<PAGE> 1
As Filed with the Securities and Exchange Commission on December 20, 1995
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT
OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ECOGEN INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
ECOGEN INC.
2005 CABOT BOULEVARD WEST
LANGHORNE, PENNSYLVANIA 19047-1810
(215) 757-1590
--------------------------
DECEMBER 15, 1995
Dear Stockholder:
We have recently completed fiscal year 1995, and I will be writing to
you shortly regarding the progress our Company has made in the last twelve
months. This letter, however, is for the specific purpose of addressing a very
important issue that is now before our Company.
On January 29, 1996 there will be a Special Meeting of the
Stockholders to consider and vote upon a proposal to amend the Company's
Restated Certificate of Incorporation (the "Amendment") which will effect a
one-for-five reverse stock split (the "Reverse Split") of the outstanding
shares of Common Stock of the Company. By this letter, I am personally
requesting each stockholder to vote.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE AMENDMENT TO
EFFECT THE REVERSE SPLIT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND STRONGLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
We believe the proposed Amendment is critical to the Company's
continued growth and development. The Reverse Split is expected to enhance the
marketability and acceptance of the Company's Common Stock in financial
markets. In addition, the Reverse Split will result in an increase in the
number of unissued shares of Common Stock available for issuance in the future
for strategic alliances, business combinations, equity offerings and other
business opportunities. In particular, the proposed increase in unissued
Shares will enable the Company to obtain additional capital resources to pursue
the commercialization of the Company's technology, including the completion of
the sale of $10 million of the Company's Common Stock to Monsanto Company as
part of the recently announced strategic alliance to jointly develop the
Company's proprietary Bt technology. Presently, the Company does not have
sufficient shares of Common Stock available to receive all of the funding being
offered to the Company by Monsanto and your approval of the Reverse Split is
important because it will permit the Company to sell the entire $10 million of
Common Stock to Monsanto at a price of no less than $2.12 per share on a
pre-Reverse Split basis (or $10.60 per share on a post-Reverse Split basis).
The approval of a majority of the outstanding shares of Common Stock
and Series B Convertible Preferred Stock, voting together as a single class, is
necessary to approve the Amendment. I ask that you please complete, date, sign
and return the accompanying proxy card in the enclosed prepaid return envelope
whether or not you plan to attend the Special Meeting. If you attend the
Special Meeting, you may vote in person whether or not you have previously
returned your proxy.
Information concerning the proposed Amendment is contained in the
attached Notice of Special Meeting of Stockholders and Proxy Statement, and I
encourage you to give these materials your careful attention and consideration.
Thank you for your continued support of our Company. With the
approval of the Amendment, I believe Ecogen will be well positioned for a
prosperous future.
Sincerely,
James P. Reilly, Jr.
Chairman and
Chief Executive Officer
<PAGE> 3
ECOGEN INC.
2005 CABOT BOULEVARD WEST
LANGHORNE, PENNSYLVANIA 19047
(215) 757-1590
-----------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1996
-----------------------
TO THE STOCKHOLDERS OF ECOGEN INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Ecogen Inc., a Delaware corporation (the "Company"), will be held at The
Sheraton, Bucks County Hotel, 400 Oxford Valley Road, Langhorne, Pennsylvania,
on Monday, January 29, 1996, at 3:00 p.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to approve an amendment to
the Restated Certificate of Incorporation of the Company (the "Amendment")
which will effect a reverse stock split (the "Reverse Split") of the Company's
outstanding shares of Common Stock on the basis of one new share of Common
Stock for each five outstanding shares of Common Stock.
2. To transact such other business as may properly come before the
Special Meeting.
The Board of Directors has fixed the close of business on December
11, 1995 as the record date, and only holders of record of Common Stock and
Series B Convertible Preferred Stock of the Company at the close of business on
that date are entitled to notice of and to vote (together as a single class) at
the Special Meeting, and any adjournment or postponement thereof.
A form of proxy and a proxy statement containing more detailed
information with respect to the matters to be considered at the Special Meeting
accompany this notice.
We invite all stockholders to attend the Special Meeting in person.
HOWEVER, TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED AND VOTED IN ACCORDANCE
WITH YOUR WISHES AT THE SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN
ENVELOPE. If you attend the meeting, you may vote in person even though you
have sent in your proxy.
