-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O02Pen24dR2dHRcF03tO63fjJQsu1aj/563PTfT/YGUsmqfk9ZWJhpVy8lifP0Sk 8I/jTlRCrGuBD5TOJQzHQA== 0000950109-96-007308.txt : 19961113 0000950109-96-007308.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950109-96-007308 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIROGEN INC CENTRAL INDEX KEY: 0000863815 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 222899415 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20404 FILM NUMBER: 96658271 BUSINESS ADDRESS: STREET 1: 4100 QUAKERBRIDGE RD STREET 2: PRINCETON RESEARCH CENTER CITY: LAWRENCEVILLE STATE: NJ ZIP: 08648 BUSINESS PHONE: 6099369300 MAIL ADDRESS: STREET 1: PRINCETON RESEARCH CENTER STREET 2: 4100 QUAKERBRIDGE RD CITY: LAWRENCEVILLE STATE: NJ ZIP: 08648 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 - ------------------------------------------------------------------------------- For Quarter Ended September 30, 1996 Commission File Number 0-20404 ENVIROGEN, INC. --------------- (Exact name of registrant as specified in its charter) Delaware 22-2899415 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4100 Quakerbridge Road Princeton Research Center Lawrenceville, NJ 08648 ----------------------- (Address of principal executive offices) (609) 936-9300 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 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 [_] The number of shares outstanding of the Registrant's Common Stock, $.01 par value, as of September 30, 1996 was 12,869,640. - ------------------------------------------------------------------------------- ENVIROGEN, INC. TABLE OF CONTENTS PART I FINANCIAL INFORMATION PAGE ---- ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets at September 30, 1996 and December 31, 1995 (Unaudited) 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General 8 Results of Operations 8 Liquidity and Capital Resources 10 Other Matters 11 PART II OTHER INFORMATION ITEM 5. OTHER INFORMATION 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURE PAGE 13 2 PART I - FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS ENVIROGEN, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 1996 1995 --------------- -------------- ASSETS Current assets: Cash and cash equivalents $4,722,318 $3,748,197 Accounts receivable-trade, net 2,591,583 1,575,664 Unbilled revenue 1,742,181 1,338,232 Inventory 55,972 Prepaid expenses and other current assets 175,698 160,481 --------------- -------------- Total current assets 9,287,752 6,822,574 Property and equipment, net 1,243,785 1,119,090 Restricted cash 399,082 309,300 Investment in and advances to joint venture 310,731 181,563 Intangible assets, net 1,392,124 26,099 Long term accounts receivable 306,768 Other, principally deposits 118,371 126,607 --------------- -------------- Total assets $13,058,613 $8,585,233 =============== ============== LIABILITIES Current liabilities: Accounts payable $877,748 $772,089 Accrued expenses and other liabilities 1,183,170 613,691 Deferred revenue 416,363 424,588 Current portion of note payable 4,600 4,333 Current portion of capital lease obligations 39,081 103,020 Preferred Stock dividends payable 14,583 --------------- -------------- Total current liabilities 2,520,962 1,932,304 Deferred rent 21,389 48,890 Note payable, net of current portion 803 4,287 Capital lease obligations, net of current portion 34,955 7,774 --------------- -------------- Total liabilities 2,578,109 1,993,255 --------------- -------------- Redeemable Cumulative Convertible Preferred Stock 1,728,621 STOCKHOLDERS' EQUITY Common stock 129,291 90,495 Additional paid-in capital 31,937,112 24,100,394 Accumulated deficit (21,579,949) (19,321,582) Less: Treasury stock (5,950) (5,950) --------------- -------------- Total stockholders' equity 10,480,504 4,863,357 --------------- -------------- Total liabilities, redeemable cumulative convertible preferred stock and stockholders' equity $13,058,613 $8,585,233 =============== ==============
The accompanying notes are an integral part of these consolidated financial statements. ENVIROGEN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ----------------------------- 1996 1995 1996 1995 ------------- ------------ ------------ ------------ Revenues: Commercial operations $2,604,163 $1,734,026 $7,621,681 $4,237,170 Research and development services 436,620 492,566 1,287,156 1,330,910 ------------- ------------ ------------ ------------ Total revenues 3,040,783 2,226,592 8,908,837 5,568,080 ------------- ------------ ------------ ------------ Cost of commercial operations 2,283,010 1,505,506 6,967,717 3,726,982 Provision for contract claim 150,000 550,000 Research and development costs 539,646 631,465 1,692,965 1,772,393 General and administrative expenses 470,444 403,009 1,380,361 1,204,983 Marketing expenses 221,550 265,827 680,562 841,384 ------------- ------------ ------------ ------------ Total costs and expenses 3,664,650 2,805,807 11,271,605 7,545,742 ------------- ------------ ------------ ------------ Other income (expense): Interest income 70,659 60,378 131,011 147,737 Interest expense (6,476) (7,909) (19,320) (23,808) Equity in gain (loss) of joint venture (49,619) (36,123) 29,168 (49,210) Other, net 13,961 ------------- ------------ ------------ ------------ Other income, net 14,564 16,346 140,859 88,680 ------------- ------------ ------------ ------------ Net loss (609,303) (562,869) (2,221,909) (1,888,982) Preferred stock dividends (43,750) (36,458) (72,917) ------------- ------------ ------------ ------------ Net loss applicable to Common Stock ($609,303) ($606,619) ($2,258,367) ($1,961,899) ============= ============ ============ ============ Net loss per share applicable to Common Stock ($0.05) ($0.08) ($0.21) ($0.26) ============= ============ ============ ============ Weighted average number of shares of Common Stock outstanding 12,869,165 7,578,760 10,926,226 7,541,266 ============= ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 ENVIROGEN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ------------------------------------ 1996 1995 --------------- -------------- Cash flows from operating activities: Net loss ($2,221,909) ($1,888,982) Adjustments to reconcile net loss to cash used by operating activities: Depreciation and amortization 724,552 428,247 Provision for doubtful accounts 63,100 45,000 Equity in (earnings) loss of joint venture (29,168) 49,210 Other 549 Changes in assets and liabilities: (Increase) in accounts receivable (319,982) (259,121) (Increase) decrease in unbilled revenue 141,036 (744,464) (Increase) decrease in prepaid expenses and other assets 33,709 (59,919) Decrease in inventory 3,231 (Increase) in restricted cash (89,782) Increase (decrease) in accounts payable (275,264) 179,306 Increase in accrued expenses and other liabilities 55,296 126,230 Increase (decrease) in deferred revenue (8,225) 84,025 --------------- -------------- Net cash used by operating activities (1,922,857) (2,040,468) --------------- -------------- Cash flows from investing activities: Capital expenditures (168,798) (68,327) Investment in and advances to joint venture (100,000) (76,750) Purchase of MWR, Inc. (1,319,018) Proceeds from sale of property and equipment 1,600 --------------- -------------- Net cash used in investing activities (1,586,216) (145,077) --------------- -------------- Cash flows from financing activities: Debt repayment (3,217) (2,971) Capital lease principal repayments (98,426) (98,114) Net proceeds from issuance of Common Stock 4,620,186 Net proceeds from issuance of Redeemable Cumulative Convertible Preferred Stock 3,457,242 Net proceeds from exercise of stock options 15,692 11,792 Cash dividends paid on Redeemable Cumulative Convertible Preferred Stock (51,041) (43,750) --------------- -------------- Net cash used in financing activities 4,483,194 3,324,199 --------------- -------------- Net increase in cash and cash equivalents 974,121 1,138,654 Cash and cash equivalents at beginning of period 3,748,197 2,465,387 --------------- -------------- Cash and cash equivalents at end of period $4,722,318 $3,604,041 =============== ============== Supplemental disclosures of cash flow information: - ------------------------------------------------- Cash paid for interest $19,014 $23,759 =============== ============== Cash paid for income taxes $1,250 $0 =============== ==============
Supplemental disclosures of non-cash investing and financing activities: - ----------------------------------------------------------------------- - -The Company entered into capital lease obligations amounting to $49,116 and $42,924 for the nine months ended September 30, 1996 and 1995, respectively. - -In February 1996, the Company purchased MWR, Inc. for $1,319,018 in cash and 456,500 shares of Common Stock valued at $1,511,015. The accompanying notes are an integral part of these consolidated financial statements. 5 ENVIROGEN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The financial information presented reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 1995. 2. ACQUISITION OF MWR, INC. ----------------------- On February 9, 1996, the Company purchased all of the outstanding capital stock of MWR, Inc. for approximately $2,830,000. The purchase price included 456,500 shares of Company Common Stock valued at approximately $1,511,000. MWR is a provider of in situ remediation services with particular expertise in soil vapor extraction. The acquisition has been accounted for by the purchase method of accounting. The excess of the aggregate purchase price over the fair market value of net assets acquired of approximately $1,283,000 resulted in goodwill of $1,051,000 and a covenant not to compete of $232,000. These are being amortized over 10 and 5 years, respectively. The operating results of the acquisition are included in the Company's consolidated results of operations from the date of acquisition. The following pro forma financial information assumes the acquisition occurred at the beginning of the periods presented and does not purport to be indicative of what would have occurred had the acquisition been made as of those dates or of results which may occur in the future.
Nine Months Year Ended Ended December 31, 1995 September 30, 1996 ------------------- ------------------ Net revenues $12,740,698 $ 9,187,604 Net loss ($ 2,745,200) ($ 2,255,684) Net loss per share applicable to Common Stock ($ 0.34) ($ 0.21)
