-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NKdAikTgfcD4OU9y0UQPfnkTnwHJ+5cmRZwvnTt7UJt5/b5HkjFw01YVOrvSAPZF dw1Hd0hGTkoL2nmoHbJWPw== 0000893220-98-000555.txt : 19980324 0000893220-98-000555.hdr.sgml : 19980324 ACCESSION NUMBER: 0000893220-98-000555 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980317 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECOGEN INC CENTRAL INDEX KEY: 0000814050 STANDARD INDUSTRIAL CLASSIFICATION: 2870 IRS NUMBER: 222487948 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09579 FILM NUMBER: 98567158 BUSINESS ADDRESS: STREET 1: 2005 CABOT BLVD W CITY: LANGHORNE STATE: PA ZIP: 19047-1810 BUSINESS PHONE: 2157571590 MAIL ADDRESS: STREET 1: 2005 CABOT BLVD W CITY: LANGHORNE STATE: PA ZIP: 19047 10-Q 1 FORM 10-Q ECOGEN INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended January 31, 1998 Commission File Number 1-9579 Ecogen Inc. (Exact name of registrant as specified in its charter) Delaware 22-2487948 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2005 Cabot Boulevard West, Langhorne, Pennsylvania 19047 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (2l5) 757-l590 Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5 (d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No . --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Class Outstanding at March 1, l998 Common Stock, $.01 par value 8,005,309
2 ECOGEN INC. INDEX
Page PART I - FINANCIAL INFORMATION Item 1 - Financial Statements: Unaudited Consolidated Condensed Balance Sheets as of January 31, l998 and October 3l, l997....................................... 1 Unaudited Consolidated Condensed Statements of Operations for the three months ended January 31, 1998 and 1997........................ 2 Unaudited Consolidated Condensed Statement of Stockholders' Equity for the three months ended January 31, l998.......................... 3 Unaudited Consolidated Condensed Statements of Cash Flows for the three months ended January 31, l998 and l997........................ 4 Notes to Unaudited Consolidated Condensed Financial Statements.................................................................. 6 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition....................................... 9 PART II - OTHER INFORMATION Item 6(a) - Exhibits............................................................ 15
3 PART I - FINANCIAL INFORMATION ECOGEN INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
- - ------------------------------------------------------------------------------------------------------------------------------- ASSETS JANUARY 31, OCTOBER 31, 1998 1997 - - ------------------------------------------------------------------------------------------------------------------------------- Current assets: Cash, cash equivalents and temporary investments ............................... $ 4,831,886 $ 2,373,945 Trade receivables ............................................................... 1,368,421 1,769,514 Inventory, net .................................................................. 8,671,843 8,356,767 Prepaid expenses and other current assets ....................................... 662,700 571,227 - - ------------------------------------------------------------------------------------------------------------------------------- Total current assets 15,534,850 13,071,453 - - ------------------------------------------------------------------------------------------------------------------------------- Plant and equipment, net ........................................................... 3,451,962 3,649,579 Intangible and other assets, net ................................................... 835,662 837,020 - - ------------------------------------------------------------------------------------------------------------------------------- $ 19,822,474 $ 17,558,052 =============================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - - ------------------------------------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable and accrued expenses ....................................... $ 5,577,845 $ 5,043,626 Deferred contract revenue ..................................................... 2,044,333 957,794 - - ------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 7,622,178 6,001,420 - - ------------------------------------------------------------------------------------------------------------------------------- Long-term debt ..................................................................... 3,866,116 3,916,432 Other long-term obligations ........................................................ 2,705,659 2,770,548 Stockholders' equity: Common stock, par value $.01 per share; authorized 42,000,000 shares; issued 8,118,573 shares in 1998 and 1997 ................................ 81,186 81,186 Additional paid-in capital .................................................... 117,823,144 117,861,372 Accumulated deficit ............................................................ (110,798,171) (111,552,038) Other ........................................................................... (1,477,638) (1,520,869) - - ------------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 5,628,521 4,869,651 - - ------------------------------------------------------------------------------------------------------------------------------- $ 19,822,474 $ 17,558,052 ===============================================================================================================================
See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements. 1 4 ECOGEN INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
- - ------------------------------------------------------------------------------------------- THREE MONTHS ENDED JANUARY 31, 1998 1997 - - ------------------------------------------------------------------------------------------- Revenues: Product sales, net .................................... $ 1,715,937 $ 912,102 Contract research ....................................... 719,844 710,301 License and other income ................................ 2,500,000 -- Interest income, net .................................... -- 61,450 - - ------------------------------------------------------------------------------------------- Total revenues 4,935,781 1,683,853 - - ------------------------------------------------------------------------------------------- Costs and expenses: Cost of products sold ................................... 1,406,584 685,510 Research and development: Funded by third parties ............................... 224,920 240,807 Self funded ........................................... 737,848 1,194,444 Selling, general and administrative ..................... 1,680,821 1,787,689 Interest expense, net ................................... 131,741 -- - - ------------------------------------------------------------------------------------------- Total costs and expenses 4,181,914 3,908,450 - - ------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------- Net income (loss) $ 753,867 ($2,224,597) =========================================================================================== Basic and diluted net income (loss) per common share available to common stockholders $ 0.09 ($ 0.28) =========================================================================================== Weighted average number of common shares outstanding 8,032,000 7,844,000 ===========================================================================================
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements. 2 5 ECOGEN INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY Three months ended January 31, 1998
- - ---------------------------------------------------------------------------------------------------------------------------------- ADDITIONAL OTHER COMMON PAID-IN ACCUMULATED STOCKHOLDERS' STOCK CAPITAL DEFICIT EQUITY TOTAL - - ---------------------------------------------------------------------------------------------------------------------------------- Balance November 1, 1997 $ 81,186 $ 117,861,372 ($111,552,038) ($1,520,869) $4,869,651 Transfer of 3,629 shares of treasury stock for employee benefits ............................................ -- (38,228) -- 47,395 9,167 Net reduction in unrealized gain on securities ......... -- -- -- (4,164) (4,164) Net income ............................................ -- -- 753,867 -- 753,867 - - ---------------------------------------------------------------------------------------------------------------------------------- Balance January 31, 1998 $ 81,186 $ 117,823,144 ($110,798,171) ($1,477,638) $5,628,521 ==================================================================================================================================
See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements. 3 6 ECOGEN INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
- - ------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED JANUARY 31, 1998 1997 - - ------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income (loss) ................................................ $ 753,867 ($2,224,597) Adjustments to reconcile net income (loss) to net cash provided by ( used in ) operating activities: Depreciation and amortization expense .................... 201,373 93,664 Unrealized foreign currency transaction loss ................ -- (1,627) Changes in assets and liabilities, net ....................... 1,631,773 (1,816,124) - - ------------------------------------------------------------------------------------------------------ Net cash provided by (used in) operating activities 2,587,013 (3,948,684) - - ------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Proceeds from maturities of temporary investments ............... -- 1,490,342 Purchase of plant and equipment ................................ (58,756) (223,804) - - ------------------------------------------------------------------------------------------------------ Net cash (used in) provided by investing activities (58,756) 1,266,538 - - ------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Repayment of capital lease obligation ............................. (70,316) (94,360) - - ------------------------------------------------------------------------------------------------------ Net cash used in financing activities (70,316) (94,360) - - ------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------ Effect of foreign exchange rate changes on cash -- (2,004) - - ------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents ........... 2,457,941 (2,778,510) Cash and cash equivalents, beginning of period ................. 2,373,945 5,620,701 - - ------------------------------------------------------------------------------------------------------ Cash and cash equivalents, end of period $ 4,831,886 $ 2,842,191 ======================================================================================================
(Continued) 4 7 ECOGEN INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED
- - ----------------------------------------------------------------------------------------- THREE MONTHS ENDED JANUARY 31, 1998 1997 - - ----------------------------------------------------------------------------------------- Changes in assets and liabilities: Decrease in receivables ............................. $ 401,093 $ 259,778 Increase in inventory .............................. (315,076) (374,131) (Increase) decrease in prepaid expenses and other current assets ............................ (91,473) 18,352 Decrease in other assets ............................. -- 66,920 Increase (decrease) in accounts payable and accrued expenses ............................ 615,579 (1,360,143) Increase (decrease) in deferred contract revenue . 1,086,539 (388,489) Decrease in other long-term liabilities .............. (64,889) (38,411) - - ----------------------------------------------------------------------------------------- Changes in assets and liabilities, net $ 1,631,773 ($1,816,124) =========================================================================================