By Order of the Board of Directors,
Richard A. Deak
Langhorne, Pennsylvania Secretary
December 15, 1995
<PAGE> 4
ECOGEN INC.
2005 CABOT BOULEVARD WEST
LANGHORNE, PENNSYLVANIA 19047
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1996
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Ecogen Inc. (the "Company") for use at
the Special Meeting of Stockholders to be held on January 29, 1996 and any
adjournment or postponement thereof (the "Special Meeting"). This Proxy
Statement and the accompanying proxy are first being mailed on or after
December 15, 1995 to holders of record at the close of business on December 11,
1995 (the "Record Date") of the Company's outstanding shares of Common Stock,
par value $.01 per share (the "Common Stock") and Series B Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock").
VOTING
Only holders of record of the Common Stock and Series B Preferred
Stock as of the close of business on the Record Date will be entitled to notice
of and to vote (together as a single class) at the Special Meeting or any
adjournment or postponement thereof.
Holders of Common Stock and Series B Preferred Stock are entitled to
one vote per share on any matter which may properly come before the Special
Meeting. The presence in person or by properly executed proxy of the holders
of a majority of the outstanding combined number of shares of Common Stock
Series B Preferred Stock is necessary to constitute a quorum and to permit
action to be taken by the stockholders at the Special Meeting.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock and Series B Preferred Stock voting together
as a single class is required to approve the Amendment to effect the Reverse
Split (defined below). Under the Company's bylaws and Delaware law, shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the Special
Meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
Abstentions will have the same effect as votes against the proposed Amendment
to effect the Reverse Split. Broker non-votes, however, will be treated as
unvoted for purposes of determining whether a proposal is approved and will not
be counted as votes either for or against such proposal.
All shares of Common Stock and Series B Preferred Stock that are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting and not revoked will be voted at the Special
Meeting in accordance with the instructions indicated in such proxies. If no
instructions are indicated, such proxies will be voted FOR the Amendment to
effect the Reverse Split.
<PAGE> 5
ADJOURNMENT
In the event that a quorum is not present at the time the Special
Meeting is convened, or if for any other reason the Company believes that
additional time should be allowed for the solicitation of proxies, the Company
may adjourn the Special Meeting with or without a vote of the stockholders. If
the Company proposes to adjourn the Special Meeting by a vote of the
stockholders, the persons named in the enclosed form of proxy will vote all
shares of Common Stock and Series B Preferred Stock for which they have voting
authority in favor of such adjournment.
REVOCABILITY OF PROXY
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (a)
giving written notice of revocation to the Secretary of the Company at or
before the Special Meeting, (b) duly executing a subsequent proxy relating to
the same shares of Stock and delivering it to the Secretary of the Company at
or before the Special Meeting, or (c) attending the Special Meeting and voting
in person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy).
SOLICITATION
The Company will bear the cost of the proxy solicitation. In
addition to solicitation by mail, the Company will request banks, brokers and
other custodian nominees and fiduciaries to supply proxy material to the
beneficial owners of Common Stock and Series B Preferred Stock of whom they
have knowledge, and may reimburse them for their expenses in so doing. Certain
directors, officers and other employees of the Company, not specially employed
for such purpose, may solicit proxies, without additional compensation
therefor, by personal interview, mail, telephone and other means. The Company
may also engage and pay the costs of an independent proxy solicitation firm to
solicit proxies for the Special Meeting.
APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT A ONE-FOR-FIVE REVERSE STOCK
SPLIT OF THE COMPANY'S OUTSTANDING COMMON STOCK
GENERAL SUMMARY
The Board of Directors of the Company has unanimously approved,
subject to stockholder approval, a proposed amendment to the Company's Restated
Certificate of Incorporation (the "Amendment") which will effect a one-for-five
reverse stock split (the "Reverse Split") of the Company's outstanding shares
of Common Stock. On December 8, 1995, the Company had 42,000,000 shares of
authorized Common Stock of which approximately 29,996,000 shares were issued
and outstanding and approximately 10,251,000 shares were reserved for issuance
pursuant to outstanding options, warrants, convertible preferred stock and
other securities. Thus, at December 8, 1995 the Company had only approximately
1,753,000 authorized shares of Common Stock unissued and not reserved for
issuance. Had the Amendment to effect the Reverse Split been approved and
effective as of December 8, 1995, the Company would have had 42,000,000
authorized shares of Common Stock, approximately 8,049,000 shares of Common
Stock issued and outstanding or reserved for issuance and approximately
33,951,000 authorized shares of Common Stock unissued and not reserved for any
purpose.
