1
AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
(this "Agreement"), dated as of June 5, 1998, between Ecogen Inc., a Delaware
corporation (the "Company"), and KA Investments LDC, a Cayman Islands
corporation (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 8%
Series 1998-A Convertible Preferred Stock, par value $.01 per share (the "Series
A Preferred"), and shares of the Company's 8% Series 1998-B Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred" and,
together with the Series A Preferred, 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 20,000 shares of the Series A
Preferred (the "Series A Shares") and 10,000 shares of the Series B Preferred
(the "Series B Shares and, together with the Series A Shares, the "Shares").
(b) The Series A Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series A
Terms"), which shall be incorporated into a Certificate of Designation to be
approved by the Purchaser and filed prior to the time of the Series A Closing
(as defined below) by the Company with the Secretary of State of Delaware (the
"Series A Designation"). The Series B Preferred shall have respective rights,
preferences and privileges identical to the Series A Terms, mutatis mutandis,
and shall rank pari passu with the Series A Preferred with regard to dividends,
liquidation, voting rights and any other preferential rights designated therein,
except that the Conversion Price (as defined below) for conversion of the Series
B Shares shall be determined as of the Original Issue Date (as defined below)
for such Series B Shares.
The Series B Preferred shall be authorized pursuant to a Certificate of
Designation prepared by the Company and, subject to the approval of the
Purchaser, filed prior to the Series B Closing Date (as defined below), by the
Company with the Secretary of State of Delaware (the "Series B Designation" and,
together with the Series A Designation, the "Certificates of Designation").
-2-
2
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 Series A Terms.
1.2 Purchase Price. The purchase price per Share shall be $100.00.
1.3 The Closings.
(a) The Series A Closing. (i) The closing of the purchase and
sale of the 20,000 Series A Shares (the "Series A Closing") shall take place at
the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("Xxxxxxxx
Xxxxxxxxx"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Series A Closing is hereinafter referred to as the "Series A
Closing Date."
(ii) At the Series A Closing, the parties shall
deliver or shall cause to be delivered the following: (a) the Company shall
deliver to the Purchaser (1) a stock certificate representing 20,000 Series A
Shares registered in the name of the Purchaser, (2) a five year common stock
purchase warrant in the form of Exhibit B (the "Series A Warrant") entitling the
Purchaser to purchase an aggregate of 160,000 shares 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 Series A Closing Date, registered
in the name of the Purchaser, (3) the legal opinion of Paul, Hastings, Xxxxxxxx
& Xxxxxx LLP, outside counsel to the Company, substantially in the form of
Exhibit D, dated the Series A Closing Date, and (4) all other documents,
instruments and writings required to have been delivered at or prior to the
Series A 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 C (the "Registration Rights
Agreement"), and the Irrevocable Transfer Agent Instructions, dated the Series A
Closing Date, in the form of Exhibit E, delivered to and acknowledged by the
Company's transfer agent (the "Transfer Agent Instructions"); and (b) the
Purchaser shall deliver to the Company (1) $2,000,000 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 Series A Closing Date (the
"Series A Purchase Price") less the amounts referred to in Section 5.1, and (2)
all documents, instruments and writings required to have been delivered at or
prior to the Series A Closing Date by the Purchaser pursuant to this Agreement,
including an executed Registration Rights Agreement.
(b) The Series B Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall have the right to
deliver a written notice to the Purchaser (a "Subsequent Financing Notice")
requiring the Purchaser to buy the Series B Shares for a purchase price of
$1,000,000. A Subsequent Financing Notice may be
-3-
3
delivered no earlier than 90 days following the date the initial Registration
Statement is filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Registration Rights Agreement (the "Series A
Underlying Securities Registration Statement" and, together with each other
Registration Statement filed with the Commission pursuant to the Registration
Rights Agreement, the "Underlying Securities Registration Statements") is
declared effective by the Commission (the "Effectiveness Date") and no later
than 210 days following the Effectiveness Date, or as otherwise agreed to by the
parties. The closing of the purchase and sale of the Series B Shares (the
"Series B Closing") shall take place at the offices of the Xxxxxxxx Xxxxxxxxx on
the third (3rd) Business Day after the Subsequent Financing Notice is delivered
hereunder or on such other date as otherwise agreed to by the parties; provided,
however, that in no case shall the Series B Closing take place unless and until
the conditions listed in Section 4.1 have been satisfied or waived by the
Purchaser. The date of the Series B Closing is hereinafter referred to as the
"Series B Closing Date."
