<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 31, 2000
Commission File Number 1-9579
Ecogen Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2487948
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2000 W. Cabot Boulevard #170, Langhorne, Pennsylvania 19047
- ----------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (2l5) 757-l590
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at February 29, 2000
----- --------------------------------
Common Stock, $.01 par value 11,995,612
<PAGE> 2
ECOGEN INC.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Unaudited Consolidated Condensed Balance Sheets
as of January 31, 2000 and October 31, 1999.........................................................1
Unaudited Consolidated Condensed Statements of Operations
for the three months ended January 31, 2000 and 1999 ...............................................2
Unaudited Consolidated Condensed Statement of Stockholders' Equity
for the three months ended January 31, 2000.........................................................3
Unaudited Consolidated Condensed Statements of Cash Flows
for the three months ended January 31, 2000 and 1999................................................4
Notes to Unaudited Consolidated Condensed Financial Statements..........................................6
Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition............11
PART II - OTHER INFORMATION
Item 6(a) - Exhibits......................................................................................15
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Assets JANUARY 31, 2000 OCTOBER 31,
PRO FORMA ACTUAL 1999
(SEE NOTE 7)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 1,392,377 $ 15,377 $ 0
Trade receivables, net 1,767,694 1,767,694 1,685,950
Inventory, net 5,909,613 5,372,613 5,358,017
Prepaid expenses and other current assets 460,058 460,058 387,043
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 9,529,742 7,615,742 7,431,010
Plant and equipment, net 2,231,291 2,231,291 2,374,462
Other assets, net 1,380,095 815,095 656,800
Intangible assets 1,816,000 -- --
- ----------------------------------------------------------------------------------------------------------------------
$ 14,957,128 $ 10,662,128 $ 10,462,272
======================================================================================================================
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt 2,639,375 2,639,375 2,193,145
Accounts payable and accrued expenses 4,125,668 4,248,668 4,010,120
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 6,765,043 6,888,043 6,203,265
Long-term debt 1,148,613 1,148,613 250,186
Long-term deferred revenue 1,482,569 1,482,569 1,451,928
Minority interest in subsidiary 1,533,854 1,533,854 1,533,854
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 10,930,079 11,053,079 9,439,233
- ----------------------------------------------------------------------------------------------------------------------
Stockholders' equity (Deficit):
Preferred stock:
Series 2000 A 150 -- --
Series 1999 A 95 95 150
Series 1998 C 324 324 324
Common stock 118,607 105,093 99,859
Additional paid-in capital 129,182,870 124,778,534 124,554,877
Accumulated deficit (125,274,997) (125,274,997) (123,632,171)
- ----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) 4,027,049 (390,951) 1,023,039
- ----------------------------------------------------------------------------------------------------------------------
$ 14,957,128 $ 10,662,128 $ 10,462,272
======================================================================================================================
</TABLE>
See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements.
1
<PAGE> 4
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
2000 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Product sales, net $ 1,099,500 $ 1,741,565
Contract research -- 515,891
- ------------------------------------------------------------------------------------------------
Total revenues $ 1,099,500 $ 2,257,456
- ------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold 906,530 1,575,159
Research and development:
Funded by third parties -- 224,676
Self funded 441,904 481,294
Selling, general and administrative 1,210,037 1,550,877
- ------------------------------------------------------------------------------------------------
Total costs and expenses 2,558,471 3,832,006
- ------------------------------------------------------------------------------------------------
Operating loss (1,458,971) (1,574,550)
Other income (expense):
Interest expense, net (146,247) (111,192)
Other income 54,351 8,306
- ------------------------------------------------------------------------------------------------
Total other expense, net (91,896) (102,886)
- ------------------------------------------------------------------------------------------------
Net loss (1,550,867) (1,677,436)
Dividends on preferred stock including assumed
incremental yield of $63,219 in 2000 155,177 102,213
- ------------------------------------------------------------------------------------------------
Net loss allocable to common stockholders $ (1,706,044) $(1,779,649)
================================================================================================
Basic and diluted net loss per common share $ (0.17) $ (0.21)
================================================================================================
Weighted average number of common shares outstanding 10,045,000 8,384,000
================================================================================================
</TABLE>
See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements.
2
<PAGE> 5
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Three months ended January 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance November 1, 1999 $474 $ 99,859 $124,554,877 $(123,632,171) $ 1,023,039
Dividends on preferred stock -- 247 26,966 (91,959) (64,746)
Stock options granted under a consulting
agreement in 1999 -- -- 18,067 -- 18,067
Conversion of 5,500 shares of Series 1999 A convertible
preferred stock to 498,747 shares of common stock (55) 4,987 (4,932) -- --
Issuance of 200,000 warrants in connection with
a loan agreement -- -- 183,556 -- 183,556
Net loss -- -- -- (1,550,867) (1,550,867)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 2000 $419 $105,093 $124,778,534 $(125,274,997) $ (390,951)
====================================================================================================================================
</TABLE>
See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements.
3
<PAGE> 6
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,550,867) $(1,677,436)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense 164,631 170,600
Noncash interest and other expense 73,968 110,943
Changes in assets and liabilities, net 4,448 (973,324)
- ------------------------------------------------------------------------------------------------------
Net cash used in by operating activities (1,307,820) (2,369,217)
- ------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturity of temporary investments -- 813,150
Purchase of plant and equipment (21,460) (6,060)
- ------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (21,460) 807,090
- ------------------------------------------------------------------------------------------------------
Cash flows from financing activities -
Proceeds from bank loan 1,500,000 --
Repayments of line of credit, net (53,770) --
Repayment of capital lease obligations (101,573) (23,262)
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,344,657 (23,262)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 15,377 (1,585,389)
Cash and cash equivalents, beginning of period -- 2,009,437
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 15,377 $ 424,048
======================================================================================================
</TABLE>
(Continued)
4
<PAGE> 7
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Changes in assets and liabilities:
Increase in receivables $ (81,744) $ (337,487)
Increase in inventory (14,596) (11,514)
Increase in prepaid expenses and
other current assets (73,015) (37,507)
Increase in other assets -- (15,202)
Increase (decrease) in accounts payable
and accrued expenses 173,803 (123,761)
Decrease in deferred contract revenue -- (447,853)
- ------------------------------------------------------------------------------------------------------
Changes in assets and liabilities, net $ 4,448 $ (973,324)
======================================================================================================
- ------------------------------------------------------------------------------------------------------
Noncash investing and financing activities:
- ------------------------------------------------------------------------------------------------------
During the first quarter of fiscal 2000 and 1999, the Company issued 24,657 and 27,621 shares of
common stock as dividends on the Company's preferred stock and 498,747 and 582,479 shares of its
common stock upon conversion of the Company's convertible preferred stock.
During the first quarter of fiscal 1999 the Company transferred 2,968 shares of treasury stock,
to outstanding shares pursuant to certain employee benefit plans.
======================================================================================================
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
5
<PAGE> 8
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, LIQUIDITY AND BASIS OF PRESENTATION:
The consolidated condensed financial statements include the accounts of
Ecogen Inc. ("Ecogen" or the "Company") and its wholly-owned and
majority-owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
The accompanying consolidated condensed financial statements include all
adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the
consolidated results of operations and financial position for the interim
periods presented. The consolidated condensed financial statements have
been prepared in accordance with the requirements for Form 10-Q and,
therefore, do not include all disclosures of financial information
required by generally accepted accounting principles. These consolidated
condensed financial statements should be read in conjunction with the
Company's October 31, 1999 consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K.
Since its inception, the Company's source of funds has been primarily
dependent on private and public offerings of equity securities, revenues
from research and development alliances, and product sales. In 1998, the
Company obtained a two-year working capital line of credit; such credit
facility expires in August 2000 and approximately $1.7 million is
outstanding under that credit facility as of February 29, 2000. The
Company believes that its existing working capital and amounts available
under its working capital line of credit should be sufficient to meet its
capital and liquidity requirements through fiscal 2000 based on reduced
spending levels, if necessary. However, the Company's working capital
line of credit will need to be renewed or refinanced in August 2000. (See
note 4 of the notes to the unaudited consolidated consolidated financial
statements.) The Company continues to evaluate various programs to raise
additional funds, pursue strategic initiatives and refinance its working
capital facility. At this time the Company is unable to predict whether
it will be successful in its efforts. If the Company is not successful in
refinancing its working capital line of credit or in raising additional
funding, the Company would take a number of steps to conserve cash,
including reducing expenditures.
The results of operations for the interim period ended January 31, 2000
are not necessarily indicative of the operating results for the full
year.
(Continued)
6
<PAGE> 9
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
CONTINUED
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONT.
OPERATIONS:
The Company is a biotechnology company specializing in the development
and marketing of environmentally compatible products for the control of
pests in agricultural and related markets. The Company has not yet
achieved profitable operations for any of its fiscal years and there is
no assurance that profitable operations, if achieved, could be sustained
on a continuing basis. Further, the Company's future operations are
dependent, among other things, on the success of the Company's
commercialization efforts and market acceptance of the Company's
products.
NET LOSS PER COMMON SHARE:
Basic loss per share is based on net loss allocable to common
stockholders for the relevant period, divided by the weighted average
number of common shares outstanding during the period. Diluted loss per
share is based on net loss allocable to common stockholders for the
relevant period divided by common shares outstanding and other potential
common shares if they are dilutive.
The conversion of the convertible preferred stock in fiscal 2000 and 1999
into common shares and adding back the dividends incurred during the
three-month periods ended January 31, 2000 and 1999, was not included in
the net loss per share calculation since the effect was anti-dilutive.
Stock options and warrants were not considered because they were
anti-dilutive.
RECLASSIFICATIONS:
Certain reclassifications have been made to the reported amounts in the
1999 financial statements to conform to the 2000 classifications.
(2) INVENTORY
At January 31, 2000, inventory consisted of raw materials of $523,054,
work-in-progress of $901,571 and finished products of $3,947,988.
(3) MONSANTO TRANSACTION
In January 1996, the Company entered into agreements with Monsanto
Company ("Monsanto") for an equity investment, purchase of technology
and joint research and development arrangement relating to the Company's
proprietary Bacillus thuringiensis ("Bt") technology for in-plant
applications (collectively, the "Monsanto Transaction"). In January
1998, the Company amended its research and development agreement with
Monsanto. The amended R&D Contract ended January 1999. During the three
months ended January 31, 1999 $.5 million was recorded as contract
research revenue principally relating to the Monsanto R&D contract. The
amended R&D Contract ended January 1999.
(Continued)
7
<PAGE> 10
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
CONTINUED
(4) LOAN AGREEMENT
In August 1998, the Company obtained a secured, revolving working
capital line of credit for up to $5.0 million with a financial
institution. Up to $1.0 million of the line may be used for letters of
credit. The working capital line of credit expires in August 2000
(subject to earlier termination on certain events of default), bears
interest at prime plus 3.25% and is fully collateralized by the
Company's assets, other than certain of its intellectual property
rights. The lending formula is based on eligible receivables and
finished goods inventory. At February 29, 2000, the balance outstanding
under the line was $1.7 million. The loan agreement contains certain
financial covenants and has certain restrictions on the Company's
ability to pay dividends on its common stock. At January 31, 2000 the
Company was not in compliance with such covenants; however such non
compliance has been waived by the lender.
On December 24, 1999, the Company obtained a secured loan for $1.5
million with a financial institution that is controlled by a principal
stockholder of the Company. The loan requires a $0.5 million principal
payment in June 2000 with the balance due in June 2001. The loan bears
interest at prime plus 2% and is payable monthly. The loan is
collateralized by the Company's assets. The loan is guaranteed by a
corporation controlled by one of the Company's principal shareholders.
In connection with the guarantee, the corporation was issued a five-year
warrant to purchase 200,000 shares of the Company's common stock at
$1.25 per share. Such warrants have a value of $183,556 which has been
recorded as deferred debt expense. Such amount is being amortized as
interest expense over the life of the loan.
(5) STOCKHOLDERS' EQUITY
During the first quarter of fiscal 2000, the Company issued 498,747
shares of its common stock in exchange for 5,500 shares of the Company's
Series 1999-A 7% convertible preferred stock issued in May 1999. The
Company also issued 24,657 shares of its common stock in payment of
cumulative dividends at the time of conversion.
(6) SUBSEQUENT EVENTS
PREFERRED STOCK:
Series 2000-A Convertible Preferred Stock:
On February 14, 2000, the Company sold 15,000 shares of Series 2000-A 7%
convertible preferred stock, stated value $100 per share, to
institutional investors for net proceeds of $1.4 million. The holders of
the preferred stock were issued five-year warrants to purchase up to
200,000 shares of common stock at $2.66 per share. Dividends are payable
quarterly in cash or stock at the option of the Company. The preferred
stock has no voting rights except with respect to certain matters
affecting the Company's preferred stock. At the election of
(Continued)
8
<PAGE> 11
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
CONTINUED
(6) SUBSEQUENT EVENTS, CONT.
