<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ENERGY BIOSYSTEMS CORPORATION
------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------------------------------------------------------
(NAME OF PERSON(s) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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>
ENERGY BIOSYSTEMS CORPORATION
4200 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
November 24, 1998
TO OUR STOCKHOLDERS:
You are cordially invited to attend a Special Meeting of Stockholders of
Energy BioSystems Corporation to be held on Friday, December 18, 1998, at 10:00
a.m., local time, at the Company's offices at 4200 Research Forest Drive, The
Woodlands, Texas. A Notice of the Special Meeting, Proxy Statement and form of
proxy are enclosed with this letter.
We encourage you to read the Notice of the Special Meeting and Proxy
Statement so that you may be informed about the business to come before the
meeting. Your participation in the Company's business is important, regardless
of the number of shares that you hold. To ensure your representation at the
meeting, please promptly sign and return the accompanying proxy card in the
postage-paid envelope.
We look forward to seeing you on December 18, 1998.
Sincerely,
William E. Nasser
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
PRELIMINARY COPY
ENERGY BIOSYSTEMS CORPORATION
4200 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 18, 1998
To the Stockholders of Energy BioSystems Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of Energy BioSystems Corporation (the "Company") will be held as, and
for the purposes, set forth below:
TIME: 10:00 a.m., local time, on Friday, December 18, 1998
PLACE: Energy BioSystems Corporation
4200 Research Forest Drive
The Woodlands, Texas 77380
ITEMS OF BUSINESS: 1. To consider and vote upon a proposal to approve and
adopt an amendment to the Company's Amended and
Restated Certificate of Incorporation to effect a
one-for-seven reverse stock split of the common stock
of the Company.
2. To act upon such other business as may properly come
before the Special Meeting or any adjournment(s) or
postponement thereof.
RECORD DATE: Only stockholders of record at the close of business on
November 20, 1998 are entitled to notice of, and to vote at,
the Special Meeting and any adjournment(s) or postponement
thereof. A complete list of stockholders entitled to vote at
the Special Meeting will be available for inspection by any
stockholder for any purpose germane to the Special Meeting
for ten days prior to the Special Meeting during ordinary
business hours at the Company's headquarters located at 4200
Research Forest Drive, The Woodlands, Texas 77381.
IMPORTANT: To avoid additional soliciting expense to the Company,
please MARK, SIGN, DATE and MAIL the enclosed Proxy
PROMPTLY and return it in the accompanying postpaid
envelope, even if you plan to attend the Special Meeting.
If you attend the Special Meeting, and wish to vote your
shares in person, arrangements will be made for you to do
so.
By Order of the Board of Directors,
Paul G. Brown, III
SECRETARY
The Woodlands, Texas
November 24, 1998
<PAGE>
ENERGY BIOSYSTEMS CORPORATION
4200 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 18, 1998
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited by the Board of Directors of Energy
BioSystems Corporation (the "Company"), to be voted at the Special Meeting of
holders of common stock, par value $0.01 per share, of the Company (the "Common
Stock") and holders of Series B Convertible Preferred Stock, par value $0.01 per
share, of the Company (the "Preferred Stock") to be held on Friday, December 18,
1998 (the "Special Meeting"), at 10:00 a.m., local time, at the Company's
offices at 4200 Research Forest Drive, The Woodlands, Texas, for the purposes
set forth in the accompanying Notice of Special Meeting of Stockholders, and at
any adjournment(s) of the Special Meeting. When Proxies in the accompanying
form are properly executed and received, the shares represented thereby will be
voted at the Special Meeting in accordance with the directions noted thereon.
If no directions are indicated, the shares will be voted in favor of the
proposal set forth in this Proxy Statement and in the discretion of the persons
appointed as proxies in the accompanying form of Proxy with respect to any other
matter that is properly brought before the Special Meeting.
Each stockholder of the Company has the unconditional right to revoke his
Proxy at any time prior to its exercise, either in person at the Special Meeting
or by written notice to the Company addressed to Secretary, Energy BioSystems
Corporation, 4200 Research Forest Drive, The Woodlands, Texas 77381. No
revocation by written notice will be effective unless such notice has been
received by the Secretary of the Company prior to the day of the Special Meeting
or by the inspector of election at the Special Meeting.