(ii) At the Series B Closing, the parties shall
deliver or shall cause to be delivered the following: (a) the Company shall
deliver to the Purchaser (1) a stock certificate representing 10,000 Series B
Shares registered in the name of the Purchaser, (2) a five year common stock
purchase warrant in the form of Exhibit B (the "Series B Warrant" and together
with the Series A Warrant, the "Warrants") entitling the Purchaser to purchase
an aggregate of 80,000 shares of Common Stock, at an exercise price equal to
120% of the Per Share Market Value on the Series B Closing Date, registered in
the name of the Purchaser, (3) the legal opinion referenced in Section 4.1(xii),
and (4) all other documents, instruments and writings required to have been
delivered at or prior to the Series B Closing Date by the Company to the
Purchaser pursuant to this Agreement; and (b) the Purchaser shall deliver to the
Company (1) $500,000 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 Series B Closing Date (the "Series B Purchase Price") less
the amounts referred to in Section 5.1, and (2) all documents, instruments and
writings required to have been delivered at or prior to the Series B Closing
Date by the Purchaser pursuant to this Agreement, including a certificate signed
on behalf of the Purchaser confirming the accuracy of its representation and
warranties incurred on and as of the Series B Closing Date.
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
-4-
4
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 Certificates of Designation,
the Warrants 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 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 Warrants, securities, rights or obligations convertible into or exchangeable
for, or giving any person any right to
-5-
5
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 Warrants. The Shares and
the Warrants are duly authorized, and, when issued and paid for in accordance
with the terms hereof, shall have been 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 will, at each Closing Date and at all times while the Shares and the
Warrants are outstanding, maintain an adequate reserve of duly reserved shares
of Common Stock, reserved for issuance to the holders of the Shares and the
Warrants to enable it to perform its conversion, exercise and other obligations
under this Agreement, the Certificates of Designations and the Warrants. 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
Series A 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 Warrants, and (iii) 175%
of the number of shares 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 Warrants are collectively referred to
herein as the "Underlying Shares." The Shares, the Dividend Shares, the Warrants
and the Underlying Shares are collectively referred to as the "Securities." When
issued in accordance with the Certificates of Designation and upon exercise of
the Warrants, in accordance with their respective terms, the Underlying Shares
shall have been 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
-6-
6
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 as set in Schedule 2.1(e) and 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 Certificates of Designation with the Secretary of State
of Delaware, (ii) the filing of the Underlying Securities Registration
Statements with the Commission pursuant to the Registration Rights Agreement,
(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 or as set forth in Schedule 2.1(g), 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 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.
-7-
7
(h) No Default or Violation. 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 set forth in Schedule 2.1(h) and 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)-(h), 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
-8-
8
normal, immaterial, year-end audit adjustments. Since October 31, 1997, except
as specifically disclosed in the SEC Documents or as set forth in Schedule
2.1(k), (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) 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 [February 13, 1998], 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 & Xxxxxx 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, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
-9-
9
(o) Seniority. Except as provided in Schedule 2.1(p), 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.
(q) Listing and Maintenance Requirements Compliance. The
Company has not in the two years preceding the date hereof received notice
(written or oral) from the 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. The Company is in compliance with all such maintenance requirements.
(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 first 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
-10-
10
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 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 Warrants, it was, and at the date hereof, it is, and at each
Closing Date and each exercise date under the Warrants, 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
-11-
11
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.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed by a
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
-12-
12
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 a 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.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET FORTH IN A
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF MAY, [ ],
1998, BETWEEN ECOGEN INC. (THE "COMPANY") AND THE ORIGINAL HOLDER
HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
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 Warrants or other issuances of Underlying Shares as contemplated hereby
or by the Certificates of Designation 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
attached hereto as Exhibit E to the Company's transfer agent on the day that the
Underlying Securities Registration Statement is declared effective by the
Commission. The Company agrees that it will provide
-13-
13
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 Certificates of Designation, and (ii)
exercise of the Warrants, 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 Certificates of Designation, and (y) exercise of the Warrants, is
unconditional and absolute, subject to the limitations set forth in this
Agreement, in the Certificates of Designation or pursuant to the Warrants,
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 13(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
-14-
14
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.
