Stockholders' Agreement

STOCKHOLDERS' AGREEMENT


This Stockholders' Agreement ("Agreement") is made as of the 15th day of February, 2000 by and between MYCOGEN CORPORATION, a California corporation ("Mycogen"), and ECOGEN INC., a Delaware corporation ("Ecogen"). Ecogen and Mycogen are collectively referred to herein as the "Parties".


RECITALS


WHEREAS, Mycogen is receiving 1,351,351 shares of the common stock, one cent ($.01) par value, of Ecogen as part of the consideration for the sale of certain assets of Mycogen to Ecogen pursuant to the terms and conditions of that certain Asset Purchase and License Agreement dated as of February 15, 2000 (the "Asset Purchase Agreement"), by and between Ecogen and Mycogen; and


WHEREAS, it is a condition precedent to the obligations of the Parties under the Asset Purchase Agreement that the Parties shall have entered into this agreement;


NOW THEREFORE, in consideration of the premises, mutual promises, representations, warranties, covenants and agreements contained herein, and in the Asset Purchase Agreement, and intending to be legally bound thereby, the parties agree as follows:


ARTICLE I


DEFINITIONS


As used in this Agreement, the following terms shall have the meanings specified below:


"Accredited Investors" has the meaning set forth in Rule 501 of Regulation D under the Securities Act, as the same may be amended from time to time.


"Affiliate" with respect to a specified Person is another Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified Person. For purposes of this definition, the term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.


"Agreement" means this Stockholders' Agreement, as the same may be amended from time to time. 2
"Asset Purchase Agreement" has the meaning set forth in the Recitals hereto.


"Business Day" means any day of the week except Saturday, Sunday and any legal holiday observed by a national banking association or one of the parties.


"Closing" means the closing of the transactions contemplated by the Asset Purchase Agreement.


"Closing Value" has the meaning set forth in Section 6.1 hereof.


"Commission" means the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.


"Common Stock" means the shares of common stock, par value $.01 of Ecogen.


"Control Securities" means securities of Ecogen, other than Restricted Securities, owned by a Holder at the time such Holder would be deemed to be an Affiliate of Ecogen.


"Ecogen" means Ecogen Inc., a Delaware corporation.


"Ecogen Securities" has the meaning set forth in Section 2.1 hereof.


"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect.


"Hereto," "hereunder," "herein," "hereof" and the like mean and refer to this Agreement as a whole and not merely to the specific article, section, paragraph or clause in which the respective word appears.


"Holder" means Mycogen and, subject to Section 4.8 hereof, any subsequent holder of outstanding shares of the Common Stock purchased under the terms of this Agreement.


"Issuable Maximum" has the meaning set forth in Section 6.1 hereof.


"Monsanto Agreement" means that certain Investment Agreement made as of January 24, 1996, by and between Ecogen and Monsanto Company, a Delaware corporation.


"Other Selling Stockholders" has the meaning set forth in Section 4.1(c) hereof.


"Person" means a corporation, association, partnership, limited liability company, individual, trust, unincorporated organization, a government agency or political subdivision thereof, or any other entity.


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"Preliminary Prospectus" means a preliminary prospectus as contemplated by Rule 430 or 430A under the Securities Act included at any time in a Registration Statement.


"Pre-Offering Percentage" has the meaning set forth in Section 2.1 hereof.


"Prospectus" means (i) a prospectus as first filed with the Commission pursuant to Rule 424(b) under the Securities Act or, (ii) if no such filing is required, the form of final prospectus included in a Registration Statement at the effective date thereof or (iii) if a Term Sheet or Abbreviated Term Sheet (as such terms are defined in Rule 434(b) and 434(c), respectively, under the Securities Act) is filed with the Commission pursuant to Rule 424(b)(7) under the Securities Act, the Term Sheet or Abbreviated Term Sheet and the last Preliminary Prospectus filed with the Commission prior to the time the Registration Statement became effective, taken together (including, in each case, the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act), together with any supplement to any of the foregoing.


"Register", "Registered" and "Registration", whether or not capitalized, mean and refer to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such Registration Statement.


"Registration Statement" means any registration statement of Ecogen filed under the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus relating thereto and all amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated or deemed to be incorporated by reference in such registration statement.


"Registrable Securities" means the Shares and all such other securities of Ecogen issued to Mycogen pursuant to stock splits, stock dividends, and similar distributions in respect of the Shares, whether held by Mycogen or by any subsequent Holder of such securities.