The principal executive offices of the Company are located at 4200 Research
Forest Drive, The Woodlands, Texas 77381. This Proxy Statement and the
accompanying Notice of Special Meeting of Stockholders and Proxy are being
mailed to the Company's stockholders on or about November 24, 1998.
The Company will bear the cost of preparing and mailing proxy materials as
well as the cost of solicitation of proxies. The Company will reimburse banks,
brokerage firms, custodians, nominees, and fiduciaries for their expenses in
sending proxy materials to the beneficial owners of Common Stock and Preferred
Stock. The Company has retained Corporate Communications Center, Inc.
("Corporate Communications") to assist in the solicitation of proxies and will
pay approximately $800 for certain brokerage searches and proxy solicitations
performed by Corporate Communications. In addition to solicitation by mail,
certain directors, officers and regular employees of the Company and Corporate
Communications may solicit proxies by fax, telex, telephone and personal
interview.
<PAGE>
PURPOSES OF THE MEETING
At the Special Meeting, the Company's stockholders will be asked to
consider and act upon the following matters:
1. A proposal to amend the Company's Amended and Restated Certificate of
Incorporation (the "Amended and Restated Certificate of
Incorporation") to effect a one-for-seven reverse stock split of the
Common Stock (the "Reverse Split"); and
2. The transaction of any and all other business that may properly come
before the Special Meeting or any adjournment(s) thereof.
QUORUM AND VOTING
The number of voting securities of the Company outstanding on November 20,
1998, the record date (the "Record Date") for the determination of stockholders
of the Company entitled to receive notice of, and to vote at, the Special
Meeting was:
- 15,241,169 shares of Common Stock. Each share of Common Stock is
entitled to one vote on each of the matters to be voted on at the
Special Meeting.
- 696,400 shares of Preferred Stock. Shares of Preferred Stock have
voting rights on all matters subject to a vote of the holders of
Common Stock on an as-converted basis. As of the Record Date, the
shares of Preferred Stock are entitled to an aggregate of 4,802,759
votes on each of the matters to be voted on at the Special Meeting.
The total number of votes that may be cast at the Special Meeting is 20,043,928.
The presence, either in person or by proxy, of holders of Common Stock and
Preferred Stock representing a majority of the votes that may be cast at the
Special Meeting is necessary to constitute a quorum at the Special Meeting.
Abstentions and broker non-votes are counted for purposes of determining whether
a quorum is present. Assuming the presence of a quorum, at least a majority of
the votes that may be cast at the Special Meeting by the holders of the
outstanding shares of Common Stock and Preferred Stock must be voted in favor of
the proposal described in this Proxy Statement for the proposal to be approved.
All Proxies that are properly completed, signed and returned prior to the
Special Meeting will be voted. Any Proxy given by a stockholder may be revoked
at any time before it is exercised by the stockholder (i) filing with the
Secretary of the Company an instrument revoking it, (ii) executing and returning
a proxy bearing a later date or (iii) attending the Special Meeting and
expressing a desire to vote his shares of Common Stock in person. Votes will be
counted by Harris Trust & Savings Bank, the Company's transfer agent and
registrar. With respect to abstentions, the shares are considered present at
the meeting for purposes of determining a quorum and voting on a particular
matter. With respect to broker non-votes, the shares are considered present at
the meeting for purposes of determining a quorum but are not entitled to vote on
the particular matter as to which the broker does not have voting authority.
Because abstentions and broker non-votes will not constitute votes in favor of
the proposal described in this Proxy Statement, they will have the same effect
as votes against the proposal.