6 3. PRIVATE PLACEMENT OF COMMON STOCK --------------------------------- On May 24, 1996, the Company successfully completed the private placement of 2,000,000 shares of Common Stock resulting in net proceeds of $4,620,186. Allen & Company Incorporated ("Allen & Company"), a principal stockholder of the Company, acted as the placement agent. Allen & Company received a placement fee of $300,000 and was reimbursed for certain legal fees and other expenses. In connection therewith, the Company issued seven-year warrants to purchase 200,000 shares of the Company's Common Stock at $2.50 per share. An officer of Allen & Company is a director of the Company. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the Company's unaudited consolidated financial statements and notes thereto included in this Quarterly Report and the consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Form 10-K for the fiscal year ended December 31, 1995. General - ------- The source of the Company's revenues to date includes (i) commercial sales of the Company's biological degradation systems, (ii) remediation services, including both in situ and ex situ bioremediation, and (iii) funds received from third parties and government agencies to conduct specific research and development programs. While the Company has realized significant commercial revenues for several years from remediation services, it has only recently seen the first substantial revenues from sales of full-scale biological degradation systems for the treatment of contaminated air and water streams. Although great strides have been made in the commercialization of these systems, significant expenditures will be required for continued research and development, additional marketing activities and ultimately the development of manufacturing capabilities for the further commercialization of the Company's biodegradation systems. The amount and timing of such expenditures will vary depending on several factors, including the progress of development and testing, funding from third parties, the level of enforcement of environmental regulations by federal and state agencies, technological advances, changing competitive conditions and determinations with respect to the commercial potential of the Company's systems. The amount of timing of such expenditures can not be predicted. Results of Operations - --------------------- Nine Months Ended September 30, 1996 Compared to - ------------------------------------------------ Nine Months Ended September 30, 1995 - ------------------------------------ For the nine months ended September 30, 1996, the Company reported revenues of $8,908,837, an increase of 60% from the same period in 1995. The net loss in the period increased 15% to $2,258,367 from $1,961,899 in the same period in 1995, while the net loss per share was $0.21 compared to $0.26 in the same period in 1995. The decrease in net loss per share is due to a greater number of shares outstanding resulting from a private placement of common stock in the second quarter of 1996. Commercial revenues increased 80% to $7,621,681 from $4,237,170 in the same period in 1995, while revenues from corporate and government research and development contracts decreased 3% to $1,287,156 from $1,330,910 in the same period in 1995. The increase in commercial revenues is due primarily to increased systems sales by the Company's Commercial Air Group related to the ABTCo biofilter project combined with revenues from the Company's MWR subsidiary which was acquired in February 1996. Revenues from remediation activities accounted for 74% of the Company's commercial revenues in the nine-month period ended September 30, 1996. Revenues from corporate and government research and development contracts decreased slightly from 1995 as revenues from numerous new projects partially offset the loss of revenues due to the conclusion in December 1995 of PCB work the Company performed for the Texas Eastern Company. In late 1995, the Company began work under a Phase II Department of Energy Small Business Innovative Research 8 Grant (SBIR), Phase II Department of Defense SBIR and Phase II National Science Foundation SBIR, which contributed significantly to 1996 results. The Company also recorded initial revenues during the first nine months of 1996 under a new Phase I grant from the Department of Energy and a new Phase I grant from the National Science Foundation. Total costs and expenses increased 49% to $11,271,605 in the first nine months of 1996 from $7,545,742 in the same period in 1995, due primarily to the increased cost of commercial services and products associated with the higher revenue levels. The cost of commercial operations increased 87% to $6,967,717 due to higher revenue levels, a greater proportion of which were attributable to lower margin systems sales. Research and development expenses decreased 4% to $1,692,965. General and administrative expenses increased 15% to $1,380,361 due largely to the increased amortization of intangible assets associated with the acquisition of MWR in February 1996. The $550,000 provision for contract claim is the estimated cost to repair and restart the previously disclosed Nylonge biofilter system. While the ultimate responsibility for these expenses has not yet been determined, the Company is actively pursuing reimbursement of these expenses from third parties. However, there can be no assurance that any such recoveries will be attained. Marketing expenses decreased 19% due primarily to reduced personnel related costs combined with other cost reduction efforts. Interest income decreased by 11% to $131,011 due to the decreased average cash available for investment resulting from the Company's continuing loss position combined with the cash required for the Company's acquisition of MWR, Inc. Equity in gain of joint venture increased to $29,168 for the nine-month period ended September 30, 1996 from a loss of $49,210 due to the Company's participation in the CVT America joint venture. Prior to its conversion in May 1996, the Company paid dividends of $36,458 in 1996 on the Company's outstanding convertible preferred stock. Three Months Ended September 30, 1996 Compared to - ------------------------------------------------- Three Months Ended September 30, 1995 - ------------------------------------- For the three months ended September 30, 1996, the Company reported revenues of $3,040,783, an increase of 37% from the same period in 1995. The net loss in the period of $609,303 remained relatively flat versus the same period in 1995, while the net loss per share was $0.05 compared to $0.08 in the same period in 1995. The decrease in net loss per share is due to a greater number of shares outstanding resulting from a private placement of common stock in the second quarter of 1996. Commercial revenues increased 50% to $2,604,163 from $1,734,026 in the same period in 1995, while revenues from corporate and government research and development contracts decreased 11% to $436,620 from $492,566 in the same period in 1995. The increase in commercial revenues is due primarily to revenues from the Company's MWR subsidiary which was acquired in February 1996. Revenues from remediation activities accounted for 84% of the Company's commercial revenues in the three-month period ended September 30, 1996. Revenues from corporate and government research and development contracts decreased due to the conclusion in December 1995 of PCB work the Company performed for the Texas Eastern Company. Total costs and expenses increased 31% to $3,664,650 in the third quarter of 1996 from $2,805,807 in the same period in 1995. The cost of commercial operations increased 52% to $2,283,010 due to higher revenue levels. Research and development expenses decreased 15% to $539,646 due primarily to the decreased revenues from corporate and government research and development contracts. General and 9 administrative expenses increased 17% to $470,444 due primarily to the increased amortization of intangible assets associated with the acquisition of MWR in February 1996. Of the $550,000 estimated cost to repair and restart the previously disclosed Nylonge biofilter system, $150,000 was recognized in the third quarter of 1996. While the final responsibility for these expenses has not yet been determined, the Company is actively pursuing reimbursement of these expenses from third parties. However there can be no assurance that any such recoveries will be attained. Marketing costs decreased 17% to $221,550 due primarily to reduced personnel related costs combined with other cost reduction efforts. Interest income increased 17% to $70,659 due to the increased level of cash available for investment as a result of the Company's May 1996 private placement of common stock. Equity in loss of joint venture of $49,619 is due to the Company's participation in the CVT America joint venture. Liquidity and Capital Resources - ------------------------------- The Company has funded its operations to date primarily through public offerings and private placements of equity securities, research and development agreements with major industrial companies, research grants from government agencies and revenues from commercial services and sales of biological degradation systems. At September 30, 1996 the Company had cash and cash equivalents of $4,722,318 and working capital of $6,766,790. Additionally, the Company had restricted cash of $399,082 that was being used to collateralize bonds for large commercial projects. Cash and cash equivalents increased by $974,121 from December 31, 1995 to September 30, 1996 due to the net proceeds of $4,620,186 from the May 1996 private placement of Common Stock which offset the cash payment of $1,319,018 for the purchase of MWR, Inc. in February 1996, cash used by operations of $1,922,857, capital expenditures of $168,798, an advance to affiliate of $100,000, capital lease principal repayments of $98,426 and cash dividends on preferred stock of $51,041. The Company expects to incur additional capital expenditures in connection with the continued development and commercialization of its technologies. The timing and amount of such expenditures will fluctuate depending on the timing of field tests, systems development activity, the rapidity with which the Company's biodegradation systems can be further commercialized and the availability of capital. Furthermore, future projects may require the Company to set aside additional capital to collateralize performance bonds. Revenue from certain of the Company's contracts is recognized as services are provided and costs are incurred. For fixed-price contracts, revenue is recognized on the percentage-of-completion method, measured by the percentage relationship of costs incurred from contract inception to date to the estimated total costs for each contract. The asset "Unbilled revenue" represents revenues recognized in excess of amounts billed. Correspondingly, the liability "Deferred revenue" represents billings in excess of costs and estimated earnings. The balance in these accounts will fluctuate depending on a number of factors, including the number and size of fixed-price contracts, contract terms and other timing and cost issues. At September 30, 1996, unbilled revenue was $403,949 greater than at December 31, 1995 due primarily to the acquisition of MWR. Accounts receivable increased by $1,015,919 from December 31, 1995 to September 30, 1996 primarily due to the acquisition of MWR and the timing of billings for the ABTCo project. Accounts payable increased by $105,659 and accrued expenses and other liabilities increased by $569,479 in the same period due primarily to the acquisition of MWR. 10 The Company will continue to incur operating losses during the period of development and commercialization of its technologies relating to the treatment of hazardous wastes and industrial pollutants. Although it is unable to predict with certainty, the Company believes it will have sufficient capital to meet its operating requirements at least through the intermediate term. If the Company is unable to obtain continued funding for the development of these technologies through research and development agreements and increased commercial revenues, it will be necessary to obtain funding from other sources. There can be no assurance that the Company will be able to obtain additional funds to meet its capital requirements or, if successful, the terms of such financing may not be advantageous to the Company. Other Matters - ------------- As of December 31, 1995, the Company had a net operating loss carryfoward of approximately $17,600,000 for federal income tax reporting purposes available to offset future taxable income, if any, through 2010. The timing and manner in which these losses may be utilized are limited under Section 382 of the Internal Revenue Code of 1986, as amended, as a result of certain ownership changes with respect to the Company to date, and may be further limited in the event of additional ownership changes. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123"). In October 1995, SFAS 123 established financial and reporting standards for stock based compensation plans. The Company will adopt the disclosure only provision of this standard during 1996. 11 PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION On November 6, 1996, the Company announced that it had entered into a letter of intent with Fluid Management, Inc. (FMI) of Milwaukee, Wisconsin to acquire FMI for approximately $11 million in cash and approximately 4.2 million shares of common stock. The acquisition is subject to customary conditions of closing, including the satisfactory results of due diligence investigations, satisfactory operating results of FMI and the Company prior to closing, receipt of necessary approvals, and the obtaining of financing from E.M. Warburg, Pincus & Company, Inc. which has expressed an interest in providing the capital to the Company necessary to finance the acquisition and supplement the working capital of the combined enterprise. Such capital would take the form of a direct purchase by Warburg, Pincus of approximately $16 million of common stock at a price of $2.625 per share. The shares issued in connection with the acquisition and the private placement would have the benefit of certain registration rights, but would be restricted from public resale for a period of one year from the date of closing. FMI is a full service environmental consulting and engineering firm with offices in Wisconsin, Illinois and Michigan. In 1995 FMI reported gross sales of $21.4 million and pre-tax income of $4.6 million. On November 7, 1996, the Company announced that it had entered into a water treatment technology agreement with Rhone-Poulenc Inc. to develop comprehensive biological water treatment technologies and systems for the industrial waste water treatment market. For a period of 18 months the companies will develop, test market and install water treatment systems to targeted sectors of the waste water treatment industry. If the results of these activities are satisfactory to both parties, the companies plan to form a joint venture that will fully exploit these synergistic applications. The Company is contributing its expertise in the biological treatment of waste water with particular emphasis on its high- performance bioreactors, such as the membrane and fluidized bed bioreactors. Rhone-Poulenc is supplying marketing, project and engineering support as well as membrane systems to the project. The Company and Rhone-Poulenc are currently working on projects that integrate their respective technologies. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibit No. Description ----------- ----------- 10.1 Letter agreement dated November 6, 1996 between Envirogen, Inc. and Fluid Management, Inc., as confirmed by E.M. Warburg, Pincus & Co., Inc. 10.2 Development agreement dated November 7, 1996 between Envirogen, Inc. and Rhone-Poulenc Inc. 27 Financial Data Schedule
(b) Reports on Form 8-K - None. 12 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. ENVIROGEN, INC. (Registrant) Date: November 12, 1996 By: /s/ Harcharan S. Gill --------------------------------------- Harcharan S. Gill President and Chief Executive Officer /s/ Patricia A. McQueary --------------------------------------- Patricia A. McQueary Controller 13 EX-10.1 2 FLUID MANAGEMENT INC. LETTER Exhibit 10.1 Envirogen, Inc. Princeton Research Center 4100 Quakerbridge Road Lawrenceville, New Jersey 08648 November 6, 1996 CONFIDENTIAL - ------------ Fluid Management, Inc. 2831 N. Grandview Blvd. Pewaukee, Wisconsin 53072 ATTN: Mr. William C. Smith, P.E. Chairman, President & CEO Dear Mr. Smith: You have discussed with Envirogen, Inc. ("Envirogen") the business and operations of, and prospects for, Fluid Management, Inc. ("FMI") and your interest in combining such operations with those of Envirogen. Based upon our review of the information received to date, and assuming that business, accounting and legal due diligence supports our preliminary valuation, we would be interested in pursuing the acquisition of FMI by Envirogen or a subsidiary of Envirogen (the "Acquisition"). The purchase price (the "Purchase Price") in the acquisition would be: (a) cash in an amount equal to $11,000,000, plus all "nonoperating" cash of FMI as of the Closing Date (the parties will agree on the amount of "operating" cash and "nonoperating" cash of FMI, but FMI believes that the amount of "operating" cash of FMI is minimal), minus the principal amount of all indebtedness of FMI for borrowed money on the Closing Date, provided that there shall be excluded as indebtedness (the "Excluded Debt") for such purposes: (i) any indebtedness of FMI incurred to pay out to FMI shareholders the balance of the so called "tax dividends" based on FMI's 1996 earnings, which balance of such dividends is currently estimated to be approximately $1,000,000; and (ii) the amount necessary to prepay the PAC bonuses to FMI employees prior to the Closing, which bonuses are currently estimated to be approximately $800,000; and (b) 4,190,477 shares of the common stock of Envirogen. The Acquisition will be structured to accommodate the business, financial, legal, tax and accounting needs of the parties, provided that the shareholders of FMI will be subject to only one level of capital gains tax on the cash portion of the Purchase Price and that the receipt by FMI shareholders of the portion of the Purchase Price payable in shares of common stock of Envirogen will be tax free, provided that the parties understand that future sales of Envirogen common stock by FMI's shareholders may be taxable. Fluid Management, Inc. November 6, 1996 Page 2 The Purchase Price is premised on, among other things, an approximate minimum net worth of FMI of $2 million on the Closing Date, provided that, in such calculation, the Excluded Debt shall not be counted and FMI's reserve for unrealized sales shall be added back to the net worth. The shares of Envirogen Common Stock issued in connection with the Acquisition would be registered by Envirogen as soon as practicable after the Closing but in any event within 9 months after the Closing Date, but the holders of such shares would agree not to sell or transfer any such shares for a period of 12 months after the Closing Date. Envirogen understands that FMI's current management and key staff members intend to remain with the combined enterprise and that, at Closing of the Acquisition, FMI's arrangements regarding continued employment with such persons will be reaffirmed or established, as the case may be, including the availability of an option pool of 600,000 shares of Common Stock of Envirogen at an exercise price to be agreed to in the definitive documents describing the Acquisition. In addition, the Envirogen Board of Directors will be reconstituted upon Closing with William C. Smith and Robert S. Hillas replacing two current Envirogen directors. The consummation of the Acquisition and the transactions contemplated hereby are subject to (a) our satisfaction with the results of a "due diligence" investigation of FMI of the type that would customarily be carried out in an acquisition of this nature, (b) satisfactory operating results of FMI during the period from the date hereof to the Acquisition's Closing, (c) authorization of the Acquisition and the transactions contemplated hereby by the Board of Directors and stockholders of Envirogen, and (d) our obtaining satisfactory financing from E.M. Warburg, Pincus & Co., Inc. ("Warburg"), which has expressed an interest in providing the capital to Envirogen necessary to finance the acquisition and supplement the working capital of the combined enterprise. Such capital would take the form of a direct investment by Warburg of approximately $16 million in Envirogen's Common Stock at a purchase price of $2.625 per share. Such shares would carry the same registration rights and would be subject to the same resale restrictions as the shares issued to the former FMI stockholders. The consummation of the Acquisition and the transactions contemplated hereby are also subject to (a) FMI's satisfaction with the results of a "due diligence" investigation of Envirogen of the type that would customarily be carried out in a transaction of this nature, (b) satisfactory operating results of Envirogen during the period from the date hereof to the Acquisition's Closing, (c) authorization of the Acquisition and the transactions contemplated hereby by the Board of Directors and stockholders of Envirogen, and Fluid Management, Inc. November 6, 1996 Page 3 (d) Warburg making the investment described above evidenced by documents reasonably satisfactory to Warburg, Envirogen and FMI. The foregoing represents only a statement of the present intent of the parties with respect to the proposed transaction and does not constitute a commitment or obligation on the part of any of the parties for the purchase or sale of FMI or the investment by Warburg in Envirogen. Any such commitment or obligation will result only from the execution of definitive agreements, which will contain representations, warranties, covenants and conditions customary for transactions of this nature, including covenants concerning the operation of the businesses of FMI and Envirogen only in the ordinary course of business, consistent with past practice, between the date of this letter and the Closing Date, mutually agreeable maximum amounts of Transaction Costs (as defined below) and other typical provisions. Furthermore, the foregoing summary does not refer to all matters upon which agreement must be reached, and for which approvals may be required, in order for the proposed transactions to be consummated. Notwithstanding the foregoing, it is acknowledged that Envirogen will incur substantial legal, accounting and other expenses in order to complete our evaluation of the business of FMI and to structure and finance the proposed transaction. Accordingly, you hereby agree that, commencing upon your signing of this letter and until the termination of this Letter of Intent, you shall not, and shall cause your management, stockholders and representatives not to, solicit, initiate, encourage