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 Warrants, 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 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 Certificates of Designation and the Warrants (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
Warrants, 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 60th day after delivery of the proxy
materials relating to such meeting) and (c) within 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 Listing and Reservation of Underlying Shares. (a) The Company shall
(i) not later than the 10th day following each Closing Date, prepare and file
with the NASDAQ (as well as any other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) an
additional shares listing application covering a number of shares of Common
Stock which is at least equal to the number of shares required
-15-
15
to be reserved pursuant to Section 2.1(d), (ii) take all steps necessary to
cause such shares to be approved for listing on the NASDAQ (as well as on any
other national securities exchange or market or trading or quotation facility on
which the Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchaser evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. If at any time thereafter the
number of Underlying Shares as are issuable upon conversion in full of the then
number of outstanding Shares and Dividend Shares, and upon exercise of the then
unexercised portion of the Warrants, exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and other required
exchanges), the Company shall take the necessary actions to immediately list a
number of Underlying Shares as equal 175% of the number of Underlying Shares
then issuable upon conversion of the Shares and Dividend Shares, and exercise of
the Warrants.
(b) The Company shall maintain a reserve of Common Stock for
issuance upon conversion of the Shares and Dividend Shares, and upon exercise of
the Warrants 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
Warrants.
3.8 Purchaser Ownership of Common Stock. The Purchaser agrees not to
convert Shares or Dividend Shares or exercise the Warrants to the extent such
conversion or exercise would result in the Purchaser beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of the Shares or
Dividend Shares and exercise of the Warrants held by such Purchaser after
application of this Section. To the extent that the limitation contained in this
Section applies, the determination of whether Shares or Dividend Shares are
convertible (in relation to other securities owned by a Purchaser) and of which
Shares or Dividend Shares are convertible shall be in the sole discretion of the
Purchaser, and the submission of Shares or Dividend Shares for conversion shall
be deemed to be such Purchaser's determination of whether such Shares or
Dividend Shares are convertible (in relation to other securities owned by a
Purchaser) and of which portion of such Shares or Dividend Shares are
convertible, in each case subject to such aggregate percentage limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict the right of
the Purchaser to convert Shares or Dividend Shares or exercise the Warrants at
such time as such conversion will not violate the provisions of this Section.
The provisions of this Section may be waived by the Purchaser 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).
-16-
16
3.9 Conversion Procedures. The Transfer Agent Instructions, Conversion
Notice (as defined in Exhibit A) and Notice of Exercise under the Warrants set
forth the totality of the procedures with respect to the conversion of the
Shares and Dividend Shares and exercise of the Warrants, 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 necessary
to enable the Purchaser to convert its Shares and Dividend Shares and exercise
the Warrants as contemplated in the Certificates Designation of and the Warrants
(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 each 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
Warrants and shall deliver Underlying Shares in accordance with the respective
terms and conditions and time periods set forth in the respective Certificates
of Designation and the Warrants.
