the protection of plants and seeds
and the promotion of overall plant health, (i) directly to the general public; (ii) to resellers or businesses that offer the Products to retailers or
to the general public; or (iii) to businesses that incorporate the Products into existing or new products to be sold to the general public (the
“Home and Garden Market”). The Company has agreed that sales of the Products in the Home and Garden Market will be limited to packaged
Products that contain less than two ounces of harpin protein composition each. The distributor agreement will continue until the closing of the
proposed asset sale or, if the asset sale is not consummated, until August 31, 2007. Either party may terminate the distributor agreement prior to the
expiration of its term if the other party fails to cure a material breach of the distributor agreement within 60 days after receipt of notice of such
breach.
As previously reported, the
Company’s financial results in 2006 have not supported its ongoing business operations and, as a result, the Company’s management and board
of directors have been reviewing strategic alternatives, including the sale of all or a portion of the Company’s business. The proposed sale of
assets and the reduction in force (described in Item 2.05 below) are part of a strategic plan unanimously approved by the board of directors that is
designed to significantly reduce the Company’s future operating losses and liabilities, generate cash for the Company’s continuing home and
garden operations and preserve the potential future value of the Company’s remaining assets, primarily the Company’s net operating loss
carryforwards. If the strategic restructuring is successfully completed, the Company plans to explore opportunities to realize potential value from its
home and garden business and from the potential utilization of its net operating loss carryforwards.
Copies of the asset purchase agreement
among the Company, PHC and Plant Healthcare plc and the Company’s press release dated December 4, 2006 are attached hereto as Exhibits 10.1 and
99.1, respectively, and are incorporated herein by reference. The foregoing description of the proposed sale of assets is qualified in its entirety by
reference to the full text of Exhibit 10.1.
The Company will file a proxy statement
and other documents regarding the proposed asset sale with the U.S. Securities and Exchange Commission (“SEC”). The definitive proxy
statement will be sent to shareholders seeking their approval of the asset purchase agreement at a special meeting of shareholders. Shareholders are
urged to read the proxy statement and any other relevant documents filed with the SEC when they become available because they will contain important
information. A proxy statement will be available free of charge at the SEC’s website at www.sec.gov. In addition, investors and security holders
may obtain free copies of the proxy statement and other documents filed with the SEC when they become available by contacting the
Company.
The Company, its board of directors,
executive officers and employees may be deemed to participate in the solicitation of proxies of Company shareholders to approve the proposed asset
sale. These individuals may have interests in the transaction, including interests resulting from their ownership of securities of the Company.
Information concerning these individuals and their interests in the transaction and their participation in the solicitation will be contained in the
proxy statement to be filed with the SEC in connection with the special meeting.
Section 2 — Financial
Information
Item
2.05. |
|
Costs Associated with Exit or Disposal
Activities. |
As part of the strategic plan described
in Item 1.01 above, the Company’s board of directors, on December 1, 2006, approved a plan to substantially reduce the Company’s
administrative, marketing, sales, manufacturing and development personnel by December 31, 2006. As of the date of this report, the Company had 19
full-time employees. The Company expects to have approximately 6 full-time employees after completion of the reduction in force. The work force
reduction is expected to decrease salaries and related expenses by approximately $1.4 million on an annualized basis. Dr. Rhett Atkins, Chief Executive
Officer and President of Eden Bioscience, will resign from those positions on December 15, 2006 as part of the reduction in force. See discussion under
Item 5.02 below.
2
The Company currently estimates
the cost of the work force reduction to be approximately $100,000, consisting of one-time employee termination
benefits.
Item
2.06 |
|
Material Impairments. |
See discussion under Item 1.01 of
the preliminary estimated asset impairment in connection with the proposed sale of assets, which discussion is incorporated in this Item 2.06 by
reference.
Section 5 — Corporate Governance and
Management
Item
5.02. |
|
Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers. |
(b) On
December 1, 2006, the Company announced that Dr. Rhett Atkins, Chief Executive Officer and President of the Company, will resign from those positions
effective as of December 15, 2006. Dr. Atkins will continue to serve as a director of the Company and will provide consulting services to the
Company under the arrangement described in Item 5.02(e) below.