- 2 -
<PAGE> 6
The authorized number of shares of the Company's Preferred Stock,
$.01 par value per share (the "Preferred Stock") will remain unchanged at
7,500,000 shares. The number of issued and outstanding shares of Preferred
Stock, which as of December 8, 1995 consisted of 23,334 shares of Series B
Convertible Preferred Stock and 122,000 shares of Series C Convertible
Preferred Stock (collectively, the "Convertible Preferred Stock"), will also be
unchanged.
The complete text of the proposed Amendment is set forth in Exhibit A
to this Proxy Statement. The final text of the Amendment is subject to change
in order to meet the requirements as to form that may be requested or required
by the Secretary of State's Office of the State of Delaware.
If the requisite approval by the Company's stockholders is obtained,
the Amendment to effect the Reverse Split will be effective upon the close of
business on the date of filing of the Amendment with the Delaware Secretary of
State (currently scheduled to occur on January 29, 1996). Each certificate
representing shares of Common Stock outstanding immediately prior to the
Reverse Split (the "Old Shares") will be deemed automatically, without any
action-on the part of the stockholders, to represent one-fifth the number of
shares of Common Stock after the Reverse Split (the "New Shares"). A
stockholder's proportionate ownership interest in the Company will remain
unchanged by the Reverse Split. The New Shares issued pursuant to the Reverse
Split will be fully paid and nonassessable. The voting and other rights of the
Common Stock will not be altered by the Amendment or the Reverse Split.
No fractional New Shares will be issued as a result of the Reverse
Split. In lieu thereof, each stockholder whose Old Shares are not evenly
divisible by five will receive one additional New Share for the fractional New
Share that such stockholder would otherwise be entitled to receive as a result
of the Reverse Split. When the Reverse Split becomes effective, stockholders
will be asked to surrender certificates representing Old Shares in accordance
with the procedures set forth in a letter of transmittal to be sent by the
Company. Upon such surrender, a certificate representing the New Shares will
be issued and forwarded to the stockholders; however, each certificate
representing Old Shares will continue to be valid and represent New Shares
equal to one-fifth the number of Old Shares (plus one additional New Share
where such Old Shares are not evenly divisible by five). Persons who hold
their shares in brokerage accounts or "street name" will not be required to
take any further actions to effect the exchange of their certificates.
The "Designated Price" and the "Original Issuance Market Price" in
effect for each series of Convertible Preferred Stock immediately prior to the
Reverse Split shall be proportionately increased upon effectiveness of the
Reverse Split and the number of shares of Common Stock issuable upon conversion
thereof shall be proportionately reduced on a five-for-one basis. Holders of
Preferred Stock are not required to take any action with respect to their
certificates.
PURPOSE OF THE REVERSE SPLIT
SUMMARY
Upon the effectiveness of the Amendment, the number of authorized
shares of Common Stock unissued and not reserved for issuance will increase
from approximately 1,753,000 to approximately 33,951,000 shares. The Board of
Directors believes that an increase in the authorized number of shares of
Common Stock available for issuance is essential to the Company's continued
growth and development. The Reverse Split is expected to enhance the
marketability and acceptance of the Company's Common Stock in financial
markets. In addition, the Reverse Split will result in an increase in the
number of unissued shares of Common Stock available for issuance in the future
for business combinations, strategic alliances, equity offerings and other
business opportunities.
- 3 -
<PAGE> 7
In particular, the proposed increase in unissued Shares will enable
the Company to obtain additional capital resources to pursue the
commercialization of the Company's technology, including the completion of the
sale of $10 million of the Company's Common Stock to Monsanto Company as part
of the recently announced strategic alliance to jointly develop the Company's
proprietary Bt technology described below. Presently, the Company does not
have sufficient shares of Common Stock available to receive all of the funding
being offered to the Company by Monsanto and your approval of the Reverse Split
is important because it will permit the Company to sell the entire $10 million
of Common Stock to Monsanto at a price no less than $2.12 per share on a
pre-Reverse Split basis (or $10.60 per share on a post-Reverse Split basis).
