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EXHIBIT NO. 10.128
CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT (the "Agreement") is entered into
on this 31st day of October, 1997, by and among ECOGEN INC., a Delaware
corporation (the "Company"), ECOGEN INVESTMENTS INC., a Delaware corporation
("E-Investments"), and ECOGEN-BIO INC., a Delaware corporation ("E-BIO"), and
UNITED EQUITIES (COMMODITIES) COMPANY, a New York general partnership (the
"Purchaser"). The Company, E-Investments and E-Bio are sometimes herein
individually called an "Issuer" and collectively called the "Issuers."
Whereas, the Issuers and the Purchaser are parties to (i) that certain
Convertible Senior Subordinated Note Purchase Agreement dated July 10, 1997 (the
"Original Purchase Agreement") and (ii) that certain 8% Convertible Senior
Subordinated Note due July 10, 2002 (the "Original Note"); and
Whereas, the Original Note (including accrued but unpaid interest)
currently has an outstanding balance of $1,537,333.33; and
Whereas, the Issuers will issue and sell to the Purchasers, $3,037,333.33
in principal amount of the Company's 8% Convertible Note due October 31, 2002
(the "New Note") and the Purchasers intend to tender the Original Note in
partial consideration of the purchase price of the New Note;
Now, therefore, for and in consideration of, and in reliance upon, the
mutual agreements, undertakings, representations, warranties and covenants
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Purchase and Sale. Subject to the terms and conditions contained
in this Agreement, on the date hereof, the Issuers shall issue and sell to the
Purchaser, and the Purchaser shall purchase and acquire from the Issuers, the
New Note, which shall be in the form attached to this Agreement as Exhibit A,
and the terms of which are hereby incorporated herein by reference. The Issuer's
obligations under the New Note shall be secured by a first lien and security
interest in and to certain of the Issuers' assets as set forth in that certain
Security Agreement (the "Security Agreement") of even date herewith, in the form
attached hereto as Exhibit B. Unless the context otherwise requires, as
hereinafter used in this Agreement (including, but not limited to paragraphs 3
and 5 hereof): the term (A) "New Note" shall be deemed to include any so-called
"pay-in-kind" promissory notes which are issued in accordance with the
provisions hereof in lieu of cash payments of interest ("PIK Notes"); (B)
"Conversion Shares" shall be deemed to include any shares of Common Stock, par
value $.01 per share, of the Company ("Common Stock") which are issuable or
issued upon conversion of any New Note; and (C) "Warrant Shares" shall mean the
shares of Common Stock issued or issuable upon exercise of a Warrant (as
hereinafter defined) in accordance with its terms.
2. Consideration. In consideration of the issuance of the New Note,
the Purchaser shall pay to the Company, on behalf of the Issuers, the purchase
price of $3,037,333.33 as follows: (A) the cash sum of $1,500,000.00, which sum
shall be wire transferred on the date
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hereof to an account of the Company designated by the Company to the Purchaser
in writing on or prior to the date hereof and (B) the surrender of the Original
Note for cancellation by the Issuer. Notwithstanding any provision contained in
the Original Agreement to the contrary, upon surrender and cancellation of the
Original Note, the Original Agreement shall be terminated and of no force and
effect.
3. Representations and Warranties of the Company. To induce the
Purchaser to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, each Issuer jointly and severally hereby makes
the following representations and warranties to the Purchaser:
a. Organization. Each Issuer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own and lease its
properties and to conduct its business as presently conducted. E-Investments,
E-Bio and Ecogen Technologies I Inc., a Delaware corporation ("ETech"), 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 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
of any nature whatsoever.
b. Validity and Enforceability. This Agreement, the New Note
and the Security Agreement and all documents and instruments delivered pursuant
hereto and thereto have been (and when executed and delivered in accordance
therewith, each PIK Note will have been) duly authorized, validly executed and
delivered to the Purchaser by each Issuer and are (or will be, in the case of
any PIK Notes) legal, valid and binding obligations of each Issuer, enforceable
in accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the rights of creditors generally, and except that the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which such a proceeding may be brought.
c. Validity and Enforceability of Warrants. Any Warrant issued
hereunder, upon its issuance will be duly authorized, validly executed and
delivered by the Company, and will be the legal, valid and binding obligation of
the Company, enforceable in accordance with its respective terms, except as such
enforcement may be limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the rights of creditors generally, and
except that the remedy of specific performance or injunctive relief is subject
to the discretion of the court before which such a proceeding may be brought.
d. Conversion Shares and Warrant Shares. (i) The Conversion
Shares issuable upon conversion of the New Note (or any PIK Note) to be issued
on the date hereof and any Warrant Shares issuable upon exercise of a Warrant
are duly and validly authorized and have been reserved for issuance, and (ii)
upon issuance in accordance with the terms of the New Note (or any PIK Note) or
a Warrant, as the case may be, the Conversion Shares and the Warrant Shares will
be duly and validly issued, fully paid and non-assessable. Upon issuance and
delivery of the Conversion Shares or the Warrant Shares, the Purchaser shall
obtain full and legal title to the
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Conversion Shares or the Warrant Shares, as the case may be, free and clear of
any lien, charge or other encumbrance of any nature.
