<PAGE> 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, 1997
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:
<TABLE>
<CAPTION>
Class Outstanding at March 1, l997
----- ----------------------------
<S> <C>
Common Stock, $.01 par value 7,880,169
</TABLE>
<PAGE> 2
ECOGEN INC.
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Unaudited Consolidated Condensed Balance Sheets as of
January 31, l997 and October 3l, l996.............................. 1
Unaudited Consolidated Condensed Statements of Operations for the
three months ended January 31, 1997 and 1996....................... 2
Unaudited Consolidated Condensed Statement of Stockholders'
Equity for the three months ended January 31, l997................. 3
Unaudited Consolidated Condensed Statements of Cash Flows
for the three months ended January 31, l997 and l996............... 4
Notes to Unaudited Consolidated Condensed Financial
Statements......................................................... 6
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition.............................. 10
PART II - OTHER INFORMATION
Item 6(a) - Exhibits...................................................... 14
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
JANUARY 31, OCTOBER 31,
ASSETS 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .......................$ 2,842,191 $ 5,620,701
Temporary investments ........................... 2,500,023 3,990,410
Contract and trade receivables .................. 1,523,827 1,783,605
Inventory ....................................... 7,294,622 6,854,472
Prepaid expenses and other current assets ....... 475,167 493,519
- -------------------------------------------------------------------------------
Total current assets 14,635,830 18,742,707
- -------------------------------------------------------------------------------
Plant and equipment, net .......................... 4,699,467 4,569,327
Intangible and other assets, net .................. 482,290 549,210
- -------------------------------------------------------------------------------
$ 19,817,587 $ 23,861,244
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses .......... $ 3,787,892 $ 5,172,090
Deferred contract revenue ....................... 713,012 1,101,367
- -------------------------------------------------------------------------------
Total current liabilities 4,500,904 6,273,457
- -------------------------------------------------------------------------------
Long-term debt .................................... 1,203,109 1,297,469
Other long-term obligations ....................... 1,925,489 1,887,078
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 7,500,000 shares
Series B convertible preferred stock --
350,000 shares authorized; none and 5,834
shares issued and outstanding in 1997 and
1996, respectively (liquidation value
$20 per share) .............................. __ 58
Common stock, par value $.01 per share;
authorized 42,000,000 shares; issued 7,976,780
and 7,928,171 shares in 1997 and 1996,
respectively .................................. 79,768 79,282
Additional paid-in capital ...................... 117,545 074 117,548,065
Accumulated deficit ............................. (103,968,356) (101,741,946)
Other ........................................... (1,468,401) (1,482,219)
- -------------------------------------------------------------------------------
Total stockholders' equity 12,188,085 14,403,240
- -------------------------------------------------------------------------------
$ 19,817,587 $ 23,861,244
===============================================================================
</TABLE>
See Accompanying Notes To Unaudited Consolidated
Condensed Financial Statements.
1
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Product sales, net ............................. $ 912,102 $ 707,033
Contract revenue ................................. 710,301 73,867
License and other income ......................... -- 4,813,049
Interest income, net ............................. 61,450 31,887
- ------------------------------------------------------------------------------------------
Total revenues 1,683,853 5,625,836
- ------------------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold ............................ 685,510 456,759
Research and development:
Funded by third parties ........................ 240,807 73,867
Self funded .................................... 1,194,444 947,558
Selling, general and administrative .............. 1,787,689 1,705,159
- ------------------------------------------------------------------------------------------
Total costs and expenses 3,908,450 3,183,343
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Net income (loss) ($2,224,597) $2,442,493
==========================================================================================
Net income (loss) per common share available to
common stockholders ($0.28) $0.39
==========================================================================================
Weighted average number of common shares outstanding 7,844,000 6,052,000
==========================================================================================
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
2
<PAGE> 5
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
Three months ended January 31, 1997
W
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
CONVERTIBLE ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance November 1, 1996 $ 58 $79,282 $ 117,548,065 ($101,741,946)
Conversion of 5,834 shares of Series B convertible
preferred stock to 44,030 shares of common stock .......... (58) 440 (382) --
Dividends on preferred stock ................................... -- 46 12,088 (1,813)
Transfer of 1,415 shares of Treasury Stock for Employee Benefits -- -- (14,697) --
Net reduction in unrealized gain on securities ................. -- -- -- --
Net loss ....................................................... -- -- -- (2,224,597)
- -----------------------------------------------------------------------------------------------------------------------
Balance January 31, 1997 $ 0 $79,768 $ 117,545,074 ($103,968,356)
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
OTHER
STOCKHOLDERS'
EQUITY TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Balance November 1, 1996 ($1,482,219) $ 14,403,240
Conversion of 5,834 shares of Series B convertible
preferred stock to 44,030 shares of common stock .......... -- --
Dividends on preferred stock ................................... -- 10,321
Transfer of 1,415 shares of Treasury Stock for Employee Benefits 18,767 4,070
Net reduction in unrealized gain on securities ................. (4,949) (4,949)
Net loss ....................................................... -- (2,224,597)
- -----------------------------------------------------------------------------------------------
Balance January 31, 1997 ($1,468,401) $ 12,188,085
===============================================================================================
</TABLE>
See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements.