PREFERRED STOCK, CONT.:
Series 2000-A Convertible Preferred Stock, cont.:
the holders, the preferred stock may be converted at various dates to
shares of the Company's common stock at the lesser of $2.73 per share or
95% of the average market price, as defined in the agreement, over a
twenty-day period at the time of conversion. The Company, at its option,
may redeem the preferred stock at 125% of the stated value. If the
Company is unable to issue sufficient shares of common stock within a
specified period of time after the holder has requested conversion, the
dividend rate may increase and the Company may be required to issue
additional warrants. Further, in certain circumstances, all of which are
in the control of the Company, the Company may be required to redeem the
shares at various premiums over stated value. The holders of the
preferred stock have certain registration rights with respect to the
shares of common stock underlying the warrants and the convertible
preferred stock. Included in the fee paid to the placement agent in
connection with the transaction were 20,000 shares of the Company's
common stock. In accordance with the terms of the Series 2000-A preferred
stock the Company is required to recognize an assumed incremental yield
of $592,496 (calculated at the date of issuance based on the conversion
formula in the agreement). Such amounts will be amortized as preferred
stock dividends over a seven-month period beginning with the date of
issuance.
ACQUISITION:
On February 15, 2000, the Company completed its acquisition of certain
assets of the sprayable Bt bioinsecticide business of Mycogen
Corporation, an affiliate of Dow AgroSciences LLP. The Company issued
1,351,351 shares of the Company's common stock valued at $3,000,000 upon
the closing of the transaction. Prior to the closing, the Company
acquired approximately $391,000 of Mycogen's inventory of sprayable Bt
products, under a distribution agreement effective January 1, 2000. Under
the terms of the agreement, Mycogen has agreed to hold the shares for a
three-year period, except in the event of certain change in control
transactions. Mycogen was granted certain demand and piggyback
registration rights with respect to the shares. In addition, Mycogen has
the right of first refusal to purchase securities of the Company so as to
maintain its ownership percentage in the Company. Mycogen also has been
granted certain market price protection rights at the time that Mycogen
sells the shares which may result in the issuance of additional shares,
which may not exceed 20% of the Company's outstanding shares without
stockholder approval. The Company and Dow AgroSciences LLC also entered
into a five- year supply agreement and the companies have agreed to enter
into distribution agreements granting exclusive rights to Dow
AgroSciences to sell the acquired products in Mexico, New Zealand and
Australia.
9
<PAGE> 12
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
CONTINUED
ACQUISITION, CONT.:
The transaction will be accounted for as a purchase and, accordingly, the
total purchase price for the assets of $3,425,000, including out of
pocket expenses, will be allocated based upon their fair value at the
date of acquisition. The assets acquired include inventory and certain
identifiable intangible assets including a license to certain genes and
strains and product registration and data citation rights. Included in
the purchase price is inventory acquired and sold by the Company under a
distribution agreement. The agreement also provides that the Company has
no obligation for past or future royalties under a 1998 settlement
agreement with Mycogen on a patent infringement dispute. Under purchase
accounting, part of the purchase price has been allocated to other assets
for the fully paid up royalty and any amounts previously accrued under
the settlement agreement have been eliminated in purchase accounting.
The unaudited pro forma balance sheet at January 31, 2000 has been
adjusted as follows for the allocation of the purchase price from the
Mycogen acquisition:
<TABLE>
<CAPTION>
Debit (Credit)
--------------
<S> <C>
Inventory 537,000
Other assets 565,000
Accrued liabilities 123,000
Intangible assets 1,816,000
Common stock and additional paid in capital (3,041,000)
</TABLE>
The allocation of the purchase price is subject to adjustment based on
the final determination of fair value at the date of acquisition.
(7) UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet presented is based
upon the Company's historical consolidated balance sheet at January 31,
2000 after giving effect to (i) the $1,377,000 net proceeds from the sale
of the Series 2000-A convertible preferred stock, and (ii) the
acquisition of Mycogen Corporation's sprayable Bt product line as
described in note 6 of the notes to unaudited consolidated condensed
financial statements.
10
<PAGE> 13
ECOGEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
OVERVIEW
Total revenues decreased $1.2 million or 51% in fiscal 2000 to $1.1 million from
$2.3 million in fiscal 1999. Net product sales decreased 37% from $1.7 million
in fiscal 1999 to $1.1 million in fiscal 2000. The Company had a $.9 million
backlog at January 31, 2000 for orders received but not shipped including $.4
million of recently acquired Mycogen products. Contract research revenue
decreased $.5 million due primarily to the expiration in January 1999 of the
research and development contract with Monsanto.
During the first quarter of fiscal 2000, the Company realized a reduction in
operating expenses of 27% from $2.3 million in the year-ago period to $1.7
million in the first quarter of fiscal 2000. For the first quarter of fiscal
2000, the Company reported a net loss allocable to common stockholders of $(1.7)
million or $(.17) per basic and diluted common share compared to a net loss
allocable to common stockholders of $(1.8) million or $(.21) per basic and
diluted common share on weighted average shares of 10.0 million and 8.4 million
in the first quarter of fiscal 2000 and 1999, respectively.
THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
REVENUES
Net product sales decreased $.6 million or 37% principally due to volume. The
Company had a $.9 million backlog at January 31, 2000 for orders received but
not shipped, including $.4 million of recently acquired Mycogen products. Sales
of the Company's Bt product line, representing 92% of Company product sales,
decreased 39% in fiscal 2000. The decrease was principally due to $.8 million of
product sales in fiscal 1999 sold to FMC Corporation upon the signing of an
agreement to distribute Lepinox in the United States. No comparable sale to FMC
occurred in the first quarter of fiscal 2000. Fiscal 2000 product sales to FMC
are expected to occur closer to the growing season. The decrease in Lepinox
sales was partially offset by $.5 million in product sales of two of the
recently acquired Mycogen products Mattch(TM) for caterpillar control in
vegetables, vines, and tree fruit and MVP(R)II for caterpillar control in tree
nuts and tree fruit. Biofungicide product sales, which represented 2% of product
sales in fiscal 2000, decreased $.1 million from the year-ago period,
principally due to lower sales of AQ10, the Company's biofungicide for control
of powdery mildew. Other product sales increased from nothing in the first
quarter of fiscal 1999 to 6% of product sales in fiscal 2000 principally
representing soil amendments.
Contract research revenues decreased $.5 million in fiscal 2000 due to the
expiration in January 1999 of the research and development agreement with
Monsanto that had contributed more than $10 million in contract research revenue
over its three-year term.
11
<PAGE> 14
COSTS AND EXPENSES
Cost of products sold decreased 42% in the first three months of fiscal 2000
compared to the same period in fiscal 1999 due primarily to a 37% decrease
in product sales. Gross margins improved from 10% in fiscal 1999 to 18% in
fiscal 2000. The higher gross margins in fiscal 2000 were due principally to
lower margin international Bt sales being replaced by higher margin domestic Bt
sales, including sales of the Mycogen products.
Total operating expenses were $1.7 million in the first quarter of fiscal 2000,
compared to $2.3 million in fiscal 1999, a decrease of 27%. Research and
development costs decreased $.3 million or 37% due principally to lower
personnel costs. The Company's commitment to provide research services to
Monsanto expired in January 1999 and the Company's technology continues to
approach commercialization, therefore requiring less activity in basic research
and process development. Selling, general and administrative expenses were $1.2
million in the first quarter of fiscal 2000 compared to $1.6 million in 1999
representing a decrease of $.3 million or 22% due to lower selling and marketing
expenses resulting from lower product sales and to lower general and
administrative personnel costs.
The operating loss improved from $(1.6) million in fiscal 1999 to $(1.5) million
in fiscal 2000. The improvement was due to improved gross margins and decreased
operating expenses.
NET LOSS
Net loss allocable to common stockholders for the three months ended January 31,
2000 was $(1.7) million, compared to a net loss allocable to common stockholders
of $(1.8) million for the same period in fiscal 1999. Basic and diluted net loss
per share for the three months ended January 31, 2000 was $(.17), compared to
net loss per share of $(.21) in the first quarter of fiscal 1999 on weighted
average shares outstanding of 10.0 million and 8.4 million in the first three
months of fiscal 2000 and 1999, respectively. Net loss allocable to common
stockholders included preferred stock dividends of $91,958 and $102,213 in
fiscal 2000 and 1999, respectively and an assumed incremental yield of $63,219
in fiscal 2000.
SEASONALITY OF BUSINESS
The bulk of the Company's current products are presently marketed for
agricultural applications in the northern hemisphere, where the growing season
generally runs from spring through fall. Because of the seasonal nature of its
business, the Company's product revenues are likely to be concentrated in the
fiscal quarters prior to and during a particular growing season which may result
in substantial variations in quarter-to-quarter financial results. Product sales
from year-to-year are also affected by unusual weather conditions, such as
droughts or floods, and the level of insect pressure in grower areas. In
addition, commercial introduction of the Company's new products is contingent
on, among other factors, completion of field testing and receipt of required
regulatory approvals. Unusual weather conditions during field tests or failure
to receive regulatory approvals prior to the growing season may require
additional field tests in subsequent growing seasons, with resulting delays in
product development and commercialization.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 2000, the Company used $1.3 million of cash
for operations. In December 1999, the Company obtained a $1.5 million variable
rate secured loan. Principal on this loan is required to be repaid in 2000 and
2001. The
12
<PAGE> 15
proceeds of the loan were used to fund operations and make payments on the
Company's working capital line of credit and capital leases.
In February 2000, the Company raised net proceeds of $1.4 million pursuant to a
private placement of 7% convertible preferred stock transaction to institutional
investors. In accordance with the terms of the preferred stock, the Company is
required to recognize a non-cash, assumed incremental yield of approximately $.6
million, calculated at the date of issuance based on 95% of the average
conversion feature, as defined in the agreement. The terms of the preferred
stock transaction are disclosed in note 6 of the notes to the consolidated
financial statements.
On February 15, 2000, the Company completed its acquisition of certain sprayable
Bt biopesticides from Mycogen Corporation, an affiliate of Dow AgroSciences Inc.
(the "Mycogen Transaction") for aggregate consideration of $3.4 million
including shares of common stock with a market value of $3.0 million. (See note
6 of notes to the unaudited consolidated condensed financial statements.)
To date, the Company has not generated positive cash flow from operations. The
Company believes that its existing working capital and amounts available under
its working capital line of credit should be sufficient to meet its capital and
liquidity requirements through fiscal year 2000 based on reduced spending
levels, if necessary. However, the Company's two-year working capital line of
credit for up to $5.0 million expires in August 2000. At February 29, 2000 $1.7
million is outstanding under this credit facility. Further, the Company's
working capital and working capital requirements are affected by numerous
factors and there is no assurance that such factors will not have a negative
impact on the Company's liquidity. Principal among these factors are the success
of its product commercialization and marketing efforts and the efforts of its
strategic partners in commercializing and selling products based on the
Company's technology, the technological advantages and pricing of the Company's
products, economic and environmental considerations which impact agricultural
crop production and the agricultural sector generally, competitive conditions in
the agricultural pest control market, and access to capital markets that can
provide the Company with the resources when necessary to fund its strategic
priorities.
The Company continues to pursue the raising of additional funds and other
strategic initiatives to improve its working capital position and its capital
structure. Also, during fiscal 2000 the Company will need to extend its working
capital line of credit with its current lender or obtain alternative financing.
There is no assurance that access to financings will be available on terms
acceptable to the Company or at all. If the Company is not successful in
refinancing its working capital line of credit or in raising additional funding,
the Company would take a number of steps to conserve cash, including reducing
expenditures to provide the necessary resources to repay the outstanding
balances under its line of credit. Over the long-term, the Company's liquidity
is dependent on market acceptance of its products and technology.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities which becomes effective for our financial
statements beginning November 1, 2001. SFAS No. 133 requires a company to
recognize all derivative instruments as assets or liabilities in its balance
sheet and measure them at fair value. We do not expect adoption of this standard
to have a material impact on our financial statements.
13
<PAGE> 16
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101). SAB 101 summarizes certain of the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB 101 requires a company to follow its guidance no later than the first
quarter of its fiscal year beginning after December 15, 1999 through a
cumulative effect of a change in accounting principle. We do not expect adoption
of this standard to have a material impact on our financial statements.