- - -------------------------------------------------------------------------------- Noncash investing and financing activities: - - -------------------------------------------------------------------------------- During the first quarter of fiscal 1997, the Company issued 1,700 shares of common stock as dividends on the Company's preferred stock and 44,030 shares of its common stock upon conversion of the Company's convertible preferred stock. During the first quarter of fiscal 1998 and 1997, the Company transferred 3,629 and 1,415 shares of treasury stock, respectively, to outstanding shares pursuant to certain employee benefit plans. ================================================================================ See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements. 5 8 ECOGEN INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JANUARY 31, 1998 AND 1997 (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND BASIS OF PRESENTATION: The consolidated condensed financial statements include the accounts of Ecogen Inc. ("Ecogen" or the "Company") and its wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated condensed financial statements include all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods presented. The consolidated condensed financial statements have been prepared in accordance with the requirements for Form l0-Q and, therefore, do not include all disclosures of financial information required by generally accepted accounting principles. These consolidated condensed financial statements should be read in conjunction with the Company's October 31, l997 consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K. The results of operations for the interim period ended January 31, 1998 are not necessarily indicative of the operating results for the full year. OPERATIONS: The Company is a biotechnology company specializing in the development and marketing of environmentally compatible products for the control of pests in agricultural and related markets. The Company has not yet achieved profitable operations for any of its fiscal years and there is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company's future operations are dependent, among other things, on the success of the Company's commercialization efforts and market acceptance of the Company's products. (Continued) 6 9 ECOGEN INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED NET INCOME (LOSS) PER COMMON SHARE: In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share" ("SFAS No. 128"). The Company adopted SFAS No. 128 in the first quarter of fiscal 1998. Under SFAS No. 128, basic income (loss) per share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is based on net income (loss) for the relevant period divided by common shares outstanding and other potential common shares if they are dilutive. There is no difference between the Company's historic net loss per share calculation and basic and diluted net loss as calculated under SFAS No. 128 because all other potential common shares were anti-dilutive since the Company reported a net loss. For the current period, diluted earnings per share were calculated giving effect to the conversion of the $3,000,000 convertible note into 1,000,000 common shares in accordance with the terms of the note, and adding back the $61,000 of interest expense incurred during the period on the note. Stock options and warrants were not considered because they were anti-dilutive. (2) INVENTORY At January 31, l998, inventory consisted of raw materials of $2,042,326, work-in-progress of $1,449,129 and finished products of $5,180,388. (3) MONSANTO TRANSACTION In January 1996, the Company entered into agreements with Monsanto Company ("Monsanto") for an equity investment, purchase of technology and joint research and development arrangement relating to the Company's proprietary Bacillus thuringiensis ("Bt") technology for in-plant applications (collectively, the "Monsanto Transaction"). In January 1998, the Company amended its research and development agreement with Monsanto and received approximately $4.3 million in cash payments which resulted in $2.5 million in other revenues earned and recorded in the first quarter of fiscal 1998 for which the Company has no continuing obligation. At January 31, 1998 the balance of deferred contract revenue from Monsanto is approximately $2.0 million which will be recognized as income when earned through January 1999, the remaining term of the amended agreement. 7 10 (Continued) ECOGEN INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, (CONTINUED) (4) COMMITMENTS AND CONTINGENCIES Subsequent to January 31, 1998 the Company entered into a $700,000 letter of credit to secure a contract manufacturing agreement. A $500,000 certificate of deposit is being maintained as collateral for the letter of credit. 8 11 ECOGEN INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED JANUARY 31, 1998 AND 1997 OVERVIEW For the first three months of fiscal 1998, total revenues almost tripled from $1.7 million in 1997 to $4.9 million in 1998. During the first quarter of fiscal 1998, the Company amended its research and development agreement with Monsanto Company (Monsanto) which resulted in $2.5 million of non-recurring revenues in the first quarter of fiscal 1998. Product sales increased 88% from $.9 million to $1.7 million for the three months ended January 31, 1997 and 1998, respectively. During the first quarter of fiscal 1998, the Company also realized a reduction in operating expenses of 18% from $3.2 million in the year-ago period to $2.6 million. As a result of increased revenues and decreased operating expenses, the Company reported net income of $.8 million or $.09 per basic and diluted share in the first quarter of fiscal 1998 compared to a net loss of ($2.2) million or ($.28) per share in 1997 on weighted average shares of 8.0 million and 7.8 million in the first quarter of fiscal 1998 and 1997, respectively. Exclusive of non-recurring revenues from Monsanto, the Company's net loss for the first quarter of fiscal 1998 improved 19% to ($1.7) million, from a net loss of ($2.2) million for the first quarter of fiscal 1997. Basic and diluted net loss per common share, exclusive of non-recurring revenues, was ($.22), compared with a net loss per common share of ($.28) for the first quarter of fiscal 1997. THREE MONTHS ENDED JANUARY 31, 1998 AND 1997 REVENUES Net product sales increased 88% during the three months ended January 31, 1998 to $1.7 million compared with $.9 million in the first quarter of 1997. Sales of the Company's Bt product line, representing 39% of total sales, increased 34% due principally to increased volume as a result of first time, first quarter sales of CRYMAX, the Company's new Bt bioinsecticide for control of caterpillars in the vegetable, tree nut and vine market. The increase in CRYMAX sales was partially offset by a decrease in volume of other Bt products. Pheromone product sales, representing 60% of total sales, increased $.9 million or 503% principally due to sales of the Company's new NoMate OLR product for control of omnivorous leafrollers in grapes and kiwi. Biofungicide sales, representing 1% of total sales, decreased $.2 million. 9 12 REVENUES (CONTINUED) Other revenues increased $2.4 million in the current period, due primarily to the non-recurring up-front payment from Monsanto described above as a result of an amendment to the Company's research and development contract with Monsanto. COSTS AND EXPENSES Cost of products sold increased 105% in the first quarter of fiscal 1998 compared to 1997 due principally to the increase in product sales. Gross margins decreased to 18% in the first quarter of fiscal 1998 compared to 25% in 1997. This decrease was due primarily to lower margins on international sales in 1998 compared to 1997 and changes in product mix. Total operating expenses were $2.6 million in the first quarter of fiscal 1998 compared to $3.2 million in 1997, a decrease of 18%. Research and development costs decreased $.5 million or 33% due principally to lower process development and startup costs associated with commercial scale-up of the Company's new WDG manufacturing process for its new WDG formulation of its products and lower personnel costs as a result of the shut down of a research lab in Israel. Research and development costs are expected to continue to decrease in fiscal 1998 when compared to fiscal 1997. Fiscal 1997 included higher process development costs as a result of the since resolved problem with the Company's scale-up of its new WDG formulation. Also personnel costs are expected to continue to decrease in the research and development area as the Company's commitment to provide research services to Monsanto decreases and as the Company's technology is commercialized, therefore requiring less activity in the basic research area. Selling, general and administrative expenses were $1.7 million in the first quarter of fiscal 1998 compared to $1.8 million in 1997, representing a decrease of $.1 million. Net interest expense was $.1 million during the three months ended January 31, 1998 compared to net interest income of $.1 million in the comparable period of 1997 due to increased levels of long-term debt and decreased funds available for investment. Net income for the three months ended January 31, 1998 was $.8 million, compared to a net loss of ($2.2) million for the same period in 1997. Basic and diluted net income per share for the three months ended January 31, 1998 was $.09, compared to net loss per share of ($.28) on weighted average shares outstanding of 8.0 million and 7.8 million in the first quarter of 1998 and 1997, respectively. SEASONALITY OF BUSINESS The bulk of the Company's current products are presently marketed for agricultural applications in the northern hemisphere, where the growing season generally runs from spring through fall. Commercial introduction of the Company's new products is contingent on, among other factors, completion of field testing and receipt of required regulatory approvals. Unusual weather 10 13 SEASONALITY OF BUSINESS (CONTINUED) conditions during field tests or failure to receive regulatory approvals prior to the growing season may require additional field tests in subsequent growing seasons, with resulting delays in product development and commercialization. In addition, because of the seasonal nature of its business, the Company's product revenues are likely to be concentrated in the fiscal quarters prior to and during a particular growing season which may result in substantial variations in quarter-to-quarter financial results. Product sales from year-to-year are also affected by unusual weather conditions, such as droughts or floods, and the level of insect pressure in grower areas. LIQUIDITY AND CAPITAL RESOURCES At January 31, 1998, the Company had cash and liquid investments of $4.8 million, representing a net increase of $2.4 million from October 31, 1997. The net increase was due to $2.6 million of cash provided by operations, offset by $.1 million used for capital expenditures and $.1 million for repayment of capital lease obligations. The Company has financed its working capital needs primarily through private and public offerings of equity securities, research revenues and license and other fees from research and development alliances and product sales. Through fiscal 1997, the Company had not generated positive cash flow from operations in any fiscal year. The Company believes that its existing working capital and cash flows generated in 1998 should be sufficient to meet its capital and liquidity requirements for fiscal 1998 based on reduced spending levels. The Company continues to pursue additional avenues to supplement its working capital, including, among other things, through the possible sale of assets. There is no assurance that such financing will be available on terms acceptable to the Company or at all. The Company's working capital and working capital requirements are affected by numerous factors and there is no assurance that such factors will not have a negative impact on the Company's liquidity. Principal among these are the success of its product commercialization and marketing efforts and the efforts of its strategic partners in commercializing and selling products based on the Company's technology, the technological advantages and pricing of the Company's products, economic and environmental considerations which impact agricultural crop production and the agricultural sector generally, competitive conditions in the agricultural pest control market, and access to capital markets that can provide the Company with the resources necessary to fund its strategic priorities. Over the long term, the Company's liquidity is dependent on market acceptance of its products and technology. 11 14 ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY Accounts receivable decreased $.4 million due to certain shorter payment terms on trade receivables. Inventory increased $.3 million at January 31, 1998 when compared to October 31, 1997, the end of the Company's fiscal year, as a result of building inventories for sales in the growing season. Accounts payable and accrued expenses increased $.5 million due to an increase in payables associated with the increase in inventory and timing of payments to vendors. Deferred contract revenue increased $1.1 million at January 31, 1998 due to amounts advanced under the Monsanto research and development agreement that are expected to be earned through January 31, 1999. FORWARD LOOKING STATEMENTS The discussion set forth in this document contains forward looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from expected results. The Company intends to market and sell a number of newly introduced products over the next several weeks and months. These products, some of which utilize new formulations, have not to date been produced on a commercial scale or produced on a commercial scale that has been replicated. Certain of the manufacturing processes for such products include newly developed equipment and techniques which may not be successfully incorporated into the manufacturing process in time to meet targeted sales opportunities. Additional risks and uncertainties include: (i) the market acceptance of the Company's current and newly introduced products; (ii) the efficacy, pricing, ease of use and performance of the Company's products; (iii) the successful development, registration, commercialization and marketing of technologically advanced new products; (iv) the continued and uninterrupted supply of the Company's products from third party toll manufacturers and the continued financial viability of such manufacturers; (v) economic and environmental considerations which impact agricultural crop production and agricultural crop protection including the amount of acres of target crops planted, the cost and efficacy of competitive products, weather conditions and the level of insect and disease infestation on target crops, and (vi) the ability of the Company to fund its strategic priorities through operations or access to capital markets. 12 15 PART II - OTHER INFORMATION Item 6(a) Exhibits