3
<PAGE> 6
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .......................................... ($2,224,597) $ 2,442,493
Adjustments to reconcile net income (loss) to net
cash provided by ( used in ) operating activities:
Depreciation and amortization expense .............. 93,664 108,479
Unrealized foreign currency transaction gain (loss) (1,627) (14,875)
Changes in assets and liabilities, net .................. (1,816,124) 1,466,678
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (3,948,684) 4,002,775
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of temporary investments ......... 1,490,342 --
Purchase of plant and equipment .......................... (223,804) (74,155)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 1,266,538 (74,155)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from issuance of Series C preferred stock . -- 2,793,943
Net proceeds from issuance of common stock ............. -- 9,517,276
Repayment of capital lease obligation ....................... (94,360) --
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (94,360) 12,311,219
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash (2,004) (125,810)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents ..... (2,778,510) 16,114,029
Cash and cash equivalents, beginning of period ........... 5,620,701 1,775,213
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 2,842,191 $ 17,889,242
=========================================================================================================
(Continued)
</TABLE>
4
<PAGE> 7
ECOGEN INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Changes in assets and liabilities:
Increase (decrease) in prepaid expenses and
other current assets ......................... $ 18,352 ($ 157,829)
Increase in inventory ........................... (374,131) (654,007)
Decrease in receivables .......................... 259,778 127,885
Decrease in other assets ........................ 66,920 205,653
Decrease in accounts payable
and accrued expenses ......................... (1,360,143) (1,053,758)
(Decrease) increase in other long-term liabilities (38,411) 27,879
(Decrease) increase in deferred contract revenue (388,489) 2,970,850
- -----------------------------------------------------------------------------------------------
Changes in assets and liabilities, net $(1,816,124) $ 1,466,673
===============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Noncash investing and financing activities:
- --------------------------------------------------------------------------------
During the first quarter of fiscal 1996, debt totalling approximately $201,000
was incurred by the Company for the acquisition of equipment.
During the first quarter of fiscal 1997 and 1996, the Company issued 1,700
and 20,552 shares of common stock, respectively, as dividends on the Company's
preferred stock.
During the first quarter of fiscal 1997 and 1996, the Company issued 44,030
and 119,668 shares of its common stock upon conversion of the Company's Series
B Convertible Preferred Stock and Series C Convertible Preferred Stock.
During the first quarter of fiscal 1997, the Company transferred 1,415 shares
of Treasury Stock to outstanding shares pursuant to certain employee benefit
plans.
================================================================================
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
5
<PAGE> 8
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1997 AND 1996
(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, l996 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, 1997
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 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
<PAGE> 9
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS, CONTINUED
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share adjusted for preferred stock dividends
of $1,815 and $52,975, in the three months ended January 31, 1997 and
1996, respectively, is computed using the weighted average number of
shares outstanding during the period. Common stock equivalents are not
included in the computation of weighted average shares outstanding using
the modified treasury stock method since the effect would be
anti-dilutive for both primary and fully diluted earnings per share.
(2) INVENTORY
At January 31, l997, inventory consisted of raw materials of $2,605,321,
work-in-progress of $1,629,448 and finished products of $3,059,853.
(3) MONSANTO TRANSACTION
In January 1996, the Company entered into an agreement 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"). The transaction
included (i) the acquisition by Monsanto of certain rights in the
Company's Bt technology for an aggregate purchase price of $5.0 million
in cash which was recorded as license and other income in the first
quarter of 1996; (ii) the sale by the Company to Monsanto of 943,397
shares of Common Stock at $10.60 per share for an aggregate purchase
price of $10.0 million in cash during the first quarter; and (iii) a
four-year research and development collaboration arrangement with
Monsanto for the further development of the Company's Bt gene library for
a minimum of $10.0 million, of which $.3 million and $3.0 million was
received in the first quarter of 1997 and 1996, respectively and recorded
as deferred contract revenue. Such contract revenue will be recorded as
earned under the terms of the agreement. Under this agreement, the
Company recognized as contract revenue approximately $.7 million and none
in the three months ended January 31, 1997 and 1996, respectively.