"Registration Expenses" means all expenses incurred by Ecogen in compliance with Article IV, including, without limitation, all registration fees, qualification fees, filing fees, advertising and road show expenses (excluding advertising and road show expenses incurred by a Holder), printing expenses, escrow fees, fees and disbursements of counsel for Ecogen, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of Ecogen, which shall be paid in any event by Ecogen).


"Requesting Holder" means a Holder requesting any registration pursuant to Section 4.1 hereof.


"Restricted Securities" means the securities of Ecogen acquired by a Holder from Ecogen or an Affiliate of Ecogen otherwise than pursuant to a public offering.


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"Securities Act" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect.


"Selling Expenses" means all underwriting discounts and selling commissions applicable to the sale of Registrable Securities.


"Shareholder Approval" has the meaning set forth in Article VI hereof.


"Shares" means the shares of Common Stock of Ecogen issued to Mycogen pursuant to the Asset Purchase Agreement or this Agreement.


"13D Group" means any group of persons formed for the purpose of acquiring, holding, voting or disposing of securities that would be required under Section 13(d) of the Exchange Act and the related rules and regulations (as now in effect, and based on present legal interpretations) to file a statement on Schedule 13D or 13G with the Commission as a "person" within the meaning of Section 13(d)(3) of the Exchange Act if the group beneficially owned Ecogen Securities representing more than five percent (5%) of the total combined voting power of all Ecogen Securities then issued and outstanding.


ARTICLE II


RIGHT OF FIRST REFUSAL


2.1 Right of First Refusal. If on or prior to the third (3rd) anniversary of the Closing, Ecogen agrees to sell shares of its Common Stock or other voting securities ("Ecogen Securities") in a private or public offering other than (i) Ecogen Securities issued to Ecogen employees or directors pursuant to Ecogen's stock option plans or issued in connection with any stock options, warrants or other rights in existence as of the date of this Agreement, (ii) upon the conversion or exchange of convertible or exchangeable securities outstanding as of the date of this Agreement, (iii) an equity investment in Ecogen by the other party to, or partner in, any license agreement, research and development agreement, distribution agreement, joint-venture or other similar corporate alliance, provided that such equity investment is made as a condition to Ecogen's good faith agreement to enter into such license agreement, research and development agreement, distribution agreement, joint-venture or other similar corporate alliance, (iv) in connection with a merger or acquisition, or (v) to any underwriter, placement agent or financial advisor in connection with any financing or other transaction by Ecogen, and provided Mycogen still owns all of the Shares at the time of such private or public offering, Mycogen shall have the right, but not the obligation, to acquire upon the same terms and conditions applicable to such private or public offering all or any portion of such Ecogen Securities sufficient for Mycogen to maintain after the offering the same percentage of ownership of issued and outstanding Ecogen Securities that Mycogen possessed immediately prior to the offering (the "Pre-Offering Percentage").


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2.2 Private Offering. With respect to a private offering, Ecogen shall no later than five (5) Business Days after the execution of any agreement entered into in connection with such private offering notify Mycogen in writing of the proposed offering (a "Notice") which Notice shall include the description of the securities proposed to be issued by Ecogen and specify the number, price and payment and other terms, together with any letter of intent and the final contract, if available. Mycogen shall have ten (10) Business Days from the date of receipt of Ecogen's notice in which to advise Ecogen whether Mycogen elects to exercise its rights under Section 2.1. If Mycogen does not respond, or if Mycogen indicates that it will not exercise its rights, Mycogen shall be considered irrevocably to have waived its rights under Section 2.1 with respect to the private offering. If Mycogen timely advises Ecogen that Mycogen will exercise its rights under Section 2.1, Mycogen shall have the right to acquire all or any portion of the necessary amount of the Ecogen Securities to maintain Mycogen's Pre-Offering Percentage at the price and upon the terms (other than any registration rights which are on terms different than those granted hereunder) specified in the Notice. Closing shall be in accordance with the terms of the private offering agreement; provided, however, that if such agreement provides for the payment of consideration other than cash, Mycogen shall have the right to purchase its Pre-Offering Percentage of shares for the cash equivalent amount of such other consideration. Mycogen shall make such investment representations to Ecogen and shall provide Ecogen with such other documentation at closing as is reasonably required by Ecogen to comply with applicable securities laws. The cash equivalent amount referred to above shall be determined by an independent third party reasonably agreed to by Mycogen and Ecogen (the costs and expenses of which shall be paid by Ecogen).