-2-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 20, 1998, certain
information with respect to the shares of Common Stock and Series B Preferred
Stock beneficially owned by (i) each person known by the Company to be the
beneficial owner of more than five percent of the Common Stock or the Series B
Preferred Stock, (ii) each director of the Company, (iii) the named executive
officers of the Company and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Amount and Nature
Amount and Nature of Beneficial
of Beneficial Ownership of Percent
Ownership of Percent of Series B of
Name of Beneficial Owner Common Stock(1) Class Preferred Stock(1) Class
------------------------ ----------------- ---------- ------------------ -------
<S> <C> <C> <C>
Zesiger Capital Group LLC. . . . . . . . . . 2,992,003 (2) 18.3% 160,300 23.0%
320 Park Avenue, 30th Floor
New York, New York 10022
Gryphon Ventures II, Limited Partnership . . 2,136,078 14.0% -- --
222 Berkeley Street, Suite 1600
Boston, Massachusetts 02116
Ethyl Corporation. . . . . . . . . . . . . . 1,989,324 (3) 12.2% 160,000 22.9%
300 South Fourth Street
Richmond, Virginia 23217
General Motors Employees
Domestic Group Trust. . . . . . . . . . 1,108,410 (4) 7.0% 100,000 14.4%
c/o Pecks Management
One Rockefeller Plaza
New York, New York 10020
State of Wisconsin Investment Board. . . . . 942,500 6.2% -- --
121 E. Wilson Street, 2nd Floor
Madison, Wisconsin 53702
Farmers Insurance Group of Companies . . . . 914,070 (5) 5.8% 80,000 11.5%
4680 Wilshire Boulevard
Los Angeles, California 90010
Keystone, Inc. . . . . . . . . . . . . . . . 900,364 (6) 5.8% 40,000 5.7%
200 Crescent Court, Suite 500
Dallas, Texas 75201
Froley Revy Investment Co., Inc.. . . . . . 443,364 (7) 2.9% 40,000 5.7%
1900 Wilshire Boulevard, Suite 1050
Los Angeles, California 90024
Ramon Lopez. . . . . . . . . . . . . . . . . 43,500 (8) * -- --
R. James Comeaux . . . . . . . . . . . . . . 29,000 * -- --
Edward B. Lurier . . . . . . . . . . . . . . 2,183,078 (9) 14.3% -- --
Thomas E. Messmore . . . . . . . . . . . . . 61,000 (10) * -- --
Daniel J. Monticello, Ph.D.. . . . . . . . . 227,410 (11) 1.5% -- --
William E. Nasser. . . . . . . . . . . . . . 180,650 (12) 1.2% -- --
William D. Young . . . . . . . . . . . . . . 31,000 (13) * -- --
John Patton. . . . . . . . . . . . . . . . . 4,000 (14) * -- --
Paul G. Brown, III . . . . . . . . . . . . . 49,206 (15) * -- --
Michael A. Pacheco . . . . . . . . . . . . . 13,000 (16)
All directors and executive officers
as a group (13 persons) . . . . . . . . . 2,821,844 (17) 17.9% -- --
</TABLE>
-3-
<PAGE>
- ---------
* Represents less than 1% of the class.
(1) Unless otherwise indicated, each of the stockholders designated above has
sole voting and investment power with respect to the securities shown to be
owned by such stockholder.
(2) Includes 1,105,517 shares issuable upon conversion of Series B Preferred
Stock.
(3) Includes 1,103,448 shares issuable upon conversion of Series B Preferred
Stock owned by Ethyl Corporation ("Ethyl"). Excludes 2,136,078 shares of
Common Stock beneficially owned by Gryphon Ventures II, Limited Partnership
("Gryphon"), a limited partnership of which a wholly-owned subsidiary of
Ethyl is the sole limited partner, and as to which Ethyl has no voting or
dispositive power, based upon information provided in a Schedule 13D filed
by Ethyl with the Securities and Exchange Commission on November 7, 1994,
as amended.
(4) Includes 689,655 shares of Common Stock issuable upon conversion of Series
B Preferred Stock.
(5) Includes 551,724 shares of Common Stock issuable upon conversion of
Series B Preferred Stock.
(6) Includes 275,862 shares of Common Stock issuable upon conversion of Series
B Preferred Stock.
(7) Represents 275,862 shares of Common Stock issuable upon conversion of
Series B Preferred Stock.