e. No Conflict. The execution and delivery by each Issuer (or
the Company only, in the case of a Warrant) of this Agreement, the New Note, a
PIK Note, a Warrant and the Security Agreement and the performance by each
Issuer (or the Company only, in the case of a Warrant) of all of its respective
obligations hereunder and thereunder will not: (a) violate or be in conflict
with (i) any law, order, rule or regulation of any court or other governmental
authority applicable to such Issuer or (ii) such Issuer's Certificate of
Incorporation or Bylaws; (b) constitute a default (with or without the giving of
notice or the passage of time or both) under any indenture, agreement or other
instrument to which such Issuer is a party or by which it or any of its
properties or assets is or may be bound; or (c) other than as contemplated by
this Agreement or the Security Agreement, result in the creation or imposition
of any lien, security interest, charge or encumbrance of any nature upon any of
such Issuer's properties or assets, which violation or conflict under clause (a)
or default under clause (b) would have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
f. No Consent. No consent, approval or authorization of, or
registration, declaration or filing with, any governmental authority or other
third party is required as a condition to, or in connection with, the due and
valid execution and delivery by the Issuers of this Agreement, the New Note, a
PIK Note, a Warrant or the Security Agreement or the performance by the Issuers
of their respective obligations hereunder or thereunder, other than such
consents, approvals, authorizations and registrations as have been obtained or
made, or any filings required to perfect the Purchaser's first lien and security
interest under the Security Agreement.
g. Capitalization. The authorized capital stock of the Company
consists of 42,000,000 shares of Common Stock, par value $.01 per share, of
which 7,995,452 shares were issued and outstanding as of October 29, 1997, and
7,500,000 shares of Preferred Stock, consisting in part of 350,000 shares
designated as Series B Convertible Preferred Stock, none of which are
outstanding. As of October 29, 1997, (i) 2,224,970 shares of Common Stock were
issuable by the Company upon the exercise or conversion of outstanding options,
warrants and convertible securities, and (ii) no shares of the Company's
Preferred Stock were issuable upon exercise or conversion of any such
securities. The outstanding shares of the Company's Common Stock have been duly
authorized and validly issued, and are fully paid and non-assessable, free of
preemptive rights and with no personal liability attached thereto.
h. SEC Filings. The Company has previously furnished the
Purchaser with true and correct copies of the following documents which have
been filed by Company with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"): (i) its Annual Report on Form 10-K for the fiscal year ended October 31,
1996, as amended; (ii) its Proxy Statement with respect to the Company's annual
meeting of stockholders held ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇▇) its Quarterly Reports on Form
10-Q for the fiscal quarters ended January 31, 1997, April 30, 1997, as amended,
and July 31, 1997; and (iv) all Currents Reports filed on Form 8-K filed by the
Company with the SEC during the period from and after October 31, 1996 (all of
which filings are herein called the "Company SEC Filings"). The Company SEC
Filings constitute all reports the Company was required to file under
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the Exchange Act since October 31, 1996. At the time of filing with the SEC, the
Company SEC Filings 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 Company SEC Filings 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 Issuers
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, 1996 (and notes thereto) included in the Company SEC Filings, (B)
liabilities or obligations arising in the ordinary course of business since
October 31, 1996, (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 Company SEC Filings or in
the Form S-3 (as defined in subparagraph 3(h) below).
i. Litigation. Except as described in: (i) the Company SEC
Filings; (ii) the Company's Registration Statement on Form S-3 (File No.
333-27175) declared effective by the SEC on August 11, 1997 (the "Form S-3"); or
(iii) the Company's press release dated January 24, 1997 (the "Press Release"),
there are no current actions, claims, suits, proceedings or, to the Issuers'
knowledge, investigations, pending against any Issuer or its properties before
any court, governmental agency, arbitration board or other tribunal, nor has any
Issuer received any written notice of any threat thereof, which if adversely
determined, would have a material adverse effect on the Company and its
subsidiaries taken as a whole. Each Issuer and its business is being conducted
in compliance with all applicable laws, rules and regulations of governmental
authorities, except for such non-compliance as would not have a material adverse
effect on the Company and its subsidiaries taken as a whole.
j. No Material Adverse Change. Since the date of the
consolidated balance sheet of the Company included in the Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1997, and except as set forth in
the Form S-3 or the Company's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1997: (i) there has been no change materially adversely affecting
the business, assets, liabilities, financial condition or operations of the
Company and its subsidiaries taken as a whole; (ii) each Issuer has operated its
business in the usual and ordinary course consistent with past practices; and
(iii) each Issuer has maintained its books and records in the customary, usual
and ordinary course.