Exhibit No. Description 10.131 Contract Manufacturing Agreement dated November 6, 1997 by and between Ecogen Inc. and Archer- Daniels-Midland Company. 10.132 Amended and Restated Research and Development Agreement dated January 30, 1998 by and between Monsanto Company and Ecogen Inc. 27 Financial Data Schedule
13 16 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: March 17, 1998 ECOGEN INC. By: /s/ JAMES P. REILLY, JR. ----------------------------------- James P. Reilly, Jr. Chairman and Chief Executive Officer By: /s/ MARY E. PAETZOLD ----------------------------------- Mary E. Paetzold Vice President and Chief Financial Officer 14 EX-10.131 2 CONTRACT MANUFACTURING AGREEMENT 1 Exhibit 10.131 CONTRACT MANUFACTURING AGREEMENT THIS CONTRACT MANUFACTURING AGREEMENT (the "Agreement") is made this 6th day of November, 1997, by and between Ecogen Inc., a Delaware corporation ("Ecogen") and Archer-Daniels-Midland Company, a Delaware corporation ("ADM"). W I T N E S S E T H WHEREAS, Ecogen desires to obtain from ADM certain fermentation and centrifugation services for its Bacillus thuringiensis based ("Bt") biorational insecticide products and its Aspire yeast product; and WHEREAS, ADM as the operator of the Biochem II facility, desires to provide and operate one seed fermenter, one main fermenter, and one westphalia centrifuge, plus support equipment, to produce the Products. NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, it is agreed as follows: I. RESPONSIBILITIES 1.01 ADM shall provide the facility as described in Article II for the production of products as described in Article III (the "Product"). 1.02 In connection with the contract manufacturing of the Products for Ecogen, ADM shall provide the following: (a) Management, manufacturing and laboratory operations personnel with specific responsibility for the Products; (b) Utilities; (c) Maintenance; (d) Operating permits; (e) Records of production from process control systems, samples per schedule 1.02(e), shipping records and weigh tickets; (f) Waste disposal of by-products and failed batches; (g) Notification to Ecogen should any more toll manufacturing be 1 2 introduced to the facility; (h) Quality control supervision and shipping of samples; and (i) Storage of raw materials and cultures. 1.03 In connection with such contract manufacturing, Ecogen shall provide the following: (a) Technical personnel when required; (b) All operating and quality control protocols an example of which is shown on Schedule 1.03(b); (c) Cultures; (d) Raw materials (to be purchased from ADM when efficacy is competitive); (e) Product specifications; (f) Safety and usage information relative to the raw materials and the Products; (g) Transportation from the subject facility (ADM Trucking to be used where applicable and competitive); and (h) Production scheduling. II. FACILITY 2.01 In order to provide the Products, ADM intends to use the facility known as BioChem II when used for producing ADM's own products (the "Facility"). The following equipment at the Facility will be used to produce the Products. (a) one nominal 21,500 gal fermenter; (b) one nominal 2,000 gal seed fermenter; (c) westphalia centrifuge; and (d) support equipment, as necessary to operate this equipment. If the westphalia centrifuge is down for maintenance, then a second centrifuge will be provided to complete centrifugation before next batch is 2 3 completed. 2.02 If during the term of this Agreement, Ecogen has product demand which requires additional fermenters and centrifuges and if ADM has available additional fermenters and centrifuges, the parties agree to negotiate in good faith the providing of the second fermenter or centrifuge and a price to do so. Whether a fermenter or centrifuge is considered available is within ADM's sole and absolute discretion. III. PRODUCTS 3.01 Products to be produced by ADM for Ecogen are to be Ecogen's own Bt products and Ecogen's Aspire yeast product. IV. TERM OF AGREEMENT 4.01 The term of this Agreement shall commence on July 1, 1997 (the "Effective Date") and shall continue through December 31, 1999 unless earlier terminated in accordance with the provisions of this Agreement. The term of this Agreement shall be extended for additional periods of one year (up to a maximum of five additional years) unless either party provide written notice to the other of its intention to terminate the Agreement, such notice to be given at least eleven months prior to the end of the then current term for ADM, and two months prior to the end of the current term for Ecogen. 4.02 Ecogen may terminate this Agreement on July 1, 1998, July 1, 1999 or December 31, 1999 with two (2) months written notice. 4.03 In the event of a material breach of this Agreement, the non-breaching party may terminate this Agreement by providing written notice to the other party of the nature of the breach and intent to terminate. Termination will be effective thirty (30) days (ten (10) days in the case of non-payment of an invoice) after such notice unless the breach has been corrected by that time; in the event any such breach can not be reasonably cured within thirty (30) days, the parties may, but need not, agree in writing upon an alternative Schedule to cure such breach. 4.04 In the event of (i) the institution by or against either party of insolvency, receivership, bankruptcy, or similar proceedings; (ii) either party making an assignment for the benefit of creditors; or (iii) either party's dissolution, the other party may terminate this Agreement by providing written notice to the other party. V. PAYMENT 5.01 ACCESS FEE REIMBURSEMENT. As consideration for the services provided 3 4 under this Agreement, Ecogen shall pay to ADM an access fee in the amount of * per year The total amount of the annual access fee is due and owing in advance from Ecogen on July 1 of each year this Agreement is in effect. Payment shall be made monthly in advance in 1/12th increments. Payment is guaranteed by a letter of credit fixed at * and a second letter of credit fixed at * to cover operating cost exposure. During the final six (6) months of the contract the * letter of credit may decline by 1/6th of its value each month. Until the end of 1997 an alternate to a letter of credit would be to prepay service fees also at the estimated usage for the month of fermenter runs, ADM raw materials and CRYMAX dryer pounds. 5.02 SERVICE FEE REIMBURSEMENT. As consideration for the services provided under this Agreement, ADM shall invoice Ecogen on a monthly basis in arrears for the number of successful batches produced. Successful batches are defined as batches which meet the specifications listed in Schedule 5.02. The exception is that batches which are not successful per Schedule 5.02, but are used (not discarded) are considered successful. (a) The invoice quantity per batch is * plus the previous months average market price for all raw materials provide from ADM and the actual cost of any other raw materials purchased by ADM. Provided at month's end the average batch gives finished concentrated active ingredient totals in excess of the following: (i) CRYMAX: * (ii) Cutlass: * (iii) Lepinox: * (iv) Condor: * (v) Aspire: * - - ----------------- * Confidential Treatment Requested (b) If the average finished concentrated active ingredient totals per batch is less than the 90% number listed in 5.02(a) (i) - (v) the * 4 5 invoice plus the average actual raw material cost defined in 5.02(a) prorated by the ratio of the actual average batch total as the numerator and the standard average shown in 5.02(a) (i) - (iv) as the denominator. (c) CRYMAX will be billed to Ecogen at * per pound until the drier is moved. Ecogen will use its best efforts to move the drier as soon as possible. 5.03 INFLATION ADJUSTMENTS. The service fee to be paid by Purchaser for fermentation batches, ordered by Purchaser for delivery after December 31, 1997 shall be determined for each subsequent calendar year by multiplying the Prices set forth in 5.02 by a fraction, the denominator of which is the Producer Price Index figure published for June, 1997 (which the parties agree was 146.9) and the numerator of which is the Producer Price Index published on or most immediately prior to January 1 of the calendar year for which Prices are being determined. The Producer Price Index used shall be the United States Department of Labor, Bureau of Labor Statistics Producer Price Index, Manufacturing Industries, Chemical and Allied Products Group, Code 28 or the successor index thereto. 5.04 INVOICE PAYMENT TERMS. Ecogen shall make full payment, without setoff, within twenty (20) days from the date of invoice; provided, however, in the event an invoice is disputed, Ecogen shall within said period, pay the undisputed amount and provide ADM with a written position on the disputed portion. 5.05 Ecogen required improvements to the facility described in 2.01 shall be completed by ADM as soon as reasonably possible and shall be paid for by Ecogen when invoiced per section 5.04. VI. LICENSE, AND MANUFACTURING RIGHTS 6.01 Ecogen grants ADM a non-exclusive license to use but no rights to sublicense, during the term of this Agreement, all proprietary rights of Ecogen required by ADM to carry out its obligations under this Agreement. - - ----------------- * Confidential Treatment Requested VII. PERFORMANCE OBLIGATIONS 5 6 7.01 ADM and Ecogen shall use their best efforts to perform their respective obligations hereunder in a manner which will allow the successful production of Products under this Agreement. VIII. TITLE TO PRODUCT 8.01 Ecogen shall take title to Products at the point such Products are shipped from the Facility. 8.02 Title to the Facility shall at all times be and remain in ADM. IX. LIABILITY 9.01 ADM shall have no liability for the Products or their use, if any or the performance or activities of its employees provided to Ecogen. Ecogen shall defend, indemnify and hold ADM, its affiliated companies and their respective directors, officers, employees and agents harmless from and against any and all claims, actions, causes of action, judgments, awards, penalties, costs and fees (including reasonable attorneys fees) arising out of the use of or in any way connected with the Products or the operation of the Facility pursuant to this Agreement. X. INSURANCE 10.01 Ecogen shall maintain the certificate of general liability and product liability insurance coverage as shown on Schedule 10 or if canceled, provide ADM with another certificate of general liability and product liability insurance evidencing Two Million Dollars ($2,000,000) of coverage with a reputable company or companies. ADM shall be named as an additional insured party on all such policies. In addition, if allowed by law, Ecogen shall cause its workers compensation carrier to waive subrogation against ADM, its affiliated companies and their respective directors, officers, employees and agents. XI. FORCE MAJEURE 11.01 Neither party shall be liable to the other for delay or failure in the performance of its obligations contained in this Agreement to the extent such failure results from any one or more of the following: (a) acts of God, or public enemy or war (declared or undeclared); (b) acts of governmental or quasi-governmental authorities of the United States or any foreign country, or any political subdivision thereof, or of any department or agency thereof, or regulations or restrictions imposed by law or by court action, except as they may result from the unreasonable failure of the party to perform as required hereunder; (c) acts of persons engaged in subversive activities or sabotage; (d) fires, floods, explosions or other 6 7 catastrophes; (e) epidemics or quarantine restrictions; (f) strikes, or similar labor disruptions; (g) freight embargoes, or interruption of transportation; (h) unusually severe weather; (i) any other extraordinary causes, similar or dissimilar, beyond the reasonable control of the party concerned; and provided that the due diligence is exercised to cure such cause and resume performance, and the time for performance by such party shall be extended by a period of any such delay. The party affected by force majeure shall promptly notify the other of the existence and expected duration of the force majeure condition. 