or actively consider any discussion, proposal or negotiation for the purchase or sale of FMI, or any part thereof, by means of merger, stock or asset sale or otherwise, with any person or entity other than Envirogen and Warburg. This Letter of Intent shall terminate on December 31, 1996 unless a definitive agreement is executed by Envirogen and FMI on or before December 31, 1996, provided, however, that this Letter of Intent may be terminated by FMI at any time prior to execution of the definitive Agreement in the event that Envirogen requests a reduction the Purchase Price or requests a material adverse change in any other material term or condition of the transaction described in this letter of intent. If the transactions described in this letter of intent are not completed, each of the parties shall pay all fees and expenses incurred by it, including the fees of its counsel, accountants, investment bankers and others incident to the negotiation and preparation of this letter of intent (the "Transaction Costs"). If the transactions described in this letter of intent are completed, Fluid Management, Inc. November 6, 1996 Page 4 Envirogen shall pay all Transaction Costs of the parties subject to mutually agreeable maximum amounts of Transaction Costs to be agreed to in the definitive agreement referred to above. The parties agree that they will not make public statements regarding the transactions contemplated by this letter of intent without first consulting with the other party in order that such public statements shall be jointly issued by the parties, except to the extent required by law or any securities exchange. If you desire to proceed with this proposal, kindly so indicate by signing and returning a duplicate copy of this letter, where upon each of the parties shall proceed diligently and in good faith to fulfill the conditions referred to above. Very truly yours, ENVIROGEN, INC. By: /s/ Harch S. Gill ----------------------------- Harch S. Gill, Ph.D. President & CEO Accepted and Agreed: FLUID MANAGEMENT, INC. By: /s/ William C. Smith ----------------------------- William C. Smith, P.E. Chairman, President & CEO Confirmed: E.M. WARBURG, PINCUS & CO., INC. By: /s/ Robert S. Hillas ----------------------------- Robert S. Hillas Managing Director EX-10.2 3 DEVELOPMENT AGREEMENT Exhibit 10.2 DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT is made, entered into and effective this the 31st day of October, 1996, by and between RHONE-POULENC INC., a New York corporation, with offices at One Corporate Drive, Box 881, Shelton, Connecticut 06484 (hereinafter called "RP"), and ENVIROGEN, INC., a Delaware corporation, with offices at Princeton Research Center, 4100 Quakerbridge Road, Lawrenceville, New Jersey 08648 (hereinafter called "Envirogen"). WHEREAS, RP and Envirogen wish to work together to promote the joint development, marketing and commercialization of Systems in the Field of Use embodying and/or utilizing certain Envirogen technology and RP technology, and improvements thereto; WHEREAS, During the Development Period (as defined herein), the parties will work together to develop the Systems for commercial use and seek to install Systems for test marketing purposes in the Territory; and WHEREAS, If, at the end of the Development Period, the parties determine that the Systems are commercially and economically viable, the parties will proceed to market and commercialize the Systems in the Field of Use throughout the Commercialization Period (as defined herein). NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises set forth in this Agreement, RP and Envirogen hereby agree as follows. ARTICLE I DEFINITIONS ----------- As used in this Agreement, the following terms shall have the following respective meanings: Business Plan: The business plan to be prepared and agreed upon by the parties - ------------- for the Commercialization Period as more fully described in Section 2.2(f). Commercialization Agreement: The written agreement to be negotiated by the - --------------------------- parties in good faith setting forth the terms and conditions of the ownership, financing, management and operation of the Joint Venture and each party's rights in, and obligations to, the Joint Venture during the Commercialization Period. Commercialization Period: The period during which the parties will form and - ------------------------ operate the Joint Venture to market and commercialize the Systems in the Field of Use pursuant to the Commercialization Agreement upon completion of the Development Period and the parties' mutual agreement to proceed with commercialization of the Systems. Development Period: The period beginning with the date of this Agreement and - ------------------ extending for a period of no longer than eighteen (18) months, during which the parties will work together to develop for commercial use and determine the commercial and economic viability of the Systems in the Field of Use. Development Plan: The development plan and schedules to be prepared and agreed - ---------------- upon by the parties for the Development Period as more fully described in Section 2.2(e). Envirogen Jointly Developed Technology: Jointly Developed Technology - -------------------------------------- applicable or relating to Envirogen Technology, Envirogen Know-How and Envirogen's improvements thereto relating to Envirogen's biological cultures, which Jointly Developed Technology will be owned by Envirogen. Envirogen Know-How: Envirogen's biological process engineering expertise, - ------------------ reactor engineering expertise, microbial library, existing reactor designs, laboratory and other expertise and know-how relevant to the Envirogen Technology presently owned, developed or acquired by Envirogen during the Term, as defined herein, of this Agreement and/or the term of the Commercialization Agreement. 2 Envirogen RP Improvements: Any ideas, developments, trade secrets and know how - -------------------------- conceived and/or reduced to practice by Envirogen in the course and as a result of working on the Project under this Agreement and/or under the Commercialization Agreement, which constitute improvements or modifications to the RP Technology or the RP Affiliate Technology which improvements or modifications cannot be used by Envirogen or others without infringing the rights (patent, proprietary or otherwise) of RP in the RP Technology or of RP's Affiliates in the RP Affiliate Technology. Envirogen Technology: Envirogen's technology presently owned, conceived or - --------------------- reduced to practice or acquired by Envirogen during the Term of this Agreement and/or the term of the Commercialization Agreement that is covered by Envirogen patents, trade secrets and/or related Envirogen Know-How, relating to Envirogen's biological cultures and biological processes known as the membrane bio-reactor ("MBR") and the fluidized bed bio-reactor ("FBR"). Exclusive Envirogen Technology: That portion of the Envirogen Technology - ------------------------------- relevant to Envirogen's membrane bio-reactor process ("MBR"), together with the Envirogen Know-How related thereto, to be utilized exclusively in Systems in the Field of Use by Envirogen and RP pursuant to this Agreement and, if any, the Commercialization Agreement. Field of Use: Biological treatment (a) of process waste water streams, (b) of - ------------- ground water streams, and/or (c) in the production of commercial products through bio-conversion, using the Envirogen Technology, the RP Technology and any improvements thereto. Jointly Developed Technology: New technology, creative ideas, developments, - ----------------------------- trade secrets and know-how conceived and/or reduced to practice jointly by an employee or employees of one party with an employee or employees of the other party, during the Term of this Agreement, and/or the term of the Commercialization Agreement. All Jointly Developed Technology which is not Envirogen Jointly Developed Technology or RP Jointly Developed Technology will be owned jointly by Envirogen and RP. 3 Joint Venture: The entity to be formed by Envirogen and RP upon a mutual - ------------- decision to proceed with the Commercialization Period to jointly market and commercialize the Systems in the Field of Use. Non-Exclusive Envirogen Technology: That portion of the Envirogen Technology - ---------------------------------- relevant to Envirogen's fluidized bed bio-reactor process ("FBR"), together with the Envirogen Know-How related thereto, to be utilized on a non-exclusive basis in Systems in the Field of Use by Envirogen and RP pursuant to this Agreement and, if any, pursuant to the Commercialization Agreement. Project: The steps, actions and plans to be taken and implemented by the parties - ------- pursuant to this Agreement throughout the Development Period and, if any, pursuant to the Commercialization Agreement throughout the Commercialization Period. RP Affiliate: Any entity which, directly or indirectly, owns or is owned by, or - ------------ is under common ownership or control with, RP, irrespective of the amount or percentage of any such ownership. RP Affiliate shall include, but not be limited to, Rhone-Poulenc S.A. and Rhone-Poulenc Chimie. RP Affiliate Technology: Technology presently owned, developed and/or acquired - ----------------------- by any RP Affiliate (but not by RP) at any time before, during and after the Development Period and/or the Commercialization Period, patented or unpatented, covered by the proprietary trade secrets and/or know-how of the RP Affiliate, including, but not limited to, the ceramic and other membrane technology of the RP Affiliate. RP Envirogen Improvement: Any ideas, developments, trade secrets and related - ------------------------ ----------------------- know how conceived and/or reduced to practice by RP in the course and as a result of working on the Project under this Agreement and/or under the Commercialization Agreement, which constitute improvements or modifications to the Envirogen Technology and Envirogen Know-How relating to Envirogen's biological cultures, which improvements or modifications cannot be used by RP or others without infringing the rights (patent, 4 proprietary or otherwise) of Envirogen in that portion of the Envirogen Technology and Envirogen Know-How relating to Envirogen's biological cultures technology. RP Jointly Developed Technology: Jointly Developed Technology applicable or - -------------------------------- relating to RP Technology, RP Affiliate Technology, Systems (other than any embodiments of Envirogen Technology, Envirogen Know-How and Envirogen's improvements thereto relating to Envirogen's biological cultures) and RP Systems Improvements, which Jointly Developed Technology will be owned by RP. RP Systems Improvements: Any ideas, developments, trade secrets and know-how - ------------------------ conceived and/or reduced to practice by RP in the course and as a result of working on the Project under this Agreement and/or under the Commercialization Agreement, which constitute improvements or modifications to the Systems, or any parts thereof, and which are physically embodied in Systems used