FORWARD-LOOKING STATEMENTS
The discussion set forth by the Company in this report contains forward-looking
statements. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and underlying
assumptions and other statements which are other than historical facts. Although
the Company believes that its expectations are based on reasonable assumptions,
the Company operates in a high technology, emerging market environment that
involves a number of risks and uncertainties that could cause actual results to
differ materially from expected results. The Company intends to market and sell
a number of new and recently introduced products. Some of these products utilize
new formulations which have not to date been produced on a commercial scale or
produced on a commercial scale that has been replicated. Certain of the
manufacturing processes for such products include newly developed equipment and
techniques which are being incorporated into commercial scale manufacturing
processes. Risks and uncertainties associated with the successful
commercialization of the products include: (i) the successful scale-up of the
Company's manufacturing process in time to meet targeted sales opportunities;
(ii) the market acceptance of the Company's current and newly introduced
products; (iii) the efficacy, pricing, ease of use and performance of the
Company's products; (iv) the successful development, registration,
commercialization and marketing of technologically advanced new products; (v)
the continued and uninterrupted supply of the Company's products from
third-party toll manufacturers and the continued financial viability of such
manufacturers; (vi) economic and environmental considerations which impact
agricultural crop production and agricultural crop protection, including the
number of acres of target crops planted, the cost and efficacy of competitive
products, weather conditions and the level of insect and disease infestation on
target crops, and (vii) the ability of the Company to fund its strategic
priorities through operations or access to capital which may be dependant on
maintaining its NASDAQ listing. See additional discussion under "factors that
may affect future results" in the Company's annual report on form 10-K for the
fiscal year ended October 31, 1999, and other factors detailed from time to time
in the Company's other filings with the Securities and Exchange Commission. The
Company does not undertake to update the results discussed herein as a result of
changes in risks or operating results.
14
<PAGE> 17
PART II - OTHER INFORMATION
Item 6 Exhibits and reports in Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Ecogen Inc.
(Form 10-Q for fiscal quarter ended January 31,
1996)*
3.2 By-laws of Ecogen Inc., as amended (Form S-1
Registration Statement, File No. 33-14119)*
3.3 Certificate of Designations, Preferences and Rights
of Series 1998-A Convertible Preferred Stock (Form
10-Q for fiscal quarter ended April 30, 1998)*
3.4 Certificate of Designations, Preferences and Rights
of Series 1998-C Convertible Preferred Stock (Form
8-K, dated September 2, 1998)*
3.5 Certificate of Designations, Preferences and Rights
of Series 1999-A Convertible Preferred Stock (Form
10-Q, for fiscal quarter ended April 30, 1999)*
3.6 Certificate of Designations, Preferences and Rights
of Series 2000-A Convertible Preferred Stock (Form
10-K, for fiscal year ended October 31, 1999)*
10.153 Asset Purchase and License Agreement between Ecogen
Inc. and Mycogen Corporation dated as of February 15,
2000 (Current Report on Form 8-K dated March 1,
2000)*
10.154 Stockholders Agreement between Ecogen Inc. and
Mycogen Corporation dated February 15, 2000 (Current
Report on Form 8-K dated March 1, 2000)*
10.155 Purchase and Sale Agreement between Ecogen Inc. and
Dow AgroSciences LLC dated as of February 15, 2000
(Current Report on Form 8-K dated March 1, 2000)*
10.156 Convertible Preferred Stock Purchase Agreement
between Ecogen Inc. and Amro International, S.A.,
Aspen International, Ltd. and Markham Holdings
Limited dated as of February 14, 2000
10.157 Registration Rights Agreement between Ecogen Inc. and
Amro International, S.A., Aspen International, Ltd.
and Markham Holdings Limited dated as of February 14,
2000
</TABLE>
15
<PAGE> 18
<TABLE>
<S> <C>
10.158 Warrant Agreement between Ecogen Inc. and Amro
International, S.A. dated February 14, 2000
10.159 Warrant Agreement between Ecogen Inc. and Aspen
International, Ltd. dated February 14, 2000
10.160 Warrant Agreement between Ecogen Inc. and Markham
Holdings Limited dated as of February 14, 2000
(b) Current Reports on Form 8-K
The Company filed a Current Report on Form 8-K on March 1,
2000 describing the purchase of assets from Mycogen Corporation.
27 Financial Data Schedule
</TABLE>
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated and are made part of this Report.
16
<PAGE> 19
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 16, 2000
ECOGEN INC.
By: /s/ James P. Reilly, Jr
---------------------------------------
James P. Reilly, Jr.
Chairman and Chief Executive Officer
By: /s/ Michael Johnson
---------------------------------------
Michael Johnson
Vice President and Corporate Controller
17
<PAGE> 1
Exhibit 10.156
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
ECOGEN INC.
and
AMRO INTERNATIONAL, S.A.,
ASPEN INTERNATIONAL, LTD.
and
MARKHAM HOLDINGS LIMITED
Dated as of February 14, 2000
<PAGE> 2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of February 14, 2000, between Ecogen Inc., a Delaware corporation (the
"Company"), and Amro International, S.A., a corporation incorporated under the
laws of Switzerland, Aspen International, Ltd. and Markham Holdings Limited
(collectively, the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase from the Company, shares of the Company's 7%
Series 2000-A Convertible Preferred Stock, par value $.01 per share
(the "Preferred Stock").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase and Sale. (a) Subject to the terms and conditions
set forth herein, the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company 15,000 shares of the Preferred Stock
(the "Shares").
(b) The Preferred Stock shall have the respective
rights, preferences and privileges set forth in the form of the Certificate of
Designations, Preferences and Rights of 7% Series 2000-A Convertible Preferred
Stock attached hereto as Exhibit A, which shall be approved by the Purchaser and
filed prior to the time of the Closing (as defined below) by the Company with
the Secretary of State of Delaware (the "Certificate of Designations").
For purposes of this Agreement, "Business Day," Conversion Price,"
"Original Issue Date," "Trading Day" and "Per Share Market Value" shall have the
meanings set forth in the Certificate of Designations.
1.2 Purchase Price. The purchase price per Share shall be
$100.00.
1.3 The Closing. (a) The closing of the purchase and sale of
the Shares (the "Closing") shall take place at the offices of Paul, Hastings,
Janofsky & Walker LLP, 1055 Washington Boulevard, Stamford, CT 06901,
immediately following the execution hereof or such later date or at such other
place as the parties shall agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
(b) At the Closing, the parties shall deliver or
shall cause to be delivered the following: (i) the Company shall deliver to each
Purchaser (1) a stock certificate representing Shares registered in the name of
each Purchaser as specified in Schedule 1.3, (2) a five year common stock
purchase warrant in the form of Exhibit B (the "Warrant") entitling the
Purchaser to purchase an aggregate of 200,000 shares (as specified in Schedule
1.3) of the Company's common stock, $.01 par value per share (the "Common
Stock"), at an exercise price equal to 120% of the Per Share Market Value on the
Closing Date, registered in the name of the Purchaser, (3) the legal opinion of
Paul, Hastings, Janofsky & Walker LLP, outside counsel to
<PAGE> 3
the Company, substantially in the form of Exhibit C, dated the Closing Date, and
(4) all other documents, instruments and writings required to have been
delivered at or prior to the Closing Date by the Company pursuant to this
Agreement, including an executed Registration Rights Agreement, dated the date
hereof, between the Company and the Purchaser, in the form of Exhibit D (the
"Registration Rights Agreement"), and the Irrevocable Transfer Agent
Instructions, dated the Closing Date, in the form of Exhibit E, delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); and (ii) the Purchaser shall deliver to the Company (1)
$1,500,000 (as specified in Schedule 1.3) in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose prior to the Closing Date (the "Purchase Price")
less the amounts referred to in Section 4.1, and (2) all documents, instruments
and writings required to have been delivered at or prior to the Closing Date by
the Purchaser pursuant to this Agreement, including an executed Registration
Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company.
The Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively the "Subsidiaries"). Except as set forth in
Schedule 2.1(a), each of the Subsidiaries is an entity, duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted except where the failure to be duly
organized, validly existing or in good standing, as the case may be is not
reasonably likely to, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of the Securities (as defined below) or any
of this Agreement, the Certificate of Designations, the Warrant or the
Registration Rights Agreement (collectively, the "Transaction Documents"), (y)
have or result in a material adverse effect on the results of operations,
assets, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), being a "Material Adverse Effect"). Except as
set forth in Schedule 2.1(a), each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, is not reasonably likely
to have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents, and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the
<PAGE> 4
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company. Each of the Transaction Documents has been
duly executed by the Company and, when delivered (or filed, as the case may be)
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate of incorporation, by-laws or other
charter documents.
(c) Capitalization. The number of authorized, issued
and outstanding shares of capital stock of the Company is set forth in Schedule
2.1(c). No shares of Common Stock are entitled to preemptive or similar rights,
nor is any holder of the Common Stock entitled to preemptive or similar rights
arising out of any agreement or understanding with the Company by virtue of any
of the Transaction Documents, except as set forth in Schedule 2.1(c). Except as
disclosed in Schedule 2.1(c), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or, except as a result of the purchase and sale of the Shares and
the Warrant, securities, rights or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire any shares of
Common Stock, or contracts, commitments, understandings, or arrangements by
which the Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. To the knowledge of the Company, except as specifically
disclosed in the SEC Documents (as defined below) or Schedule 2.1(c), no Person
or group of related Persons beneficially owns (as determined pursuant to Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of in excess of 5% of the Common
Stock. A "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
(d) Issuance of the Shares and the Warrant. The
Shares and the Warrant are duly authorized, and, when issued and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "Liens"). The Company has on the date hereof
and, at all times while the Shares and the Warrant are outstanding, will
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the holders of the Shares and the Warrant to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Certificate of Designations and the Warrant. Such number of reserved and
available shares of Common Stock shall be not less than the sum of (i) the
number of shares of Common Stock which would be issuable upon conversion in full
of the Shares, assuming such conversion were effected on the Closing Date or the
Filing Date (as defined in the Registration Rights Agreement), whichever yields
a lower Conversion Price, (ii) the number of shares of Common Stock issuable
upon exercise in full of the Warrant, and (iii) 175% of the number of shares of
Common Stock which would be issuable upon conversion of additional Shares issued
as payment of dividends on the Shares (such additional Shares, the "Dividend
Shares"), assuming each Share and Dividend Share is outstanding for two years
and all dividends are paid in the form of Dividend Shares. The shares of Common
Stock issuable upon conversion of the Shares and Dividend Shares and upon
exercise of the Warrant are collectively referred to
<PAGE> 5
herein as the "Underlying Shares." The Shares, the Dividend Shares, the Warrant
and the Underlying Shares are collectively referred to herein as the
"Securities." When issued in accordance with the Certificate of Designations and
upon exercise of the Warrant, in accordance with their respective terms, the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated thereby do not and will not (i)
conflict with or violate any provision of its certificate of incorporation,
bylaws or other charter documents (each as amended through the date hereof), or
(ii) subject to obtaining the consents referred to in Section 2.1(f), conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, credit facility,
indenture or instrument (evidencing a Company debt or otherwise) to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including Federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), as is not reasonably likely to,
individually or in the aggregate, have or result in a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, are not reasonably likely to have or
result in a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically
set forth in Schedule 2.1(f), neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other Federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filings of the Certificate of Designations with the Secretary
of State of Delaware, (ii) the filing of an initial Registration Statement with
the Securities and Exchange Commission (the "Commission") pursuant to the
Registration Rights Agreement (the "Underlying Securities Registration
Statement"), (iii) the application(s) to the Nasdaq National Market ("NASDAQ")
for the listing of the Underlying Shares with the NASDAQ (and with any other
national securities exchange or market on which the Common Stock is then
listed), (iv) the filing of a Form D with the Commission, and (v) in all other
cases where the failure to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or registration is not reasonably
likely to have or result in, individually or in the aggregate, a Material
Adverse Effect (together with the consents, waivers, authorizations, orders,
notices and filings referred to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically
disclosed in the SEC Documents, there is no action, suit, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their respective properties before or by any court, governmental or
<PAGE> 6
administrative agency or regulatory authority (Federal, state, county, local or
foreign) which is reasonably likely, individually or in the aggregate, to have
or result in a Material Adverse Effect.
(h) No Default or Violation. Except as set forth in
Schedule 2.1(h), neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred which has not been waived which,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound, (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is in violation of any statute, rule or regulation of any governmental
authority, except, with respect to each of (i), (ii) and (iii), as is not
reasonably likely, individually or in the aggregate, to have or result in a
Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchaser set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchaser as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken any action which might subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act.