MONSANTO TRANSACTION
In November 1995, the Company entered into a letter of intent (the
"Letter of Intent") with Monsanto Company ("Monsanto") for a proposed equity
investment, purchase of technology and joint research and development
arrangements relating to the Company's proprietary Bacillus thuringensis ("Bt")
technology for in plant applications (collectively, the "Monsanto
Transaction"). The proposed transactions contemplated by the Monsanto
Transaction include (a) the acquisition by Monsanto of certain rights in the
Company's Bt technology, (b) the sale by the Company to Monsanto of Common
Stock for an aggregate purchase price of $10,000,000 in cash (the "Common Stock
Sale"), and (c) a research and development collaboration arrangement with
Monsanto for the further development of the Company's Bt gene library. The
Monsanto Transaction is subject to the negotiation and completion of definitive
agreements for each of its components and is expected to be completed in early
1996. Concurrently with the execution and delivery of the Letter of Intent,
Monsanto made a one-year loan of $1,000,000 to the Company which loan may be
increased to $2,000,000 upon the occurrence of certain events. The amount of
the outstanding loan will be credited against the initial payment to be made by
Monsanto to the Company under the proposed research and development
arrangements when completed. As part of the initial $1,000,000 loan, the
Company issued to Monsanto a warrant to purchase 2,000,000 shares of Common
Stock (the "Monsanto Warrant"). The Monsanto Warrant may be exercised upon the
occurrence of certain events within one year of the Letter of Intent at an
exercise price of $1.175 per share, which is equal to the average of the
closing sale prices of the Company's Common Stock for the ten trading days
prior to the signing of the Letter of Intent. The Monsanto Warrant expires
upon the completion of the Monsanto Transaction.
Under the terms of the Common Stock Sale, Monsanto will purchase $10
million of the Company's Common Stock. The price per share to be paid by
Monsanto in cash will be the greater of (a) $2.12 per share or (b) 85% of the
average closing price of the Common Stock for the 60 days prior to closing.
Based upon the $2.12 price per share (which is the lowest price to be paid),
approximately 4,700,000 shares of Common Stock would be needed for issuance to
Monsanto for the Company to obtain the entire $10 million being offered. The
Company had only approximately 1,753,000 shares available for issuance at
December 8, 1995. The definitive agreement for the Common Stock Sale, which is
currently being negotiated, is expected to contain provisions for (a) continued
ownership by Monsanto of its ownership position during the term of the research
and development agreement to be entered into as part of the Monsanto
Transaction, (b) during the first three years following the closing, an
agreement by Monsanto not to acquire more than 25% of the Company's voting
stock without the Company's consent and (c) the grant of registration rights
to Monsanto for its shares.
After giving effect to the Reverse Split, the Company will issue and
sell up to approximately 940,000 shares of Common Stock to Monsanto in the
proposed transaction (based upon a $10.60 price per share on a post-Reverse
Split basis). Upon consummation of the Common Stock Sale, Monsanto will own
approximately 13.6% of the total number of shares of Common Stock outstanding,
and the aggregate voting power of the remaining stockholders will be reduced
proportionately. Under the proposed terms of the definitive agreement for the
Common Stock Sale, Monsanto will not be permitted to acquire more than 25% of
the Company's voting stock without the Company's consent for a period of three
years following the closing. The purchase by Monsanto of additional shares of
Common Stock up to the 25% maximum amount would cause a further increase in
Monsanto's voting power, resulting in a proportionate reduction in the voting
power of the other stcokholders of the Company. However, the proposed sale of
shares to Monsanto will result in an increase in the tangible net book value
per share of the Company and, accordingly, the sale will not have a dilutive
effect on the economic position of exisiting stockholders.
The proceeds from the sale of Common Stock to Monsanto will provide
the Company with much needed working capital to pursue the commercialization of
its technology.