(Continued)
7
<PAGE> 10
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
(CONTINUED)
(3) MONSANTO TRANSACTION (CONTINUED)
As part of the agreement, Monsanto has agreed to maintain its ownership
position during the term of the research and development agreement and
Monsanto is prohibited, during the first three years following the
closing, from acquiring more than 25% of the Company's voting stock
without the Company's consent, except in certain circumstances primarily
related to a change of control of the Company. Monsanto was granted
certain demand and piggyback registration rights with respect to its
shares. In addition, Monsanto has a right of first refusal to purchase
securities of the Company so as to maintain its ownership percentage in
the Company except in certain circumstances defined in the applicable
agreement.
(4) LONG-TERM DEBT
The Company has obtained a $2.1 million line of credit to be used for the
leasing of production equipment. At January 31, 1997 and 1996, the
Company had borrowed approximately $1.9 million and $.8 million under the
line of credit. The Company is required to pay interest only until the
equipment is delivered at which time the notes are converted to a capital
lease obligation. The lease facility requires a 15% security deposit
which has been made.
In July 1996, the Company established a two year revolving working
capital line of credit with a commercial bank for up to $5,000,000.
Borrowings under this line are required to be fully collateralized by
certain of the Company's investments. As of January 31, 1997 there have
been no borrowings under this agreement.
(5) STOCKHOLDERS' EQUITY
PREFERRED STOCK
In November 1995, the Company raised $2.8 million, net of expenses, from
institutional investors from the private placement of 122,000 shares of
8% Series C Convertible Preferred Stock (the "Series C Preferred Stock").
All of the Series C Preferred Stock have been converted into shares of
the Company's Common stock in accordance with its terms.
(Continued)
8
<PAGE> 11
ECOGEN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
CONTINUED
STOCKHOLDERS' EQUITY (CONTINUED)
During the first quarter of fiscal 1997 and 1996, the Company issued
44,030 and 119,668 shares of its common stock upon conversation of the
Company's Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock. Further, in the first quarter of fiscal 1997 and 1996,
the Company issued 1,700 and 20,552 shares of its common stock,
respectively, in payment of dividends on its preferred stock.
COMMON STOCK
In January 1996, the shareholders approved an amendment to the Company's
Restated Certificate of Incorporation (the "Amendment") which effected a
one-for-five reverse stock split (the "Reverse Split") of the Company's
outstanding shares of common stock.
In April 1996, the Company's Board of Directors authorized a program to
purchase up to 350,000 shares of the Company's common stock over a two
year period. As of January 31, 1997, 92,000 shares have been purchased in
the open market pursuant to this program.
In December 1997, the Board of Directors granted the Company's U.S.
employees, excluding officers, the right to exchange 224,360 options at
exercise prices from $2.75 to $15.63 for new options at an exercise price
of $2.56, the fair market value at the new grant date. The new options
generally vest over a three year period.
9
<PAGE> 12
ECOGEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
OVERVIEW
For the first three months of fiscal 1997, total revenues decreased from $5.6
million in 1996 to $1.7 million in 1997, due to a nonrecurring upfront fee from
the Monsanto Company of $4.8 million recorded in the first quarter of 1996.
Total revenues excluding this nonrecurring fee in 1996 more than doubled during
the first quarter of 1997. Product sales increased 29% from $.7 million to $.9
million for the three months ended January 31, 1996 and 1997, respectively. For
the three months ended January 31, 1997, the Company reported a net loss of
($2.2) million or ($.28) per share compared to net income of $2.4 million or
$.39 per share in 1996 on weighted average shares of 7.8 million and 6.1 million
in 1997 and 1996, respectively. The difference between the net loss of ($2.2)
million for the three month period ended January 31, 1997 and the net income of
$2.4 million for the same period in 1996 is principally the $4.8 million in
other revenue recognized in January 1996 from the Company's strategic alliance
with Monsanto.
THREE MONTHS ENDED January 31, 1997 AND 1996
REVENUES
Net product sales increased 29% to $.9 million compared with $.7 million in the
first quarter of 1996, the first quarter typically being the Company's slowest
quarter, due to the seasonality of the agricultural marketplace. Sales of the
Company's Bt product line, representing 55% of total sales, increased 13% due to
increased volume in the first quarter of 1997 from the comparable period in 1996
due principally to higher international sales. Pheromone product sales,
representing 19% of total sales, decreased 36% principally due to decreased
volume including decreased sales of NoMate (R) TPW, for control of tomato
pinworm on tomatoes, and a decrease in government contracts for trap and lure
products. The Company expects that both shortfalls will be made up during the
remainder of fiscal 1997. Biofungicide sales, representing 27% of total sales
in the first quarter of 1997, were not sold by the Company in the same period
in 1996. Such sales are the result of the resumption of sales of AspireTM
biofungicide into the post harvest market. During the fourth quarter of fiscal
1996, the Company had announced manufacturing problems associated with this
product. Subsequent to the end of the first quarter, the Company has filled
the balance of a 1996 purchase order from its distributor in the post
harvest market.