(j) SEC Documents; Financial Statements. The Company
has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Documents" and, together with the Schedules to this
Agreement the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
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. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required. The financial statements of the Company included
in the SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company as
of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since October 31, 1998, except as
specifically disclosed in the SEC Documents, (a) there has been no event,
occurrence or development that has resulted or is reasonably expected to result
in a Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x)
<PAGE> 7
liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP, (c) the Company has not altered its
method of accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans or other existing plan for the benefit of the
Company's employees described in the SEC Documents) with respect to its capital
stock, or purchased, or redeemed (or made any agreements to purchase or redeem)
any shares of its capital stock. The Company last filed audited financial
statements with the Commission on January 15, 1999, and has not received any
comments from the Commission in respect thereof.
(k) Investment Company. The Company is not, and is
not an Affiliate (as defined in Rule 405 under the Securities Act) of, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(l) Certain Fees. Except for certain fees payable by
the Company to Jesup & Lamont Securities Corp., no fees or commissions will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and reasonable attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor
any Person acting on the Company's behalf has (i) distributed any offering
materials in connection with the offering and sale of the Securities, or (ii)
solicited any offer to buy or sell the Securities by means of any form of
general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is eligible to
register securities for resale with the Commission under Form S-3 promulgated
under the Securities Act.
(o) Seniority. No class of equity securities of the
Company is senior to the Shares in right of payment, whether upon liquidation or
dissolution, or otherwise.
(p) Patents and Trademarks. The Company has, or has
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights
(collectively, the "Intellectual Property Rights") which the Company reasonably
believes are necessary for use in connection with its business, and which the
failure to so have would have a Material Adverse Effect. To the best knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights that is reasonably likely to have a Material Adverse Effect.
<PAGE> 8
(q) Listing and Maintenance Requirements Compliance.
The Company has not in the two years preceding the date hereof received notice
(written or oral) from NASDAQ or any other stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it has
been quoted) to the effect that the Company is not in compliance with respect to
the Common Stock with the listing or maintenance requirements of such exchange
or market.
(r) Registration Rights; Rights of Participation.
Except as described on Schedule 6(b) to the Registration Rights Agreement, (i)
the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority which
has not been satisfied and (ii) no Person, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents.
(s) Regulatory Permits. The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate Federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Documents, except
where the failure to possess such permits could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(t) Disclosure. The Company confirms that it has not
provided the Purchaser or its agents or counsel with any information that
constitutes or might constitute material non-public information, other than
information the substance of which will be disclosed upon the filing by the
Company of its next Quarterly Report in Form 10-Q or the Underlying Securities
Registration Statement filed by the Company with the Commission pursuant to the
Registration Rights Agreement or which within 60 days from the date hereof will
cease to be material nonpublic information. The Company understands and confirms
that the Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
2.2 Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows:
(a) Organization: Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, with the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
purchase by the Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement and
the Registration Rights Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. The Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to the
<PAGE> 9
Purchaser's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(c) Purchaser Status. At the time the Purchaser was
offered the Shares and the Warrant, it was, and at the date hereof, it is, and
at each exercise date under the Warrant, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. The Purchaser,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of
Investment. The Purchaser is able to bear the economic risk of an investment in
the Securities and, at the present time, is able to afford a complete loss of
such investment.
(f) Access to Information. The Purchaser acknowledges
receipt of the Disclosure Materials and further acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials.
(g) General Solicitation. The Purchaser is not
purchasing the Shares as a result of or subsequent to any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar.
(h) Reliance. The Purchaser understands and
acknowledges that (i) the Securities are being offered and sold to it without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes
no representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
<PAGE> 10
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed
by the Purchaser or a subsequent transferee of the Securities pursuant to an
effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from or in a transaction not subject to the
registration requirements of the Securities Act. In connection with any transfer
of Securities other than pursuant to an effective registration statement or to
the Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably satisfactory to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by the Purchaser to an
Affiliate of the Purchaser or to a fund under common management with the
Purchaser, or any transfer among any such Affiliates or funds, provided that
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes. Any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
the Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long
as is required by this Section 3.1(b), of the following legend on the
Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Shares and Dividend Shares, exercise
of the Warrant or other issuances of Underlying Shares as contemplated hereby or
by the Certificate of Designations occurs at any time while an Underlying
Securities Registration Statement is effective under the Securities Act or in
the event there is not an effective Underlying Securities Registration Statement
at such time, if in the opinion of counsel to the Company such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the Transfer Agent Instructions to the
Company's transfer agent on the day that the Underlying Securities Registration
Statement is declared effective by the Commission. The
<PAGE> 11
Company agrees that it will provide the Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from such
legend at such time as such legend is no longer required hereunder. The Company
may not make any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer set forth in
this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that
the issuance of the Underlying Shares upon (i) conversion of the Shares and
Dividend Shares in accordance with the terms of the Certificate of Designations,
and (ii) exercise of the Warrant, may result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Underlying Shares upon (x) conversion of the Shares and Dividend Shares in
accordance with the terms of the Certificate of Designations, and (y) exercise
of the Warrant, is unconditional and absolute, subject to the limitations set
forth in this Agreement, in the Certificate of Designations or pursuant to the
Warrant, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchaser owns Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section l3(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including the legal opinion referenced above in this Section. Upon the
reasonable request of any such Person, the Company shall deliver to such Person
a written certification of a duly authorized officer as to whether it has
complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify or exempt the issuance and sale of the
Underlying Shares under the securities or Blue Sky laws of such jurisdictions as
the Purchaser may reasonably request and shall continue such qualification or
exemption at all times until the Purchaser notifies the Company in writing that
it no longer owns Securities; provided, however, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified or to take any action
that would subject the Company to general service of process in any such
jurisdiction where it is not then required to be so subject or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.
<PAGE> 12
3.5 Integration. The Company shall not, and shall use its best
efforts to ensure that, no Affiliate shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchaser.
3.6 Increase in Authorized Shares. At such times as the
Company would be, if a notice of conversion or exercise (as the case may be)
were to be delivered on such date, precluded from (a) converting 175% of the
Shares and Dividend Shares outstanding that remain unconverted at such date, or
(b) honoring the exercise in full of the Warrant due to the unavailability of a
sufficient number of shares of authorized but unissued or reacquired Common
Stock, the Board of Directors of the Company shall promptly (and in any case,
within thirty (30) Business Days from such date) prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's Certificate of Incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as reasonably requested by the Purchaser in order to provide for such
number of authorized and unissued shares of Common Stock to enable the Company
to comply with its conversion, exercise and reservation of shares obligations as
set forth in this Agreement, the Certificate of Designations and the Warrant
(the sum of (x) the number of then authorized shares of Common Stock, (y) the
number of shares of Common Stock then outstanding plus all shares of Common
Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (z) the sum of (i) 175% of the number of Underlying
Shares as are then issuable upon a conversion in full of all Shares and Dividend
Shares, and (ii) the number of Underlying Shares as are issuable upon exercise
in full of the Warrant, shall be a reasonable number). In connection therewith,
the Board of Directors shall (a) adopt proper resolutions authorizing such
increase, (b) recommend to and otherwise use its best efforts to promptly and
duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the sixtieth (60th) day after
delivery of the proxy materials relating to such meeting) and (c) within five
(5) Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's Certificate of Incorporation to evidence
such increase.
3.7 Reservation of Underlying Shares. The Company shall
maintain a reserve of Common Stock for issuance upon conversion of the Shares
and Dividend Shares, and upon exercise of the Warrant in accordance with its
terms, in such amount as may be required to perform its obligations in full
under the Transaction Documents, which reserve shall include a number of shares
of Common Stock equal to no less than two times the number of shares of Common
Stock as would be issuable upon conversion in full of the Shares and Dividend
Shares, and upon exercise in full of the Warrant.
3.8 [Intentionally omitted.]
3.9 Conversion Procedures. The Transfer Agent Instructions,
Conversion Notice (as defined in Exhibit A) and Notice of Exercise under the
Warrant set forth the totality of the procedures with respect to the conversion
of the Shares and Dividend Shares and exercise of the Warrant, including the
form of legal opinion, if necessary, that shall be rendered to the Company's
transfer agent and such other information and instructions as may be reasonably
<PAGE> 13
necessary to enable the Purchaser to convert its Shares and Dividend Shares and
exercise the Warrant as contemplated in the Certificate Designations and the
Warrant (as applicable).
3.10 Notice of Breaches. (a) Each of the Company and the
Purchaser shall give prompt written notice to the other of any material breach
by it of any representation, warranty or other agreement contained in any
Transaction Document, as well as any events or occurrences arising after the
date hereof which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained therein
to be incorrect or breached as of the Closing Date. However, no disclosure by
either party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in any Transaction
Document.
(b) Notwithstanding the generality of Section
3.10(a), the Company shall promptly notify the Purchaser of any notice or claim
(written or oral) that it receives from any lender of the Company to the effect
that the consummation of the transactions contemplated by the Transaction
Documents violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall promptly furnish by
facsimile to the holders of the Shares a copy of any written statement in
support of or relating to such claim or notice.
3.11 Conversion and Exercise Obligations of the Company. The
Company shall honor conversions of the Shares and Dividend Shares and exercises
of the Warrant and shall deliver Underlying Shares in accordance with the
respective terms and conditions and time periods set forth in the Certificate of
Designations and the Warrant.
3.12 Subsequent Registrations and Resale Restrictions. (a)
Except for (w) Underlying Shares, (x) other "Registrable Securities" (as such
term is defined in the Registration Rights Agreement) to be registered in
accordance with the Registration Rights Agreement, (y) the securities listed on
Schedule 6(b) to the Registration Rights Agreement, and (z) Company securities
to be registered for resale in connection with any rights of first refusal of
Jesup & Lamont Securities Corp. ("Jesup") pursuant to that certain letter
agreement between Jesup and the Company dated the date hereof, the Company shall
not, without the prior written consent of the Purchaser (i) issue or sell any of
its or any of its Affiliates' equity or equity-equivalent securities pursuant to
Regulation S promulgated under the Securities Act, or (ii) register for resale
any securities of the Company for a period of not less than ninety (90) Trading
Days after the later to occur of (1) the date that an Underlying Securities
Registration Statement is declared effective by the Commission and (2) the
ninetieth (90th) Trading Day after the Closing Date. Any days that the Purchaser
is unable to sell Underlying Shares under an Underlying Securities Registration
Statement shall be added to such 90 Trading Day period.
3.13 Certain Securities Laws Disclosures; Publicity. Pursuant
to the Closing, the Company shall (i) timely file with the Commission a Form D
promulgated under the Securities Act as required under Regulation D promulgated
under the Securities Act and provide a copy thereof to the Purchaser promptly
after the filing thereof, and (ii) file with the Commission a Report on Form 8-K
or, if permitted, Form 10-Q disclosing the transactions contemplated hereby
within ten (10) Business Days after the Closing Date.
<PAGE> 14
3.14 Use of Proceeds. The Company shall use the net proceeds
from the sale of the Securities hereunder for working capital purposes and not
for the satisfaction of any portion of Company debt (other than capitalized
lease obligations) or to redeem any Company equity or equity equivalent
securities. Pending application of the proceeds of this placement in the manner
permitted hereby, the Company will invest such proceeds in interest bearing
accounts and/or short-term, investment grade interest bearing securities.
3.15 Reimbursement. If the Purchaser, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which the Purchaser is a named party, the Company will pay the
Purchaser the charges, as reasonably determined by the Purchaser, for the time
of any officers or employees of the Purchaser devoted to appearing and preparing
to appear as witnesses, assisting in preparation for hearings, trials or
pretrial matters, or otherwise with respect to inquiries, hearings, trials, and
other proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchaser who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchaser and any such Affiliate, and shall be binding upon and inure
to the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Purchaser and any such Affiliate and any such Person. The
Company also agrees that neither the Purchaser nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any
liability to the Company or any person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of the
Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the Purchaser or entity in connection with the
transactions contemplated by this Agreement.
3.16 Exclusivity. The Company shall not issue and sell any
Shares to any Person other than the Purchaser except with the specific prior
written consent of the Purchaser.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. On the Closing Date, the Purchase Price
shall be reduced by (i) $90,000 to be paid to Jesup & Lamont Securities Corp.,
and (ii) $10,500 to be paid to Robinson Silverman Pearce Aronsohn & Berman LLP
in connection with legal fees and expenses relating to the Closing, in each case
directly from the Purchaser. Other than the amounts contemplated in the
immediately prior sentence, and except as otherwise set forth in the
Registration Rights Agreement, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party
<PAGE> 15
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the Securities pursuant hereto.
4.2 Entire Agreement; Amendments. This Agreement, together
with the Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificate of Designations and the Warrant contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via confirmed
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (New York City time) on a Business Day, (ii) the Business Day after
the date of transmission, if such notice or communication is delivered via
confirmed facsimile at the facsimile telephone number specified below later than
8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the Business Day following the date of mailing,
if sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Ecogen Inc.