3.12 Right of First Refusal; Subsequent Registrations. (a) Except as
provided for in Schedule 3.12, the Company shall not, directly or indirectly,
without the prior written consent of the Purchaser, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition) any of its or its Affiliates'
equity or equity equivalent securities in a transaction intended to be exempt or
not subject to registration under the Securities Act (a "Subsequent Financing")
for a period of 180 days after each Closing Date, except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan heretofore
or hereinafter duly adopted by the Company, (ii) shares issued upon exercise of
any currently outstanding warrants and upon conversion of any currently
outstanding convertible security in each case disclosed in Schedule 2.1 (c),
-17-
17
(iii) shares of Common Stock issued upon conversion of the Shares and Dividend
Shares in accordance with the Certificates of Designation, and (iv) shares of
Common Stock issued in connection with a Strategic Transaction (as defined
below); unless (A) the Company delivers to the Purchaser a written notice (the
"Subsequent Placement Notice") of its intention to effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement shall be
affected, the date on which the Company reasonably expects such Subsequent
Placement to close and attached to which shall be a term sheet or similar
document relating thereto and (B) the Purchaser shall not have notified the
Company by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after
its receipt of the Subsequent Placement Notice of its willingness to cause the
Purchaser to provide (or to cause its sole designee, which must be an affiliate
of the Purchaser, to provide), subject to completion of mutually acceptable
documentation, financing to the Company on substantially the terms set forth in
the Subsequent Placement Notice. If the Purchaser shall fail to notify the
Company of its intention to enter into such negotiations within such time
period, the Company may effect the Subsequent Placement substantially upon the
terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; provided, that the Company shall provide the
Purchaser with a second Subsequent Placement Notice, and the Purchaser shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within sixty (60) Business Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchaser
exercises its right of first refusal, the closing shall take place at the time
contemplated in the Subsequent Placement Notice, subject to completion of
mutually acceptable documentation, which the parties shall negotiate in good
faith. For purposes of this Section 3.12, a "Strategic Transaction" shall mean a
transaction or relationship in which the Company issues Common Stock to an
entity which is, itself or through its subsidiaries, an operating company in a
business related to the business of the Company and in which the Company
receives material benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital.
(b) 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 actions
permitted pursuant to paragraph (a)(i) through (iv) of this Section, 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
-18-
18
for a period of not less than 90 Trading Days after the later to occur of (1)
the date that an Underlying Securities Registration Statement is declared
effective by the Commission (provided, that in the event that the Underlying
Securities Registration Statement filed does not cover the Underlying Shares
issuable upon conversion or exercise of the Series B Shares, then each such 90
Trading Day period shall commence on the date that the Underlying Securities
Registration Statement covering the Underlying Shares issuable in respect of the
Series B Shares is declared effective by the Commission) and (2) the 90th
Trading Day after the Series B 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 each
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 each Closing Date.
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
-19-
19
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
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchaser to Purchase
the Series B Shares. The obligation of the Purchaser to acquire Series B Shares
is subject to the satisfaction or waiver by the Purchaser, at or before the
Series B Closing Date of each of the following conditions:
(i) Series A Closing The Series A Closing shall have occurred;
(ii) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Series B Closing Date as though made on and as of the Series B Closing Date.
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Series B Closing
Date, including, without limitation, (a) delivery of the Underlying Shares upon
conversion of Series A Shares and performance of its obligations in accordance
with the terms, conditions and timing requirements of the Series A Designation
and (b) delivery of Underlying Shares upon exercise of the Series A Warrant and
performance of its obligations in accordance with the terms of the Series A
Warrant;
(iv) Underlying Securities Registration Statement. The Series
A Underlying Securities Registration Statement shall have been declared
effective under the Securities Act by the Commission and shall have remained
effective at all times, not subject
-20-
20
to any actual or threatened stop order or subject to any actual or threatened
suspension at any time between the Effectiveness Date and the Series B Closing
Date;
(v) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents, including the issuance of Common
Stock upon conversion of any of the Shares or Dividend Shares or exercise of the
Warrants;
(vi) Adverse Changes. Since the Series A Closing Date, no
event or series of events which had or could reasonably be expected to result in
a Material Adverse Effect shall have occurred;
(vii) No Suspensions of Trading in Common Stock. The trading
in the Common Stock shall not have been suspended by the Commission or on the
NASDAQ (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company) at any time
since the Series A Closing Date;
(viii) Listing of Common Stock. The Common Stock shall have
been at all times since the Series A Closing Date listed for trading on the
NASDAQ;
(ix) Change of Control. No Change of Control in the Company
shall have occurred. "Change of Control" means the occurrence of any of: (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 50% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger or
consolidation of the Company with or into another entity, if the stockholders of
the Company immediately before such merger or consolidation do not own, directly
or indirectly, immediately following such merger or consolidation, more than 50%
of the combined voting power of the resulting outstanding voting securities in
substantially the same proportion as their pre-merger or pre-consolidation
ownership, or sale of all or substantially all of the assets of the Company in
one or a series of related transactions or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (i), (ii) or (iii);
(x) Legal Opinion. The Company shall have delivered to the
Purchaser the opinion of the Company's outside counsel, in substantially the
form of Exhibit D, dated the Series B Closing Date;
-21-
21
(xi) Required Approvals. All Required Approvals shall have
been obtained.