(8) Represents 43,500 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(9) Includes 2,136,078 shares of Common Stock held by Gryphon, which Mr. Lurier
may be deemed to beneficially own due to his status as an affiliate of the
general partner of Gryphon.
(10) Includes 20,000 shares of Common Stock subject to stock options exercisable
within 60 days of November 20, 1998.
(11) Includes 219,860 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(12) Includes 150,650 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(13) Represents 31,000 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(14) Represents 4,000 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(15) Includes 44,206 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(16) Represents 13,000 shares of Common Stock subject to stock options that are
exercisable within 60 days of November 20, 1998.
(17) Includes an aggregate of 518,216 shares of Common Stock subject to stock
options that are exercisable within 60 days of November 20, 1998. Includes
2,136,078 shares of Common Stock held by Gryphon which Mr. Lurier may be
deemed to beneficially own due to his status as an affiliate of the general
partner of Gryphon.
-4-
<PAGE>
REVERSE SPLIT
GENERAL
At the Special Meeting, the stockholders of the Company will consider and
vote upon a proposal providing for a one-for-seven Reverse Split of the Common
Stock. The Reverse Split will be effected by an amendment to the Company's
Amended and Restated Certificate of Incorporation (the "Reverse Split
Amendment") contained in Exhibit A to this Proxy Statement, which is
incorporated by reference herein. The Reverse Split Amendment will become
effective upon its filing with the Secretary of State of the State of Delaware
(the "Effective Date"). Fractional shares of Common Stock will not be issued as
a result of the Reverse Split. Stockholders entitled to receive a fractional
share of Common Stock as a consequence of the Reverse Split will, instead,
receive from the Company a cash payment in United States dollars equal to such
fraction multiplied by seven times the average closing price of the Common Stock
on the Nasdaq National Market for the five trading days immediately preceding
the Effective Date.
AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Reverse Split Amendment will amend Article IV of the Amended and
Restated Certificate of Incorporation. At the Effective Date, without further
action on the part of the Company or the stockholders, each share of Common
Stock will be converted into one-seventh of a share of Common Stock. The
Reverse Split Amendment will become effective upon its filing with the Secretary
of State of the State of Delaware.
A vote for the Reverse Split proposal will include authorization of the
Company's Board of Directors not to file the Reverse Split Amendment in the
event the Board of Directors determines that filing the Reverse Split Amendment
would not be in the best interest of the Company's stockholders.
VOTE NEEDED FOR APPROVAL
The proposed Reverse Split and the related amendment to the Company's
Amended and Restated Certificate of Incorporation must be approved by at least a
majority of the votes that may be cast at the Special Meeting by the holders of
the outstanding shares of Common Stock and Preferred Stock.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED A RESOLUTION APPROVING THE
REVERSE SPLIT, AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
FOR THE PROPOSED REVERSE SPLIT AMENDMENT.
EFFECT OF THE PROPOSED REVERSE SPLIT
The proposed Reverse Split will be effected by means of an amendment to the
Amended and Restated Certificate of Incorporation. Under Delaware law, no
appraisal rights are available to dissenting stockholders. Each stockholder who
owns fewer than seven shares of Common Stock will have his fractional share of
Common Stock converted into the right to receive cash as set forth below in
"--Exchange of Stock Certificates and Payment for Fractional Shares." The
interest of such stockholder in the Company will thereby be terminated, and such
stockholder will have no right to share in the assets or future growth of the
Company. Each stockholder who owns seven or more shares of Common Stock will
continue to own shares of Common Stock and will share in the assets and future
growth of the Company. Such interest will be represented by one-seventh as many
shares as such stockholder owned before the Reverse Split, except that no
fractional shares will be issued.
Adoption of the Reverse Split proposal as of December 31, 1997 would
not have had an effect on net income for the fiscal year ended December 31,
1997 or the nine months ended September 30, 1998. However, net loss per
share would have been proportionately increased from $(1.09) to $(7.64)
for the fiscal year ended December 31, 1997 and from $(0.72) to $(5.05)
for the nine months ended September 30, 1998. No adjustment has been made
for the reduction in the number of shares of Common Stock resulting from the
payment of cash for fractional shares.