commercially for or by customers of the Project or the Joint Venture upon termination of this Agreement or, if any, the Commercialization Agreement, excluding, however, those parts or portions of the Systems which embody Envirogen Technology relating to biological cultures and/or Envirogen Know-How relating to biological cultures. RP Systems Improvements may include RP Technology to the extent any such RP Technology is physically embodied in Systems as described herein. RP Technology: RP's technology presently owned, developed and/or acquired by RP - -------------- during the Term of this Agreement and/or the term of the Commercialization Agreement that is covered by or related to RP patents, trade secrets and/or know-how and that does not constitute RP Envirogen Improvements or RP Affiliate Technology. RP Technology for purposes of this Agreement shall include, but not be limited to, RP's project management and chemical handling technology and expertise, engineering and mechanical technology and expertise, sales and marketing expertise, and market and trade name and trademark recognition. Systems: The physical and mechanical processes, plant, equipment, products and - -------- systems which facilitate the use and application of, and/or embody, the Envirogen Technology, Envirogen Know-How and/or, if any, any RP Envirogen Improvements, Envirogen RP 5 Improvements, RP Systems Improvements, Envirogen Jointly Developed Technology, RP Jointly Developed Technology and/or Jointly Developed Technology, to be designed, engineered, constructed, installed and started- up by the parties hereunder in furtherance of the Project. Term: The period beginning on the date of this Agreement and ending on the ----- date of the earliest to occur of (a) termination of this Agreement by mutual consent of the parties; (b) termination or expiration of the Development Period pursuant to this Agreement or (c) termination of this -------------------------- Agreement pursuant to Section 8.2. Territory: The territory consisting of the United States, Canada and Mexico ---------- and their respective territories and possessions. ARTICLE II DEVELOPMENT PERIOD ------------------ 2.1 Development Period. The Development Period and this Agreement may be ------------------- terminated or extended by mutual agreement of the parties. During the Development Period, the parties will work together to develop the Systems for commercial marketing and use in the Territory and will seek to install Systems at third party locations in the Territory for test and marketing purposes. 2.2 Responsibilities. During the Development Period, the following provisions ----------------- will apply and the parties will work together to perform the following tasks in the Territory. a) Envirogen Technology. Envirogen will make available to the Project in --------------------- the Field of Use in the Territory for use by Envirogen and RP in furtherance of the Project (i) the Exclusive Envirogen Technology, relevant Envirogen Know-How, Envirogen RP Improvements, relevant Envirogen Jointly Developed Technology and any improvements and modifications thereto, on an exclusive, royalty-free basis and (ii) the Non-Exclusive Envirogen Technology, relevant Envirogen Know-How, Envirogen RP Improvements, relevant Envirogen Jointly Developed Technology and any improvements and 6 modifications thereto, on a non-exclusive, royalty-free basis during the term of this Agreement. b) RP Technology. RP will make available to the Project in the Field of Use in ------------- the Territory for use by Envirogen and RP in furtherance of the Project, the RP Technology, RP Systems Improvements, RP Envirogen Improvements and relevant RP Jointly Developed Technology, and any improvements and modifications thereto, on an exclusive, royalty-free basis, during the term of this Agreement. c) RP Affiliate Technology. The parties acknowledge and agree that at no time ----------------------- during the Development Period and/or the Commercialization Period will the RP Affiliate Technology be disclosed to or utilized by the Project or Envirogen or otherwise become subject to this Agreement or the Commercialization Agreement, except pursuant to and in accordance with the RP Affiliate's prior written agreement. RP will use its reasonable efforts to obtain and provide to the Project the RP Affiliate's membrane products and such information deemed by RP, in its sole discretion, necessary or appropriate for proper commercial utilization of such membrane products in furtherance of the Project. d) Jointly Developed Technology. The parties will make available to the Project ---------------------------- in the Field of Use in the Territory any (jointly owned) Jointly Developed Technology deemed by either or both parties necessary or appropriate in furtherance of the Project, on an exclusive, royalty-free basis during the term of this Agreement. e) Development Plan. Prepare and agree upon the Development Plan on or before ---------------- December 1, 1996. The Development Plan will include the definition of the costs and expenses to be shared by the parties, and the billing rates and charges to be made to the Project based on the applicable party's actual direct internal cost to provide its services, facilities and materials to the Project as further provided in Section 2.3 hereof; provided, however, no charges will be made for the use of either party's technology or know-how as provided elsewhere in this Agreement. 7 f) Business Plan. Prepare and agree upon the Business Plan for the ------------- Commercialization Period on or before February 1, 1997. The Business Plan will include the capital requirements and financial proposals for the Joint Venture, the definition of the costs and expenses to be shared by the parties, the billing rates and charges to be made to the Joint Venture based on the applicable party's actual internal cost to provide engineering, technical, marketing, sales and other services, facilities and materials, and reimbursement procedures. After completion, the Business Plan shall be, except as otherwise agreed between the parties, mutually reviewed and adjusted, modified and/or revised, as needed, every six (6) months, pursuant to agreement between the parties. g) UNOCAL Project. Share equally, on a 50/50 basis, the direct, out-of-pocket -------------- costs needed to complete the design, engineering, construction, installation and start-up of a System pending as of the date of this Agreement for UNOCAL, estimated to total $300,000 in costs. In the event the total costs for the UNOCAL System are estimated to exceed $500,000, either party may elect, in its discretion, to terminate its participation in the UNOCAL project. h) Installation of Systems. Promote the installation of at least four (4) ----------------------- Systems on a test basis, at locations in the Territory to be agreed upon by the parties, in the first twelve (12) months of the Development Period. Either the Envirogen MBR Technology or the Envirogen FBR Technology will be used in each individual System as the parties shall mutually determine to be necessary or appropriate. i) Periodic Reviews. RP and Envirogen will review, from time to time, and ---------------- adjust or revise as deemed necessary or appropriate, the Development Plan, the activities undertaken and the progress being made during the Development Period. j) Envirogen as Contractor. Envirogen shall act as the primary contractor in ----------------------- the design, engineering, construction, installation and start-up of the Systems during the Development Period. 8 k) Outline of Commercialization Agreement. Within six (6) months after -------------------------------------- the date of this Agreement, the parties will negotiate in good faith and mutually agree upon an outline of the principal terms and conditions of the Commercialization Agreement. The outline shall set forth the principal terms and conditions which shall govern the ownership, financing, management and operation of the Joint Venture as well as each party's rights in, and obligations to, the Joint Venture. Until the effective date of the Commercialization Agreement, the terms of this Agreement and, where appropriate, the Business Plan will apply to the Commercialization Period and the Joint Venture. If any term or condition in this Agreement is inconsistent, at variance or in conflict with the Commercialization Agreement with respect to any period after commencement of the Commercialization Period, then the term or condition in the Commercialization Agreement shall govern and control. 2.3 Sharing of Income, Costs and Expenses. All income, revenues, capital ------------------------------------- requirements, costs and expenses of the Project during the Development Period will be shared equally between the parties, on a 50/50 basis, as further described hereinafter. Costs and expenses will include only direct, out-of-pocket costs incurred by a party in furtherance of the Project or specific Systems, such as the direct costs incurred to design, engineer, construct, install and start up a System. Costs and expenses shall not include indirect, overhead, sales and administration and similar costs, except as otherwise agreed in writing between the parties. The parties shall mutually agree on the handling of cash received from revenues and paid out against invoices from third parties. Each party will maintain separate books, records and/or "accounts by Project" to record the revenues and the costs and expenses of the Project. Each party may at any time review, audit and copy the other party's books and records to assure compliance with this Agreement. During the Development Period, distribution of net income from the Project will be subject to agreement by RP and Envirogen; provided, however, that no less than eighty percent (80%) of the positive cash flow from the Project, subject to reserves for working capital needs as agreed to by the parties, shall be distributed to Rp and Envirogen equally on a quarterly basis. 