4. Representations and Warranties of the Purchaser. To induce the
Issuers to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, the Purchaser hereby makes the following representations
and warranties to each Issuer:
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a. Organization. The Purchaser is a general
partnership, duly organized, validly existing and in good standing under the
laws of the State of New York. The Purchaser has all requisite partnership
power and authority to own and lease its properties and to conduct its
business as presently conducted.
b. Validity and Enforceability. This Agreement and the
Security Agreement have been duly authorized, validly executed and delivered to
the Issuers by the Purchaser and are a legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with their terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the rights of creditors
generally, and except that the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which such a proceeding
may be brought.
c. No Conflict. The execution and delivery by the Purchaser of
this Agreement and the performance by the Purchaser of all of its obligations
hereunder will not (a) violate or be in conflict with: (i) any law, order, rule
or regulation of any court or other governmental authority applicable to the
Purchaser or (ii) the Partnership Agreement of the Purchaser; or (b) constitute
a default (with or without the giving of notice or the passage of time or both)
under any indenture, agreement or other instrument to which the Purchaser is a
party or by which the Purchaser or any of its properties or assets is or may be
bound; or (c) result in the creation or imposition of any lien, security
interest, charge or encumbrance of any nature upon any of the Purchaser's
properties or assets, which violation or conflict under clause (a), default
under clause (b), or lien, security interest, charge or encumbrance under clause
(c) would have a material adverse effect on the Purchaser's business, assets,
liabilities or financial condition.
d. No Consent. No consent, approval or authorization of, or
registration, declaration or filing with, any governmental authority or other
third party is required as a condition to, or in connection with, the due and
valid execution and delivery by the Purchaser of this Agreement, or the
performance by the Purchaser of its obligations hereunder, other than such
consents, approvals, authorizations and registrations as have been obtained or
made.
e. Need for Additional Funding. Purchaser acknowledges that
the proceeds of the New Note will not satisfy the Company's need for additional
funding and that the Issuers are currently seeking additional bank or other
institutional senior financing. Purchaser agrees to negotiate in good faith
customary modifications to the Purchase Documents and, if requested, a customary
intercreditor agreement to enable the Company to complete such a senior
financing on customary terms. Purchaser further acknowledges that the Issuers
are also seeking strategic arrangements with one or more agricultural/chemical
companies. Purchaser agrees to release such of the Collateral (as defined in the
Security Agreement) as may be required to consummate any such arrangements.
f. Accredited Investor. The Purchaser is an "accredited
investor" as such term is defined in Rule 501 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser's state of
organization is as set forth in the preamble of this Agreement, and the
Purchaser's principal executive offices are located in the State of New York.
The Purchaser is acquiring the New Note and, if issued, any Warrant for
investment and for the
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Purchaser's own account and not with a view to, or for resale in connection
with, any distribution. The Purchaser understands that the New Note, any PIK
Notes issued in respect hereof, the Conversion Shares, any Warrant and the
Warrant Shares have not been registered under the Securities Act or registered
under any state securities or blue sky laws, and, as a result thereof, are
subject to substantial restrictions on transfer. The Purchaser acknowledges that
the New Note, any PIK Note issued in respect hereof, the Conversion Shares, any
Warrant and the Warrant Shares must be held indefinitely unless subsequently
registered under the Securities Act and any applicable state securities or blue
sky laws, or exemptions from registration under the Securities Act or such laws,
and that the Company has no obligation to register the New Note, any PIK Notes
issues in respect hereof, the Conversion Shares, any Warrant or the Warrant
Shares other than as set forth in this Agreement.
g. Access to Information. The Purchaser has been provided with
a copy of and has reviewed the Company SEC Filings, the Form S-3, and the Press
Release. The Purchaser acknowledges that the Purchaser is a stockholder of the
Company, and further acknowledges that the Purchaser and the Purchaser's
advisors have been provided with or been given access to all the financial and
other information requested by them or deemed by them to be necessary or
material for the Purchaser to make the investment decision to purchase the New
Note and the Warrant in consideration for the Purchase Price, and that the
Purchaser has based such investment decision solely on such information.
5. Issuance of Warrants.
a. Certain Definitions. As used in this Section 5, the
following terms shall have the following respective meanings:
(i) "Market Price" means, as of any day, the
closing sales price of the Common Stock on such day on the New York Stock
Exchange or the American Stock Exchange (or if the Common Stock shall not then
be listed on either such exchange, such closing sales price on the principal
(determined by highest volume averaged for a period of twenty consecutive
business days prior to the day as to which "Market Price" is being determined)
national securities exchange (as defined in the Securities Exchange Act of 1934,
as amended) on which the Common Stock may then be listed) or, if the Common
Stock shall not be listed on such exchange or exchanges, the closing bid price
at the end of such day as quoted by each of three independent market makers as
reported by the Nasdaq Stock Market or, if the Common Stock shall not be listed
or included for quotation on the Nasdaq Stock Market, the closing bid price at
the end of the day as quoted by each of three independent market makers in the
over-the-counter market as reported by the National Quotation Bureau, Inc. or by
any successor organization.
