1
Exhibit 10.134
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
ECOGEN INC.
and
UNITED EQUITIES (COMMODITIES) COMPANY
Dated as of August 20, 1998
2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated
as of August 20, 1998, between Ecogen Inc., a Delaware corporation (the
"Company"), and United Equities (Commodities) Company, a New York general
partnership (the "Purchaser").
WHEREAS, the Company and the Purchaser are parties to (i) a Convertible
Note Purchase Agreement (the "Note Purchase Agreement"), dated October 31, 1997
and (ii) an 8% Convertible Note due October 31, 2002 (the "Convertible Note");
WHEREAS, the Convertible Note (including accrued but unpaid interest)
currently has an outstanding balance of $3,233,747.56; and
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-C
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and the Purchaser intends to tender the Convertible Note in consideration of the
purchase price for the Preferred Stock.
IN CONSIDERATION of the mutual covenants contained in this Agreement the
receipt and sufficiency of which are hereby acknowledged by the parties, 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 32,338 shares of the Preferred Stock (the
"Shares") at a purchase price per share of $100.00, payable by the surrender of
the Convertible Note for cancellation by the Company.
(b) The Preferred Stock shall have the respective rights,
preferences and privileges set forth in the form of Certificate of Designations,
Preferences and Rights of 8% Series 1998-C Convertible Preferred Stock attached
hereto as Exhibit A (the "Certificate of Designations"), which Certificate of
Designations, appropriately completed, shall be filed prior to the time of the
Closing (as defined below) by the Company with the Secretary of State of
Delaware.
1.2 The Closing. (a) The closing of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP, 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxx, XX 00000, immediately following
the execution hereof
3
or such later date as the parties shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
(b) At the Closing, the Company shall deliver to the Purchaser a
stock certificate representing 32,338 Shares registered in the name of the
Purchaser against delivery by the Purchaser of the Convertible Note to be
canceled.
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. Ecogen Investments Inc., a Delaware corporation ("E-Investments"),
Ecogen-Bio Inc., a Delaware corporation ("E-Bio") and Ecogen Technologies I
Incorporated, a Delaware corporation ("ETech" and, together with E-Investments
and E-Bio, the "Subsidiaries"), comprise all of the entities which would be
deemed "significant subsidiaries" of the Company, as such term is defined in
Rule 1-02(w) of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company is the owner of all of the
issued and outstanding capital stock of E-Investments and E-Bio, and is the
owner of no less than 70% of the issued and outstanding common stock of ETech,
free and clear of any and all liens, claims, charges or encumbrances or rights
of first refusal of any nature whatsoever (collectively, "Liens").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of this Agreement, the Certificate of Designations and the
Registration Rights Agreement, dated the date hereof, between the Company and
the Purchaser (together, 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.
-2-
4
(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,
securities, rights or obligations convertible into or exchangeable for, or
giving any Person (as defined in the Certificate of Designations) 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 into, or exchangeable for, shares of Common Stock.
(d) Issuance of the Shares. The Shares 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. The
Company has on the date hereof and will, at the Closing Date and at all times
while the Shares are outstanding, maintain an adequate reserve of duly reserved
shares of Common Stock, reserved for issuance to the holders of the Shares to
enable it to perform its conversion and other obligations under this Agreement
and the Certificate of Designations, including the issuance of Common Stock upon
conversion of additional Shares issued as payment of dividends on the Shares
(such additional Shares, the "Dividend Shares"). The shares of Common Stock
issuable upon conversion of the Shares and Dividend Shares are collectively
referred to herein as the "Underlying Shares." The Shares, the Dividend Shares
and the Underlying Shares are collectively referred to as the "Securities." When
issued in accordance with the terms of the Certificate of Designations, 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 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
-3-
5
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, (x) adversely affect the legality, validity or enforceability
of the Securities or any of the Transaction Documents, (y) have or result in a
material adverse effect on the business, operations, property, assets,
liabilities 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"). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except as set forth 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 Certificate of Designation with the Secretary of State of
Delaware, (ii) the filing of the Registration Statement (the "Underlying
Securities Registration Statement") with the Securities and Exchange Commission
(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 (as defined below) 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.
(h) SEC Documents; Financial Statements. The Company has previously
furnished the Purchaser with true and correct copies of the following documents
which have been filed by the Company with the Commission pursuant to the
Exchange Act: (i) its annual report on Form 10-K for the fiscal year ended
October 31, 1997, as amended; (ii) its proxy statement with respect to the
Company's annual meeting of stockholders held on May 7,
-4-
6
1998, (iii) its quarterly reports on Form 10-Q for the fiscal quarters ended
January 31, 1998 and April 30, 1998; and (iv) all currents reports filed on Form
8-K filed by the Company with the Commission during the period from and after
October 31, 1997 (all of which filings are herein called the "SEC Documents"
and, together with the Schedules to this Agreement, the "Disclosure Materials").