Other revenues decreased $4.1 million in the current period, due primarily to
$4.8 million in nonrecurring upfront fees from
10
<PAGE> 13
REVENUES (CONTINUED)
revenue recognized in the first quarter of 1996 pursuant to the Company's
strategic alliance with Monsanto partially offset by higher research contract
revenue from Monsanto in the first quarter of fiscal 1997. Research contract
revenue increased from $.1 million to $.7 million in the first fiscal quarter of
1997 when compared to the same quarter in 1996, since 1997 represents the first
full year of the Monsanto Research and Development Contract.
COSTS AND EXPENSES
Cost of products sold increased 50% due principally to the increase in product
sales. Gross margins decreased to 25% in 1997 compared to 35% in 1996. This
decrease was due primarily to changes in product mix and higher costs on initial
production of new products.
Research and development costs increased $.4 million or 41% principally as a
result of start-up costs associated with process development for CRYMAXTM and
Aspire, two of the Company's new products. After the announcement of
manufacturing problems associated with equipment design failures, the Company
began working on developing alternative processes for the manufacturing of its
new water dispersible granule products. Selling, general and administration
expenses increased $.1 million or 5% primarily as a result of higher public
relations and investor relations costs in the current quarter.
Net loss for the three months ended January 31, 1997 was ($2.2) million,
compared to net income of $2.4 million for the same period in 1996. Net loss per
share for the three months ended January 31, 1997 was ($.28), compared to net
income per share of $.39 on weighted average shares outstanding of 7.8 million
and 6.1 million in the first quarter of 1997 and 1996, respectively. Excluding
the Monsanto other income in 1996, the net loss for the first fiscal quarter
improved 6% from ($2.4) million in 1996 to ($2.2) million in the first quarter
of fiscal 1997.
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
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
11
<PAGE> 14
SEASONALITY OF BUSINESS (CONTINUED)
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, 1997, the Company had cash and liquid investments of $5.3
million, representing a net decrease of $4.3 million from October 31, 1996. The
decrease was due to $3.9 million of cash used in operations, $.2 million
used for capital expenditures and $.1 million for repayment of capital lease
obligations for the purchase of equipment. Negative cash flows from operations
during the three months ended January 31, 1997 of $3.9 million principally
funded the net loss of $2.2 million and a reduction in accounts payable and
accrued expenses of $1.4 million.
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 contracts and product sales.
To date, the Company has not generated positive cash flow from operations. The
Company believes that its existing working capital and cash flow generated from
total revenues in 1997 should be sufficient to meet its capital and liquidity
requirements for fiscal 1997 based on reduced spending levels, if necessary. 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. The Company may need additional financing to support current levels
of product development and commercialization in 1997. There is no assurance that
such financing will be available on terms acceptable to the Company or at all.
Over the long term, the Company's liquidity is dependent on market acceptance of
its products and technology.
The Company has a $2.1 million line of credit to be used for the leasing of
equipment. To date, approximately $1.9 million has been borrowed under the line
of credit. The Company has commitments for $.2 million of capital expenditures
as of March 3, 1997.
12
<PAGE> 15
ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
Inventory increased $.4 million as a result of building inventories for sales in
the second quarter. Accounts payable and accrued expenses decreased $1.4 million
due to timing of payments to vendors and refunds paid to distributors in the
first quarter of fiscal 1997 for product returns in the fourth quarter of fiscal
1996. Deferred contract revenue decreased $.4 million during the three months
ended January 31, 1997 due to amounts earned under the Monsanto Research and
Development Agreement relating to certain Bt technology for use in plants.
In late February 1997 the Financial Accounting Standards Board issued FASB
Statement No. 128 "Earnings per Share". The Company is beginning to assess the
effect of this statement but does not believe the statement will have
significant impact because the Company's common stock equivalents are presently
anti-dilutive and therefore are excluded from earnings per share calculations.
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.
13
<PAGE> 16
PART II - OTHER INFORMATION
Item 6(a) Exhibits
Exhibit No. Description
10.125 Form of Indemnification Agreement for Directors and Officers
27 Financial Data Schedule
14
<PAGE> 17
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, 1997
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
15
<PAGE> 1
EXHIBIT 10.125
FORM OF
INDEMNIFICATION AGREEMENT
FOR DIRECTORS AND OFFICERS
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of
this ____ day of December, 1996, between Ecogen Inc., a Delaware corporation
(the "Company"), and ("Officer" ["Director"]).