(ii) "Redemption Event" shall occur if the Company
redeems the New Note in whole or in part at any time other than when the Market
Price of the Common Stock on each of 20 consecutive trading days ending within
15 days from the date on which the notice of redemption is given to the holder
of the New Note equals or exceeds 150% of the "Conversion Price" (as defined in
the New Note) then in effect. A Redemption Event shall occur only with respect
to any portion of a New Note that is actually redeemed by the Company under the
circumstances provided in the previous sentence and shall not be deemed to occur
with respect to any portion of a New Note that is converted into Conversion
Shares.
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(iii) "Redemption Event Date" means the date upon
which the Company redeems all or any portion of a New Note with respect to which
there is a Redemption Event.
(iv) "Redemption Shares" means, with respect to a
Redemption Event, the number of shares of Common Stock into which the New Note
(in the case of a total redemption) or, in the case of a partial redemption,
such portion of the New Note then being redeemed, together in each case with any
accrued but unpaid interest with respect to the New Note or portion thereof
being then being redeemed, as the case may be, which interest is not paid in
cash on the Redemption Event Date, is then convertible, based on the applicable
Conversion Price on the Redemption Event Date.
b. Issuance of Warrants. Upon each Redemption Event Date, the
Company shall issue to the holder of the New Note with respect to which there is
a Redemption Event a warrant, substantially in the form attached to this
Agreement as Exhibit C (the "Warrant"), to purchase such number of shares of
Common Stock as equals the number of Redemption Shares with respect to such
Redemption Event. The purchase price for each Warrant Share for which such
Warrant is exercisable shall initially be the Conversion Price on the relevant
Redemption Event Date, subject to adjustment as set forth in the Warrant (which
adjustment provisions are intended to be substantially the same as those which
apply to the conversion of the New Notes).
6. Registration Rights.
a. Certain Definitions. As used in this Section
6, the following terms shall have the following respective meanings:
(i) "SEC" means the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
(ii) "Exchange Act" means the Securities Exchange
Act of 1934 or any successor federal statute, and the rules and regulations of
the SEC issued under such Exchange Act, as they each may, from time to time, be
in effect.
(iii) "Registration Statement" means a registration
statement filed by the Company with the SEC for a public offering and sale of
equity securities of the Company (other than a registration statement on Form
S-8 or Form S-4, or their successors, or any other form for a limited purpose,
or any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
(iv) "Registration Expenses" means the expenses
described in subsection 6(e) hereof.
(v) "Registrable Shares" means the Conversion
Shares and the Warrant Shares and any other shares of Common Stock of the
Company issued in respect of such
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shares (because of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, however, that shares of Common
Stock which are Registrable Shares shall cease to be Registrable Shares upon any
sale pursuant to a Registration Statement or upon the date when such Registrable
Shares may be sold or transferred without restriction pursuant to Rule 144 under
the Securities Act or any similar provision then in force.
b. Piggy-Back Registration.
(i) If at any time and from time to time, the
Company proposes to file a Registration Statement, it will, prior to such
filing, give written notice to the Purchaser of its intention to do so and, upon
the written request of the Purchaser given within 20 days after the Company
provides such notice (which request shall specify the Registrable Shares
intended to be disposed of by the Purchaser and the intended method of
disposition thereof), the Company, subject to the provisions hereof, shall use
its best efforts to cause all Registrable Shares which the Company has been
requested by the Purchaser to register to be registered under the Securities Act
to the extent necessary to permit their sale or other disposition in accordance
with the intended methods of distribution specified in the request of the
Purchaser; provided that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this subsection 6(b) hereof
without obligation to the Purchaser; and, provided further, that the Company
shall not be obligated to include any Registrable Shares in a Registration
Statement filed at the request of another holder of securities of the Company to
whom the Company has previously granted registration rights which would not
permit or otherwise limit the number of Registrable Shares which may be included
therein.
(ii) In connection with any offering under this
subsection 6(b) involving an underwriting, the Company shall not be required to
include any Registrable Shares in such underwriting unless the Purchaser accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the offering by the
Company. If, in the opinion of the managing underwriter, the registration of
all, or part of, the Registrable Shares which the Purchaser has requested to be
included would materially and adversely affect such public offering of shares
for the account of the Company or any other person on whose behalf shares are
being included in the registration pursuant to an obligation which is superior
in right or preference to the registration obligation to the Purchaser arising
hereunder ("Senior Registration Rights"), then the Company shall be required to
include in the underwriting only that number of Registrable Shares, if any,
which the managing underwriter believes may be sold without causing such adverse
effect. If the number of Registrable Shares to be included in the underwriting
in accordance with the foregoing is less than the total number of Registerable
Shares which the Purchaser has requested to be included, then the Purchaser and
other holders of securities entitled to include securities in such registration
shall participate in the underwriting pro rata based upon the relative number of
shares of Common Stock the Purchaser and each holder of such other securities
has requested to be included in such registration, subject to any "cut-back"
priority having previously been granted to a holder of Senior Registration
Rights.