BACKGROUND AND REASONS
The Board of Directors believes that the Amendment to effect the
Reverse Split is desirable for several additional reasons. During the fall of
1994, the Company's principal shareholder was forced to
- 4 -
<PAGE> 8
release and sell into the public markets over nine million shares of Common
Stock. The release of these shares overwhelmed the financial market for the
Company's shares, causing a precipitous decline in market value. In January
1995, the Company issued an additional 4.1 million shares of Common Stock in
connection with the successful acquisition of 70% of Ecogen Technologies I
Incorporated, thereby solidifying the Company's control over its core
technologies. From January 1, 1995 through November 30, 1995 the closing sales
price of the Common Stock has ranged from $0.75 to $3.75 per share. The
Reverse Split will have the effect of reducing the number of outstanding shares
of Common Stock without effecting any material change in the proportionate
ownership interest of Common Stockholders in the Company. The Board believes
that the Reverse Split may increase the trading price for shares of Common
Stock on the Nasdaq National Market and thereby enhance the acceptability of
the Common Stock by institutional investors (many of whom will not invest in
securities which trade at a price of under $5 per share), and the financial
community and the investing public at large.
A variety of brokerage house policies and practices tend to
discourage individual brokers within those firms from dealing with lower priced
stocks. Some of those policies and practices pertain to the payment of
brokers' commissions and to time-consuming procedures that make the trading of
lower priced stocks economically unattractive to brokers. In addition, the
structure of trading commissions also tends to have an adverse impact upon
investors in lower priced securities because the brokerage commission on a sale
of lower priced stock generally represents a higher percentage of the sales
price than the commission on a relatively higher priced issue. The proposed
Reverse Split should result in a price level for the Common Stock that will
reduce, to some extent, the effect of these policies and practices of brokerage
firms and diminish the adverse impact that minimum trading commissions may have
on the market for the Company's Common Stock. The potential increase in price
may also encourage new interest and additional trading in the Common Stock.
However, there can be no assurance that the market price for the
Common Stock will increase proportionately or at all as a result of the Reverse
Split or that any of the other potentially favorable consequences of the
Reverse Split will occur. Stockholders should note that the Board of Directors
cannot predict what effect the Reverse Split will have on the market price of
the Common Stock. The Company is aware that not all companies which have
effected reverse stock splits have maintained their market capitalization after
their reverse stock split.
EFFECT OF THE REVERSE SPLIT
The Reverse Split will be effected by means of filing the Amendment
with the Delaware Secretary of State. Assuming approval of the Reverse Split
by the requisite vote of the stockholders at the Special Meeting, the Amendment
will thereafter be filed with the Delaware Secretary of State as promptly as
practicable and the Reverse Split will become effective as of 5:00 p.m Eastern
Standard Time on the date of that filing (the "Effective Date"). After the
Reverse Split, without any further action on the part of the Company or the
stockholders, certificates representing Old Shares will thereafter represent
New Shares equal to one-fifth of the number of Old Shares.
The Company currently has authorized capital stock of 49,500,000
shares. The Reverse Split will not affect the number of authorized shares of
Common Stock or Preferred Stock of the Company. The Reverse Split also will
not effect the number of shares of Convertible Preferred Stock currently issued
and outstanding.
As of December 8, 1995, the number of issued and outstanding Old
Shares was approximately 29,996,000. The following table illustrates the
principal effects of the proposed Reverse Split and decrease in outstanding
Common Stock assuming that no additional shares of Common Stock are issued
prior to the Effective Date as a result of the exercise of any options or
warrants or the conversion of any outstanding shares of Convertible Preferred
Stock and without giving effect to fractional shares:
- 5 -
<PAGE> 9
<TABLE>
<CAPTION>
Authorized Authorized Outstanding Outstanding
Prior to After Prior to After
Reverse Reverse Reverse Reverse
Split Split Split Split
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
Common Stock 42,000,000 42,000,000 29,996,000 5,999,000
Series B Preferred Stock 35,000 35,000 23,334 23,334
Series C Preferred Stock 160,000 160,000 122,000 122,000
Preferred Stock 7,500,000 7,500,000 145,334 145,334
</TABLE>
As of December 8, 1995, the Company had approximately 3,510,000
shares of Common Stock reserved for issuance pursuant to the Ecogen Inc. Stock
Option Plan (the "Plan"), warrant agreements to purchase Common Stock (the
"Warrants") between the Company and various third parties (the "Warrant
Agreements"), the terms of the Convertible Preferred Stock and certain other
outstanding options, warrants or rights for the purchase or issuance of shares
of Common Stock. Under the terms of the Plan, the Warrant Agreements, the
Convertible Preferred Stock and the other securities, the number of shares
reserved for issuance will be reduced proportionately by a factor of five.