WITNESSETH THAT:
WHEREAS, Officer [Director] is an executive officer [a member
of the Board of Directors] of the Company and in such capacity is performing a
valuable service for the Company; and
WHEREAS, the by-laws of the Company (the "By-laws") provide
for the indemnification of its directors and executive officers to the maximum
extent authorized by law; and
WHEREAS, Section 145 of the Delaware General Corporation Law
(the "DGCL") specifically provides that it shall not be deemed exclusive of any
other rights to indemnification or advancement of expenses to which directors or
officers may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise; and
WHEREAS, the number of lawsuits and shareholders' derivative
lawsuits against corporations, their directors and officers has increased in
recent years, such lawsuits frequently are without merit and seek damages in
amounts having no reasonable relationship to the amount of compensation received
by the directors and officers from the corporation, and such lawsuits whether or
not meritorious are expensive and time-consuming to defend; and
WHEREAS, recent developments with respect to the application
and interpretation of the business judgment rule and statutory and by-law
indemnification provisions have created uncertainty regarding the adequacy and
reliability of the protections afforded to directors and officers thereby; and
WHEREAS, adequate directors and officers liability insurance
may not be available at a reasonable cost; and
16
<PAGE> 2
WHEREAS, the Company wishes to have Officer [Director]
continue to serve as an executive officer [a director] of the Company free from
undue concern for unpredictable or unreasonable claims for damages by reason of
Officer's [Director's] status as an executive officer [a director] of the
Company, by reason of Officer's [Director's] decisions or actions on its behalf
or by reason of Officer's [Director's] decisions or actions in another capacity
while serving as an executive officer [a director] of the Company; and
WHEREAS, Officer [Director] has expressed reluctance to
continue to serve as an executive officer [a director] of the Company without
assurances that adequate insurance and indemnification is and will continue to
be provided; and
WHEREAS, in order to induce Officer [Director] to continue to
serve as an executive officer [a director] of the Company, the Company has
determined and agreed to enter into this Agreement with Officer [Director];
NOW, THEREFORE, in consideration of Officer's [Director's]
continued service as an executive officer [a director] of the Company, the
parties agree as follows:
1. Directors and Officers Liability Insurance.
(a) Except as provided in (b) below, the Company
hereby agrees to use its best efforts to obtain and maintain directors and
officers liability insurance for Officer [Director] for so long as Officer
[Director] shall continue to serve as an executive officer [a director] of the
Company and thereafter so long as Officer [Director] shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that Officer [Director] was an executive officer [a director] of the Company.
(b) The Company shall have no obligation hereunder
to obtain or maintain directors and officers liability insurance if, in the
reasonable business judgment of the Board of Directors of the Company, such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, or the coverage provided by
such insurance is limited, by exclusions or otherwise, so as to provide an
insufficient benefit.
17
<PAGE> 3
(c) In all policies of directors and officers
liability insurance, Officer [Director] shall be covered as an insured party in
such a manner as to provide Officer [Director] the same rights and benefits,
subject to the same limitations, as are accorded to the Company's executive
officer [director] most favorably insured by such policies.
(d) The Company shall give prompt written notice to
Officer [Director] of any amendment or other change or modification, or any
proposed amendment, change or modification, to any policy of directors and
officers liability insurance maintained by the Company and covering Officer
[Director].
2. Indemnification of Officer [Director]. Subject only
to the exclusions set forth in this Agreement, the Company hereby agrees to hold
harmless and indemnify Officer [Director] to the full extent authorized or
permitted by Section 145 of the DGCL, including any amendment thereof, or any
other statutory provisions authorizing or permitting such indemnification which
are adopted after the date hereof. Notwithstanding the foregoing, the Company
shall not be required to indemnify Officer [Director] for any losses to the
extent that such losses are covered by directors and officers liability
insurance as described in Section 1 above. Without limiting the generality of
the foregoing:
(a) Third Party Actions. The Company shall
indemnify Officer [Director] if Officer [Director] was or is a party or is
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Officer [Director] is or was or
had agreed to serve as (so long as Officer [Director] actually is serving or did
so serve) an executive officer [a director] of the Company, or is or was serving
or had agreed to serve as an executive officer [a director] (so long as Officer
[Director] actually is serving or did so serve) at the request of the Company as
a director, officer, employee or agent of another corporation, limited liability
company, partnership, joint venture, trust or other enterprise, against any and
all expenses (including attorneys' fees), liabilities, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by Officer
[Director] or on Officer's [Director's] behalf in connection with such action,
suit or proceeding, and any appeal therefrom, if Officer [Director] acted in
good faith and in a manner Officer [Director] reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Officer's
[Director's] conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that
Officer [Director] did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
18
<PAGE> 4
(b) Suits By or in the Right of the Company. The
Company shall indemnify Officer [Director] if Officer [Director] is or was a
party or is threatened to be made a party to any action or suit by or in the
right of the Company by reason of the fact that Officer [Director] is or was or
had agreed to be (so long as Officer [Director] actually is or did become) an
executive officer [a director] of the Company, or is or was serving or had
agreed to serve (so long as Officer [Director] actually is or did so serve) at
the request of the Company as a director, officer, employee or agent of another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise, against any and all expenses (including attorneys' fees) and,
to the extent permitted by law, amounts paid in settlement actually and
reasonably incurred by Officer [Director] or on Officer's [Director's] behalf in
connection with the defense or settlement of such action or suit or any appeal
therefrom provided that Officer [Director] acted in good faith and in a manner
Officer [Director] reasonably believed to be in or not opposed to the best
interests of the Company and except that no indemnification shall be made in
respect of any claim, issue or matter as to which Officer [Director] shall have
been adjudged to be liable to the Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, Officer [Director] is fairly and reasonably entitled to indemnity
for such expenses which the court shall deem proper.