(xii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement to be
reserved for issuance upon conversion of Series B Shares and of additional
Series B Shares issued as payment of dividends on the Series B Shares (such
additional Series B Shares, the "Dividend B Shares"), assuming each Series B
Share and Dividend B Share is outstanding for two years and all dividends are
paid in the form of Dividend B Shares;
(xiii) Delivery of Stock Certificates and Warrant. The Company
shall have delivered to the Purchaser or its designee a stock certificate
representing the 10,000 Series B Shares, registered in the name of the Purchaser
or its designee, and a warrant, substantially in the form of Exhibit B, to
purchase 0,000 shares of Common Stock, each in form satisfactory to the
Purchaser;
(xiv) Closing Threshold. For the 30 Trading Days immediately
preceding the Series B Closing Date, the average daily trading volume of the
Common Stock on the NASDAQ shall have been at least 35,000 shares, and the Per
Share Market Value for each of the seven (7) Trading Days preceding the Series B
Closing Date shall be greater than $3.00;
(xv) Transfer Agent Instructions. The Transfer Agent
Instructions, dated the Series B Closing Date, shall have been delivered to and
acknowledged in writing by the Company's transfer agent; and
(xvi) Shareholder Approval. No approval of the shareholders of
the Company shall be required in order to issue 175% of the number of Underlying
Shares issuable upon conversion in full of the Series B Shares to be issued on
the Series B Closing Date and the number of Shares issuable on account of
dividends in the Series B Shares, assuming all dividends for a two year period
were paid in the form of Series B Shares (assuming such conversion occurred on
the Series B Closing Date).
4.2 Delay of Series B Closing. If all of the conditions set forth in
Section 4.1 are not met on the date scheduled for the Series B Closing and such
conditions have not been waived by the Purchaser, the Company shall have the
right to postpone the Series B Closing to a date not later than 210 days after
the Effectiveness Date. No such postponement shall have the effect of waiving or
eliminating any of the conditions for the Series B Closing set forth in Section
4.1.
-22-
22
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. On the Series A Closing Date, the Series A
Purchase Price shall be reduced by (i) $115,000 to be paid to Jesup & Xxxxxx
Securities Corp., and (ii) $15,000 to be paid to Xxxxxxxx Xxxxxxxxx in
connection with the preparation and negotiation of the Transaction Documents
relating to the Series A Closing, in each case directly from the Purchaser, and
on the Series B Closing Date, the Series B Purchase Price shall be reduced by
(i) $62,000 to be paid to Jesup & Xxxxxx Securities Corp., and (ii) $3,000 to be
paid to Xxxxxxxx Xxxxxxxxx in connection with the preparation of the Transaction
Documents relating to the Series B 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 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.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificates of Designation and the Warrants 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.
5.3 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 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 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.
0000 Xxxxx Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
-23-
23
With copies to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxxxx, Esq.
If to the Purchaser: KA Investments LDC
c/o Tarmachan Capital Management
0000 Xxxxxxx Xxxxxxxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Ivana Bozjak
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 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.
5.5 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.
5.6 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
-24-
24
or assign rights hereunder or under the Registration Rights Agreement, each in
accordance with the terms of this Agreement.
5.7 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.
5.8 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.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive each Closing and the delivery and conversion or
exercise (as the case may be) of the Shares, the Dividend Shares and the
Warrants.
5.10 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 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.
5.11 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.
5.12 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 affecting 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.
-25-
25
5.13 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-26-
26
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: /s/ Xxxxx X. Xxxxxx, Xx.
Xxxxx X. Xxxxxx, Xx.
Chairman and
Chief Executive Officer
KA INVESTMENTS LDC
By: /s/ Xxxx Xxxxxxx
-----------------
Xxxx Xxxxxxx
Secretary
-27-