c. Demand Registration Rights. Upon the request of the
Purchaser and, subject to the provisions hereof, the Company will use its best
efforts to cause such of the Registrable Shares as may be requested by the
Purchaser to be registered under the Securities Act as expeditiously as
possible; provided, however, that any such request for registration must be made
with respect to at least 50% of the Registrable Shares then outstanding. The
Company shall not be
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required to effect more than one registration pursuant to this subsection 6(c).
The Company will be entitled to include in any registration statement referred
to in this subsection 6(c) for sale in accordance with the method of disposition
specified above, securities to be sold by the Company for its own account and
securities of any other holder having registration rights, unless such inclusion
would adversely affect the marketing of the Registrable Shares to be sold.
d. Registration Procedures. If and whenever the Company
is required by the provisions of this Agreement to use its best efforts to
effect the registration of any of the Registrable Shares under the Securities
Act, the Company shall:
(i) prepare and file with the SEC a Registration Statement on
an appropriate form with respect to such Registrable Shares and use its best
efforts to cause that Registration Statement to become and remain effective,
provided, however, that the Company may discontinue any registration of its
securities which is being effected pursuant to subsection 6(b) herein at any
time prior to the effective date of the Registration Statement relating thereto;
(ii) prior to filing a Registration Statement or prospectus or
any amendment or supplement thereto, furnish to the Purchaser and to its
counsel, and to each underwriter, if any, of Registrable Shares covered by such
Registration Statement, copies of such Registration Statement, prospectus,
amendment or supplement, together with exhibits thereto, for review by the
foregoing;
(iii) as soon as reasonably practicable prepare and file with
the SEC any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective until the earlier of (i) the second
anniversary of the effective date thereof, or (ii) the date on which there are
no longer any Registrable Shares covered thereby (including when such shares no
longer constitute Registrable Shares);
(iv) as soon as reasonably practicable furnish to the
Purchaser two copies of the Registration Statement and each amendment thereto as
filed with the SEC, and such reasonable numbers of copies of the prospectus,
including a preliminary prospectus and any supplements thereto, in conformity
with the requirements of the Securities Act, and such other documents as the
Purchaser may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by the Purchaser;
(v) as soon as reasonably practicable, to the extent required,
use its best efforts to register or qualify the Registrable Shares covered by
the Registration Statement under the securities or Blue Sky laws of states
within the United States as the Purchaser shall reasonably request; provided,
however, that the Company shall not be required in connection with this
subsection 6(d)(v) to (A) qualify as a foreign corporation in any jurisdiction
where, but for the requirements of this subsection 6(d), it would not be
obligated to be so qualified, (B) execute a general consent to service of
process in any jurisdiction, (C) subject itself to taxation in any such
jurisdiction, or (D) register in any state requiring, as a condition to
registration, escrow or surrender of any Company securities held by any security
holder other than the Purchaser;
(vi) use its best efforts to cause all Registrable Shares
included in such Registration Statement to be listed on each securities exchange
on which the Common Stock is then listed, or to be admitted for trading on the
Nasdaq Stock Market National Market if the Common
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Stock is then admitted for trading; and
(vii) if an underwritten public offering, obtain a comfort
letter from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by comfort letters and an
opinion from the Company's counsel in customary form and covering such matters
of the type customarily required to be included in an opinion filed as an
exhibit to the Registration Statement, in each case addressed to the Purchaser.
If the Company has delivered a preliminary or final prospectus to
the Purchaser and after having done so the prospectus is amended to comply with
the requirements of the Securities Act, the Company shall promptly notify the
Purchaser and, if requested, the Purchaser shall immediately cease making offers
of Registrable Shares and return all prospectuses to the Company. The Company
shall promptly provide the Purchaser with revised prospectuses and, following
receipt of the revised prospectuses, the Purchaser shall be free to resume
making offers of the Registrable Shares.