(c) Successful Defense. To the extent that Officer
[Director] has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) or (b) of this Section
2, or in the defense of any claim, issue or matter therein, the Company shall
indemnify Officer [Director] against any and all expenses (including attorneys'
fees) actually and reasonably incurred by Officer [Director] or on Officer's
[Director's] behalf in connection therewith. Dismissal of any action with
prejudice, or a settlement not involving any payment or assumption of liability,
shall be deemed a successful defense.
(d) Partial Indemnification. If Officer [Director]
is entitled to indemnification under any provision of this Agreement for a
portion of the expenses (including attorneys' fees), liabilities, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by Officer [Director] or on Officer's [Director's] behalf in the investigation,
defense, appeal or settlement of such suit, action or proceeding, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Officer [Director] for the portion thereof to which Officer [Director] is
entitled.
(e) Advancement of Expenses. All expenses
(including attorney and other expert and professional fees and expenses)
incurred by Officer [Director] or on Officer's [Director's] behalf in defending
a civil or criminal action, suit
19
<PAGE> 5
or proceeding, or in enforcing Officer's [Director's] rights under any
provisions of this Agreement, shall be paid by the Company in advance of the
final disposition of such action, suit or proceeding in the manner prescribed by
Section 4 hereof.
(f) Amendments to Indemnification Rights. The
Company shall not adopt any amendment to its Certificate of Incorporation, as
amended (the "Certificate") or By-Laws the effect of which would be to deny,
diminish or encumber Officer's [Director's] rights to indemnity pursuant to the
Certificate, By-Laws, the DGCL or any other applicable law as applied to any act
or failure to act occurring in whole or in part prior to the date (the
"Effective Date") upon which the amendment was approved by the Company's Board
of Directors or stockholders, as the case may be. In the event that the Company
shall adopt any amendment to the Certificate or By-Laws the effect of which is
to change Officer's [Director's] rights to indemnity under such instruments,
such amendment shall apply only to acts or failures to act occurring entirely
after the Effective Date thereof. The Company shall give written notice to
Officer [Director] of any proposal with respect to any such amendment no later
than the date such amendment is first presented to the Board of Directors (or
any committee thereof) for consideration, and shall provide a copy of any such
amendment to Officer [Director] promptly after its adoption.
(g) indemnification for Expenses as a Witness. To
the extent Officer [Director] is, by reason of Officer's [Director's] status as
an executive officer [a director] of the Company, a witness in any proceeding,
the Company shall indemnify Officer [Director] against all expenses in
connection therewith.
3. Limitations on Indemnification. No indemnity
pursuant to Section 2 hereof shall be paid by the Company:
(a) on account of Officer's [Director's] conduct
which is finally adjudged in a non-appealable decision to have been fraudulent,
dishonest or willful misconduct, or a knowing violation of law;
(b) on account of any suit in which judgment in a
final, non-appealable decision is rendered against Officer [Director] for an
accounting of profits made from the purchase or sale by Officer [Director] of
securities of the Company within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of federal or state law;
(c) on account of the receipt by Officer [Director]
of any personal profit or advantage to which Officer [Director] is adjudged in a
final, non-appealable decision not to be entitled;
(d) for expenses incurred by Officer [Director], as
a plaintiff, in suits against the Company or against other executive officers
[directors] of the Company (other than suits
20
<PAGE> 6
brought by Officer [Director] to enforce Officer's [Director's] rights under any
provisions of this Agreement), unless such suit is authorized by the Board of
Directors or such indemnification is required by law;
(e) if a final, non-appealable decision by a court
having jurisdiction in the matter shall determine that such indemnification is
not lawful; or
(f) for amounts paid by Officer [Director] in
settlement of any action or proceeding without the Company's written consent.