2.3 Public Offering. With respect to a public offering, Ecogen shall notify Mycogen no later than five (5) Business Days after Ecogen has entered into a letter of intent with its underwriters, and shall provide Mycogen with a copy of any letter of intent with its underwriters. Mycogen shall have ten (10) Business Days from the date of receipt of Ecogen's notice in which to advise Ecogen whether Mycogen elects to exercise its rights under Section 2.1. If Mycogen does not respond or if Mycogen indicates that it will not exercise its rights, Mycogen shall be considered irrevocably to have waived its rights under Section 2.1 with respect to the public offering. If Mycogen timely advises Ecogen that Mycogen desires to retain its rights under Section 2.1, then when Ecogen files a registration statement containing a preliminary prospectus with the Commission, Ecogen shall provide Mycogen with copies of the preliminary prospectus and all subsequent amendments. Mycogen shall have ten (10) Business Days from its receipt of the preliminary prospectus in which to exercise its rights under Section 2.1 by making an offer to acquire all or any portion of the necessary amount of Ecogen Securities to maintain Mycogen's Pre-Offering Percentage based on the price and the other terms contained in the final prospectus, except that the price to be paid by Mycogen shall be net of any underwriting discount and selling commissions. No such offer to buy shall be accepted prior to the time that the registration statement becomes effective. The registration statement shall indicate that Mycogen has anti-dilution rights to purchase Ecogen Securities on the terms offered to the public.


2.4 Limitations. Notwithstanding the preceding provisions of this Article II, Ecogen shall not be required to issue any fractional shares as a result of Mycogen's exercise of its rights under Section 2.1. Ecogen shall not be required to transfer any Ecogen Securities to Mycogen


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ARTICLE III


LIMITATION ON TRANSFER


3.1 Limitation on Transfer. Prior to the third (3rd) anniversary of the Closing, Mycogen shall not directly or indirectly offer for sale, or transfer, any of the Shares. Notwithstanding the foregoing, Mycogen may sell Shares without limitation in the following situations:


(a) sales or transfers to Affiliates of Mycogen;


(b) private placements of Shares with Accredited Investors;


(c) if any of the following events occurs:


(i) a tender or exchange offer is made by any Person or 13D
Group (other than an Affiliate of or Person acting in concert
with Mycogen) to acquire Ecogen Securities and/or other
securities of Ecogen that, if added to the Ecogen Securities
and other securities of Ecogen already owned by that Person or
13D Group, would represent more than forty percent (40%) of
the total combined voting power or profit and loss
participation of all Ecogen Securities and other securities of
Ecogen issued and outstanding;


(ii) there is public disclosure that Ecogen Securities and/or
other securities of Ecogen representing more than forty
percent (40%) of the total combined voting power or profit and
loss participation of all Ecogen Securities and other
securities of Ecogen issued and outstanding have been acquired
or are proposed to be acquired by any Person or 13D Group
(other than an Affiliate of or Person acting in concert with
Mycogen);


(iii) any Person or 13D Group (other than an Affiliate of or
Person acting in concert with Mycogen) shall beneficially own
Ecogen Securities representing more than forty percent (40%)
of the total combined voting power of all issued and
outstanding Ecogen Securities;


(iv) at any election or series of elections, persons not
proposed for nomination or nominated by the management of
Ecogen are elected as directors of Ecogen, and together
constitute fifty percent (50%) or more of Ecogen's Board of
Directors; or


(v) any Person or 13D Group (other than an Affiliate of or
Person acting in concert with Mycogen) solicits or receives
valid proxies for the election of


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Ecogen's Board of Directors representing an aggregate of forty
percent (40%) or more of the total combined voting power of
all Ecogen Securities issued and outstanding.


or;


(d) with the prior approval of Ecogen, which will not unreasonably be withheld.


3.2 Further Condition. No sale or transfer of Shares pursuant to this Section 3.1, except for transfers pursuant to Section 3.1(c), shall be effective unless the transferee agrees to be bound by the limitations on transfer contained in this Section 3.1.


ARTICLE IV


REGISTRATION RIGHTS


4.1 Requested Registration.


(a) Request for Registration. Subject to Article III, Holders of Registrable Securities shall have the right to request (with such requests in writing and stating the number of shares of Registrable Securities to be disposed of and the intended method of disposition of shares by such Holders) up to three (3) registrations on Form S-3 at Ecogen's expense and an unlimited number of additional registrations on Form S-3 at the selling Holder's expense, provided that (i) a request for registration is made by Holders of at least fifty percent (50%) of the aggregate Registrable Securities held on such date; and (ii) the requests for additional registrations are made by Holders of at least twenty percent (20%) of the Registrable Securities, and (iii) such Registrable Securities have an aggregate offering price ...