11.02 During the term of this Agreement and for the period of five (5) years after the termination or expiration of this Agreement, ADM agrees to treat as confidential all information of Ecogen and its manufacturing partners relative to the Products manufactured by ADM for Ecogen under this Agreement, shall not use such information except as contemplated herein, and shall not disclose such information to any third party, except to the extent that the information (a) was already known to ADM at the time of disclosure by Ecogen, (b) is in or through no fault of ADM enters the public domain, (c) is received without obligations of confidentiality or limited use from a third party having the right to disclose the same to ADM, (d) is independently developed by ADM, or (e) is required to be disclosed pursuant to a valid court order or lawful subpoena provided notice was given to Ecogen in sufficient time for Ecogen to seek a protective order or other relief. 12.03 During the term of this Agreement and for a period of five (5) years after the termination or expiration of this Agreement, Ecogen agrees to treat as confidential all information of ADM and its manufacturing partners provided to Ecogen by ADM in connection with this Agreement, shall not use such information except as contemplated herein, and shall not disclose such information to any third party, except to the extent that the information (a) was already known to Ecogen at the time of disclosure by ADM, (b) is in or through no fault of Ecogen enters the public domain, (c) is received from a third party having the right to disclose the same to Ecogen, (d) is independently developed by Ecogen, or (e) is required to be disclosed pursuant to a valid court order or lawful subpoena. XIII. NOTICE 13.01 Any notices required or permitted hereunder shall be effective on the mailing thereof if placed in the U.S. mail, certified or registered mail, return receipt requested and deposited postage prepaid, addressed to: ADM: Archer-Daniels-Midland Company P.O. Box 1470 Decatur, IL 62525 Attention: President, Bio-Products Division 7 8 with a copy to: Archer-Daniels-Midland Company P.O. Box 1470 Decatur, IL 62525 Attention: General Counsel Ecogen: Ecogen Inc. 2005 Cabot Boulevard West Langhorne, PA 19047 Attention: President with a copy to: Ecogen Inc. 2005 Cabot Boulevard West Langhorne, PA 19047 Attention: General Counsel XIV. ASSIGNMENT 14.01 This Agreement will be binding and inure to the benefit of the parties hereto and their respective successors and assigns. No assignment (including assignment by operation of law), delegation or other use of any right or duty under this Agreement may be made by either party without the written consent of the other party, except that either party may at any time assign and delegate its mutual rights and duties to a purchaser of all or substantially all of its stock or assets or to the surviving entity in a merger, consolidation or other corporate reorganization in which the party participates, as long as such surviving entity or purchaser shall expressly assume in writing the performance of this Agreement. XV. SEVERABILITY. 15.01 If any part of this Agreement is found invalid or unenforceable, that part will be amended to achieve, as nearly as possible, the same economic effect as the original provision and the remainder of this Agreement shall remain in full force. XVI. GOVERNING LAW. 16.01 This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, excluding any conflict of law principles of the State of Illinois which may require the application of the laws of another jurisdiction. The courts of the State of Illinois, the personal 8 9 jurisdiction to which each of the parties of this Agreement voluntarily submits, shall have the exclusive jurisdiction to hear and decide any dispute or controversy concerning this Agreement. XVII. ARBITRATION. 17.01 In the event of a dispute between the parties arising out of this Agreement or any part of it, or their performance under it, the dispute shall be submitted to binding arbitration in Chicago, Illinois, in accordance with the Commercial Rules then in effect of the American Arbitration Association. XVIII. ANNOUNCEMENTS. 18.01 Neither party shall make any announcements relative to the Agreement without the prior written consent of the other party except as required by law. XIX. Entire Agreement. 19.01 This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior agreements and understandings. This Agreement cannot be amended or modified except in writing duly executed by each party. 9 10 IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate as of the date first above written. ARCHER-DANIELS-MIDLAND COMPANY By: /s/ Brian Peterson ------------------------------------- Brian Peterson ECOGEN INC. By: /s/ James P. Reilly, Jr. ------------------------------------- James P. Reilly, Jr. Chairman & Chief Executive Officer 10 EX-10.132 3 AMENDED & RESTATED RESEARCH & DEVELOPMENT AGRMNT 1 Exhibit 10.132 AMENDED AND RESTATED RESEARCH AND DEVELOPMENT AGREEMENT This Amended and Restated Research and Development Agreement (the "Agreement") is made as of January 30, 1998, by and between Monsanto Company, a Delaware corporation, with its general offices at 800 North Lindbergh Boulevard, St. Louis, Missouri 63167 (together with its Subsidiaries, successors and assigns, "Monsanto"), and Ecogen Inc., a Delaware corporation having its principal office at 2005 Cabot Boulevard West, Langhorne, PA 19047 (together with its Subsidiaries, successors and assigns, "Ecogen"). W I T N E S S E T H WHEREAS, Monsanto and Ecogen are parties to that certain Research and Development Agreement dated as of January 24, 1996, as amended by Amendment No. 1 thereto dated as of May 22, 1997 (the "Original Agreement"); WHEREAS, Monsanto acquired certain bacterium Bacillus thuringiensis ("Bt") strain libraries, crystal protein gene libraries, and certain proprietary rights regarding protein engineering of Bt crystal proteins pursuant to the Technology Assignment Agreement by and between Monsanto and Ecogen dated as of January 24, 1996 ("Assignment Agreement"); WHEREAS, Monsanto has expertise in the field of plant biotechnology and Ecogen has expertise in finding, screening and commercializing compounds, including proteins based on Bt; WHEREAS, both Monsanto and Ecogen have research facilities and have conducted research and development pursuant to the Original Agreement which may lead to the commercialization of (i) improved bioinsecticides, and (ii) plants and/or plant seeds into the genomes of which Bt genes have been included so that such plants or plant seeds will express proteins; WHEREAS, in order to effect an orderly transition of the parties' respective research and development activities, capabilities and resources, Monsanto and Ecogen desire to restructure the terms of Original Agreement; NOW, THEREFORE, in consideration of the mutual covenants contained herein, Monsanto and Ecogen agree as follows: ARTICLE 1 - DEFINITIONS Capitalized terms not otherwise defined in this Agreement shall have the same meaning given such terms in the Assignment Agreement. In addition, the following terms shall have the meanings set forth below and will include the plural as well as the singular. 1.1 "Affiliate" shall mean, as to any party, any other person or entity that controls, is under common control with, or is controlled by, such party. 2 1.2 "Change of Control" shall have the meaning specified in Section 7.6(b) hereof. 1.3 "Competitor Company" shall mean any commercial entity (including joint ventures) involved to any significant extent in the development of transgenic plants, plant seeds, plant cells or components thereof, and any Subsidiaries or Affiliates of any of the foregoing entities. For purposes of this Agreement, a university or other educational institution (other than that which maintains a meaningful licensing or other arrangement with a Competitor Company that includes the area of In Planta Application) shall not be deemed a commercial entity. 1.4 "Confidential Information" shall have the meaning specified in that certain Confidentiality Agreement between Ecogen and Monsanto dated as of January 24, 1996. 1.5 "Date of this Agreement" shall mean the date first written above. 1.6 "Designated Supervisory Employees" shall mean the persons identified on Schedule 1.6 hereto. 1.7 "Event of Default" shall have the meaning specified in Section 7.2 hereof. 1.8 "Field of the Agreement" shall mean research and development in finding, discovering, screening and developing new proteins and genes. 1.9 "In Planta Application" means (i) use, development, or commercialization of transgenic plants, plant seeds, plant cells or components thereof (collectively "Plants") or (ii) use, development, or commercialization of genetic material used so that Plants express a new material or an existing material at levels different from the levels that such Plants otherwise would. 1.10 "Intellectual Property Rights" means (i) all patent rights and all right, title and interest in and to all letters patent and applications for letters patent, and other government issued or granted indicia of invention ownership including any substitutions, extensions, reissues, divisions, continuations or continuations-in-part or applications thereof or therefor throughout the world; (ii) all rights, title and interest in and to all trade secrets and trade secret rights arising under the common law, state law, federal law and laws of foreign countries; (iii) all copyright rights, and all other literary property and author rights whether or not copyrightable; and all rights, title and interest in and to all copyrights, copyright registrations, certificates of copyright and copyrighted interests throughout the world; (iv) all rights, title and interest in and to all know-how whether or not protectable by patent, copyright or trade secret law; and (v) all goodwill associated with any of the foregoing; provided, however, that the term "Intellectual Property Rights" shall not include any trademarks, trade names or service marks, whether registered or arising under the common law, state law, federal law or the laws of foreign countries or any registrations thereof or interests therein. 1.11 "Microbial Applications" shall mean use, development or commercialization of insecticidal, bacterial, fungicidal, pesticidal, medical, veterinary, scientific, nutritional, food 3 additive or preservative, materials, textiles, and similar products; provided, however, that such products shall not include any product for an In Planta Application. 1.12 "Naturally Occurring Genes" shall mean genes expressed by Bt that produce proteins without genetic engineering or protein engineering. 1.13 "R&D Technology" shall mean the Bt strains or genes discovered or developed pursuant to the Research Program and the Intellectual Property Rights arising pursuant to the performance of the parties' obligations under this Agreement. 1.14 "Relevant Employee" shall mean the persons named on Schedule 1.14 hereto. 1.15 "Remaining Term" shall mean the period commencing on January 30, 1998 and ending on January 24, 1999. 1.16 "Research Budget" shall mean the forecast of expenses and expenditures set by Monsanto from time to time during the Term for that part of the Research Program undertaken by Ecogen, which may be revised based on the recommendation of the Supervisory Committee; provided, however the Research Budget shall not include the cost or expenses of filing, prosecution or maintenance of patent applications or issued patents. 