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a result, the
Company is subject to the periodic reporting and other requirement of the
Exchange Act. The Common Stock is admitted for trading on the Nasdaq National
Market. The number of holders of the Common Stock on the Record Date was
1,295. The Company does not anticipate that the Reverse Split will result in a
significant reduction in the number of such holders. Accordingly, the Reverse
Split is not expected to affect the registration of the Common Stock under the
Exchange Act or its status as a Nasdaq National Market security.
FEDERAL INCOME TAX CONSEQUENCE OF THE REVERSE SPLIT
The Company has not sought and will not seek an opinion of counsel or
a ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Split. However, the Company believes that because
the Reverse Split is not part of a plan to periodically increase a
stockholder's proportionate interest in the assets or earnings and profits of
the Company, the Reverse Split will have the following effects. The receipt of
Common Stock in the Reverse Split should not result in any taxable gain or loss
to stockholders for federal income tax purposes. If the Reverse Split is
approved, the tax basis of Common Stock received as a result of the Reverse
Split will be equal, in the aggregate, to the basis of the shares exchanged for
the Common Stock. For tax purposes, the holding period of the shares
immediately prior to the Effective Date will be included in the holding period
of the Common Stock received as a result of the Reverse Split.
CERTIFICATES AND FRACTIONAL SHARES
As soon as practicable after the Effective Date, the Company will
send a letter of transmittal to each holder of record of Old Shares outstanding
on the Effective Date. The letter of transmittal will contain instructions for
the surrender of certificate(s) representing such Old Shares to American Stock
Transfer & Trust Company, the Company's exchange agent (the "Exchange Agent").
Upon proper completion and execution of the letter of transmittal and return
thereof to the Exchange Agent, together with the certificate(s) representing
Old Shares, a stockholder will be entitled to receive a certificate
representing the number of New Shares into which his or her Old Shares have
been reclassified and changed as a result of the Reverse Split.
- 6 -
<PAGE> 10
Stockholders should not submit any Common Stock certificates until
requested to do so. No new certificate will be issued to a stockholder until
he or she has surrendered his or her outstanding certificate(s), together with
the properly completed and executed letter of transmittal, to the Exchange
Agent.
No fractional New Shares will be issued as a result of the Reverse
Split. In lieu thereof, each stockholder whose Old Shares are not evenly
divisible by five will receive one additional New Share for the fractional New
Share that such stockholder would otherwise be entitled to receive as a result
of the Reverse Split. After the Reverse Split becomes effective, stockholders
will be asked to surrender certificates representing Old Shares in accordance
with the procedures set forth in a letter of transmittal to be sent by the
Company. Upon such surrender, a certificate representing the New Shares will
be issued and forwarded to the stockholders; however, each certificate
representing Old Shares will continue to be valid and represent New Shares
equal to one-fifth the number of Old Shares (plus one additional New Share
where such Old Shares are not evenly divisible by five).
STATUTORY ACCOUNTING CONSEQUENCES
The par value of the Common Stock will remain at $.01 per share
following the Reverse Split, and the number of shares of Common Stock
outstanding will be reduced. As a consequence, the aggregate par value of the
outstanding Common Stock will be reduced, while the aggregate capital in excess
of par value attributable to the outstanding Common Stock will be
correspondingly increased for statutory accounting purposes under the Delaware
General Corporation Law. Although it is currently expected that this increase
in capital in excess of par value will continue to be treated as capital for
statutory accounting purposes, the Board of Directors of the Company has the
authority to transfer some or all of such increased capital in excess of par
value from its statutory capital account to surplus. The additional statutory
surplus created thereby would then be available for general corporate purposes
without further action by the stockholders. The Company currently has no plans
to use any surplus so created.
MISCELLANEOUS
The Board of Directors may abandon the proposed Amendment to effect
the Reverse Split at any time before or after the Special Meeting and prior to
the Effective Date if for any reason the Board of Directors deems it advisable
to abandon the proposal. The Board of Directors may consider abandoning the
proposed Amendment if it determines, in its sole discretion, that the Amendment
would adversely affect the ability of the Company to raise capital or the
liquidity of the Common Stock, among other things. In addition, the Board of
Directors may make any and all changes to the Amendment that it deems necessary
or appropriate to file the Amendment with the Delaware Secretary of State to
give effect to the Amendment.