The SEC Documents constitute all reports the Company was required to file under
the Exchange Act since October 31, 1997. At the time of filing with the
Commission, the SEC Documents were prepared in all material respects in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations thereunder, did not contain any untrue statement of a material
fact, and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited and unaudited consolidated
financial statements contained in the SEC Documents are true and correct in all
material respects and present fairly in all material respects the consolidated
financial condition and results of operations and changes in stockholders'
equity and cash flows of the Company and its consolidated subsidiaries as of the
dates and for the periods indicated, in each case in accordance with generally
accepted accounting principles consistently applied during the periods
presented, except as may otherwise be stated in such financial statements. For
purposes of this Agreement, all financial statements of the Company shall be
deemed to include the notes to such financial statements. None of the Company or
any Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a consolidated balance sheet of the
Company or in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied except for (A) liabilities or
obligations that were reserved on or reflected in the consolidated balance sheet
of the Company at October 31, 1997 (and notes thereto) included in the SEC
Documents, (B) liabilities or obligations arising in the ordinary course of
business since October 31, 1997, (C) liabilities or obligations which are not,
individually or in the aggregate, material to the Company and its Subsidiaries
taken as a whole, or (D) liabilities and obligations described in the SEC
Documents.
(i) Certain Fees. 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.
(j) 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
-5-
7
respect to each of (i), (ii) and (iii), as set forth in Schedule 2.1(j) and as
is not reasonably likely, individually or in the aggregate, to have or result in
a Material Adverse Effect.
(k) Form S-3 Eligibility. The Company is, and at the Closing Date
will be, eligible to register securities for resale with the Commission under
Form S-3 promulgated under the Securities Act.
(l) Seniority. Except as set forth in Schedule 2.1(l), no class of
equity securities of the Company is senior to the Shares in right of payment,
whether upon liquidation or dissolution, or otherwise.
(m) 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.
(n) Listing and Maintenance Requirements Compliance. Except as set
forth in Schedule 2.1(n), 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. The Company is in compliance with all
such maintenance requirements.
(o) Registration Rights; Rights of Participation. Except as set
forth in Schedule 2.1(o), (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.
(p) 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.
-6-
8
(q) 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.
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 company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite organizational 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, it was, and at the date hereof, it is, and at the Closing Date, 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
-7-
9
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 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
-8-
10
(as defined in Rule 405 under the Securities Act) of the Purchaser, 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 of the following legend
on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE 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.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT, DATED AS OF AUGUST 20, 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 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 attached hereto as Exhibit
D 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 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
-9-
11
on its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section.
(c) Notwithstanding anything contained in this Section 3.1 to the
contrary, the Purchaser agrees that (i) for a period of one year from the date
hereof, it shall not transfer or otherwise dispose of any Shares, Dividend
Shares or Underlying Shares, to any Person (other than an Affiliate), and (ii)
thereafter, any transfer or other disposition of Shares and/or Dividend Shares
otherwise permitted hereunder shall be in an aggregate amount of no less than
200,000 such shares (or, if less, the aggregate amount of the Shares and
Dividend Shares then held by the Purchaser).
3.2 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.
3.3 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.
-10-
12
3.4 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.
3.5 Listing and Reservation of Underlying Shares. The Company shall
maintain a reserve of Common Stock for issuance upon conversion of the Shares
and Dividend Shares, in accordance with their terms, in such amount as may be
required to perform its obligations in full under the Transaction Documents and
shall file additional listing applications with respect to such Shares and
Dividend Shares as required under applicable rules of NASDAQ or other applicable
securities exchanges.
3.6 Right of First Refusal; Subsequent Registrations. (a) Subject to the
rights of Monsanto Company and the holders of the Company's Series 1998-A
Convertible Preferred Stock, and the Series 1998-B Convertible Preferred Stock,
if any, and except as provided for in Schedule 3.6, 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 Placement") for a period of 180 days after the 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), (iii) shares of Common Stock issued upon conversion of the
Shares and Dividend Shares in accordance with the Certificate of Designations,
(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 effected, 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
-11-
13
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 3.6, a
"Strategic Transaction" shall mean a transaction or relationship in which the
Company issues equity securities 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 2.1(o), and (z) Company securities to be
registered for resale in connection with actions permitted pursuant to paragraph
(a)(i) through (iv) of this Section 3.6, 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 90 calendar days after the date
that an Underlying Securities Registration Statement is declared effective by
the Commission. Any days that the Purchaser is unable to sell Underlying Shares
under an Underlying Securities Registration Statement shall be added to such 90
day period.
3.7 Bank Agreements. The Company shall not enter into any agreements which
would prohibit the Company from performing its obligations hereunder.
3.8 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.