2.4 Contributions of the Parties during the Development Period. It is ---------------------------------------------------------- understood and agreed that, during the Development Period, each party will make available to the Project its technology and know-how at no cost to the other party or the Project as further described in Sections 2.2(a) through 9 (d) above. If Envirogen and RP participate together in a project outside the Territory pursuant to Article VII, then the technology and know-how of each party made available to the Project will be made available to the project outside the Territory at no cost to the other party, the Project or the specific project outside the Territory. Nothing in the foregoing shall prohibit or restrict the reimbursement, as provided for elsewhere in this Agreement, to either party for the direct costs and expenses actually incurred by each party in performing functions for the Project in the Territory (or any project outside the Territory in which RP participates), utilizing such technology and know-how, and/or providing such technology and know-how to the Project as described in this Agreement, the Development Plan, the Commercialization Agreement and/or the Business Plan. ARTICLE III COMMERCIALIZATION PERIOD ------------------------ 3.1. Decision to Proceed with Commercialization Period. Upon completion of ------------------------------------------------- the Development Period, but commencing no later than May 1, 1998, RP and Envirogen will determine in good faith whether the Project is commercially and economically viable. Factors relevant to this determination will include the technical, financial and commercial viability and prospects for the Envirogen Technology and the Systems in the Field of Use in the Territory, the technical and financial viability of Envirogen, the strength of the claims in the relevant patents and patent applications, the resolution of any technical, regulatory and business issues identified during the Development Period and the projected future revenue stream and financial returns. If RP and Envirogen determine to continue their participation in the Project, the parties will work together to commercialize and market the Systems in the Field of Use in the Territory and, pursuant to Article VII, outside the Territory, pursuant to the Commercialization Agreement and the Business Plan. 3.2. Decision Not to Proceed. In the event that the parties do not mutually ---------------------- agree to proceed with the Commercialization period, the following provisions will apply. a) Installed Systems. The parties will continue to operate any ----------------- Systems installed during the Development Period until the earliest to occur of the expiration of (a) the term of the lease or contract for the System, or (b) three (3) years from the date of 10 termination of the Development Period. During such period the costs, expenses and revenues will be shared as provided in Sections 2.3 and 2.4 hereof. b) Purchase of One Party's Interest. During such period, the parties -------------------------------- may agree to have one party purchase the other party's interest in the installed Systems based on a discounted cash flow basis. If one party wishes to purchase the other party's interest, the parties agree to negotiate in good faith the terms and conditions of such purchase. c) Liquidation of Physical Assets. If neither party wishes to ------------------------------ purchase the other party's interest, then any physical assets that are jointly owned will be liquidated and the proceeds will be distributed equally between RP and Envirogen. d) Article V Restrictions. The provisions of Section 5.1 shall apply ---------------------- to both parties with respect to each party's right and/or license to use the other party's technology. If Envirogen determines, other than in good faith or for no reason or for any reason other than a valid business reason as described in Section 3.1, not to proceed with the Commercialization Period, then the restrictions in Sections 5.1(c)(iii) and 5.2 shall apply to Envirogen. 3.3 Decision to Proceed. In the event that the parties mutually agree to ------------------- proceed with the Commercialization Period, the following provisions will apply. a) Commercialization Agreement. The parties will negotiate in good --------------------------- faith and execute the definitive Commercialization Agreement within two (2) months after the date a firm decision is made to proceed with the Commercialization Period. The outline of the Commercialization Agreement agreed to during the Development Period will serve as the basis for the definitive Commercialization Agreement. b) Joint Venture Entity. A Joint Venture entity (partnership, -------------------- corporation or limited liability partnership or company) will be formed to operate the business of the Project and commercialize and market the Systems in the Field of Use in the 11 Territory and, as provided in Article VII, outside the Territory. Each party will own a fifty percent (50%) interest in the Joint Venture entity. c) Financing. RP will assist in securing for the Joint Venture a line or --------- lines of credit from third parties to finance the leasing of Systems to customers. d) Envirogen Technology. Envirogen will (i) assign or transfer to the -------------------- Joint Venture the Exclusive Envirogen Technology and the Envirogen Know-How, Envirogen RP Improvements, and Envirogen Jointly Developed Technology related thereto, and (ii) grant a nonexclusive, royalty- free license to the Joint Venture for the use of the Non-Exclusive Envirogen Technology and the Envirogen Know-How, Envirogen RP Improvements and Envirogen Jointly Developed Technology related thereto, in the Field of Use in the Territory and, as provided in Article VII, outside the Territory, at no cost to the Project or the other party. e) RP Technology. RP will (i) assign or transfer to the Joint Venture ------------- the RP Envirogen Improvements and (ii) will grant an exclusive, royalty-free license to the Joint Venture for the use of the RP Technology, RP Systems Improvements and RP Jointly Developed Technology applicable or relating to Systems, RP Technology and RP Systems Improvements, in the Field of Use in the Territory and, as provided in Article VII, outside the Territory, at no cost to the Project or the other party. f) Furnishing of Services, Materials and Facilities. Each party will ------------------------------------------------ continue to provide the services, materials and facilities described herein to the Joint Venture. Such services, materials and facilities will be provided at the billing rates and charges based on the applicable party's actual internal cost to provide such services, facilities and materials to be established in the Commercialization Agreement. Any services provided by outside contractors will be billed to Joint Venture at actual cost. g) Membrane Supply. RP and Envirogen will negotiate in good faith for a --------------- contract pursuant to which RP will supply the Joint Venture with membranes for the 12 Systems manufactured by the RP Affiliate on competitive terms. Any such contract will be subject to the RP Affiliate's willingness to supply such membranes and to agree to such terms and conditions. RP will use its reasonable best efforts to obtain membranes on such terms for purchase by the Joint Venture, together with such information deemed by RP, in its sole discretion, necessary or appropriate for proper commercial utilization of the membrane products in furtherance of the Project. 3.4 Sharing of Income, Costs and Expenses. All income, revenues, capital ------------------------------------- requirements, costs and expenses of the Project during the Commercialization Period, will be shared on substantially similar terms as those set forth in Section 2.3 and 2.4 during the Development Period, subject to adjustment based on the parties' experience during the Development and/or Commercialization Period pursuant to mutual agreement of the parties. The Commercialization Agreement shall contain the provisions agreed upon between the parties in this respect. During the Commercialization Period, distribution of net income from the Project or the Joint Venture will be subject to agreement by RP and Envirogen; provided, however, that no less than eighty percent (80%) of the positive cash flow from the Project, subject to reserves for working capital needs as agreed to by the parties, shall be distributed to RP and Envirogen equally on a quarterly basis. 3.5 Contributions of the Parties during the Commercialization Period. It is ---------------------------------------------------------------- understood and agreed that, during the Commercialization Period, each party will contribute or license to the Joint Venture its technology and know-how at no cost to the other party or the Joint Venture as described in Sections 3.3(d) and (e) above. If Envirogen and RP participate together in a project outside the Territory pursuant to Article VII, then the technology and know-how of the Joint Venture will be made available to the project at no cost to the other party, the Joint Venture or the specific project outside the Territory. Nothing in the foregoing shall prohibit or restrict the reimbursement, as provided for elsewhere in this Agreement, to either party for the direct costs and expenses actually incurred by each party in performing functions for the Joint Venture in the Territory (or any project of the Joint Venture outside the Territory in which RP participates), utilizing such technology and know-how, and/or providing such technology and know-how to the Project as described in this Agreement, the Development Plan, the Commercialization Agreement and/or the Business Plan. 13 ARTICLE IV PROVISIONS APPLICABLE TO DEVELOPMENT PERIOD AND ----------------------------------------------- COMMERCIALIZATION PERIOD ------------------------ 4.1 Project Administration. All decisions relating to the Project, the ---------------------- Development Period and the Commercialization Period shall be made jointly by Envirogen and RP. 4.2 Articles V, VI and VII. The provisions of Articles V, VI and VII will --------------------- apply during the Commercialization Period, as well as during the Development Period. ARTICLE V OWNERSHIP, USE AND LIMITATIONS ON USE OF THE TECHNOLOGY ------------------------------------------------------- 5.1 Ownership and Use of the Technology. The following provisions shall apply ---------------------------------- to each party's technology, respectively, during and after the terms of this Agreement and the Commercialization Agreement. a) Ownership. Subject to the rights of the Project and the parties hereto --------- pursuant to this Agreement and, if any, the Commercialization Agreement, each party shall have exclusive ownership of all technology presently owned or conceived and/or reduced to practice solely by such party. Envirogen shall have exclusive ownership of the Envirogen Technology, Envirogen Know-How, Envirogen RP Improvements and Envirogen Jointly Developed Technology. RP shall have exclusive ownership of the RP Technology, RP Systems Improvements, RP Envirogen Improvements and RP Jointly Developed Technology, except to the extent assigned or transferred to the Joint Venture pursuant to the Commercialization Agreement. The RP Affiliate shall have exclusive ownership of the RP Affiliate Technology. All Jointly Developed Technology that does not constitute Envirogen or RP Jointly Developed Technology shall be owned jointly by Envirogen and RP. b) Use in the Project. Except for the RP Affiliate Technology, and subject to ------------------ this Agreement and, if any, the Commercialization Agreement, each party will have the right to use the other party's technology referred to in subparagraph (a) above to the extent necessary or 14 appropriate solely in furtherance of the Project, in the Field of Use in the Territory and, pursuant to Article VII, outside the Territory. To the extent agreed upon in writing by the RP Affiliate, RP will make available to the Project such information deemed by RP, in its sole discretion, necessary or appropriate in furtherance of the Project for the proper commercial utilization of membrane products manufactured by the RP Affiliate and supplied to the Project. RP will use its reasonable best