RECOMMENDATION AND VOTE
The affirmative vote of a majority of the shares of Common Stock and
Series B Preferred Stock outstanding on the Record Date, voting together as a
single class, is required to approve the Amendment. The Board of Directors is
of the opinion that the Amendment is advisable and in the best interests of the
Company and recommends a vote FOR the approval of the Amendment. All proxies
will be voted to approve the Amendment unless a contrary vote is indicated on
the enclosed proxy card.
OTHER BUSINESS
The Board of Directors does not intend to present to the meeting any
business other than the matters described in this proxy statement. If any
other matter is presented to the meeting which under applicable proxy
regulations need not be included in this proxy statement or which the Board of
Directors did not know would be presented within a reasonable time before this
solicitation, the persons named in the accompanying
- 7 -
<PAGE> 11
proxy will have discretionary authority to vote proxies with respect to such
matter in accordance with their best judgment.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of December 8, 1995,
with respect to the beneficial ownership of the Company's Common Stock and
Convertible Preferred Stock by all persons known by the Company to be the
beneficial owners of more than 5% of its outstanding capital stock by each
director, by each executive officer, and by all executive officers and
directors as a group. Except as indicated in the footnotes to the table, the
persons named in the table have sole voting and investment power with respect
to all shares of capital stock beneficially owned by them.
<TABLE>
<CAPTION>
Number of Percentage
Shares of of
Common Common
Name and Address (1) Stock (10) Stock
- ---------------- --------- -----------
<S> <C> <C>
John E. Davies (2) 542,198 1.8%
James P. Reilly, Jr. (3) 328,333 1.1%
Richard A. Deak (4) 66,024 *
Mary E. Paetzold (5) 75,000 *
Leigh English (6) 27,900
Patrick Owen Burns (7) 14,916 *
Jack D. Early (8) 9,954 *
Lowell N. Lewis (9) 20,616 *
All executive officers 1,084,941 3.6%
and directors as a group
(eight persons) (2)(3)(4)
(5)(6)(8) and (9)
</TABLE>
- -----------------------------------------
* Indicates amount is less than 1%.
(1) The addresses of all officers, directors and nominees for director of the
Company listed above are in care of the Company. None of the officers or
directors own any shares of Convertible Preferred Stock.
(2) Includes 170,444 shares held by Mr. Davies' wife. Mr. Davies disclaims
beneficial ownership of these shares. Includes 302,708 shares which Mr.
Davies has the right to acquire upon exercise of stock options under the
Plan. Does not include 2,292 shares which Mr. Davies has the right to
acquire upon exercise of stock options under the Plan which are not yet
exercisable.
- 8 -
<PAGE> 12
(3) Includes 313,333 shares which Mr. Reilly has the right to acquire upon
exercise of stock options under the Plan. Does not include 51,667 shares
which Mr. Reilly has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(4) Includes 66,024 shares which Mr. Deak has the right to acquire upon
exercise of stock options under the Plan. Does not include 38,976 shares
which Mr. Deak has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(5) Includes 75,000 shares which Ms. Paetzold has the right to acquire upon
exercise of stock options under the Plan. Does not include 75,000 shares
which Ms. Paetzold has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(6) Includes 24,800 shares which Dr. English has the right to acquire upon the
exercise of stock options under the Plan. Does not include 6,500 shares
which Dr. English has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(7) Includes 14,916 shares which Mr. Burns has the right to acquire upon the
exercise of stock options under the Plan. Does not include 84 shares
which Mr. Burns has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(8) Includes 9,954 shares which Dr. Early has the right to acquire upon the
exercise of stock options under the Plan. Does not include 84 shares
which Dr. Early has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(9) Includes 14,916 shares which Dr. Lewis has the right to acquire upon
exercise of stock options under the Plan. Does not include 84 shares
which Dr. Lewis has the right to acquire upon exercise of stock options
under the Plan which are not presently exercisable.
(10) Includes and gives pro forma effect to stock options, warrants and shares
of Convertible Preferred Stock, which are presently exercisable or
convertible (as the case may be), held by executive officers and
directors.