1.17 "Research Plan" shall mean the Research and Development Plan as may be amended from time to time and which Plan shall include a specific schedule for work, resources to be allocated by each party, the identification of target pests, personnel requirements, capital needs, and a schedule for the duplication and transfer to Monsanto of copies of all strains and genes developed under the Research Program. The selection of projects within the Research Plan is to be determined by Monsanto, with Ecogen having the right to object to any project which is inconsistent with the practices and procedures of Ecogen. 1.18 "Research Program" shall mean all research, experimentation or development relating to the projects to be conducted or conducted by the parties hereto under the terms of the Research Plan, including decisions regarding the filing, prosecution and maintenance of patent applications and issued patents. 1.19 "Subsidiary" shall mean a subsidiary more than 50 percent of whose outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors, is owned by the applicable party and/or one or more of such party's other majority-owned Subsidiaries. Subsidiaries of Ecogen shall also include the entities set forth in Schedule 3.01 to the Investment Agreement by and between Monsanto and Ecogen dated as of January 24, 1996. 1.20 "Supervisory Committee" shall mean the Committee described in Article 2 hereof. 1.21 "Term" shall mean the period commencing on January 24, 1996 and ending on January 24, 1999. 4 1.22 "Third Party" shall mean any entity other than Monsanto, Ecogen and their respective Affiliates. ARTICLE 2 - RESEARCH COLLABORATION 2.1 Research Plan. During the Term and subject to the terms and conditions of this Agreement, Monsanto and Ecogen shall use all commercially reasonable efforts to undertake their respective obligations (including as to the retention of staffing) under the Research Program in accordance with the Research Plan. The Research Plan shall be updated in writing and revised from time to time by the Supervisory Committee in furtherance of the goals of the Research Program, taking into account the then continuing personnel and other resources of Ecogen. The efforts of Ecogen pursuant to Section 4.6 hereof shall be deemed to be a part of the Research Program and the Research Plan. Ecogen agrees to diligently pursue each project covered by the Research Program and to assign the appropriate number of its then continuing personnel required to carry out the Research Program, each of whom shall be qualified to perform his or her assigned duties. The parties acknowledge that Ecogen makes no representation or assurance whatsoever that the Research Program will be successfully completed or result in the development of products with any technical or commercial value. 2.2 Research Funding. Monsanto shall be responsible for providing all funding necessary for both parties to undertake their respective duties and obligations under the Research Program and all other costs and expenses related thereto. Transfers of funds to Ecogen under the Research Budget during the Term shall be in accordance with the terms of Article 3 hereof. 2.3 Supervisory Committee. (a) Collaboration between the parties shall be determined by a Supervisory Committee of four (4) people; two (2) people appointed by each party. The Chairman of the Supervisory Committee shall be appointed by Monsanto. (b) It is the intent of the parties that information related to the Research Program be shared with one another in an open manner. For this purpose, the Supervisory Committee shall meet periodically and no less than once a quarter to review the status of the Research Program at mutually convenient locations. It is contemplated, however, that the parties may meet as frequently as weekly at Ecogen's facility to review results of the Research Program. At such meetings the implementation of the Research Program, including insectary services, insect targets and sources of insecticidal or other biocidal proteins, shall be discussed and mutually agreed upon. Each of the parties hereto shall provide to the Supervisory Committee quarterly written summaries of data and the status of its work under the Research Program in such form as such party routinely uses for the summary of similar research work for its own purposes. Modifications to the Research Program may be made by the Supervisory Committee as collaboration progresses in accordance with this Agreement. In the event that the Supervisory Committee cannot reach a decision regarding the Research Program, the issue shall be referred for resolution to a senior business executive of each party responsible for the Research Program. 5 In the event that the parties continue to have a good faith dispute, the issue will be resolved by the Monsanto business executive. 2.4 Continuity of Supervisory Committee. Each party shall attempt in good faith to maintain continuity in the identity of its representatives to the Supervisory Committee. ARTICLE 3 - COSTS 3.1 Research and Development Funding Payment. Monsanto shall pay to Ecogen the amount of $2,000,000 (including funds previously advanced pursuant to the Original Agreement) for the funding of the Research Program during the Remaining Term. $1,270,000, representing the balance of such amount after subtracting amounts already advanced to Ecogen aggregating $730,000, shall be paid to Ecogen in immediately available funds by bank wire transfer to the account designated by Ecogen, contemporaneously with the execution and delivery of this Agreement. 3.2 Transition Payment. Monsanto shall pay to Ecogen the additional sum of $2,500,000 in immediately available funds by bank wire transfer to the account designated by Ecogen, contemporaneously with the execution and delivery of this Agreement. Such payment is in consideration, among other things, of performance by Ecogen of its obligations under Article 4 hereof. 3.3 Research Budget. On or before thirty (30) days after the Date of this Agreement, Monsanto will develop, with input from the Supervisory Committee, and present to the Supervisory Committee a revised Research Budget outlining budgeted costs and expenses on a quarterly basis for the Remaining Term. The Research Budget shall be revised from time to time upon approval of the Supervisory Committee to reflect the availability of continuing personnel and other resources of Ecogen. Any budgeted amounts that remain unallocated or unspent at the termination of this Agreement shall be retained by Ecogen, free and clear of any obligation to Monsanto to perform research or other service; provided, that such unallocated or unspent amounts shall be returned to Monsanto promptly following a termination of the Research Program resulting from an Event of Default by Ecogen. 3.4 Allocated Researchers and Equipment Purchases. In establishing the Research Budget, each researcher employed by Ecogen shall be included in the Research Budget at an annual rate of $*, which annual rate shall include all costs and expenses for personnel, supplies (including consumables and standard reagents), existing equipment required for the services to be performed by Ecogen pursuant to the Research Plan and replacements therefor (so long as the individual cost of any such item of replacement equipment does not exceed $1,000), and overhead with respect to such researcher. Ecogen shall have no obligation to purchase or obtain any other equipment not already in its possession. Ecogen shall be responsible for paying up to $50,000 to Hauptman Woodward Medical Research Institute, Inc. and up to $3,000 to Dr. Slayton of the Albert Einstein College of Medicine for consulting services performed pursuant to the Research Plan. Such amounts paid by Ecogen shall be applied to and shall reduce the Research Budget. No other agreements with or payments to Third Parties shall be included in or - - ------------ * Confidential Treatment Requested. 6 applied to the Research Budget. ARTICLE 4 - TRANSITIONAL MATTERS 4.1 Access to Certain Employees. (a) Ecogen shall make no objection to any meetings or interviews at reasonable times and locations between representatives of Monsanto and either or both of the Designated Supervisory Employees for the purpose of allowing Monsanto and either or both of the Designated Supervisory Employees to investigate and consider potential employment of one of the Designated Supervisory Employees with Monsanto. (b) Monsanto may make an offer of employment to one of the Designated Supervisory Employees. Monsanto may not make an offer of employment to the other Designated Supervisory Employees unless and until (i) such first offer of employment shall have been rejected by the recipient of such offer or (ii) such first offer shall have expired or shall have been withdrawn by Monsanto, or upon the occurrence of one of the events identified in Section 4.1(c) hereof. Except as expressly set forth in Section 4.1(c) hereof, Monsanto shall hire a maximum of one of the Designated Supervisory Employees and shall not have offer of employment to each of the Designated Supervisory Employees pending at the same time. (c) The restrictions set forth in Section 4.1(b) hereof that Monsanto may hire a maximum of one of the Designated Supervisory Employees and may not have pending offers of employment to each of the Designated Supervisory Employees at the same time shall have no further effect upon the occurrence of any of the following: (i) Change of Control of Ecogen involving a Competitor Company; (ii) Event of Default by Ecogen; (iii) Receipt by a Designated Supervisory Employee (who has not previously been hired by Monsanto) of a bona fide, verifiable offer of employment from a Competitor Company containing terms reflective of the skills and background of such person and otherwise containing reasonably standard terms and conditions (it being understood that a condition requiring Ecogen to waive any confidentiality or other significant obligation owed to Ecogen by such person shall not be deemed reasonably standard unless such condition is subsequently waived by the offeror Competitor Company); (iv) Termination of employment initiated by Ecogen of a Designated Supervisory Employee. (d) Monsanto acknowledges and agrees that the provisions of this Section 4.1 have been specifically negotiated and carefully tailored with a view to preventing the serious and 7 irreparable injury that Ecogen will suffer in the event of a breach by Monsanto of its obligations under this Section. Monsanto further acknowledges that a breach of this Section 4.1 by it will cause irreparable injury and damage to Ecogen, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach would be inadequate. Accordingly, in the event that Monsanto breaches this Section 4.1, then Ecogen shall be entitled to injunctive relief without posting bond or other security. 4.2 Additional Payment. In the event that Monsanto hires a Designated Supervisory Employee, then, unless any of the events described in clauses (i) through (iv) of Section 4.1(c) hereof shall have occurred prior to the date of commencement of such person's service with Monsanto, Monsanto shall pay to Ecogen the amount of $* within 30 days following such commencement date. For greater certainty, no payment shall be due and payable pursuant to this Section 4.2 if the subject hiring is the second such hiring under Section 4.1(b) hereof. 4.3 Access to Relevant Employees and Information. Ecogen shall make no objection to any reasonable meetings or interviews between representatives of Monsanto and any number of Relevant Employees for the purpose of allowing Monsanto and such Relevant Employees to investigate and consider potential employment of such Relevant Employees with Monsanto. Monsanto may make written offers of employment to no more than six Relevant Employees at any one time. Monsanto shall not hire more than six Relevant Employees; provided, that the hiring of a Relevant Employee who subsequently does not actually begin his or her employment with Monsanto shall not be counted for purposes of this sentence. Ecogen agrees to provide Monsanto with prompt and reasonable access to files, records, contracts and other information pertaining to the employment and work history of such Relevant Employees. 4.4 Cooperation. Ecogen shall cooperate reasonably with Monsanto to ensure the prompt and orderly transition of employment of any Ecogen employee hired by Monsanto pursuant to this Article 4. Without limiting the foregoing, Ecogen shall cooperate with Monsanto in complying with all applicable Federal, state and local employment, tax, labor and immigration laws and regulations. 