efforts to obtain the necessary agreement from the RP Affiliate. c) Licenses After termination. Except as otherwise provided in this Agreement, -------------------------- upon termination or expiration of the later of this Agreement or the Commercialization Agreement, each party shall have the following licenses to the other party's technology. (i) Envirogen RP Improvements. RP shall have a non-exclusive, ------------------------- perpetual, royalty-free license to use the Envirogen RP Improvements. (ii) RP Envirogen Improvements, RP Systems Improvements and RP Jointly ----------------------------------------------------------------- Developed Technology. Subject to subparagraph (iii) below, -------------------- Envirogen shall have a non-exclusive, perpetual, royalty-free license to use only in the Field of Use the RP Envirogen Improvements, RP Systems Improvements and those portions of the RP Jointly Developed Technology physically embodied in Systems used commercially for or by customer of the Project or the Joint Venture upon termination or expiration of the applicable Agreement, without the right to sublicense to another party, except with RP's prior written consent, in RP's sole discretion. (iii) Termination of Envirogen's Right to the RP License. Envirogen will -------------------------------------------------- not receive any right or license to the RP Envirogen Improvements, RP Systems Improvements or RP Jointly Developed Technology, in the event (A) Envirogen determines to terminate the Project, this Agreement, the Commercialization Agreement or the Joint Venture (i) without the consent or agreement of RP, or (ii) not as a result of a material breach by RP pursuant to which Envirogen terminates this Agreement or the Commmercialization Agreement in accordance with Section 8.2, or (iii) not as a 15 result of RP's decision to discontinue its participation in the Project or the Joint Venture; or (B) Envirogen determines, other than in good faith or for no reason or for any reason other than a valid business reason as described in Section 3.1, not to proceed with the Commercialization Period. (iv) Jointly Developed Technology. If one party wishes a nonexclusive ---------------------------- license to use the Jointly Developed Technology owned by the other party, and such other party is, in its sole discretion, willing to grant such license, the parties will negotiate in good faith the terms and conditions of such license. (v) No Other Rights or Licenses. Except as expressly set forth in --------------------------- this Section 5.1(c) or in the Commercialization Agreement, neither party shall have any right or license to use the other party's technology or know-how after termination or expiration of this Agreement or, if any, the Commercialization Agreement. d) Restrictions on Transfer. Except as otherwise provided in this ------------------------ Agreement, the Commercialization Agreement and/or a written agreement between the parties, during and after the term of this Agreement or the Commercialization Agreement, each party agrees that it will not use, assign, transfer or license to a third party any of the technology referred to in subparagraph (a) above that it may own or have rights to, to the extent, but only to the extent, any use of such technology would infringe the technology rights of the other party. e) Envirogen technology and Know-How. Except as otherwise provided in this --------------------------------- Agreement and, if any, in the Commercialization Agreement, RP will have no right or license to use the Envirogen Technology, Envirogen Know-How and Envirogen Jointly Developed Technology. 5.2. Envirogen Commitment re the Exclusive Envirogen Technology. Envirogen ---------------------------------------------------------- represents and agrees, with respect to the Exclusive Envirogen Technology in and outside the Territory, that (A) for so long as the Project, this Agreement, the Commercialization Agreement or the Joint Venture remains in effect, and (B), except as otherwise provided in Section 5.3, for a period of two (2) years after termination of the Project, this Agreement, the Commercialization Agreement or the 16 Joint Venture, whichever is the last to occur, (the"Two-Year Nonexploitation Period"), where such termination (i) occurs without the consent or agreement of RP, or (ii) is not as a result of a material breach by RP of this Agreement or the Commercialization Agreement pursuant to which this Agreement or the Commercialization Agreement, as applicable, is terminated by Envirogen in accordance with Section 8.2, or (iii) is not as a result of RP's decision to discontinue its participation in the Project or the Joint Venture, or (iv) is as a result of Envirogen's determination, other than in good faith or for any reason other than a valid business reason as described in Section 3.1, not to proceed with the Commercialization Period: a) Envirogen will not seek, discuss, promote or enter into any arrangement or transaction involving the development and/or exploitation of the Exclusive Envirogen Technology in the Field of Use with any third party (including any entity related to or affiliated with Envirogen); b) Envirogen will not transfer, license, assign or grant any right to or interest in the Exclusive Envirogen Technology in the Field of Use to any third party (including any entity related to or affiliated with Envirogen); and c) Envirogen will not use the Exclusive Envirogen Technology for Systems in the Field of Use except in connection with the Project or as otherwise provided in this Agreement and/or the Commercialization Agreement. 5.3 Alternative to Envirogen Commitment After Termination. If, pursuant to ----------------------------------------------------- Section 5.2, Envirogen becomes subject to the Two-Year Nonexploitation Period upon any termination described therein, Envirogen may elect to make royalty payments to RP in accordance with this Section 5.3 in exchange for release from its obligations under Section 5.2 during the Two-Year Nonexploitation Period. In order to qualify for such release, such royalty payments shall be five percent (5%) of total gross sales and total gross lease rentals (net of transportation, insurance and customs duties to the extent stated separately on invoices issued to customers) over a period of seven (7) years generated by Envirogen and any third party or parties from the exploitation of the Exclusive Envirogen Technology in Systems in the Field of Use in and outside the Territory. Royalty payments shall be made to RP annually. If the Exclusive Envirogen Technology is exploited and gross sales and/or 17 lease rentals are generated, Envirogen will be released from its obligations under Section 5.2 for so long as such royalty payments are made during the seven year royalty period. If, at any time during the seven year royalty period, Envirogen ceases making royalty payments in accordance with this Section 5.3, the Two-Year Nonexploitation Period shall come into effect as of the date royalty payments cease and Envirogen's obligations under Section 5.2 with respect to such Period shall continue for a full two-year period thereafter. Once royalty payments are made in accordance with this Section 5.3 for the full seven year royalty period, Envirogen shall be released in full from any further obligations under Section 5.2. The royalty payments to be made hereunder shall be deemed to be liquidated damages intended by the parties to compensate RP for its losses and damages and not as a penalty. 5.4 Customer Contacts. Nothing in Sections 5.2 or 5.3 is intended to ----------------- prevent or restrict Envirogen from contacting or having discussions with customers or potential customers within the scope of both parties' efforts to market and sell/lease Systems as contemplated in this Agreement and/or the Commercialization Agreement in furtherance of the Project. 5.5 Right to Audit. RP shall have the right, at any time upon reasonable -------------- advance notice to Envirogen, to audit those books, records, supporting documentation and other information of Envirogen and any entity in which Envirogen has an interest, relevant to Envirogen's obligations under Sections 5.2 and 5.3 hereof, to determine Envirogen's compliance with the provisions of Sections 5.2 and 5.3. 5.6 No Right to Use RP Envirogen or Systems Improvements. If Envirogen ---------------------------------------------------- breaches the provisions of Sections 5.2 and/or 5.3 and such breach is not cured within fifteen (15) days after written notice from RP or Envirogen terminates this Agreement or its participation in the Project under the circumstances described in Section 5.1(c)(iii), Envirogen shall not have the license referred to in Section 5.1(c)(iii) or any right to use the technology of RP. ARTICLE VI CONFIDENTIALITY --------------- 18 6.1. Confidentiality. The terms and conditions of the Joint Confidentiality --------------- Agreement dated July 5, 1995 between the parties (the "Joint Confidentiality Agreement") shall remain in full force and effect during the Development Period and, if any, the Commercialization Period. In addition, the parties hereby agree that the Joint Confidentiality Agreement is hereby amended as follows: a) The Envirogen Technology, Envirogen Know-How, Envirogen RP Improvements, Envirogen Jointly Developed Technology and the jointly owned Jointly Developed Technology are included, for all purposes, in the definition of Envirogen's Confidential Information in the Joint Confidentiality Agreement. b) The RP Technology, RP Affiliate Technology, RP Envirogen Improvements, RP Systems Improvements, RP Jointly Developed Technology and the jointly owned Jointly Developed Technology are included, for all purposes, in the definition of RP's Confidential Information in the Joint Confidentiality Agreement. c) The purpose for the disclosures to be made by each party described in Paragraph 3. of the Joint Confidentiality Agreement is hereby expanded to include the purposes provided for and described in this Agreement and, if any, the Commercialization Agreement. d) The word "or" in the last line of the first subparagraph in Paragraph 5. of the Joint Confidentiality Agreement is hereby corrected to read ",by". e) Paragraph 12 of the Joint Confidentiality Agreement is hereby amended in its entirety to read as follows: "This Agreement shall terminate upon the termination of the Development Agreement, the Commercialization Agreement or the Joint Venture, whichever occurs later, except that Recipient's obligations set forth in Paragraph 4. shall survive the termination of this Agreement for a period of fifteen (15) years after the termination of this Agreement." ARTICLE VII RP PARTICIPATION OUTSIDE THE TERRITORY -------------------------------------- 19 7.1 RP Participation Outside the Territory. During the Development Period and -------------------------------------- the Commercialization Period and for so long as the Project and/or the Joint Venture remains in effect, RP shall have a right of first refusal to participate in any and all opportunities to introduce and/or exploit the Exclusive Envirogen Technology outside the Territory in the Field of Use no less than to the same extent, on a 50/50 basis, as RP participates within the Territory hereunder or, if the parties agree to share ownership with a local third party as set forth in Section 7.2, to the same extent, on a 50/50 basis, that Envirogen participates, by ownership or control, in such opportunity. Each time Envirogen determines or proposes to introduce and/or exploit the Exclusive Envirogen Technology in an area outside the Territory, Envirogen shall so notify RP in writing. RP shall thereafter exercise its right of first refusal by notifying Envirogen in writing, within two (2) months of Envirogen's written notice to RP, of RP's intention to exercise its right to participate in such opportunity. The parties shall thereupon negotiate in good faith for a definitive agreement on terms and conditions no less favorable to each party than the terms and conditions provided for each such party in this Agreement and the Commercialization Agreement, subject to the provisions of Section 7.2 and, in accordance with the circumstances, as the parties may otherwise agree. If RP and Envirogen are unable to reach a definitive agreement after negotiating in good faith for a period of three (3) months (or longer, if mutually agreed upon in writing) after RP's notification of the exercise of its right of first refusal, the parties shall attempt in good faith to resolve their differences by mediation, as provided in Section 9.4. 