- 9 -
<PAGE> 13
STOCKHOLDER PROPOSALS FOR THE COMPANY'S 1996 ANNUAL MEETING
The deadline has passed for the receipt of stockholder proposals for
the Company's 1996 Annual Meeting of Stockholders which is expected to be held
in March 1996. Stockholder proposals intended to be presented at the Company's
1997 Annual Meeting of Stockholders, which is expected to be held in March,
1997, are required to be received at the principal executive offices of the
Company no later than October 1, 1996 for inclusion in the Company's proxy
statement and form of proxy relating to such meeting.
By Order of the Board of Directors
Richard A. Deak
Secretary
Dated: December 15, 1995
- 10 -
<PAGE> 14
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ECOGEN INC.
The undersigned, a Stockholder of ECOGEN INC., a Delaware corporation, (the
"Company") hereby appoints James P. Reilly, Jr. and Mary E. Paetzold, and each
of them, the proxies of the undersigned, each with full power of substitution,
to attend, vote and act for the undersigned at the Special Meeting of
Stockholders of the Company, to be held on January 29, 1996, and any
postponements or adjournments thereof (the "Special Meeting"), and, in
connection herewith, to vote and represent all of the shares of the Company
which the undersigned would be entitled to vote, as follows:
1. To approve and adopt an amendment to the Company's Restated
Certificate of Incorporation to effect a reverse stock split of the
presently issued and outstanding shares of Common Stock, par value $.01
per share, of the Company (the "Common Stock") on the basis of one new
share of Common Stock for each five issued and outstanding shares of
Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
2. To transact such other business as may properly come before the
Special Meeting.
FOR AGAINST ABSTAIN
/ / / / / /
The undersigned hereby revokes all other proxies to vote at such Special
Meeting, and hereby ratifies and confirms all that said proxies, and each of
them, may lawfully do by virtue hereof.
This Proxy will be voted in accordance with the instructions set forth above.
This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE FOR the amendment to
the Company's Restated Certificate of Incorporation, and as said proxy shall
deem advisable on such other business as may come before the Special Meeting,
unless otherwise directed.
The undersigned acknowledges receipt of a copy of the notice of Special Meeting
and accompanying Proxy Statement dated December 15, 1995 relating to the
Special Meeting.
Date:
------------------------------------
------------------------------------
Signature(s) of Stockholder(s)
(See Instructions Below)
The signature(s) herein should correspond exactly with the name(s) of the
Stockholder(s) appearing on the Stock Certificate. If stock is jointly held,
all joint owners should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If signer
is a corporation name, please sign the full corporation name, and give title of
signing officer.
<PAGE> 1
EXHIBIT A
AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
"FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is forty-nine million five
hundred thousand (49,500,000) shares, of which forty-two million
(42,000,000) shall be shares of Common Stock, the par value of which is
one cent ($.01) per share, amounting in the aggregate to Four Hundred
Twenty Thousand Dollars ($420,000) and seven million five hundred thousand
(7,500,000) shall be shares of Preferred Stock, the par value of which is
one cent ($.01) per share, amounting in the aggregate to Seventy Five
Thousand Dollars ($75,000). At the time this amendment becomes effective,
and without any further action on the part of the Corporation or its
stockholders, each five shares of Common Stock, par value $.01 per share,
then issued and outstanding shall be changed and reclassified into one
fully paid and non-assessable share of Common Stock, par value $.01. The
Capital account of the Corporation shall not be increased or decreased by
such change and reclassification. To reflect the said change and
reclassification, each certificate representing shares of Common Stock,
par value $.01 per share, theretofore issued and outstanding shall
represent one-fifth the number of shares of Common Stock, with a par value
of $.01 per share, issued and outstanding after such change and
reclassification; and the holder of record of each such certificate shall
be entitled to receive a new certificate representing a number of shares
of Common Stock, par value $.01, of the kind authorized by this amendment,
equal to one-fifth the number of shares represented by said certificate
for theretofore issued and outstanding shares, so that upon this amendment
becoming effective each holder of record of five shares of the Common
Stock will have or be entitled to certificates representing in the
aggregate one share of Common Stock with par value $.01 of the kind
authorized by this amendment for each share of Common Stock with par value
of $.01 of which he was the holder prior to the effectiveness of this
amendment."