2000 Cabot Boulevard West
Suite 170
Langhorne, PA 19047
Facsimile No.: (215) 757-3339
Attn: Chief Financial Officer
With copies to: Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Facsimile No.: (203) 359-3031
Attn: Elizabeth A. Brower, Esq.
If to Purchaser: Amro International, S.A.
c/o Ultra Finance, Ltd.
Grossmuenster Platz 26, P.O. Box 4401
Zurich, Switzerland, CH 8022
Facsimile No.: ( )
Attn: Thomas Badian
Aspen International, Ltd.
Charlotte House, Charlotte St.
Nassau Bahamas
Facsimile No.: (242) 323-7918
<PAGE> 16
Markham Holdings Limited
Suite 7B and 8B
50 Town Range
Gibraltar
Facsimile No.: 011-350-40-40-4
Attention: J. David Hassan
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser; or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchaser. Except as set
forth in Section 3.1(a), the Purchaser may not assign this Agreement or any of
the rights or obligations hereunder without the consent of the Company. This
provision shall not limit the Purchaser's right to transfer securities or
transfer or assign rights hereunder or under the Registration Rights Agreement,
each in accordance with the terms of this Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
4.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Shares, the Dividend Shares
and the Warrant.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall
<PAGE> 17
become effective when counterparts have been signed by each party and delivered
to the other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page were an original
thereof.
4.11 Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchaser without the prior written consent of the
Purchaser, except to the extent such disclosure (but not any disclosure as to
the controlling Persons thereof) is required by law, in which case the Company
shall provide the Purchaser with prior notice of such disclosure.
4.12 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchaser
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
4.14 Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
<PAGE> 18
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Preferred Stock Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.
ECOGEN INC.
By:
-------------------------------------
Name: James P. Reilly, Jr.
Title: Chairman and CEO
AMRO INTERNATIONAL, S.A.
By:
-------------------------------------
Name:
Title:
ASPEN INTERNATIONAL, LTD.
By:
-------------------------------------
Name:
Title:
MARKHAM HOLDINGS LIMITED
By:
-------------------------------------
Name:
Title:
<PAGE> 20
SCHEDULE 1.3
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Purchaser Shares to be delivered Warrants to be delivered Purchase Price to be
by Company by Company delivered by Purchaser
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amro International S.A. 8,000 106,667 $800,000
- --------------------------------------------------------------------------------------------------------------------------
Aspen International, Ltd. 5,000 66,667 $500,000
- --------------------------------------------------------------------------------------------------------------------------
Markham Holdings Limited 2,000 26,666 $200,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 21
SCHEDULE 2.1(a)
SUBSIDIARIES*
<TABLE>
<CAPTION>
State or Other Jurisdiction of
Name of Subsidiary Incorporation or Organization
- ------------------ -----------------------------
<S> <C>
Ecogen-Bio Inc. Delaware
Ecogen Investments Inc. Delaware
Ecogen-Jerusalem Inc. Delaware
Ecogen-Israel Delaware
Ecogen-Technologies I Incorporated Delaware
Ecogen-Bio Germany GmbH Germany
Ecogen Biotechnologies Israel Ltd. Israel
Ecogen Israel International Inc. Delaware
</TABLE>
* All of the subsidiaries listed above are wholly-owned subsidiaries of
Ecogen Inc. with the exception of Ecogen Technologies I Incorporated of
which Ecogen Inc. owns approximately 70% of the outstanding common
stock. The following corporations, all of which were incorporated under
the laws of the state of Delaware, are wholly-owned subsidiaries of
Ecogen Technologies I Incorporated; Ecoresearch Mildew I Inc.,
Ecoresearch Harvest Rot II Inc., Ecoresearch Corn Borer III Inc.,
Ecoresearch Nematodes IV Inc., Ecoresearch Rootworm V Inc. and
Ecoresearch Turf VI Inc.
<PAGE> 22
SCHEDULE 2.1(c)
CAPITALIZATION
1. Prior to the Closing, the authorized capital stock of the Company
consists of 42,000,000 shares of Common Stock, par value $0.01, and
7,500,000 shares of Preferred Stock, par value $0.01, the terms of
which will be determined by the Company's Board of Directors as and
when such shares are issued. Of the 7,500,000 shares of Preferred
Stock, 35,000 have been designated Series 1998-A Convertible Preferred
Stock, 50,000 have been designated Series 1998-C Convertible Preferred
Stock and 30,000 have been designated Series 1999-A Convertible
Preferred Stock. As of January 31, 2000, 10,509,263 shares of Common
Stock, no shares of Series 1998-A Convertible Preferred Stock 32,354
shares of Series 1998-C Convertible Preferred Stock and 7,500 shares of
Series 1999-A Convertible Preferred Stock were outstanding.
2. The Convertible Preferred Stock Purchase Agreement, dated as of August
20, 1998, between Ecogen Inc. and United Equities (Commodities)
Company, among other things, provides: (i) United Equities has certain
anti-dilution protections in the event Ecogen issues shares of its
common stock or securities convertible into common stock; and (ii)
United Equities has certain registration rights.
3. As of January 31, 2000, the Company had outstanding options to purchase
up to 384,526 shares of the Company's Common Stock pursuant to the
terms of the Company's 1987 Stock Option Plan (the "1987 Plan"). No
grants of stock options have been made under the 1987 Plan since July
31, 1998. As of January 31, 2000, the Company had outstanding options
to purchase up to 525,000 shares of the Company's Common Stock pursuant
to the terms of the Company's 1998 Stock Option Plan (the "1998 Plan").
No additional stock options will be granted under the 1998 Plan. As of
January 31, 2000, the Company had outstanding options to purchase up to
908,000 shares of the Company's Common Stock pursuant to the terms of
the Company's 1999 Stock Option Plan (the "1999 Plan"). Up to 592,000
shares of the Company's Common Stock are available for issuance in
connection with options to be granted under the 1999 Plan. As of
January 31, 2000, the Company had outstanding warrants and options
(exclusive of options issued under the 1987 Plan, the 1998 Plan and the
1999 Plan) to purchase up to 629,121 shares of the Company's Common
Stock.
4. The Convertible Preferred Stock Purchase Agreements, dated as of June
5, 1998 and May 2, 1999, respectively, between the Company and KA
Investments LDC, each provide, among other things, that: (i) KA
Investments LDC has certain anti-dilution protection in the event the
Company issues shares of its Common Stock or securities convertible
into its Common Stock and (ii) KA Investments LDC has certain
registration rights.
5. Investment Agreement, dated as of January 24, 1996, between Ecogen Inc.
and Monsanto Company, among other things, provides: (i) Monsanto has a
right of first refusal in the event Ecogen sells shares of its common
stock or other voting securities; and (ii) certain registration rights.
<PAGE> 23
SCHEDULE 2.1(f)
CONSENTS AND APPROVALS
Monsanto Company
Congress Financial Corporation
The Berkshire Bank
<PAGE> 24
SCHEDULE 2.1(h)
NO DEFAULT OR VIOLATION
The Company is not in compliance with the net worth and working capital
covenants contained in the Loan and Security Agreement between the Company and
Congress Financial Corporation ("Congress") dated August 20, 1998. Congress has
not declared the Company in default under such covenants. The Company expects
Congress to waive compliance with such covenants.
<PAGE> 1
Exhibit 10.157
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of February 14, 2000, between Ecogen Inc., a Delaware
corporation (the "Company"), and Amro International, S.A., a corporation
incorporated under the laws of Switzerland, Aspen International, Ltd. and
Markham Holdings Limited (collectively, the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof between the Company and
the Purchaser (as amended, modified or supplemented from time to time, the
"Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par
value.
"Effectiveness Date" means (i) with respect to the Registrable
Securities issuable upon conversion of the Preferred Stock and exercise of the
Warrant, the 90th day following the
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Closing Date and (ii) with respect to the Registrable Securities issuable upon
exercise of the Trigger Warrants, the 90th day following the issuance of Trigger
Warrants.
"Effectiveness Period" shall have the meaning set forth in
Section 2(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means (i) with respect to the Registrable
Securities issuable upon conversion of the Preferred Stock and exercise of the
Warrant, the 30th day following the Closing Date and (ii) with respect to the
Registrable Securities issuable upon exercise of the Trigger Warrants, the 30th
day following the issuance of Trigger Warrants.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the Company's shares of 7% Series
2000-A Preferred Stock, $.01 par value, to be issued to the Purchaser pursuant
to the Purchase Agreement (including any shares of Preferred Stock issued in
payment of dividends on the Preferred Stock).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Common Stock
issuable upon (i) conversion in full of the Preferred Stock, and (ii) exercise
in full of each of the Warrant and the Trigger Warrants, provided that in order
to account for the fact that the number of shares of
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<PAGE> 3
Common Stock that is issuable upon conversion of the Preferred Stock is
determined in part upon the market price of the Common Stock at the time of
conversion, Registrable Securities contemplated by clause (i) above, shall
include (but not be limited to) a number of shares of Common Stock equal to no
less than 175% of the number of shares of Common Stock into which the shares of
Preferred Stock (including shares of Preferred Stock issuable as dividends) are
convertible, assuming such conversion occurred on the Closing Date or the Filing
Date, whichever yields a lower Conversion Price and assuming all dividends for a
two year period are paid in shares of Preferred Stock and that all such shares
of Preferred Stock are outstanding. Notwithstanding anything herein contained to
the contrary, if the actual number of shares of Common Stock into which the
shares of Preferred Stock are convertible exceeds twice the number of shares of
Common Stock into which the shares of Preferred Stock are convertible based upon
a computation at a particular Closing Date, the term "Registrable Securities"
shall be deemed to include such additional shares of Common Stock. With respect
to the Registration Statement filed with respect to the Registrable Securities
issuable upon conversion of the Preferred Stock and exercise of the Warrant, the
Company shall be required to file additional Registration Statements to the
extent the actual number of shares of Common Stock into which the Preferred
Stock is convertible and Warrants are exercisable exceeds the number of shares
of Common Stock registered in the initial Registration Statement hereunder. The
Company shall have ten (10) Business Days to file such additional Registration
Statements after notice of the requirement thereof, which the Holders may give
at such time when the number of shares of Common Stock as are issuable upon
conversion of Preferred Stock plus the number of shares of Common Stock issuable
upon exercise in full of the Warrant, exceed 85% of the number of shares of
Common Stock registered in the initial Registration Statement hereunder.
"Registration Statement" means the registration statement and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
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<PAGE> 4
"Trigger Warrants" means the common stock purchase warrants
issuable to the Purchaser pursuant to Section 5(a)(iii) of the Certificate of
Designations filed in connection with the authorization of the Preferred Stock.
"Warrant" means the Warrant to be issued to the Purchaser
pursuant to the Purchase Agreement.
2. Shelf Registrations
(a) On or prior to each applicable Filing Date, the Company
shall prepare and file with the Commission a "Shelf" Registration Statement
covering all Registrable Securities required to be included herein in such
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415. Each Registration Statement shall be on Form S-3 (except if
otherwise directed by the Holders of a majority in interest of the applicable
Registrable Securities in accordance herewith or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith). Each Registration Statement shall state, to the extent permitted by
Rule 416 under the Securities Act, that it also covers such indeterminate number
of shares of Common Stock as may be required to effect (i) conversion of the
Preferred Stock to prevent dilution resulting from stock splits, stock dividends
or similar events, or by reason of changes in the Conversion Price in accordance
with the terms of the Certificate of Designations (as defined in the Purchase
Agreement) and (ii) exercise of the Warrant in full to prevent dilution
resulting from stock splits, stock dividends or similar events, or by reason of
changes in the Exercise Price (as defined in the Warrant) in accordance with the
terms of the Warrant, provided that any Registration Statements covering
Registrable Securities issuable upon exercise of Trigger Warrants will state, to
the extent permitted by Rule 416 under the Securities Act, that it also covers
such indeterminate number of shares of Common Stock as may be required to effect
exercise of Trigger Warrants in full to prevent dilution resulting from stock
splits, stock dividends or similar events, or by reason of changes in the
Exercise Price (as defined in the Trigger Warrants) in accordance with the terms
of the Trigger Warrants.