4. Indemnification Procedures.
(a) Notice to the Company. Promptly after receipt
by Officer [Director] of notice of the commencement of any action, suit or
proceeding, Officer [Director] shall, if a claim in respect thereof is to be
made against the Company under this Agreement, notify the Company of the
commencement thereof. Such notice shall set forth in reasonable detail the
events giving rise to such claim and the amount requested, if known. Failure of
Officer [Director] to provide such notice shall not relieve the Company of its
obligations under this Agreement except to the extent such failure has a
material and adverse effect on the ability of the Company to meet such
obligations.
(b) Notice to Insurers. If, at the time of receipt
of such notice, the Company has directors and officers liability insurance in
effect, the Company shall give prompt notice of the commencement of such action,
suit or proceeding to the insurers in accordance with the procedures set forth
in the respective policies in favor of Officer [Director]. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Officer [Director], all losses and expenses payable as a result of
such action, suit or proceeding in accordance with the terms of such policies.
(c) Advancement of Expenses. Subject to subsections
(d) and (e) below, the costs and expenses reasonably incurred by Officer
[Director] or on Officer's [Director's] behalf in investigating, defending or
appealing any action, suit or proceeding, whether civil, criminal,
administrative or investigative, or in enforcing Officer's [Director's] rights
under any provisions of this Agreement, covered by Section 2 above shall be paid
by the Company within 20 days of Officer's [Director's] written request therefor
even if there has been no final disposition of such action, suit or proceeding.
Officer's [Director's] written request shall state the amount requested and
shall be accompanied by copies of the invoices or other relevant documentation.
(d) Undertaking to Repay Advances. Officer
[Director] agrees that Officer [Director] will reimburse the Company for all
advances paid by the Company to Officer
21
<PAGE> 7
[Director] under this Agreement in the event and only to the extent that it
shall ultimately be determined that Officer [Director] was not entitled to be
indemnified under this Agreement.
(e) Assumption of Defense by the Company. Except as
otherwise provided below, the Company, jointly with any other indemnifying party
similarly notified, will be entitled to assume the defense of any action, suit
or proceeding of which it has been notified by Officer [Director] pursuant to
subsection (a) above, with counsel reasonably satisfactory to Officer
[Director]. After notice from the Company to Officer [Director] of its election
to assume the defense thereof, the Company will not be liable to Officer
[Director] under this Agreement for any legal or other expenses subsequently
incurred by Officer [Director]; provided, however, that Officer [Director] shall
have the right to employ Officer's [Director's] own counsel in such action, suit
or proceeding at the expense of the Company if, at any time after such notice
from the Company, (i) the employment of counsel by Officer [Director] has been
authorized by the Company, (ii) Officer [Director] shall have reasonably
concluded that there may be a conflict of interest between the Company and
Officer [Director] in the conduct of such defense, or (iii) the Company shall
not in fact have employed counsel to assume the defense of such action, in each
of which cases the fees and expenses of Officer's [Director's] counsel shall be
subject to reimbursement in accordance with the terms of this Agreement. The
Company shall not be entitled to assume Officer's [Director's] defense of any
action, suit or proceeding brought by the Company or as to which Officer
[Director] shall have made the conclusion provided for in clause (ii) above.
(f) Determination of Right to Entitlement. (i) In
the event that Officer [Director] incurs liability for any fines, judgments,
liabilities, penalties or amounts paid in settlement, and indemnification is
sought under this Agreement, the Company shall pay (or provide for payment if so
required by the terms of any judgment or settlement) such amounts within 30
business days of Officer's [Director's] written request therefor unless a
determination is made within such 30 business days that the claims giving rise
to such request are excluded or indemnification is otherwise not due under this
Agreement. Such determination, and any determination required by applicable law
as to whether Officer [Director] has met the standard of conduct required to
qualify and entitle Officer [Director], partially or fully, to indemnification
under Section 2 of this Agreement, shall be made, at the Company's discretion,
(1) by the Board of Directors of the Company by a majority vote of the directors
who were not parties to such action, suit or proceeding even though less than a
quorum, or (2) if such a majority is not obtainable, or even if obtainable a
majority of the disinterested directors so directs, by written opinion of
independent legal counsel selected by the Company and reasonably satisfactory to
Officer [Director], or (3) by the Company's stockholders; provided, however,
that if a change of control has occurred such
22
<PAGE> 8
determination shall be made by written opinion of independent legal counsel
selected by Officer [Director] or, if requested by Officer [Director], by the
Company. The term "independent legal counsel" shall mean for this purpose an
attorney or firm of attorneys experienced in matters of corporation law that is
not now nor has within the previous three years been retained to represent
Officer [Director], the Company or any other party to the proceeding giving rise
to the claim for indemnification hereunder; provided that "independent legal
counsel" shall not include any person who under applicable standards of
professional conduct would have a conflict of interest in representing Officer
[Director] or the Company in an action to determine Officer's [Director's]