Notwithstanding any other provisions of this Agreement, upon receipt
by the Purchaser of a written notice signed by the Chief Executive Officer,
Chief Operating Officer or Chief Financial Officer of the Company, to the effect
set forth below, the Company shall not be obligated during a reasonable period
of time thereafter to effect any registrations pursuant to this Agreement, and
the Purchaser agrees that it will immediately suspend sales of shares under any
effective Registration Statement for a reasonable period of time, in either case
not to exceed 90 days, at any time during which, in the Company's reasonable
judgment, (i) there is a development involving the Company or any of its
affiliates which is material but which has not yet been publicly disclosed or
(ii) sales pursuant to the Registration Statement would materially and adversely
affect an underwritten public offering for the account of the Company and any
other material financing project where a proposed or pending material merger or
other material acquisition or material business combination or material
disposition of the Company's assets, to which the Company or any of its
affiliates is, or is expected to be, a party. In the event a registration is
postponed or sales by the Purchaser pursuant to an effective Registration
Statement are suspended in accordance with this paragraph, there shall be added
to the period during which the Company is obligated to keep a registration
effective the number of days for which the registration was postponed or sales
were suspended.
e. Expenses of Registration. The Company will pay all
Registration Expenses of all registrations under this Agreement. For purposes of
this Agreement, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Agreement, including without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, the fees and disbursements of the Company's counsel and accountants,
state Blue Sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts
and selling commissions.
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f. Indemnification.
(i) Indemnification of the Purchaser. In the event
of any registration of any of the Registrable Shares under the Securities Act
pursuant to this Agreement, the Company will indemnify and hold harmless the
Purchaser, each of its directors, partners, agents and officers and each other
person, if any, who controls the Purchaser within the meaning of the Securities
Act or the Exchange Act against any losses, claims, damages or liabilities to
which the Purchaser or controlling person may become subject under the
Securities Act, the Exchange Act, Blue Sky laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and the Company will
reimburse the Purchaser and each such controlling person for any legal or any
other expenses reasonably incurred by the Purchaser or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of the Purchaser or
controlling person specifically for use in the preparation thereof; and provided
further, however, that any indemnification contained in this paragraph with
respect to any preliminary prospectus shall not inure to the benefit of any
person who otherwise is entitled to indemnification hereunder on account of any
loss, liability, claim, damage or expense if a copy of an amended or
supplemental preliminary prospectus, or the final prospectus, shall have been
delivered or sent to such person within the time required by the Securities Act,
and the untrue statement or omission of a material fact was corrected in such
amended or supplemental preliminary prospectus or final prospectus and provided
that such person did not deliver such amended or supplemental preliminary
prospectus or final prospectus on a timely basis. The Company shall also
indemnify any person or entity which may be deemed to be an "underwriter" for
purposes of the Securities Act with respect to the Registrable Shares covered by
the Registration Statement, and such entity's directors, partners, agents and
officers, and each other person, if any, who controls such "underwriter" within
the meaning of the Securities Act, on the same basis as that of the
indemnification of the Purchase pursuant to this subparagraph 5(f)(1).
(ii) Indemnification of the Company. In the event
of any registration of any of the Registrable Shares under the Securities Act
pursuant to this Agreement, the Purchaser will indemnify and hold harmless the
Company, each of its directors and officers and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Company, such directors and officers or controlling persons may become
subject under the Securities Act, Exchange Act, Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the
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Registration Statement, or arise out of or are based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, but only if the statement or omission was made
in reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of the Purchaser or controlling person, specifically for
use in connection with the preparation of such Registration Statement,
prospectus, amendment or supplement.
(iii) Notice of Claim. Each party entitled to
indemnification under this subsection 6(f) (the "Indemnified Party") shall give
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this subsection 6(f)
unless the failure to provide such notice materially prejudices the defense by
the Indemnifying Party against such claim. The Indemnified Party may participate
in such defense at such party's expense (provided that the counsel of the
Indemnifying Party shall control the defense of such claim or proceeding);
provided, however, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would, in the opinion of counsel of the Indemnified Party, be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding, it being understood, however, that in such event, the Indemnifying
Party shall be liable for the reasonable fees and expenses of only one counsel
for the Indemnified Parties. No Indemnifying Party, in the defense of any such
claim or litigation shall as to an Indemnified Party, except with the consent of
such Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld).
g. Underwriting Agreement. In the event that Registrable
Shares are sold pursuant to a Registration Statement in an underwritten
offering, the Purchaser agrees to enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for the
underwriting (together with the Company and other holders of securities
distributing their shares through such underwriting), containing customary
representations and warranties with respect to the Purchaser, including without
limitation, customary provisions with respect to indemnification by the
Purchaser of the underwriters of such offering.
h. Cooperation. The Purchaser shall furnish to the Company
such information regarding the Purchaser and the distribution proposed by the
Purchaser as the Company may from time to time request in writing, and shall do
such reasonable acts and things as the Company may from time to time request,
with respect to any registration, qualification or compliance referred to in
this Agreement and in order to permit the Company to comply with the
requirements of law. Any failure by the Purchaser to make available such
information or to do such acts and things shall constitute a waiver by the
Purchaser of its rights to include the Purchaser's Registrable Shares in any
such registration.