-5-
<PAGE>
OTHER EFFECTS OF THE REVERSE SPLIT
The Company has previously issued and has outstanding various stock options
pursuant to its 1992 Stock Compensation Plan and its 1997 Employee Stock Option
Plan for an aggregate of 1,251,747 shares of Common Stock. If the Reverse Split
is implemented, both the per share exercise price and the number of shares of
Common Stock issuable upon the exercise of each option will be appropriately
adjusted.
The Company's outstanding Preferred Stock is presently convertible into an
aggregate of 4,802,759 shares of Common Stock. If the Reverse Split is
implemented, the conversion price of the Preferred Stock and, accordingly, the
number of shares of Common Stock issuable upon the conversion of the Company's
outstanding Preferred Stock will be appropriately adjusted.
The Reverse Split is likely to result in some stockholders owning
"odd-lots" of less than 100 shares of Common Stock. Brokerage commissions
and other costs of transactions in odd-lots are generally somewhat higher
than the costs of transaction on "round-lots" of even multiples of 100 shares.
REASONS FOR THE REVERSE SPLIT
Management of the Company believes that the Reverse Split is beneficial to
the Company and its stockholders. The Reverse Split is being proposed primarily
to prevent the Common Stock from being delisted from the Nasdaq National Market.
On October 9, 1998, the Company received notice from the Nasdaq National Market
that the shares of Common Stock have failed to maintain a closing bid price on
the Nasdaq National Market of greater than or equal to $1.00 per share for 30
consecutive trading days, subjecting the Common Stock to possible delisting. In
order to stay the delisting, the shares of Common Stock must trade on the Nasdaq
National Market at a closing bid price of $1.00 per share or greater for ten
consecutive trading days prior to January 6, 1999. It is anticipated that
following the Reverse Split, the Common Stock will trade higher than $1.00 per
share during the relevant period to satisfy the Nasdaq continuing listing
requirements. However, there can be no assurance that, after the consummation
of the Reverse Split, the shares of Common Stock will trade at seven times the
market price of the Common Stock prior to Reverse Split. Further, the Company
cannot offer any assurance that it will continue to meet Nasdaq National Market
listing requirements (including the minimum bid price requirement) following the
Reverse Split. If the Company's Common Stock is delisted from the Nasdaq
National Market, such delisting might adversely affect the trading in and
liquidity of the Common Stock.
Management of the Company also believes that it may be more difficult to
attract new investors to the Company because the Common Stock trades at a
relatively low price (the closing price on November 12, 1998 was $0.719 per
share). Stockbrokers are sometimes subject to internal restrictions on their
ability to recommend stocks trading at less than $5.00 per share because of the
general presumption that such stock may be highly speculative. In addition,
stock which trades in the trading range of the Common Stock may not be
marginable under the internal policies of some stockbrokers.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
The exchange of shares of Common Stock will occur on the Effective Date
without any action on the part of stockholders of the Company and without
regard to the date certificates representing pre-split shares of Common Stock
are physically surrendered for certificates representing post-split shares of
Common Stock. The Company's Transfer Agent will exchange certificates. In
the event that the number of shares of post-split Common Stock includes a
fraction, the Company will pay to the stockholder, in lieu of the issuance of
fractional shares of the Company, a cash amount in United States dollars
which will be equal to the same fraction multiplied by seven times the
average closing price of the Common Stock on the Nasdaq National Market for
the five trading days immediately preceding the Effective Date. The closing
price of the Common Stock ranged from $0.656 to $0.906 from November 6, 1998
to November 12, 1998, with an average closing price of $0.769. A change in
the closing price of the Common Stock will affect the amount received for a
fractional share by a stockholder.