4.5 Release. (a) Ecogen for itself and for its Affiliates (collectively, the "Releasor"), hereby voluntarily and knowingly releases, acquits, discharges and covenants not to claim against any Designated Supervisory Employee, any Relevant Employee, Monsanto, or any Affiliates, shareholders (in - - ---------------- * Confidential Treatment Requested. 8 their capacity as shareholders), joint venturers, predecessors or successors of the foregoing entities and each of their respective officers, directors, employees, agents and attorneys (each a "Releasee" and collectively, the "Releasees") from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, disputes, costs, expenses, damages, judgments, orders and liabilities of whatever kind or nature, in law or in equity, by statute or otherwise whether now known or unknown, vested or contingent, suspected or unsuspected, which have existed or may have existed, or do exist or may exist, of any kind which the Releasor may have against the Releasees (i) in connection with the hiring by Monsanto of any Releasee pursuant to Sections 4.1 or 4.3, (ii) based upon the disclosure to Monsanto of Confidential Information, Intellectual Property Rights or other information of Ecogen (but not the confidential information of a Third Party to which Ecogen is subject to an obligation of confidentiality) or (iii) based upon any noncompetition obligation to Ecogen as such obligation would apply to activities for or on behalf of Monsanto. (b) For purposes of this Section 4.5, any Confidential Information of Ecogen disclosed to Monsanto by a Designated Supervisory Employee or by a Relevant Employee who has been hired by Monsanto shall be deemed to be Confidential Information subject to the provisions of Section 8.1 hereof. Nothing contained in Section 4.5(a) hereof is meant to grant to Monsanto a license or other right to use or otherwise exploit Confidential Information, Intellectual Property Rights or other information of Ecogen that has not been otherwise licensed or transferred to Monsanto by Ecogen. 4.6 Program Development Assistance and Other Transitional Services. During the Remaining Term Ecogen shall assist Monsanto to develop a sustainable Bt discovery, development and improvement program. Such assistance shall be reasonable in light of Ecogen's then continuing personnel and other resources and shall include, without limitation, providing Monsanto with reasonable access to Ecogen's facilities and research employees, training of Monsanto employees, and providing advice and recommendations to Monsanto regarding program establishment and development. Without limiting the foregoing, during the Remaining Term Ecogen shall assist Monsanto in the transfer of electronic versions of (i) all bioassay, biophysical and other data associated with the Bt strain libraries and crystal protein gene libraries acquired by Monsanto from Ecogen on January 24, 1996 and (ii) all bioassay, biophysical and other data generated under the Research Program from and after January 24, 1996. In addition, to the extent feasible, during the Remaining Term Ecogen shall provide Monsanto with reasonable stocks from its existing insect colonies. Monsanto shall reimburse Ecogen for the reasonable out-of-pocket travel and travel related expenses incurred by Ecogen in providing assistance and services to Monsanto pursuant to this Section 4.6 and the amount of such expenses shall not be included in or applied to the Research Budget. 4.7 Monsanto Noncompetition. (a) From the Date of this Agreement through December 31, 1999 (the "Non-Competition Period"), Monsanto agrees that it shall not engage in (i) research and development specifically directed to, or (ii) the commercialization, license or sale of products incorporating, Bt Microbial Applications. Monsanto shall not enter into any arrangement, including any ownership, joint 9 venture or licensing arrangement, as a result of which Monsanto would engage, directly or indirectly, in any significant manner, in an activity otherwise prohibited to Monsanto by the preceding sentence of this Section 4.7(a). (b) Monsanto acknowledges and agrees that the provisions of this Section 4.7 have been specifically negotiated and carefully tailored with a view to preventing the serious and irreparable injury that Ecogen will suffer in the event of competition by Monsanto with Ecogen with respect to Bt Microbial Applications or research during the Non-Competition Period. Ecogen is providing the benefits set forth herein in reliance on Monsanto's representation that the restrictions on it set forth in this Section 4.7 will not impose an undue hardship on Monsanto because of the availability of other opportunities with respect to the operation of its business and because of the benefit that Monsanto will derive as a result of this Agreement. Monsanto further acknowledges that a breach of this Section 4.7 by it will cause irreparable injury and damage to Ecogen, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach would be inadequate. Accordingly, in the event that Monsanto breaches this Section 4.7, then Ecogen shall be entitled to injunctive relief without posting bond or other security. (c) In the event that, despite the express agreement of Ecogen and Monsanto, any provision of this Section 4.7 shall be determined by any court or other tribunal of competent jurisdiction to be unenforceable for any reason whatsoever, the parties agree that this Section 4.7 shall be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical areas as to which it may be enforceable, and/or to the maximum extent in any and all other respects as to which it may be enforceable, all as determined by such court or tribunal. 4.8. Ecogen Noncompetition. (a) During the Remaining Term, except in connection with the Research Program, Ecogen agrees that (except to the extent of existing obligations described on Schedule 1.12 to the Assignment Agreement) it shall not engage in (i) research and development specifically directed to, or (ii) the commercialization, license or sale of products incorporating, In Planta Applications (whether or not involving Bt, Bt genes or Bt proteins). During the period commencing on January 25, 1999 and ending on December 31, 1999, Ecogen agrees that (except to the extent of existing obligations described on Schedule 1.12 to the Assignment Agreement) it shall not engage in (i) research and development specifically directed to, or (ii) the commercialization, license or sale of products incorporating, In Planta Applications involving Bt, Bt genes or Bt proteins. Ecogen shall not enter into any arrangement, including any ownership, joint venture or licensing arrangement, as a result of which Ecogen would engage, directly or indirectly, in any significant manner, in an activity otherwise prohibited to Ecogen by the preceding sentences of this Section 4.8(a). (b) Ecogen acknowledges and agrees that the provisions of this Section 4.8 have been specifically negotiated and carefully tailored with a view to preventing the serious and irreparable injury that Monsanto will suffer in the event of competition by Ecogen with 10 Monsanto with respect to In Planta Applications or research during the Non-Competition Period. Monsanto is providing the benefits set forth herein in reliance on Ecogen's representation that the restrictions on it set forth in this Section 4.8 will not impose an undue hardship on Ecogen because of the availability of other opportunities with respect to the operation of its business and because of the benefit that Ecogen will derive as a result of this Agreement. Ecogen further acknowledges that a breach of this Section 4.8 by it will cause irreparable injury and damage to Monsanto, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach would be inadequate. Accordingly, in the event that Ecogen breaches this Section 4.8, then Monsanto shall be entitled to injunctive relief without posting bond or other security. (c) In the event that, despite the express agreement of Ecogen and Monsanto, any provision of this Section 4.8 shall be determined by any court or other tribunal of competent jurisdiction to be unenforceable for any reason whatsoever, the parties agree that this Section 4.8 shall be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical areas as to which it may be enforceable, and/or to the maximum extent in any and all other respects as to which it may be enforceable, all as determined by such court or tribunal. 4.9 Employee Letter. Ecogen shall distribute promptly, and in any event with fourteen days following the Date of this Agreement, to each Designated Supervisory Employee and each Relevant Employees a letter in the form of Exhibit A attached hereto releasing each such employee with respect to Monsanto from the noncompetition restrictions contained in any agreement between such employee and Ecogen, and advising such employees generally of Ecogen's plans to restructure its research operations and to assist Monsanto in the development of a Bt discovery, development and improvement program. ARTICLE 5 - REPRESENTATIONS AND WARRANTIES 5.1 Representations and Warranties of Monsanto. Monsanto hereby represents and warrants to Ecogen, as of the date hereof, as follows: (a) Monsanto is duly organized, validly existing and in good standing under the Delaware General Corporation Law with all requisite power and authority to own its assets and conduct its business as now conducted; Monsanto is in good standing and duly qualified to transact business as a foreign corporation in each jurisdiction where it is legally required to do so; (b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Monsanto; this Agreement has been duly executed and delivered by Monsanto and constitutes the valid and binding obligation of Monsanto enforceable against Monsanto in accordance with its terms; (c) the execution and delivery of this Agreement by Monsanto and the performance by Monsanto of its obligations hereunder will not violate or conflict with, or constitute a breach or default under, or result in the creation or imposition of any lien under (i) the articles of 11 incorporation or bylaws of Monsanto, (ii) any applicable statute, law, regulation, rule, judgment, order or decree or (iii) any contract, instrument, agreement, lease, mortgage, or other restriction to which Monsanto is a party or by which Monsanto is bound; (d) no filing with, consent or approval or authorization of, any governmental authority or third party is required for Monsanto to enter into and to perform its obligations under this Agreement. 5.2 Representations and Warranties of Ecogen. Ecogen hereby represents and warrants to Monsanto, as of the date hereof, as follows: (a) Ecogen is duly organized, validly existing and in good standing under the Delaware General Corporation Law with all requisite power and authority to own its assets and conduct its business as now conducted; Ecogen is in good standing and duly qualified to transact business as a foreign corporation in each jurisdiction where it is legally required to do so; (b) the execution, delivery and performance of this Agreement have been duly authorized by the Board of Directors of Ecogen and by all necessary corporate action on the part of Ecogen; this Agreement has been duly executed and delivered by Ecogen and constitutes the valid and binding obligation of Ecogen enforceable against Ecogen in accordance with its terms; (c) the execution and delivery of this Agreement by Ecogen and the performance by Ecogen of its obligations hereunder will not violate or conflict with, or constitute a breach or default under, or result in the creation or imposition of any lien under (i) the articles of incorporation or bylaws of Ecogen, (ii) any applicable statute, law, regulation, rule, judgment, order or decree or (iii) any contract, instrument, agreement, lease, mortgage, or other restriction to which Ecogen is a party or by which Ecogen is bound; (d) no filing with, consent or approval or authorization of, any governmental authority or third party is required for Ecogen to enter into and to perform its obligations under this Agreement. ARTICLE 6 - INVENTIONS, LICENSES AND PATENTS 6.1 License Grant for Intellectual Property Arising Under Agreement. Ecogen shall have a worldwide, perpetual, exclusive, fully paid up, royalty-free, transferable license to the R&D Technology to make, have made, offer for sale, import, use or sell products solely for Microbial Applications. The rights granted in this Agreement include the right to grant sublicenses. In addition, Ecogen shall have a perpetual and permanent right to hold and possess Bt strains and genes discovered or developed hereunder, solely for Microbial Applications. Licenses granted pursuant to this Section during the Term shall survive the termination or expiration of this Agreement for any reason. 