(b) The Company shall use its reasonable best efforts to cause
each Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to each
applicable Effectiveness Date, and shall use its reasonable best efforts to keep
such Registration Statement continuously effective under the Securities Act
until the date which is five years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144(k) as determined by
the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent (the "Effectiveness
Period"), provided, however, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in the
Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under
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<PAGE> 5
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to each
Filing Date, a Registration Statement on Form S-3 in accordance with Section
2(a) and the method or methods of distribution thereof as specified by the
Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than seven (7) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to the Holders and their Special Counsel copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of such
Holders and their Special Counsel, and (ii) cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of respective counsel
to such Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Holders or their Special Counsel will provide the Company
with their comments on the proposed Registration Statement within five (5)
Business Days of their receipt thereof (the "Review Period") and if the Holders
and their Special Counsel provide their comments to the Company after the end of
the Review Period, the Filing Date shall be extended by the number of Business
Days after the Review Period before which such comments were provided. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, shall reasonably object on a
timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended
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<PAGE> 6
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and their Special Counsel as promptly as reasonably possible (and, in the case
of (i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder and their Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(f) Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each
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<PAGE> 7
of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(g) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(h) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by applicable law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as Holders may request at least two
(2) Business Days prior to any sale of Registrable Securities.
(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market (the "NASDAQ") and any other securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which similar securities
issued by the Company are then listed as and when required pursuant to the
Purchase Agreement.
(k) Make available for inspection by the selling Holders, any
representative of such Holders, and any attorney or accountant retained by such
selling Holders, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors, agents and employees of the Company and its subsidiaries to supply
all information in each case reasonably requested by any such Holder,
representative, attorney or accountant in connection with the Registration
Statement; provided, however, that any information that is
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<PAGE> 8
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company. In the event
that any Person is requested or required to disclose any such information as
described in clause (i) or (ii) of the immediately preceding sentence, such
Person shall provide the Company with prompt prior notice so that the Company
may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. If such protective order or other remedy
is not obtained, or if the Company waives compliance with the provisions of this
Agreement, such Person shall furnish only that portion of such confidential
information that is advised by such Person's counsel is legally required and
shall exercise its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded to such confidential
information.
(l) Comply with all applicable rules and regulations of the
Commission in connection with the Registration Statement.
(m) The Company may require each selling Holder to furnish to
the Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request. The parties agree that the "Plan
of Distribution" section of each Prospectus shall be substantially in the form
of Annex A attached hereto.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(i) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
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<PAGE> 9
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), or
3(c)(v), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(i), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company, shall be borne
by the Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the NASDAQ or each other securities exchange or market
on which Registrable Securities are required hereunder to be listed and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is requested by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders (in
the case of Special Counsel for the Holders, such fees and disbursements shall
not exceed $5,000), (v) Securities Act liability insurance, if the Company so
desires such insurance, and (vi) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal, in connection with a block
trade or as a result of a pledge or any failure to perform under a margin call
of Common Stock), investment advisors and employees of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling
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<PAGE> 10
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information regarding such Holder so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus, or in any amendment or supplement
thereto. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof,
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<PAGE> 11
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or
11
<PAGE> 12
alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof, nor shall the Company or any of its
Subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as and to the extent specified in Schedule 6(b) hereto, neither the
Company nor any of its Subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request
12
<PAGE> 13
the Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(c) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there is
not an effective Registration Statement covering all of the Registrable
Securities and the Underlying Shares, the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered; provided, however,
that the Company shall not be required to register any Registrable Securities
pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k)
under the Securities Act.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of certain Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(e) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via confirmed
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (New York City time) on a Business Day, (ii) the Business Day after
the date of transmission, if such notice or communication is delivered via
confirmed facsimile at the facsimile
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<PAGE> 14
telephone number specified in the Purchase Agreement later than 8:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Ecogen, Inc.
2000 Cabot Boulevard West
Suite 170
Langhorne, PA 19047
Facsimile No.:(215) 757-3339
Attn: Chief Financial Officer
With copies to: Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Facsimile No.: (203) 359-3031
Attn: Elizabeth A. Brower, Esq.
If to Purchaser: Amro International, S.A.
c/o Ultra Finance, Ltd.
Grossmuenster Platz 26, P.O. Box 4401
Zurich, Switzerland, CH 8022
Facsimile No.: ( )
Attn: Thomas Badian
Aspen International, Ltd.
Charlotte House, Charlotte St.
Nassau Bahamas
Facsimile No.: (242) 323-7918
14
<PAGE> 15
Markham Holdings Limited
Suite 7B and 8B
50 Town Range
Gibraltar
Facsimile No.: 011-350-40-40-4
Attention: J. David Hassan
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the
stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(g) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder and up to four other assignees of
all or a portion of the shares of Preferred Stock, the Warrants, the Trigger
Warrants or the Registrable Securities if: (i) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement, and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement. The rights to assignment shall apply to the Holders (and
to subsequent) successors and assigns.
(h) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
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<PAGE> 16
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
ECOGEN INC.
By:
-------------------------------------
Name: James P. Reilly, Jr.
Title: Chairman and CEO
AMRO INTERNATIONAL, S.A.
By:
-------------------------------------
Name:
Title:
ASPEN INTERNATIONAL, LTD.
By:
-------------------------------------
Name:
Title:
MARKHAM HOLDINGS LIMITED
By:
-------------------------------------
Name:
Title:
<PAGE> 18
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on any stock exchange market or trading
facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when
selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144
under the Securities Act, if available, rather than under this
prospectus.
The Selling Stockholders may also engage in short sales
against the box, puts and calls and other transactions in securities of
the Company or derivatives of Company securities and may sell or
deliver shares in connection with these trades. The Selling
Stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a Selling Stockholders defaults
on a margin loan, the broker may, from time to time, offer and sell the
pledged shares.
<PAGE> 19
Broker-dealers engaged by the Selling Stockholders may arrange
for other brokers-dealers to participate in sales. Broker-dealers may
receive commissions or discounts from the Selling Stockholders (or, if
any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The Selling Stockholders do not
expect these commissions and discounts to exceed what is customary in
the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that
are involved in selling the shares may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales.
In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may
be deemed to be underwriting commissions or discounts under the
Securities Act.
The Company is required to pay all fees and expenses incident
to the registration of the shares, including fees and disbursements
(not to exceed $5,000) of counsel to the Selling Stockholders. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
<PAGE> 20
SCHEDULE 6(b)
REGISTRATION RIGHTS
The following parties have registration rights:
Monsanto Company (with respect to 943,397 shares of
Common Stock).
United Equities (Commodities) Company (with respect
to shares of Common Stock issuable upon conversion of 32,354 shares of
Ecogen's 8% 1998-C Convertible Preferred Stock (shares have been
registered)).
KA Investments LDC (with respect to shares of Common
Stock issuable upon conversion of Ecogen's 8% Series 1998-A Convertible
Preferred Stock and 7% Series 1999-A Convertible Preferred Stock).
Momar Corporation (with respect to 200,000 shares of
Common Stock issuable upon exercise of a warrant).
<PAGE> 21
SCHEDULE 6(c)
The following will parties will be able to piggyback on Registrations:
Jesup & Lamont Securities Corporation (with respect to 20,000 shares of
Common Stock);
Momar Corporation (with respect to 200,000 shares of Common Stock
issuable upon exercise of a warrant);
Mycogen Corporation (with respect to approximately 1,400,000 shares of
Common Stock to be issued in connection with the purchase of a business).
In addition approximately 1,750,000 shares of Common Stock or Common
Stock equivalents to be sold to investors within six months of the Closing Date
may piggyback on Registrations.
<PAGE> 1
EXHIBIT 10.158
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
ECOGEN INC.
WARRANT
Dated: February 14, 2000
Ecogen Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received, Amro International, S.A., or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to a total of 106,667 shares of Common Stock, $.01 par value per
share (the "Common Stock"), of the Company (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at an exercise price equal to $2.66
per share (as adjusted from time to time as provided in Section 11, the
"Exercise Price"), at any time and from time to time from and after the date
hereof and through and including February 14, 2005 (the "Expiration Date"), and
subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at the office specified in or pursuant to
Section 3(b). Upon any such registration or transfer, a new warrant to purchase
<PAGE> 2
Common Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company specified in or pursuant to Section
3(b) for one or more New Warrants, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased hereunder. Any
such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., Eastern time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 5:30 P.M., Eastern time on the Expiration Date, the portion of this Warrant
not exercised prior thereto shall be and become void and of no value. Prior to
the Expiration Date, the Company may not call or otherwise redeem this Warrant
without the prior written consent of the Holder.
(b) Subject to Sections 2(b) and 6, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 11 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in lawful money of the United
States of America, in cash, by certified or official bank check or checks or
wire transfer of immediately available funds, all as specified by the Holder in
the Form of Election to Purchase, the Company shall promptly (but in no event
later than five (5) business days after the Date of Exercise) issue or cause to
be issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends other
than as required by applicable law. Any person so designated by the Holder to
receive Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as applicable), with
the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(c) Notwithstanding anything in this Section 3 to the
contrary, if a registration statement contemplated by the Registration Rights
Agreement between the Company and the Holder dated as of February 14, 2000 (the
"Registration Rights Agreement") which includes the Warrant Shares, is not
declared effective by the Effectiveness Date (as defined in the Registration
Rights Agreement), or if declared effective, such effectiveness lapses, then the
Holder hereof may exercise this Warrant, in whole or in part, by surrender to
the Company for cancellation of a portion
2
<PAGE> 3
of this Warrant representing that number of Warrant Shares which is equal to the
quotient obtained by dividing (A) the product obtained by multiplying the
Exercise Price by the number of Warrant Shares being purchased upon such
exercise by (B) the difference obtained by subtracting the Exercise Price from
the Current Market Price per Warrant Share as of the date of such exercise.
For purposes of this Section 3, "Current Market Price per
Warrant Share" means (a) the closing bid price per share of the Common Stock on
such date on the NASDAQ or the Nasdaq SmallCal Market, as the case may be, or
any other stock exchange or quotation system on which the Common Stock is then
listed, or if there is no such price on such date, then the closing bid price on
such exchange or quotation system on which the Common Stock is listed for
trading on the date nearest preceding such date, or (b) if the Common Stock is
not listed then on the NASDAQ or the Nasdaq SmallCap Market or any stock
exchange or quotation system, the closing bid price for a share of Common Stock
in the over-the-counter market, as reported the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Company, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Company.
(d) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares.
If less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
(e)(i) The Holder may not exercise this Warrant to the
extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules thereunder) in excess of 4.999% of the then issued and outstanding shares
of Common Stock. The Holder shall have the sole authority and obligation to
determine whether the restriction contained in this Section applies and to the
extent that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be in the sole discretion of the Holder, and the Company shall have no
obligation to verify or confirm the accuracy of any such determination. The
provisions of this Section may be waived by the Holder (but only as to itself
and not to any other Holder) upon not less than 75 days prior notice to the
Company, and the provisions of this Section shall continue to apply until such
75th day (or later, if stated in the notice of waiver).
(ii) The Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.999% of the then issued
and outstanding shares of Common Stock. The Holder shall have the sole
3
<PAGE> 4
authority and obligation to determine whether the restriction contained in this
Section applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be in the sole discretion of the Holder and the
Company shall have no obligation to verify or confirm the accuracy of any such
determination. The provisions of this Section may be waived by the Holder (but
only as to itself and not to any other Holder) upon not less than 75 days prior
notice to the Company and the provisions of this Section shall continue to apply
until such 75th day (or later, if stated in the notice of waiver).
(iii) Notwithstanding anything herein to the contrary,
unless the Company shall have previously (A) received the shareholder approval
as may be required under Rule 4310(H)(i)(b) of the NASDAQ Stock Market or (B)
obtained an exemption from the requirement from the NASDAQ Stock Market for such
shareholder approval, the Holder shall not exercise this Warrant to the extent
such exercise would result in the Holder holding in excess of 25% of the number
of shares of Common Stock outstanding on the date hereof.
4. No Voting or Dividend Rights; Limitation of Liability.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No cash dividends shall be payable or accrued in respect of this Warrant or the
Warrant Shares until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
the Holder for the Exercise Price or as a stockholder of the company whether
such liability is asserted by the Company or by its creditors.
5. Registration Rights. The Warrant Shares are entitled to
certain registration rights pursuant to that certain Registration Rights
Agreement, dated as of February 14, 2000, between the Company and the Purchaser
named therein (as may be amended, modified or supplemented from time to time,
the "Registration Rights Agreement"). Pursuant to the terms of the Registration
Rights Agreement, the Company is obligated, among other things, to file a
registration statement registering for resale the Warrant Shares and naming the
Holder as a selling stockholder thereunder.
6. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder, and the Company shall not be required to issue or cause
to be issued or deliver or cause to be delivered the certificates for Warrant
Shares unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
4
<PAGE> 5
7. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity and/or bond, if requested, satisfactory to it. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable charges as the Company
may prescribe.
8. Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9) The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
5
<PAGE> 6
9. Certain Adjustments. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 9. Upon each such adjustment of
the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior
to the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated divided
rate) or otherwise make a distribution or distributions on shares of its Common
Stock (as defined below) or on any other class of capital stock and not the
Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 9(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for
6
<PAGE> 7
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire, or
securities convertible into, or otherwise sell or distribute, shares of Common
Stock for a consideration per share less than the Market Value in effect on the
date of issuance of such rights, warrants or shares, then, forthwith upon such
issue or sale, the Exercise Price shall be reduced to the price (calculated to
the nearest cent) determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock which the aggregate consideration
received (or to be received, assuming exercise or conversion in full of such
rights, warrants and convertible securities) for the issuance of such additional
shares of Common Stock would purchase at such Market Value, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such adjustment shall
be made successively whenever such an issuance is made. For purposes hereof, the
"Market Value" of the Common Stock as at a date of determination shall mean the
arithmetic average of the Per Share Market Value (as defined in the Convertible
Preferred Stock Purchase Agreement, dated as of February 14, 2000, between the
Company and the original Holder of this Warrant) for the ten (10) business days
preceding the date of determination.
(e) For the purposes of this Section 9, the following
clauses shall also be applicable:
(i) Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
7
<PAGE> 8
(g) Whenever the Exercise Price is adjusted pursuant to
Section 9(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(h) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
(iii) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of any
rights; or
(iv) the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company, any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted
into other securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least ten (10) business days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record
8
<PAGE> 9
shall be entitled to exchange their shares of Common Stock for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(i) No adjustment in the Exercise Price under
Sections 9(c) or (d) shall be required to be made if such adjustment would
result in a change of less than $.10 in the Exercise Price, but any adjustments
not made by reason of this clause (i) shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment(s) which,
together with any adjustment(s) so carried forward, shall require an increase or
decrease of at least $.10 in the Exercise Price then in effect.
10. Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.
11. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via confirmed facsimile at the facsimile telephone number specified
in this Section prior to 8:00 p.m. (New York City time) on a business day, (ii)
the business day after the date of transmission, if such notice or communication
is delivered via confirmed facsimile at the facsimile telephone number specified
in this Section later than 8:00 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the business
day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, to Ecogen Inc., 2000 Cabot Boulevard West, Suite 170, Langhorne, PA
19047, Attention: Chief Financial Officer, or to facsimile no. (215) 757-3339,
or (ii) if to the Holder, to the Holder at the address or facsimile number
appearing on the Warrant Register or such other address or facsimile number as
the Holder may provide to the Company in accordance with this Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent under this
Warrant. Upon not less than thirty (30) days' notice to the Holder, the Company
may appoint a new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant
9
<PAGE> 10
agent transfers substantially all of its corporate trust or shareholders
services business shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the Company and
the Holder.
(b) Subject to Section 13(a) above, nothing in this
Warrant shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under this
Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
ECOGEN INC.
By:
----------------------------------
Name:
Title:
<PAGE> 12
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Ecogen Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Ecogen
Inc. and, if such Holder is not utilizing the cashless exercise provisions set
forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks or wire transfer of immediately available funds,
which sum represents the aggregate Exercise Price (as defined in the Warrant)
for the number of shares of Common Stock to which this Form of Election to
Purchase relates, together with any applicable taxes payable by the undersigned
pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
----------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , Name of Holder:
---------------------
(Print)
-------------------------------------
(By:)
---------------------------------------
(Name:)
(Title:)
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
<PAGE> 13
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Ecogen Inc. to which
the within Warrant relates and appoints ________________ attorney to transfer
said right on the books of [ ] with full power of substitution in the premises.
Dated:
- ---------------, ----
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face
of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
<PAGE> 1
EXHIBIT 10.159
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
ECOGEN INC.
WARRANT
Dated: February 14, 2000
Ecogen Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received, Aspen International, Ltd., or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to a total of 66,667 shares of Common Stock, $.01 par value per
share (the "Common Stock"), of the Company (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at an exercise price equal to $2.66
per share (as adjusted from time to time as provided in Section 11, the
"Exercise Price"), at any time and from time to time from and after the date
hereof and through and including February 14, 2005 (the "Expiration Date"), and
subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at the office specified in or pursuant to
Section 3(b). Upon any such registration or transfer, a new warrant to purchase
<PAGE> 2
Common Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the
registered Holder on any business day before 5:30 P.M., Eastern time, at any
time and from time to time on or after the date hereof to and including the
Expiration Date. At 5:30 P.M., Eastern time on the Expiration Date, the portion
of this Warrant not exercised prior thereto shall be and become void and of no
value. Prior to the Expiration Date, the Company may not call or otherwise
redeem this Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b) and 6, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in lawful money of
the United States of America, in cash, by certified or official bank check or
checks or wire transfer of immediately available funds, all as specified by the
Holder in the Form of Election to Purchase, the Company shall promptly (but in
no event later than five (5) business days after the Date of Exercise) issue or
cause to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate for
the Warrant Shares issuable upon such exercise, free of restrictive legends
other than as required by applicable law. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto (or attached
to such New Warrant) appropriately completed and duly signed, and (ii) payment
of the Exercise Price for the number of Warrant Shares so indicated by the
holder hereof to be purchased.
(c) Notwithstanding anything in this Section 3 to the
contrary, if a registration statement contemplated by the Registration Rights
Agreement between the Company and the Holder dated as of February 14, 2000 (the
"Registration Rights Agreement") which includes the Warrant Shares, is not
declared effective by the Effectiveness Date (as defined in the Registration
Rights Agreement), or if declared effective, such effectiveness lapses, then the
Holder hereof may exercise this Warrant, in whole or in part, by surrender to
the Company for cancellation of a portion
2
<PAGE> 3
of this Warrant representing that number of Warrant Shares which is equal to the
quotient obtained by dividing (A) the product obtained by multiplying the
Exercise Price by the number of Warrant Shares being purchased upon such
exercise by (B) the difference obtained by subtracting the Exercise Price from
the Current Market Price per Warrant Share as of the date of such exercise.
For purposes of this Section 3, "Current Market Price
per Warrant Share" means (a) the closing bid price per share of the Common Stock
on such date on the NASDAQ or the Nasdaq SmallCal Market, as the case may be, or
any other stock exchange or quotation system on which the Common Stock is then
listed, or if there is no such price on such date, then the closing bid price on
such exchange or quotation system on which the Common Stock is listed for
trading on the date nearest preceding such date, or (b) if the Common Stock is
not listed then on the NASDAQ or the Nasdaq SmallCap Market or any stock
exchange or quotation system, the closing bid price for a share of Common Stock
in the over-the-counter market, as reported the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Company, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Company.
(d) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares.
If less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
(e)(i) The Holder may not exercise this Warrant to
the extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules thereunder) in excess of 4.999% of the then issued and outstanding shares
of Common Stock. The Holder shall have the sole authority and obligation to
determine whether the restriction contained in this Section applies and to the
extent that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be in the sole discretion of the Holder, and the Company shall have no
obligation to verify or confirm the accuracy of any such determination. The
provisions of this Section may be waived by the Holder (but only as to itself
and not to any other Holder) upon not less than 75 days prior notice to the
Company, and the provisions of this Section shall continue to apply until such
75th day (or later, if stated in the notice of waiver).
(ii) The Holder may not exercise this Warrant to the
extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.999% of the then
issued and outstanding shares of Common Stock. The Holder shall have the sole
3
<PAGE> 4
authority and obligation to determine whether the restriction contained in this
Section applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be in the sole discretion of the Holder and the
Company shall have no obligation to verify or confirm the accuracy of any such
determination. The provisions of this Section may be waived by the Holder (but
only as to itself and not to any other Holder) upon not less than 75 days prior
notice to the Company and the provisions of this Section shall continue to apply
until such 75th day (or later, if stated in the notice of waiver).
(iii) Notwithstanding anything herein to the
contrary, unless the Company shall have previously (A) received the shareholder
approval as may be required under Rule 4310(H)(i)(b) of the NASDAQ Stock Market
or (B) obtained an exemption from the requirement from the NASDAQ Stock Market
for such shareholder approval, the Holder shall not exercise this Warrant to the
extent such exercise would result in the Holder holding in excess of 25% of the
number of shares of Common Stock outstanding on the date hereof.
4. No Voting or Dividend Rights; Limitation of Liability.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No cash dividends shall be payable or accrued in respect of this Warrant or the
Warrant Shares until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
the Holder for the Exercise Price or as a stockholder of the company whether
such liability is asserted by the Company or by its creditors.
5. Registration Rights. The Warrant Shares are entitled to
certain registration rights pursuant to that certain Registration Rights
Agreement, dated as of February 14, 2000, between the Company and the Purchaser
named therein (as may be amended, modified or supplemented from time to time,
the "Registration Rights Agreement"). Pursuant to the terms of the Registration
Rights Agreement, the Company is obligated, among other things, to file a
registration statement registering for resale the Warrant Shares and naming the
Holder as a selling stockholder thereunder.
6. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder, and the Company shall not be required to issue or cause
to be issued or deliver or cause to be delivered the certificates for Warrant
Shares unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
4
<PAGE> 5
7. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity and/or bond, if requested, satisfactory to it. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable charges as the Company
may prescribe.
8. Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9) The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
5
<PAGE> 6
9. Certain Adjustments. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 9. Upon each such adjustment of
the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior
to the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated divided
rate) or otherwise make a distribution or distributions on shares of its Common
Stock (as defined below) or on any other class of capital stock and not the
Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 9(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for
6
<PAGE> 7
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) If, at any time while this Warrant is
outstanding, the Company shall issue or cause to be issued rights or warrants to
acquire, or securities convertible into, or otherwise sell or distribute, shares
of Common Stock for a consideration per share less than the Market Value in
effect on the date of issuance of such rights, warrants or shares, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to the
price (calculated to the nearest cent) determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock which the aggregate
consideration received (or to be received, assuming exercise or conversion in
full of such rights, warrants and convertible securities) for the issuance of
such additional shares of Common Stock would purchase at such Market Value, and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made. For
purposes hereof, the "Market Value" of the Common Stock as at a date of
determination shall mean the arithmetic average of the Per Share Market Value
(as defined in the Convertible Preferred Stock Purchase Agreement, dated as of
February 14, 2000, between the Company and the original Holder of this Warrant)
for the ten (10) business days preceding the date of determination.
(e) For the purposes of this Section 9, the following
clauses shall also be applicable:
(i) Record Date. In case the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in Common Stock or
in securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares
of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
7
<PAGE> 8
(g) Whenever the Exercise Price is adjusted pursuant
to Section 9(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(h) If:
(i) the Company shall declare a
dividend (or any other
distribution) on its Common
Stock; or
(ii) the Company shall declare a
special nonrecurring cash
dividend on or a redemption of
its Common Stock; or
(iii) the Company shall authorize the
granting to all holders of the
Common Stock rights or warrants
to subscribe for or purchase
any shares of capital stock of
any class or of any rights; or
(iv) the approval of any stockholders
of the Company shall be required
in connection with any
reclassification of the Common
Stock of the Company, any
consolidation or merger to which
the Company is a party, any sale
or transfer of all or
substantially all of the assets
of the Company, or any compulsory
share exchange whereby the Common
Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the
voluntary dissolution,
liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least ten (10) business days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record
8
<PAGE> 9
shall be entitled to exchange their shares of Common Stock for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(i) No adjustment in the Exercise Price under
Sections 9(c) or (d) shall be required to be made if such adjustment would
result in a change of less than $.10 in the Exercise Price, but any adjustments
not made by reason of this clause (i) shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment(s) which,
together with any adjustment(s) so carried forward, shall require an increase or
decrease of at least $.10 in the Exercise Price then in effect.
10. Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.
11. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via confirmed facsimile at the facsimile telephone number specified
in this Section prior to 8:00 p.m. (New York City time) on a business day, (ii)
the business day after the date of transmission, if such notice or communication
is delivered via confirmed facsimile at the facsimile telephone number specified
in this Section later than 8:00 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the business
day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, to Ecogen Inc., 2000 Cabot Boulevard West, Suite 170, Langhorne, PA
19047, Attention: Chief Financial Officer, or to facsimile no. (215) 757-3339,
or (ii) if to the Holder, to the Holder at the address or facsimile number
appearing on the Warrant Register or such other address or facsimile number as
the Holder may provide to the Company in accordance with this Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent under
this Warrant. Upon not less than thirty (30) days' notice to the Holder, the
Company may appoint a new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant
9
<PAGE> 10
agent shall be a party or any corporation to which the Company or any new
warrant agent transfers substantially all of its corporate trust or shareholders
services business shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the Company and
the Holder.
(b) Subject to Section 13(a) above, nothing in this
Warrant shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under this
Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.