-6-
<PAGE>
As soon as practicable after the Effective Date, transmittal forms will
be mailed to each holder of record of certificates for shares of Common Stock
to be used in forwarding their certificates for surrender and exchange for
certificates representing the number of shares of post-split Common Stock
such stockholders are entitled to receive as a consequence of the Reverse
Split. After receipt of such transmittal form, each holder should surrender
the certificates representing pre-split shares of Common Stock of the
Company. Each holder who surrenders certificates will receive new
certificates representing the whole number of shares of post-split Common
Stock to which he is entitled and any cash payable in lieu of a fractional
share. The transmittal forms will be accompanied by instructions specifying
other details of the exchange. STOCKHOLDERS SHOULD NOT SEND THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Date, each certificate representing pre-split shares
of Common Stock will, until surrendered and exchanged as described above, be
deemed, for all corporate purposes, to evidence ownership of the whole number
of post-split shares of Common Stock, and the right to receive from the
Company the amount of cash for any fractional shares, into which the shares
evidenced by such certificate have been converted, except that the holder of
such unexchanged certificates will not be entitled to receive any dividends
or other distributions payable by the Company after the Effective Date, until
the certificates representing pre-split shares of Common Stock have been
surrendered. Such dividends and distributions, if any, will be accumulated,
and at the time of the surrender of the certificates for pre-split shares of
Common Stock, all such unpaid dividends or distributions will be paid without
interest.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain federal income tax
consequences of the Reverse Split. This discussion is based upon the
Internal Revenue Code of 1986 (the "Code"), existing and proposed regulations
thereunder, reports of congressional committees, judicial decisions and
current administrative rulings and practices, all as amended and in effect on
the date hereof. Any of these authorities could be repealed, overruled or
modified at any time. Any such change could be retroactive and, accordingly,
could cause the tax consequences to vary substantially from the consequences
described below. No ruling from the Internal Revenue Service (the "IRS")
with respect to the matters discussed herein has been requested, and there is
no assurance that the IRS would agree with the conclusions set forth in this
discussion.
This discussion is for general information only and does not address the
federal income tax consequences that may be relevant to particular
stockholders in light of their personal circumstances or to certain types of
stockholders (such as dealers in securities, insurance companies, foreign
individuals and entities, financial institutions and tax-exempt entities) who
may be subject to special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under state, local or
foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF PARTICIPATION IN THE REVERSE SPLIT,
INCLUDING THE APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES
IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any gain or loss as a result of the
Reverse Split. No gain or loss should be recognized by a stockholder who
receives only Common Stock upon the Reverse Split. The aggregate tax basis
of post-split Common Stock received by such a stockholder in connection with
the Reverse Split will equal the stockholder's aggregate tax basis in the
pre-split Common Stock exchanged therefor and generally will be allocated
among post-split Common Stock received on a pro rata basis. Stockholders who
have used the specific identification method to identify their basis in
pre-split Common Stock surrendered in the Reverse Split should consult their
own tax advisors to determine their basis in the post-split Common Stock
received in exchange therefor. A stockholder who receives cash in lieu of a
fractional share of Common Stock that otherwise would be held as a capital
asset generally should recognize capital gain or loss on the receipt of such
cash in an amount equal to the difference between the cash received and his
basis in such fractional share of Common Stock. For this purpose, a
stockholder's basis in such fractional share of Common Stock will be
determined as if the stockholder actually received such fractional share.
-7-
<PAGE>
OTHER INFORMATION
ADDITIONAL MATTERS
While the notice for the Special Meeting calls for the transaction of
any other business as may be properly presented, management is not aware of
any business to be submitted at the Special Meeting not referred to in this
Proxy Statement. If any further business is presented, the persons named in
the Proxy will act according to their best judgment on behalf of the
stockholders they represent.
SUBMISSION OF STOCKHOLDER PROPOSALS
The deadline for stockholders to submit proposals pursuant to Rule 14a-8
of the Exchange Act for inclusion in the Company's proxy statement and form
of proxy for the 1999 Annual Meeting of Stockholders is December 31, 1998.