3.9 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations, or other actions by, or giving any notices
to, or making any filings with, any Person) as may be reasonably required or
desirable to carry out or to perform its obligations under this Agreement.
-12-
14
3.10 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 hereby, 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 to 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 transactions contemplated hereby 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. Notwithstanding the foregoing, the Company shall only be responsible
for reimbursement obligations pursuant to this Section 3.10 to the extent that
they arise solely from this Agreement, exclusive of Purchaser's beneficial
ownership of other securities of the Company, the role of any partner of
Purchaser on the Company's Board of Directors and the role of any of Purchaser's
designees on the Company's Board of Directors.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The Purchaser's obligation to purchase the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Purchaser:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2.1 hereof shall be true and correct
in all material respects
-13-
15
when made and on the Closing Date with the same force and effect as if they had
been made on and as of said date.
4.2 Covenants. All covenants and agreements contained in this Agreement to
be performed or complied with by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
4.3 Registration Rights Agreement. The Company shall have executed and
delivered to the Purchaser the Registration Rights Agreement substantially in
the form of Exhibit B attached hereto (the "Registration Rights Agreement").
4.4 Transfer Agent Instructions. The Company shall have executed and
delivered to the Purchaser Irrevocable Transfer Agent Instructions, dated the
Closing Date, acknowledged by the Company's transfer agent, in the form of
Exhibit C attached hereto (the "Transfer Agent Instructions").
4.5 Bank Financing. The Company shall have closed a working capital line
of credit in the aggregate amount of up to $5,000,000.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligation to issue the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Company:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Purchaser in Section 2.2 hereof shall be true and correct
in all material respects when made and on the Closing Date with the same force
and effect as if they had been made on and as of said date.
5.2 Covenants. All covenants and agreements contained in this Agreement to
be performed or complied with by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 Registration Rights Agreement. The Purchaser shall have executed and
delivered to the Company the Registration Rights Agreement.
5.4 Convertible Note. The Purchaser shall have delivered to the Company
the original Convertible Note to be canceled by the Company.
-14-
16
5.5 Termination and Release Agreement. The Purchaser shall have executed
and delivered to the Company the Termination and Release Agreement substantially
in the form of Exhibit D attached hereto, providing that (x) all of the
obligations of the Company to the Purchaser under the Note Purchase Agreement
(including in any event all obligations under the Convertible Note) are deemed
to be performed and paid in full and (y) the Purchaser shall have terminated and
released all security interests and Liens (as defined in Section 2.1(a)) on the
assets owned or to be owned by the Company or any of its Subsidiaries granted in
connection with the Note Purchase Agreement.
5.6 Release of Liens. The Purchaser shall have delivered to the Company
such releases of security interests and Liens on the assets owned or to be owned
by the Company as may be reasonably requested by, and satisfactory to, the
Company and including, in any event (x) proper termination statements (Form
UCC-3 or the appropriate equivalent) for filing under the Uniform Commercial
Code of each jurisdiction where a financing statement (Form UCC-1 or the
appropriate equivalent) was filed with respect to the Company or any of its
Subsidiaries in connection with the security interests created by the Note
Purchase Agreement, (y) terminations or assignment of any security in,
assignment of, or Lien on, any patents trademarks, copyrights or similar
interests of the Company or any of its Subsidiaries, on which filings have been
made and (z) terminations of all mortgages, leaseholder mortgages and deeds of
trust created with respect to property of the Company or any of its Subsidiaries
to secure obligations under the Note Purchase Agreement.
5.7 Bank Financing. The Company shall have closed a working capital line
of credit in the aggregate amount of up to $5,000,000.
ARTICLE VI
MISCELLANEOUS
6.1 Termination of Agreement. This Agreement may be terminated, and the
transactions contemplated abandoned, by either the Company or the Purchaser by
written notice to the other if the Closing does not occur on or before October
31, 1998.
6.2 Fees and Expenses. 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. Notwithstanding the foregoing, the Company shall
pay the reasonable fees and expenses of Purchaser's legal counsel in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement.
6.3 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificate of Designations and
-15-
17
the Termination and Release Agreement 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.
6.4 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 (as such term is defined in the Certificate of
Designations), (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.
0000 Xxxxx Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
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: United Equities (Commodities) Company
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xx. Xxxxxxxx X. Xxxx
With copies to: Xxxxxx Xxxxxxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
-16-
18
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.5 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.
6.6 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.
6.7 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.
6.8 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.
6.9 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.
6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion of
the Shares and the Dividend Shares.
6.11 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
-17-
19
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.
6.12 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.
6.13 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.
6.14 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]
-18-
20
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/ Xxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President and
Chief Financial Officer
UNITED EQUITIES (COMMODITIES)
COMPANY
By: /s/ Xxxxxxxx Xxxx
------------------------------------------
Name: Xxxxxxxx Xxxx
Title: Partner
-19-