6.2 Rights of Monsanto: Other Than Microbial Applications. The rights to any (i) invention related to the Field of the Agreement, conceived during the performance under this Agreement, and not related solely to Microbial Applications (ii) applications for a patent for the 12 aforesaid invention, (iii) patent granted on such application, and (iv) all other Intellectual Property Rights in the Field of the Agreement arising from the performance under this Agreement and not related solely to Microbial Applications shall be owned by Monsanto. 6.3 Rights of Ecogen: Solely Microbial Applications. The rights to any (i) invention related to the Field of the Agreement conceived during the performance under this Agreement and which is related solely to Microbial Applications (ii) applications for a patent for the aforesaid invention, (iii) patent granted on such application, and (iv) all other Intellectual Property Rights in the Field of the Agreement arising from the performance under this Agreement related solely to Microbial Applications shall be owned by Ecogen. 6.4 Patent Applications by Monsanto. (a) From time to time, not less than quarterly, the Supervisory Committee shall make a determination if any patent applications should be filed to protect inventions conceived in accordance with this Agreement and if so the countries in which such patent applications should be filed. In the event that the Supervisory Committee has decided that one or more patent applications should be filed regarding an invention that has in whole or part In Planta Applications, Monsanto shall be responsible for the filing, prosecution and maintenance of patent applications (and related issued patents) directed to such rights, including all costs, expenses and taxes associated therewith. Monsanto shall include in such patent applications such claims, including without limitation claims relating solely or in part to Microbial Applications as Ecogen shall reasonably request. Monsanto shall remain responsible for the filing, prosecution and maintenance of all claims (and related patent applications and issued patents) that are submitted in such patent applications whether or not such claims relate solely to Microbial Applications and whether or not such claims become the subject of divisional applications, continuation applications or otherwise related applications directed solely to Microbial Applications. (b) Ecogen and Monsanto shall cooperate with one another as to the preparation and prosecution thereof, including, without limitation, the claim language. Monsanto shall allow Ecogen, at Ecogen's own expense, to participate to the extent requested in the preparation and prosecution of such patent applications including, without limitation, (i) the receipt of copies of all correspondence to or from the United States Patent and Trademark Office or foreign patent offices, and (ii) the participation in all communications and/or meetings with the United States Patent and Trademark Office or foreign patent offices. 6.5 Abandonment by Monsanto. Monsanto may decide to allow any patent application or patent directed in whole or in part to In Planta Applications that was filed pursuant to Section 6.4 hereof to go abandoned and/or patent to lapse, and, in such event, Monsanto may also allow any patent application, divisional application, continuation application or patent directed solely to Microbial Applications related (as described in the fourth sentence of Section 6.4) to such patent application or patent to go abandoned or to lapse; provided, however, Monsanto shall have first provided Ecogen with adequate opportunity to prosecute and/or maintain any patent application, divisional application, continuation application or patent that Monsanto has decided to go abandoned or to lapse. In the event Ecogen elects to prosecute and/or maintain any such 13 patent application, divisional application, continuation application or patent, then Monsanto shall assign all of its rights thereto to Ecogen and Monsanto shall have no license thereto or to any resulting patents; provided, however, Ecogen shall not have any rights to In Planta Applications thereunder nor shall Ecogen have the right to grant rights to In Planta Applications thereunder to any Third Party. 6.6 Countries Where Patent Applications Are Not Prosecuted. In the event the Supervisory Committee shall determine not to file a patent application in any country with respect to an invention conceived in accordance with this Agreement, Ecogen may decide to file, prosecute and maintain such a patent application at its own expense and in its own name after notifying Monsanto of such decision. Upon receipt of notice of such decision Monsanto shall assign its rights to such invention in such country to Ecogen and Monsanto shall have no rights with respect to such patent application or related patent in such country unless Monsanto shall reimburse Ecogen for all of Ecogen's out- of-pocket costs incurred after such notice including, without limitation, prosecuting the patent application, maintaining the patent application and resulting patent or any other administrative or legal proceeding. Upon receipt of such reimbursement Ecogen shall grant to Monsanto a royalty-free, worldwide, perpetual exclusive license with the right to sublicense under such patent solely for In Planta Applications. 6.7 Patent Applications by Ecogen. Ecogen shall be responsible for the filing and prosecution of patent applications directed solely to its rights under Section 6.2 hereof including all costs, expenses and taxes associated therewith. Ecogen may decide to allow any such patent application or resulting patent to go abandoned and/or to lapse; provided, however, Ecogen shall have first provided Monsanto with adequate opportunity to prosecute and/or maintain any such patent application or resulting patent. In the event Monsanto elects to prosecute and/or maintain any such patent application or resulting patent, Ecogen shall assign all of its rights thereto to Monsanto and Ecogen shall have the rights set forth in Section 6.1 hereof with respect to such patent application and resulting patent. 6.8 No Warranty. Neither Monsanto nor Ecogen warrants to the other that any patent obtained is valid or enforceable. 6.9 Other Ecogen Programs. (a) Ecogen shall offer (the "Offer") Monsanto the opportunity to participate in each of Ecogen's own research and development programs in existence or commenced during the Term (the "Ecogen Programs"), other than Excluded Technology, which are not part of the Research Program for which in Ecogen's good faith judgment there is a reasonable expectation that the Ecogen Program will result in technology applicable to the Field of the Agreement for In Planta Applications. Such Offer shall be in writing and in reasonable detail and shall be made as soon as Ecogen has a reasonable expectation that the technology will be applicable to the Field of the Agreement. Each such Ecogen Program shall be called a "Designated Program." Such Offer shall be made prior to initiation of the Designated Program. For Designated Programs already under way as of the Date of this Agreement, Ecogen shall inform Monsanto of the existence of these Designated Programs at or before the first meeting of the Supervisory Committee. Ecogen shall 14 have no duty to present to Monsanto an Offer for any Ecogen Programs funded by a Third Party and Monsanto shall have no rights to such Ecogen Programs. (b) Should Monsanto desire to have a Designated Program become subject to this Agreement, it shall notify Ecogen of that decision within thirty (30) days from Monsanto's receipt of the Offer. The parties shall negotiate in good faith to modify the Research Program and increase the Budget, if necessary, to account for the Designated Program. (c) If Monsanto decides not to have a Designated Program become subject to this Agreement the results and Intellectual Property arising from the Designated Program corresponding to the Offer shall be owned solely by Ecogen and Monsanto shall have no rights thereto. (d) If Ecogen has not offered an Ecogen Program to Monsanto and such Ecogen Program results during the Term and within 3 months thereafter in technology applicable to the target pests in the Research Program, then Monsanto shall have the option to acquire a license, on the same terms and conditions of the Monsanto License Agreement dated of even date herewith, for such technology for In Planta Applications by reimbursing Ecogen for Ecogen's cost in developing such technology based upon the costs and expenses per year per researcher as if the technology were developed pursuant to this Agreement and Monsanto had paid the costs of such researcher pursuant to the terms of Section 3.4. 6.10 Genes Discovered by Ecogen. All genes or strains discovered by Ecogen in Ecogen's research outside the Research Program shall be owned solely by Ecogen; provided, however, that Ecogen hereby grants to Monsanto a perpetual, paid-up, royalty-free worldwide license in and to Naturally Occurring Genes applicable to the target pests of the Research Program that are discovered by Ecogen to the extent Ecogen then has the right to do so. In that event such a license shall be deemed to be part of the Research Program. 6.11 Other Research by Monsanto. It is envisioned that in the course of this Agreement, evaluation of useful Bt Genes by Monsanto will create research at Monsanto that will have application to Ecogen's performance of its obligations under this Agreement. Manipulation of Bt Genes in microorganisms with application to gene discovery, expression and protein stability will be shared with Ecogen for purposes of enhancing gene discovery, expression and protein stability in connection with Ecogen's performance of its obligations under this Agreement. Use of such manipulation techniques for the development of microbial pesticides shall be licensed to Ecogen in paid-up, royalty-free worldwide license, with the right to sublicense, for use solely in Microbial Applications. 6.12 Notice of Infringement. During the Term each party shall notify the other of the existence of an infringement of which such party becomes aware of an invention or other Intellectual Property Right conceived during or arising from the performance under this Agreement. 6.13 Infringement Relating to Microbial Applications. If the infringement referred to in 15 Section 6.12 relates to an application solely for Microbial Applications, then Ecogen shall be solely responsible in its sole discretion for the abatement of the infringement including settlement and the bringing of a lawsuit and all costs and expenses of such lawsuit, provided, however, that no settlement shall impose any affirmative obligation or obligation of payment on Monsanto without Monsanto's prior written consent given in Monsanto's sole discretion. Monsanto shall provide all reasonable nonmonetary assistance requested by Ecogen and agrees to be named in the lawsuit if required by law as a necessary or indispensable party. All recoveries and damages obtained by Ecogen shall be owned solely by Ecogen. In the event there is a counterclaim regarding the validity or enforceability of an Intellectual Property Right, Monsanto shall be permitted to join in the action at its own expense, in which case any recovery obtained or damages awarded shall be first used to reimburse Ecogen's reasonable attorneys' fees and other out-of-pocket costs in bringing the lawsuit, then reimbursing Monsanto's reasonable attorneys' fees and other out-of-pocket costs in joining the action, and then all remaining recovery and damage award to Ecogen. 6.14 Infringement Relating to Other Than Microbial Applications. If the infringement referred to in Section 6.12 relates to an application other than solely for Microbial Applications, then Monsanto shall be solely responsible in its sole discretion for the abatement of the infringement including settlement and the bringing of a lawsuit and all costs and expenses of such lawsuit, provided, however, that no settlement shall impose any affirmative obligation or obligation of payment on Ecogen without Ecogen's prior written consent given in Ecogen's sole discretion. Ecogen shall provide all reasonable nonmonetary assistance requested by Monsanto and agrees to be named in the lawsuit if required by law as a necessary or indispensable party. All recoveries and damages obtained by Monsanto shall be owned solely by Monsanto. In the event there is a counterclaim regarding the validity or enforceability of an Intellectual Property Right, Ecogen shall be permitted to join in the action at its own expense, in which case any recovery obtained or damages awarded shall be first used to reimburse Monsanto's reasonable attorneys' fees and other out-of-pocket costs in bringing the lawsuit, then reimbursing Ecogen's reasonable attorneys' fees and other out-of-pocket costs in joining the action, and then all remaining recovery and damage award to Monsanto. ARTICLE 7 - TERM AND TERMINATION 7.1 Term. The Term shall commence on January 24, 1996 and shall end on January 24, 1999, unless earlier terminated pursuant to the provisions hereof. 