly
- ---------
participated in the negotiation and drafting of this Agreement.
In the
24
<PAGE> 25
event an ambiguity or question of intent or interpretation
arises, this Agreement, shall be construed as if drafted jointly
by the parties and no presumptions or burdens of proof shall
arise favoring any party by virtue of the authorship of any of
the provisions of this Agreement.
ARTICLE 9 - AFFIRMATIVE COVENANTS
9.1 So long as the Research and Development Agreement is in
effect, Ecogen covenants that it will:
(a) Furnish to Monsanto (i) such financial statements,
financial information and audit reports as are provided to the
Board of Directors of Ecogen, (ii) Quarterly Reports on Form 10-Q
and Annual Reports on Form 10-K as filed with the Securities and
Exchange Commission and (iii) all other information furnished to
Ecogen's Board of Directors relating to the financial condition
of Ecogen or Ecogen's Bt technology, other than information
relating to (A) potential acquisitions, mergers, joint ventures
or other strategic alliances, (B) its relationship with Monsanto,
and (C) personnel performance and compensation. The information
described in clauses (i) and (iii) above shall be furnished to
Monsanto promptly after the Ecogen Board of Director's meeting
for which such information is provided to Ecogen's Board of
Directors and the information described in clause (ii) above
shall be furnished to Monsanto at the time such reports are filed
with the Securities and Exchange Commission.
(b) Furnish to Monsanto promptly upon preparation a
copy of the minutes of each directors' meeting and each
stockholders' meeting pertaining to financial condition and Bt
Technology other than information relating to (i) potential
acquisitions, mergers, joint ventures or other strategic
alliances, (ii) its relationship with Monsanto and (iii)
personnel performance and compensation.
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<PAGE> 26
IN WITNESS WHEREOF, each party has caused this Agreement to
be executed by its duly authorized representative effective on
the date set forth first above.
MONSANTO COMPANY ECOGEN INC.
By: -------------------------- By: ------------------------------------
Name: Derek K. Rapp James P. Reilly, Jr.
Title: Director, Commercial Chairman and Chief Executive Officer
Partnerships & Alliances
26