(c) This Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do
not constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
ECOGEN INC.
By:
--------------------------------
Name:
Title:
<PAGE> 12
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Ecogen Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Ecogen
Inc. and, if such Holder is not utilizing the cashless exercise provisions set
forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks or wire transfer of immediately available funds,
which sum represents the aggregate Exercise Price (as defined in the Warrant)
for the number of shares of Common Stock to which this Form of Election to
Purchase relates, together with any applicable taxes payable by the undersigned
pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
-----------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , Name of Holder:
--------------------------
(Print)
-----------------------------------
(By:)
-----------------------------------
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
<PAGE> 13
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Ecogen Inc. to which
the within Warrant relates and appoints ________________ attorney to transfer
said right on the books of [ ] with full power of substitution in the premises.
Dated:
- ---------------, ----
---------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
<PAGE> 1
EXHIBIT 10.160
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
ECOGEN INC.
WARRANT
Dated: February 14, 2000
Ecogen Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received, Markham Holdings Limited, or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to a total of 26,666 shares of Common Stock, $.01 par value per
share (the "Common Stock"), of the Company (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at an exercise price equal to $2.66
per share (as adjusted from time to time as provided in Section 11, the
"Exercise Price"), at any time and from time to time from and after the date
hereof and through and including February 14, 2005 (the "Expiration Date"), and
subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register
this Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at the office specified in or pursuant to
Section 3(b). Upon any such registration or transfer, a new warrant to purchase
<PAGE> 2
Common Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the
registered Holder on any business day before 5:30 P.M., Eastern time, at any
time and from time to time on or after the date hereof to and including the
Expiration Date. At 5:30 P.M., Eastern time on the Expiration Date, the portion
of this Warrant not exercised prior thereto shall be and become void and of no
value. Prior to the Expiration Date, the Company may not call or otherwise
redeem this Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b) and 6, upon surrender
of this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in lawful money of
the United States of America, in cash, by certified or official bank check or
checks or wire transfer of immediately available funds, all as specified by the
Holder in the Form of Election to Purchase, the Company shall promptly (but in
no event later than five (5) business days after the Date of Exercise) issue or
cause to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate for
the Warrant Shares issuable upon such exercise, free of restrictive legends
other than as required by applicable law. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto (or attached
to such New Warrant) appropriately completed and duly signed, and (ii) payment
of the Exercise Price for the number of Warrant Shares so indicated by the
holder hereof to be purchased.
(c) Notwithstanding anything in this Section 3 to
the contrary, if a registration statement contemplated by the Registration
Rights Agreement between the Company and the Holder dated as of February 14,
2000 (the "Registration Rights Agreement") which includes the Warrant Shares, is
not declared effective by the Effectiveness Date (as defined in the Registration
Rights Agreement), or if declared effective, such effectiveness lapses, then the
Holder hereof may exercise this Warrant, in whole or in part, by surrender to
the Company for cancellation of a portion
2
<PAGE> 3
of this Warrant representing that number of Warrant Shares which is equal to the
quotient obtained by dividing (A) the product obtained by multiplying the
Exercise Price by the number of Warrant Shares being purchased upon such
exercise by (B) the difference obtained by subtracting the Exercise Price from
the Current Market Price per Warrant Share as of the date of such exercise.
For purposes of this Section 3, "Current Market
Price per Warrant Share" means (a) the closing bid price per share of the Common
Stock on such date on the NASDAQ or the Nasdaq SmallCal Market, as the case may
be, or any other stock exchange or quotation system on which the Common Stock is
then listed, or if there is no such price on such date, then the closing bid
price on such exchange or quotation system on which the Common Stock is listed
for trading on the date nearest preceding such date, or (b) if the Common Stock
is not listed then on the NASDAQ or the Nasdaq SmallCap Market or any stock
exchange or quotation system, the closing bid price for a share of Common Stock
in the over-the-counter market, as reported the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Company, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Company.
(d) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares.
If less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
(e)(i) The Holder may not exercise this Warrant to
the extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules thereunder) in excess of 4.999% of the then issued and outstanding shares
of Common Stock. The Holder shall have the sole authority and obligation to
determine whether the restriction contained in this Section applies and to the
extent that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be in the sole discretion of the Holder, and the Company shall have no
obligation to verify or confirm the accuracy of any such determination. The
provisions of this Section may be waived by the Holder (but only as to itself
and not to any other Holder) upon not less than 75 days prior notice to the
Company, and the provisions of this Section shall continue to apply until such
75th day (or later, if stated in the notice of waiver).
(ii) The Holder may not exercise this Warrant to the
extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.999% of the then
issued and outstanding shares of Common Stock. The Holder shall have the sole
3
<PAGE> 4
authority and obligation to determine whether the restriction contained in this
Section applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be in the sole discretion of the Holder and the
Company shall have no obligation to verify or confirm the accuracy of any such
determination. The provisions of this Section may be waived by the Holder (but
only as to itself and not to any other Holder) upon not less than 75 days prior
notice to the Company and the provisions of this Section shall continue to apply
until such 75th day (or later, if stated in the notice of waiver).
(iii) Notwithstanding anything herein to the
contrary, unless the Company shall have previously (A) received the shareholder
approval as may be required under Rule 4310(H)(i)(b) of the NASDAQ Stock Market
or (B) obtained an exemption from the requirement from the NASDAQ Stock Market
for such shareholder approval, the Holder shall not exercise this Warrant to the
extent such exercise would result in the Holder holding in excess of 25% of the
number of shares of Common Stock outstanding on the date hereof.
4. No Voting or Dividend Rights; Limitation of
Liability. Nothing contained in this Warrant shall be construed as conferring
upon the Holder the right to vote or to consent or to receive notice as a
stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No cash dividends shall be payable or accrued in respect of this
Warrant or the Warrant Shares until, and only to the extent that, this Warrant
shall have been exercised. No provisions hereof, in the absence of affirmative
action by the Holder to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of the Holder for the Exercise Price or as a stockholder of the
company whether such liability is asserted by the Company or by its creditors.
5. Registration Rights. The Warrant Shares are entitled
to certain registration rights pursuant to that certain Registration Rights
Agreement, dated as of February 14, 2000, between the Company and the Purchaser
named therein (as may be amended, modified or supplemented from time to time,
the "Registration Rights Agreement"). Pursuant to the terms of the Registration
Rights Agreement, the Company is obligated, among other things, to file a
registration statement registering for resale the Warrant Shares and naming the
Holder as a selling stockholder thereunder.
6. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the issuance of Warrant Shares upon the
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder, and the Company shall not be required to issue or
cause to be issued or deliver or cause to be delivered the certificates for
Warrant Shares unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid. The
Holder shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Warrant or receiving Warrant Shares upon
exercise hereof.
4
<PAGE> 5
7. Replacement of Warrant. If this Warrant is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity and/or bond, if requested, satisfactory to it. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable charges as the Company
may prescribe.
8. Reservation of Warrant Shares. The Company covenants
that it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9) The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
5
<PAGE> 6
9. Certain Adjustments. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 9. Upon each such adjustment of
the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior
to the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant
is outstanding, (i) shall pay a stock dividend (except scheduled dividends paid
on outstanding preferred stock as of the date hereof which contain a stated
divided rate) or otherwise make a distribution or distributions on shares of its
Common Stock (as defined below) or on any other class of capital stock and not
the Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 9(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall
be determined by multiplying the Exercise Price in effect immediately prior to
the record date fixed for
6
<PAGE> 7
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) If, at any time while this Warrant is
outstanding, the Company shall issue or cause to be issued rights or warrants to
acquire, or securities convertible into, or otherwise sell or distribute, shares
of Common Stock for a consideration per share less than the Market Value in
effect on the date of issuance of such rights, warrants or shares, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to the
price (calculated to the nearest cent) determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock which the aggregate
consideration received (or to be received, assuming exercise or conversion in
full of such rights, warrants and convertible securities) for the issuance of
such additional shares of Common Stock would purchase at such Market Value, and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made. For
purposes hereof, the "Market Value" of the Common Stock as at a date of
determination shall mean the arithmetic average of the Per Share Market Value
(as defined in the Convertible Preferred Stock Purchase Agreement, dated as of
February 14, 2000, between the Company and the original Holder of this Warrant)
for the ten (10) business days preceding the date of determination.
(e) For the purposes of this Section 9, the
following clauses shall also be applicable:
(i) Record Date. In case the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them (A) to receive a dividend or other distribution payable in Common
Stock or in securities convertible or exchangeable into shares of Common Stock,
or (B) to subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares
of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
7
<PAGE> 8
(g) Whenever the Exercise Price is adjusted pursuant
to Section 9(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(h) If:
(i) the Company shall declare a
dividend (or any other
distribution) on its Common
Stock; or
(ii) the Company shall declare a
special nonrecurring cash
dividend on or a redemption of
its Common Stock; or
(iii) the Company shall authorize the
granting to all holders of the
Common Stock rights or warrants
to subscribe for or purchase
any shares of capital stock of
any class or of any rights; or
(iv) the approval of any
stockholders of the Company
shall be required in connection
with any reclassification of
the Common Stock of the
Company, any consolidation or
merger to which the Company is
a party, any sale or transfer
of all or substantially all of
the assets of the Company, or
any compulsory share exchange
whereby the Common Stock is
converted into other
securities, cash or property;
or
(v) the Company shall authorize the
voluntary dissolution,
liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least ten (10) business days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record
8
<PAGE> 9
shall be entitled to exchange their shares of Common Stock for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(i) No adjustment in the Exercise Price under
Sections 9(c) or (d) shall be required to be made if such adjustment would
result in a change of less than $.10 in the Exercise Price, but any adjustments
not made by reason of this clause (i) shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment(s) which,
together with any adjustment(s) so carried forward, shall require an increase or
decrease of at least $.10 in the Exercise Price then in effect.
10. Fractional Shares. The Company shall not be required
to issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.
11. Notices. Any and all notices or other communications
or deliveries hereunder shall be in writing and shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via confirmed facsimile at the facsimile telephone
number specified in this Section prior to 8:00 p.m. (New York City time) on a
business day, (ii) the business day after the date of transmission, if such
notice or communication is delivered via confirmed facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the business day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to Ecogen Inc., 2000 Cabot
Boulevard West, Suite 170, Langhorne, PA 19047, Attention: Chief Financial
Officer, or to facsimile no. (215) 757-3339, or (ii) if to the Holder, to the
Holder at the address or facsimile number appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent
under this Warrant. Upon not less than thirty (30) days' notice to the Holder,
the Company may appoint a new warrant agent.
(b) Any corporation into which the Company or
any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant
9
<PAGE> 10
agent transfers substantially all of its corporate trust or shareholders
services business shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. This Warrant may be amended only in writing signed by the
Company and the Holder.
(b) Subject to Section 13(a) above, nothing in
this Warrant shall be construed to give to any person or corporation other than
the Company and the Holder any legal or equitable right, remedy or cause under
this Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.
(c) This Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience
only, do not constitute a part of this Warrant and shall not be deemed to limit
or affect any of the provisions hereof.
(e) In case any one or more of the provisions of
this Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
ECOGEN INC.
By:
-----------------------------------
Name:
Title:
<PAGE> 12
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Ecogen Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Ecogen
Inc. and, if such Holder is not utilizing the cashless exercise provisions set
forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks or wire transfer of immediately available funds,
which sum represents the aggregate Exercise Price (as defined in the Warrant)
for the number of shares of Common Stock to which this Form of Election to
Purchase relates, together with any applicable taxes payable by the undersigned
pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
-------------------,------- Name of Holder:
(Print)
(By:)
--------------------------------
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
<PAGE> 13
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Ecogen Inc. to which
the within Warrant relates and appoints ________________ attorney to transfer
said right on the books of [ ] with full power of substitution in the premises.
Dated:
- ---------------, ----
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 15,377
<SECURITIES> 0
<RECEIVABLES> 1,847,694
<ALLOWANCES> 80,000
<INVENTORY> 5,372,613
<CURRENT-ASSETS> 7,615,742
<PP&E> 7,305,550
<DEPRECIATION> 5,074,259
<TOTAL-ASSETS> 10,662,128
<CURRENT-LIABILITIES> 6,888,043
<BONDS> 1,148,613
0
419
<COMMON> 105,093
<OTHER-SE> (496,463)
<TOTAL-LIABILITY-AND-EQUITY> 10,662,128
<SALES> 1,099,500
<TOTAL-REVENUES> 1,099,500
<CGS> 906,530
<TOTAL-COSTS> 2,558,471
<OTHER-EXPENSES> (54,351)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146,247
<INCOME-PRETAX> (1,550,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,550,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,706,044)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