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i. Lock-Up Agreement. The Purchaser, if requested by the
Company and an underwriter of Common Stock or other securities of the Company,
shall agree not to sell or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by the Purchaser for a specified
period of time (not to exceed 90 days) following the effective date of a
Registration Statement. Such agreement shall be in writing in a form
satisfactory to the Company and such underwriter. The Company may impose stop
transfer instructions with respect to the Registrable Shares or other securities
subject to the foregoing restriction until the end of the lock-up period.
j. Assignment of Registration Rights to Transferees. The
rights granted under this Section 6 shall be exercisable by the Purchaser and
may be assigned by the Purchaser to: (i) a transferee of the Purchaser of all or
any portion of the principal obligation represented by the New Note (or a
related PIK Note) in accordance with the terms of the New Note (or such PIK
Note), (ii) a transferee of the Purchaser of all or any portion of a Warrant in
accordance with its terms; (iii) a transferee of the Purchaser of Conversion
Shares, or (iv) a transferee of the Purchaser of Warrant Shares (in each case, a
"Permitted Transferee"), but shall not thereafter be assignable or otherwise
exercisable by a transferee of a Permitted Transferee. In the event of any
assignment or other transfer of the rights under this Section 6, each Permitted
Transferee shall agree as a condition of exercise of such rights, that: (A) the
Purchaser shall act as the sole representative of all Permitted Transferees and
that the Company shall be obligated to communicate or otherwise send notices
required under this Section 6 only to the Purchaser on behalf of all Permitted
Transferees; and that (B) the Company shall be obligated to comply with
subsection 6(c) on only one occasion regardless of the number of holders of
Registrable Shares.
7. Right of First Refusal.
a. If, at any time during which at least twenty-five percent
of the original principal amount of this New Note (plus any PIK Notes) shall be
outstanding and held by Purchaser, the Company desires to sell shares of its
Common Stock or other voting securities or notes or other evidences of
indebtedness which by their terms are convertible into Common Stock or other
voting securities of the Company ("Ecogen Equity Securities") in an offering,
excluding (i) an underwritten public offering; or (ii) a traditional financing
with a nationally recognized investment banking firm or banking institution to
raise gross proceeds of at least $10,000,000 (excluding the proceeds to be
received by the Company upon payment of any exercise price upon the exercise or
conversion of any convertible security into shares of Common Stock); or (iii) an
offering which represents an investment by a strategic partner of the Company or
which constitutes part of a joint venture, partnership or similar alliance with
a strategic partner of the Company, (a "Private Offering"), then the Company
shall provide to the Purchaser written notice of such Private Offering (an
"Offer Notice") no less than twenty business days prior to the earlier of (A)
the commencement of the Private Offering or (B) the execution of an agreement
concerning the Private Offering, whether a purchase or similar agreement with a
third party purchaser, or a placement, solicitation or offering agreement with a
placement agent, broker or similar party. The Offer Notice shall set forth the
type and number of Ecogen Equity Securities being offered, the offering price,
the manner of payment and the other principal terms of the Private Offering.
b. The Purchaser shall have the right to elect to purchase
all, but not less than all, of the Ecogen Equity Securities on the terms of the
Private Offering, which election shall be made by the Purchaser providing
written notice to the Company of its irrevocable election
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to purchase the Ecogen Equity Securities which written notice shall be delivered
on or prior to the expiration of ten business days from the date of the Offer
Notice (the "Election Notice"). Upon failure by the Company to receive the
Election Notice within the prescribed ten business day period, the Purchaser
shall be deemed to have irrevocably waived its right of first refusal to
purchase the Ecogen Securities in the Private Offering, and the Company may
proceed with the Ecogen Private Offering or negotiate the terms of the Private
Offering with any other third party, subject to subsection 7(c) hereof. If the
Company receives an Election Notice within the prescribed ten business day
period, the Purchaser shall purchase the Ecogen Equity Securities on the same
terms and conditions as the Private Offering (and the Purchaser shall provide to
the Company such documentation and representations as the Company shall deem
necessary to ensure compliance with applicable securities laws), and closing
shall occur on or prior to the closing date set forth in the Offer Notice or, in
the absence of a closing date specified in the Offer Notice, within thirty days
from the date of the Election Notice.
c. If the Purchaser fails to timely provide the Election
Notice and the Company subsequently modifies the material terms of the Private
Offering in a manner which makes the terms of the Private Offering, taken as a
whole, more favorable to the proposed purchaser of the Ecogen Equity Securities,
then the Private Offering shall be deemed to become a new Private Offering and
Company shall not be permitted to consummate the new Private Offering without
again complying with this Section 7.
d. Notwithstanding anything herein to the contrary: (i) the
rights granted to the Purchaser by this Section 7 may not be assigned or
transferred without the prior written consent of the Company, which consent may
be withheld for any reason, and (ii) the rights granted in this Section 7 shall
not limit, impair or otherwise prevent the Company from complying with any other
right of first refusal or preemptive right previously granted by the Company to
any other party, and the Purchaser's rights hereunder shall be subject to such
prior rights of first refusal or preemptive rights.