7.2 Events of Default. Each of the following shall be deemed an "Event of Default": (a) a petition is filed against either party under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and the party, as applicable, is not diligently prosecuting a dismissal of such petition and such petition is not dismissed within 90 days after its filing; (b) either party files a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, 16 dissolution or liquidation law of any jurisdiction whether now or hereafter in effect, or consents to the filing of any petition against it under any such law; (c) a party admits insolvency or bankruptcy or its inability to pay its debts as they become due or is generally not paying its debts as such debts become due, or becomes insolvent or bankrupt or makes an assignment for the benefit of creditors, or a custodian (including without limitation a receiver, liquidator or trustee) of the party or any of its property is appointed by court order or takes possession thereof; (d) other than a failure by Monsanto to transfer funds to Ecogen under the Research Budget in accordance with the terms of Article 3 hereof, a party shall fail to perform any of its material obligations hereunder for a period of 90 days after written notice, specifying such failure and requesting that it be remedied is given to such breaching party by the nonbreaching party; provided, however, if such default is such that it can be corrected but cannot be corrected within such 90-day period, it shall not constitute an Event of Default if corrective action is instituted by the breaching party within such 90-day period and diligently pursued until the default is corrected. No such default shall remain uncured 120 days after written notice. (e) a failure on Monsanto's part to transfer funds to Ecogen under the Research Budget in accordance with the terms of Article 3 hereof for a period of 30 days after written notice from Ecogen, specifying such failure and requesting that such funds be transferred. 7.3 Notice of Default. Each party agrees to give the other prompt written notice if any petition referred to in Section 7.2(a) or 7.2(b) is filed by or against it or of the occurrence of any other event or condition which constitutes an Event of Default immediately upon becoming aware of the existence thereof. 7.4 Termination of Agreement in Event of Default. If an Event of Default shall have occurred and shall be continuing, the nonbreaching party shall have the right to terminate this Agreement effective upon written notice of such termination from the nonbreaching party. 7.5 Suspension of Payments During Cure Period. Notwithstanding the period in which Ecogen has to cure a breach of this Agreement and prior to the time in which such breach would constitute an Event of Default, Monsanto shall have the right to suspend transfers of funds to Ecogen under the Research Budget during the applicable cure period and prior to Monsanto's exercise of its right to terminate this Agreement: (i) if Monsanto has in good faith given notice to Ecogen of Ecogen's failure to perform any of its material obligations hereunder pursuant to Section 7.2(d); or (ii) if any petition referred to in Section 7.2(a) is filed against Ecogen. 7.6 Change of Control. (a) Notwithstanding anything contained in this Agreement to the contrary, Monsanto shall have the right to terminate the Research Program and all of Monsanto's obligations under Article 2 and Article 3 hereof effective upon written notice of such termination from Monsanto at any time following the occurrence of a Change of Control of Ecogen; provided, that upon any 17 such termination any budgeted amounts that are then unallocated or unspent shall be retained by Ecogen free and clear of any obligation to Monsanto to perform research or other services. (b) For purposes of this Agreement, the term "Change of Control" shall mean the occurrence of any of the following events with respect to Ecogen: (i) there shall be consummated (A) any merger, consolidation or combination involving Ecogen in which Ecogen is not the continuing or surviving corporation, or pursuant to which shares of Ecogen's voting stock would be converted in whole or in part into cash (excluding any such transaction in which only fractional shares are so converted to cash), or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Ecogen, or (ii) any person, company, corporation or other entity shall become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of securities of Ecogen representing 50% or more of the combined voting power of then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise. The parties hereto agree that a sale, lease, exchange or transfer of all or substantially all of the Intellectual Property Rights of Ecogen shall constitute a sale, lease, exchange or transfer (as the case may be) of all or substantially all of the assets of Ecogen for purposes hereof. The parties hereto further agree that a sale, lease, exchange or transfer of Ecogen assets which does not include all or substantially all of the Intellectual Property Rights of Ecogen shall not constitute a sale, lease, exchange or transfer (as the case may be) of all or substantially all of the assets of Ecogen for purposes hereof, unless after giving effect to such transaction, Ecogen would be unable to pay its debts as they become due, would become insolvent or would cease operations as a going concern. ARTICLE 8 - CONFIDENTIALITY 8.1 Confidentiality. Confidential Information shall be treated by the parties in accordance with the Confidentiality Agreement dated as of January 24, 1996. ARTICLE 9 - LIABILITY; INDEMNITY; PATENT INFRINGEMENT; SEVERABILITY 9.1 Limitation of Liability. It is understood and agreed that the furnishing of any chemicals, samples or any information (including Confidential Information) by either party pursuant to this Agreement is not to be construed as a recommendation by that party to use the same. FURTHERMORE, WITH RESPECT TO SUCH INFORMATION, MATERIALS, PRODUCTS, PROCESS INFORMATION, PROCESSES, ADVICE, CONSULTATIONS, ASSISTANCE, SERVICES, LICENSES AND RIGHTS PROVIDED HEREUNDER, AND ANY MATERIALS OR PRODUCTS MADE USING SUCH, NEITHER PARTY MAKES ANY REPRESENTATION, WARRANTY OR GUARANTEE OF ANY KIND, EXPRESSED OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR PARTICULAR A PURPOSE, SATISFACTORY RESULTS BASED UPON USE THEREOF OR RELIANCE THEREON, OR OTHERWISE, AND NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY LOSS OR DAMAGE RESULTING FROM THE RELIANCE AND/OR USE THEREOF. 18 9.2 Indemnification. Notwithstanding the foregoing Section, each of the parties agrees to hold the other party harmless from and against any and all demands, claims, penalties, liabilities, causes of action, suits, damages, judgments, losses, costs and expenses (including cost of defense, settlement and reasonable attorneys' fees and expenses) arising out of injury to any employee of such party resulting from or in any way connected with the performance of this Agreement, unless arising from the other party's negligence or willful misconduct. 9.3 Limitation on Infringement. Neither of the parties to this Agreement shall be liable to the other party in any way for Third Party patent infringement by said other party arising out of the use of any information furnished to such other party pursuant to this Agreement. ARTICLE 10 - MISCELLANEOUS 10.1 Severability. If any provision of this Agreement is found to be unenforceable under any law applicable thereto, then that provision shall be deemed to have been severed from this Agreement in that jurisdiction, but all other provisions of this Agreement shall remain in full force and effect. 10.2 No Partnership Created. The parties acknowledge that this Agreement does not constitute nor does it create any partnership or joint venture between Monsanto and Ecogen. 10.3 Governing Law. This Agreement shall be governed by and shall be construed to take effect according to the laws of the State of Missouri, United States of America. 10.4 Notices. All notices or other communications which any party to this Agreement may desire or be required to give hereunder shall be in writing and, except for notices of meetings of the Supervisory Committee which shall be given as reasonably agreed among the members of such Committee, shall be given by personal delivery, by mailing the same by registered or certified mail, postage prepaid, return receipt requested, or by facsimile transmission followed up by a nationally recognized overnight carrier, addressed: (a) If to Monsanto: Monsanto Company 800 North Lindbergh Boulevard St. Louis, Missouri 63167 Attn: Vice President - Technology, Agricultural Sector Facsimile Number: 314-737-7554 with a copy to: Monsanto Company 700 Chesterfield Parkway North St. Louis, Missouri 63198 19 Attn: Intellectual Property Counsel Facsimile Number: 314-737-6047 and (b) if to Ecogen: Ecogen Inc. 2005 Cabot Boulevard West Langhorne, Pennsylvania 19047 Attention: President Facsimile Number: 215-757-4156 Notices given by personal delivery shall be deemed given when delivered, otherwise notices shall be deemed given when sent. 10.5 Survival. The provisions of Articles 6, 8 and 9 shall survive the expiration or termination of this Agreement. The provisions of Article 4 hereof shall survive the expiration or termination of this Agreement for a period of seven years; provided, that any release pursuant to Section 4.5(a) hereof shall be perpetual. Any license which has been granted to any party pursuant to this Agreement, including one which has been granted under Section 6.1 hereof, shall survive any termination of this Agreement, including a termination caused by an Event of Default. 10.6 Counterparts. This Agreement may be signed in counterparts, both of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.7 Entire Agreement. This Agreement represents the entire understanding of the parties hereto with respect to research and development in the Field of the Agreement and supersedes all other and prior memoranda and agreements between the parties hereto, other than documents executed or delivered at the Closing of this Agreement or the Assignment Agreement. 10.8 Amendment. No amendment, modification or waiver of any term or condition of this Agreement shall be valid or of any force or effect unless made by written instrument signed by the parties hereto, specifying the exact nature of such amendment, modification or waiver. Any waiver by any party of any provision of this Agreement shall not imply a subsequent waiver of that or any other provision. 10.9 Assignment. Neither party shall assign its rights or delegate its performance under this Agreement without the prior written consent of the other, other than the licenses granted hereunder, which shall be transferable without the prior written consent of the other party. 10.10 Section Headings. The section captions and headings in this Agreement are for convenience and reference purposes only and should not affect in any way the meaning or interpretation of this Agreement. 10.11 No Presumption Against Drafter, Qualifications on Schedules. The parties to this 20 Agreement have jointly participated in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement, shall be construed as if drafted jointly by the parties and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement. ARTICLE 11 - AFFIRMATIVE COVENANT 11.1 Ecogen Information. During the Remaining Term, Ecogen covenants that it will furnish to Monsanto Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K as filed with the Securities and Exchange Commission. 21 IN WITNESS WHEREOF, each party has caused this Agreement to be executed by its duly authorized representative effective on the date set forth first above.
MONSANTO COMPANY ECOGEN INC. By: /s/ Derek K. Rapp By: /s/ James P. Reilly Jr. ----------------------------------------- ------------------------------------------ Name: Derek K. Rapp James P. Reilly, Jr. Title: Director, Mergers and Acquisitions Chairman and Chief Executive Officer
EX-27 4 FINANCIAL DATA SCHEDULE
5 3-MOS OCT-31-1998 NOV-01-1997 JAN-31-1998 4,831,886 0 1,446,199 77,778 8,671,843 15,534,850 9,250,122 5,798,160 19,822,474 7,622,178 0 0 0 81,186 5,547,335 19,822,474 1,715,937 4,935,781 1,406,584 1,631,504 2,418,669 0 131,741 753,867 0 753,867 0 0 0 753,867 .09 .09
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