The date after which notice of a stockholder proposal submitted outside of
the processes of Rule 14a-8 of the Exchange Act is considered untimely is
March 16, 1999. If notice of a stockholder proposal submitted outside the
processes of Rule 14a-8 of the Exchange Act is received by the Company after
March 16, 1999, then the Company's proxy for the 1999 Annual Meeting may
confer discretionary authority to vote on such matter without any discussion
of such matter in the proxy statement for the 1999 Annual Meeting.
By Order of the Board of Directors
Paul G. Brown, III
SECRETARY
November 24, 1998
The Woodlands, Texas
-8-
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ENERGY BIOSYSTEMS CORPORATION
Energy BioSystems Corporation (the "Corporation"), organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"DGCL") does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth the following amendment to the Amended and Restated
Certificate of Incorporation of the Corporation (the "Amendment"), declaring the
Amendment to be advisable and calling for the submission of the proposed
Amendment to the stockholders of the Corporation for consideration thereof. The
resolution setting forth the proposed Amendment is as follows:
ARTICLE IV of the Amended and Restated Certificate of Incorporation of
Energy BioSystems Corporation, a Delaware corporation, is hereby amended by
adding thereto a new paragraph to read as follows:
REVERSE SPLIT. Effective immediately upon the filing of this
Amendment to the Amended and Restated Certificate of Incorporation in the office
of the Secretary of State of the State of Delaware, each outstanding share of
previously existing Common Stock shall be and hereby is converted into and
reclassified as one-seventh of a share of Common Stock; PROVIDED, HOWEVER, that
fractional shares of Common Stock will not be issued and each holder of a
fractional share of Common Stock shall receive in lieu thereof a cash payment
from the Corporation determined by multiplying such fractional share of Common
Stock by seven times the average closing price of a share of previously existing
Common Stock on the Nasdaq National Market for the five trading days immediately
preceding the effective date, and upon such other terms as the officers of the
Corporation, in their sole discretion, deem to be advisable and in the best
interests of the Corporation. Certificates representing reclassified shares are
hereby canceled and upon presentation of the canceled certificates to the
Corporation, the holders thereof shall be entitled to receive certificate(s)
representing the new shares into which such canceled shares have been converted.
SECOND: That thereafter pursuant to a resolution of the Board of
Directors, a special meeting of the stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the DGCL at which
meeting the necessary number of shares as required by statute were voted in
favor of the Amendment.
THIRD: That the Amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this Certificate
of Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
A-1
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by William E. Nasser, its President, and attested by Paul A. Brown, III,
its Secretary, this _____ day of ____________, 1998.
ENERGY BIOSYSTEMS CORPORATION
By:
-------------------------------------
William E. Nasser
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATTEST:
------------------
Paul G. Brown, III
SECRETARY
A-2
<PAGE>
PROXY
ENERGY BIOSYSTEMS CORPORATION
4200 Research Forest Drive
The Woodlands, Texas 77381
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William E. Nasser, and Paul G.
Brown, III, and each of them, as proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and vote, as
designated on the reverse side, all of the shares of the common stock,
par value $0.01 per share, and Series B Convertible Preferred Stock, par
value $0.01 per share, of Energy BioSystems Corporation (the "Company"),
held of record by the undersigned on November 20, 1998, at the Special
Meeting (the "Special Meeting") of Stockholders of the Company to be held
on Friday, December 18, 1998, and any adjournment(s) thereof.
SEE REVERSE
(TO BE DATED AND SIGNED ON REVERSE SIDE) SIDE
PLEASE MARK VOTES AS IN THIS EXAMPLE. /X/
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1, AND THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN PROPOSAL 2.
1. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-SEVEN REVERSE STOCK SPLIT
OF THE COMPANY'S COMMON STOCK, PAR VALUE $0.01 PER SHARE, AS DESCRIBED IN
THE COMPANY'S PROXY STATEMENT RELATING TO THE SPECIAL MEETING.
FOR / / AGAINST / / ABSTAIN / /
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY
ADJOURNMENT(S) THEREOF.
FOR / / AGAINST / / ABSTAIN / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please execute this Proxy as your name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature: Date
----------------------- ----------
Signature: Date
----------------------- ----------