(c) On
December 1, 2006, the board of directors named Bradley S. Powell, the Vice President of Finance and the Chief Financial Officer of the Company, to
serve as the President of the Company effective upon Dr. Atkins’ resignation on December 15, 2006.
Mr. Powell, age 46, has served
as the Chief Financial Officer and the Vice President of Finance of the Company since July 1998 and has served as the Secretary of the Company since
June 2000. Mr. Powell served as the Company’s interim President from November 2001 to June 2002. From March 1994 to July 1998, he was the Vice
President and Corporate Controller of Omega Environmental, Inc., a provider of products and services to owners of underground storage tanks. In 1983,
Mr. Powell joined KPMG Peat Marwick, an international public accounting firm, as a certified public accountant, and from 1990 to March 1994, was as a
Senior Audit Manager. Mr. Powell received a B.S. degree in accounting from Central Washington University.
Mr. Powell is party to an employment
agreement entered into with the Company in January 2002. Pursuant to this agreement, if Mr. Powell’s employment is terminated by the Company
without cause, as defined in the agreement, he is entitled to receive severance payments equal to six months annual base salary. Mr. Powell’s
employment agreement is included as Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 2005.
Mr. Powell also is a party to a change
of control agreement entered into with the Company in August 2000. The change of control agreement provides that, upon a change of control, the Company
(or its successor) will continue to employ Mr. Powell, and he will remain in such employ, for a period of two years following the change of control.
The change of control agreement provides that, during such two-year period, the position, authority, duties and responsibilities of Mr. Powell will be
substantially the same as they were during the 90-day period prior to the change of control, and that Mr. Powell’s annual base salary will be at
least equal to his annual base salary established by the Company’s board of directors prior to the change of control. If, during the two-year
period following the change of control, the employment of Mr. Powell is terminated by the Company other than for cause, as defined in the change of
control agreement, or by Mr. Powell for good reason, as defined in the change of control agreement, Mr. Powell would be entitled to receive (i) his
annual base salary, and pro rata annual bonus, through the date of termination, and any deferred compensation; and (ii) a severance payment equal to
twice the sum of his annual base salary and the average of his past three annual bonuses. In addition, Mr. Powell’s unvested options would
accelerate and become fully vested and exercisable. If, during the two-year period following the change of control, Mr. Powell’s employment is
terminated by the Company for cause or by Mr. Powell without good reason, Mr. Powell would receive only the amount of his annual base salary and other
deferred compensation then due.
3
Mr. Powell’s change of control
agreement is included as Exhibit 10.8 to the Company’s Form 10-K for the year ended December 31, 2005.
(e) On
December 6, 2006, the compensation committee of the Company’s board of directors approved entering into a consulting arrangement with Dr. Atkins,
to be effective immediately following Dr. Atkins’ resignation as Chief Executive Officer and President of the Company on December 15, 2006. Under
this verbal arrangement, Dr. Atkins will provide consulting services to the Company in connection with the proposed asset sale, work force reduction
and other operational matters until the earlier of (i) the date of completion of the proposed asset sale or (ii) March 31, 2007. In consideration of
his services, Dr. Atkins will receive compensation in the amount of $15,000 per month, plus reimbursement of reasonable travel and other
expenses.
Section 9 — Financial Statements and
Exhibits
Item 9.01. |
|
Financial Statements and Exhibits. |
10.1 |
|
|
|
Asset Purchase Agreement by and among Plant Health Care, Inc., Plant Health Care plc and Eden Bioscience Corporation dated as of December 1,
2006, including the form of Secured Promissory Note from PHC (Exhibit A), the form of License and Supply Agreement between PHC and the Company (Exhibit
B), the form of Guaranty between the Plant Health Care plc for the benefit of the Company (Exhibit C), and the form of Security Agreement and Patent
and Trademark Security Agreement (Exhibit D) |
99.1 |
|
|
|
Press release dated December 4, 2006 |
4
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 hereunto duly
authorized.
|
|
|
|
Eden Bioscience Corporation |
| |
Dated: December
7, 2006 |
|
|
|
By: s/Bradley S. Powell
Name: Bradley S. Powell
Title: Chief Financial
Officer |
5