rights under this Agreement. The term "change of control" shall mean: (1) the
consummation of any transaction after which any "person" or "group" (as such
terms are used in Sections 3(a)(9), 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities, or possesses the power to vote or control the vote of securities, of
the Company representing 30% or more of the combined voting power of either the
Common Stock or all outstanding securities of the Company; or (2) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation or entity, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 66 2/3%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(ii) Notwithstanding the foregoing, Officer [Director] may
within 60 days after a determination adverse to Officer [Director] has been made
as provided above, or if no determination has been made within 30 business days
of Officer's [Director's] written request for payment, petition the Court of
Chancery of the State of Delaware or any other court of competent jurisdiction,
or may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association, which award shall
be deemed final, unappealable and binding, to determine whether Officer
[Director] is entitled to indemnification under this Agreement, and such court
or arbitrator, as the case may be, shall thereupon have the exclusive authority
to make such determination unless and until such court or arbitrator dismisses
or otherwise terminates such action without having made a determination. The
court or arbitrator, as the case may be, shall make an independent determination
of entitlement irrespective of any prior determination made by the Board of
Directors, independent legal counsel or stockholders. In any such action before
the court or
23
<PAGE> 9
arbitrator, Officer [Director] shall be presumed to be entitled to
indemnification and the Company shall have the burden of proving that
indemnification is not required under this Agreement. All fees and expenses of
any arbitrator pursuant to this provision shall be paid by the Company.
(g) Enforcement Expenses. In the event that Officer
[Director] brings suit or takes any other action to enforce Officer's
[Director's] rights or to collect monies due under this Agreement, and if
Officer [Director] is successful therein, the Company shall reimburse (to the
extent not previously advanced) Officer [Director] for all of Officer's
[Director's] reasonable expenses, including attorneys' fees, in any such suit or
action.
5. Continuation of Indemnification. The Company's obligations
to indemnify Officer [Director] hereunder shall continue throughout the period
Officer [Director] is an executive officer [a director] of the Company (or is
serving at the Company's request in the capacities described in subsections 2(a)
and 2(b) above) and thereafter so long as Officer [Director] shall be subject to
any possible claim, action, suit or proceeding by reason of the fact that
Officer [Director] was an executive officer [a director] of the Company (or was
serving in such other capacities).
6. Successors and Assigns. This Agreement shall be binding
upon the Company, its successors and assigns (including any transferee of all or
substantially all of its assets and any successor by merger or otherwise by
operation of law), and shall inure to the benefit of Officer [Director] and
Officer's [Director's] heirs, personal representatives, executors and
administrators and shall be binding upon Officer [Director] and Officer's
[Director's] successors in interest under this Agreement.
7. Rights Not Exclusive. The rights provided hereunder shall
not be deemed exclusive of any other rights to which Officer [Director] may be
entitled under any provision of law, By-law, other agreement, vote of
stockholders or of disinterested directors or otherwise, both as to action in
Officer's [Director's] official capacity and as to action in any other capacity
while occupying any of the positions referred to in Section 2 of this Agreement.
8. Subrogation. Upon payment of any amount under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of Officer's [Director's] rights of recovery therefor and Officer [Director]
shall take all reasonable actions requested by the Company to secure such
rights, including, without limitation, execution of all documents necessary to
enable the Company to enforce such rights.
24
<PAGE> 10
9. Severability. In the event that any provision of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason,
such provision shall be limited or modified in its application to the minimum
extent necessary to avoid a violation of law, and, as so limited or modified,
such provision and the balance of this Agreement shall be enforceable in
accordance with their terms.
10. Integration. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
11. Modification. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
12. Notices. All notices given under this Agreement shall be
in writing and delivered either (i) personally, (ii) by registered or certified
mail (postage prepaid, return receipt requested), (iii) by recognized overnight
courier service or (iv) by telecopy (if promptly followed by a copy delivered as
provided in clauses (i), (ii) or (iii) above), as follows:
If to Officer [Director]:_______________________________________
_______________________________________
_______________________________________
If to the Company: Ecogen Inc.
2005 Cabot Boulevard West
Langhorne, Pennsylvania 19047
Notices hereunder given as provided above shall be deemed to be duly given upon
delivery if delivered personally, three business days after mailing if by
registered or certified mail, one business day after mailing if by overnight
courier service and upon confirmation of transmission if by telecopy.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
25
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
ECOGEN INC.
By: ___________________________
Name: James P. Reilly, Jr.
Title: Chairman and Chief
Executive Officer
By: ___________________________
Name:
Title:
26
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