8. Closing. The Closing of the transactions contemplated hereby
(the "Closing") shall take place on such date, and at such time and place, as
may be mutually agreed upon by the Purchaser and the Issuers (the "Closing
Date").
a. Actions by Issuers. At the Closing, the Issuers shall:
(i) deliver the New Note, duly completed and executed, to
the Purchaser;
(ii) deliver the Security Agreement, duly completed and
executed, to the Purchaser; and
(iii) deliver UCC-1 Financing Statements and such other
similar documents as the Purchaser may have theretofore requested, duly
completed and executed by the Purchaser.
b. Actions by Purchaser. At the Closing, the Purchaser
shall:
(i) deliver to the Issuers, the sum of $1,500,000; and
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(ii) surrender the Original Note to the Issuers marked
"cancelled".
9. Miscellaneous.
a. Entire Agreement. This Agreement, the New Note and the
Security Agreement and the other documents and instruments executed and
delivered pursuant hereto, and, if issued, any PIK Notes constitute the entire
Agreement between the Issuers and the Purchaser with respect to the subject
matter hereof and thereof, and supersede all prior Agreements, understandings,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or use or trade inconsistent with any of the terms hereof.
b. Waivers and Amendments. No waiver by either party of any
condition, or the breach of any term or covenant contained in this Agreement,
the Security Agreement, the New Note or any PIK Note, whether by conduct or
otherwise, in one or any more instances, shall be deemed or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated other than by an agreement in writing signed by
the Company (on behalf of the Issuers) and either the Purchaser or the holders
of a majority of the principal amount of the New Notes and any PIK Notes then
outstanding, and except that the provisions of paragraph 6 hereof may be amended
by a written instrument executed by the Company and the holders of a majority of
Registrable Shares.
c. Governing Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, notwithstanding any conflict of law provisions to the contrary.
d. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Issuers and the Purchaser and, subject to
subsection 6(j), their respective heirs, personal representatives, successors
and assigns and, as to subparagraph 6(f) those persons defined herein as
"Indemnified Parties."
e. Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly made and received when personally served,
or when mailed by first class mail or overnight, by courier service such as
Federal Express, postage prepaid, or telecopied with answer back receipt and
hard copy sent in the manner set forth above, addressed to the party as provided
in the New Note.
f. Severability. If any provision of this Agreement shall
be held invalid under any applicable laws, such invalidity shall not affect any
other provision of this Agreement that can be in effect without the invalid
provisions and, to this end, the provisions hereof are severable. Any such
invalid provision shall be enforceable to the extent permissible under
applicable law.
g. Counterparts. This Agreement may be executed in two or
more
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counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute but one and the same instrument. This Agreement shall
become effective when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatory.
h. Further Assurances. Each Issuer and the Purchaser agree to
execute and deliver all such other instruments and to take all such other action
as any party may reasonably request from time to time before and after the date
hereof and without payment of further consideration in order to effectuate the
transactions provided for herein. The parties shall cooperate fully with each
other and with their respective counsel in connection with any steps required to
be taken as part of their respective obligations under this Agreement.
i. Expenses. The Issuers shall be responsible for, and shall
pay, the reasonable costs and expenses of counsel for the Purchaser in
connection with the preparation, execution and delivery of this Agreement, the
New Note, the Security Agreement and the documents and instruments pursuant
hereto or thereto and the consummation of the transactions contemplated hereby
and thereby.
j. Survival. The representations and warranties of the Issuers
and the Purchaser contained herein and in the New Note shall survive the
consummation of the transactions contemplated hereby and shall terminate on the
second anniversary of the date hereof.
k. Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not affect the interpretation of
any of the provisions hereof.
l. Rule 144. The Company shall use its best efforts to file,
on a timely basis, all reports which are required to be filed by it under the
Securities Act and the Exchange Act, and shall take all such other actions as
are reasonably necessary in order for Rule 144 under the Securities Act (or any
successor Rule) to be available with respect to a sale of Conversion Shares
without registration under the Securities Act. The Company hereby agrees that
upon the receipt by it of a written opinion, to the reasonable satisfaction of
the Company, from counsel for a holder of Conversion Shares or Warrant Shares,
as the case may be, reasonably acceptable to the Company, to the effect that
said Conversion Shares or Warrant Shares, as the case may be, are eligible for
sale pursuant to the provisions of subparagraph (k) of Rule 144 it will promptly
take such actions as are necessary to provide said holder with unlegended
certificates representing the Conversion Shares which are the subject of said
opinion, and that it will promptly remove all stop transfer instructions with
respect thereto.
IN WITNESS WHEREOF, the Purchaser and the Company each has caused its
authorized representative to execute and deliver this Agreement on the date
first written above.
ECOGEN INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
-----------------------
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ECOGEN INVESTMENTS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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ECOGEN-BIO INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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UNITED EQUITIES (COMMODITIES)
COMPANY
By: ▇. ▇▇▇▇
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General Partner
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