7.2 Local Third Party Participation. RP and Envirogen understand that it may ------------------------------- be necessary or appropriate to work with a local third party for assistance in introducing and exploiting the Exclusive Envirogen Technology outside the Territory and that such third party may require profit or equity participation in any entity formed for this purpose. RP and Envirogen agree that the remainder of any equity or profit participation not held in such entity by the local third party shall be shared equally, on a 50/50 basis, by Envirogen and RP. RP and Envirogen shall cooperate and work together in good faith to mutually agree on the identification of local third parties, negotiations with such third parties, development of business plans and the negotiation of definitive agreements between Envirogen and RP and between the parties and the local third party. 7.3 License to RP Improvements. In the event RP does not participate with -------------------------- Envirogen hereunder with respect to a specific opportunity outside the Territory, Envirogen shall be free to 20 exploit the Exclusive Envirogen Technology outside the Joint Venture in connection with, but limited to, the specific opportunity offered to RP. In such event, if Envirogen wishes to be granted a non-exclusive limited license to use the RP Envirogen Improvements, RP Systems Improvements and applicable RP Jointly Developed Technology in the Field of Use outside the Territory solely in connection with the specific opportunity declined by RP, RP may, in its sole discretion, determine whether to grant such license to Envirogen. If RP determines to grant such license, the parties will negotiate in good faith the terms and conditions of a license agreement which shall include reasonable royalties to be paid to RP. ARTICLE VIII TERMINATION ----------- 8.1 Application of this Article. The provisions of this Article VIII shall --------------------------- apply to the Development Period and, except as otherwise agreed by the parties as set forth in the Commercialization Agreement, the Commercialization Period. 8.2 Termination for Cause. Either party may, at its sole option, terminate --------------------- this Agreement and/or, if any, the Commercialization Agreement, upon written notice to the other party, in accordance with this Section 8.2 at such time that any one of the following occurs: a) Breach or Default by a Party. At such time that the other party is in ---------------------------- breach or default of a material term or condition of this Agreement (a "Breach"), the nonbreaching party may elect to give the breaching party written notice of the Breach which notice shall include a description of the Breach in sufficient detail to enable the breaching party to identify and cure such Breach. Upon receipt of the notice of Breach, the breaching party shall have thirty (30) days from the date of receipt of such notice in which to cure or, to the extent that the cure cannot be completed with such thirty (30) day period using commercially reasonable efforts, to take meaningful action to commence the cure of such Breach. If the breaching party does not cure the Breach within said thirty (30) days, or, where the Breach is not capable of being cured within thirty (30) days, the breaching party does not take meaningful action to commence such cure within the thirty (30) days and/or does not thereafter prosecute such cure to completion, then the parties 21 shall proceed to mediation in accordance with Section 8.4 in good faith attempt to resolve any dispute or disagreement with respect to the Breach. If the Breach is capable of being cured by both parties working together, then both parties shall work together in good faith for a period of no less than thirty (30) additional days to effect a cure of the Breach within such additional thirty (30) days. If the breaching party does not cooperate or does not in good faith participate in mediation within the foregoing time periods, then the nonbreaching party may, at its sole option, terminate this Agreement upon expiration of the applicable time periods upon written notice to the breaching party. b) Insolvency. At such time that a party becomes insolvent or unable to ---------- pay its debts as they mature, makes an assignment for the benefit of its creditors or a trustee or receiver of the party's business and/or assets is appointed, the other party may elect to terminate this Agreement immediately upon written notice to the affected party. c) Bona Fide Efforts. If, at any time that either party is not exerting ----------------- a bona fide effort to advance the Project during the Development Period or, if any, the Commercialization Period, the other party may announce its intention to declare a Breach and invoke the provisions of Subsection (a) of this Section 8.2 by written notice to the party not exerting a bona fide effort (the "breaching party"). The breaching party shall have the opportunity to explain or cure possible delays within the thirty (30) day period as provided for in Subsection (a). A "bona fide" effort will include, but will not be limited to, the completion or attainment of milestones to be more fully described in the Development Plan, Commercialization Agreement or Business Plan. 8.3 Survival of Certain Provisions. Notwithstanding termination of this ------------------------------ Agreement or the Commercialization Agreement, the provisions of Sections 3.2, 5.1, 5.2, 5.3, 5.5, 5.6, 6.1, 9.4, 9.5 and 9.6 of this Agreement and the provisions of the Joint Confidentiality Agreement shall survive any such termination in accordance with their respective provisions, as applicable, for the time period or periods stated therein. 22 ARTICLE IX MISCELLANEOUS ------------- 9.1 Entire Agreement. This Agreement, together with the Joint Confidentiality ---------------- Agreement, and, when agreed to or executed in writing, the Development Plan, Business Plan and Commercialization Agreement, is the complete and entire statement of the contract between the parties with respect to the subject matter hereof, whether written or oral, and there are no understandings, agreements, representations or warranties of any kind, express or implied, not expressly set forth herein. 9.2 Amendments. No amendment, modification, addition or supplement to this ---------- Agreement shall be effective or binding on the parties unless made in writing, dated, acknowledged as an amendment to this Agreement and signed by both parties hereto. 9.3 No Assignments. This Agreement and the rights and obligations of each party -------------- hereunder shall not be assigned, delegated, sold or transferred to any other person or entity, by operation of law or otherwise, without the prior written consent of the nonassigning party, which consent may be granted or withheld in ----------- the sole discretion of the nonassigning party. Any attempted assignment contrary to this Section 9.3 shall be void and of no force or effect and may be considered by the nonassigning party a breach of a material provision of this Agreement. 9.4 Dispute Resolution. Any dispute, controversy or claim arising under, out ------------------ of, or relating to, this Agreement or the Commercialization Agreement and any subsequent amendments hereto or thereto, including, without limitation, its validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims, shall be submitted to mediation in accordance with the Rules of the Center for Public Resources Institute for Dispute Resolution. The place of mediation shall be New York City, New York. Mediation costs will be shared equally by the parties. If the dispute is not resolved by the mediation process within sixty (60) days after commencement, either party may initiate litigation. 23 9.5. Governing Law. The terms and conditions of this Agreement and the ------------- interpretation thereof shall be governed by the laws of the State of New York without regard to that state's conflicts-of-laws rules or principles. 9.6 RP Affiliates. The terms and conditions of this Agreement and, if any, ------------- the Commercialization Agreement shall not be binding upon or applicable to any RP Affiliate without the prior written agreement of such RP Affiliate. 9.7 Press Releases. Neither party shall issue any press release referring to -------------- the Project, the Joint Venture, the business of the Project and the Joint Venture, any agreement between the parties or the fact of a relationship between RP and Envirogen, without first obtaining the prior written consent of the other party, which consent may be granted or withheld in such other party's sole discretion. Such other party shall, in addition, have the right to edit and make changes and deletions in any press release proposed by the releasing party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. RHONE-POULENC INC. ENVIROGEN, INC. By: /s/ M. S. Galuskin By: /s/ Harch S. Gill ------------------------- ------------------------- Name: Myron S. Galuskin Name: Harch S. Gill Title: Vice President & Title: President & General Manager Chief Executive Officer 24 JOINT CONFIDENTIALITY AGREEMENT ------------------------------- THIS JOINT CONFIDENTIALITY AGREEMENT is effective as of July 5, 1995, between RHONE-POULENC, INC. ("RP"), having offices at One Corporate Drive, Shelton, Connecticut 06484, and ENVIROGEN ("Envirogen"), having its principal office at Princeton Research Center, 4100 Quakerbridge Road, Lawrenceville, New Jersey 08648. WHEREAS, each party has and may in the future have certain information, trade secrets, inventions, writings, ideas, formulae, processes, production information, manufacturing, financial and business information (hereinafter collectively referred to as the "Information"); WHEREAS, each party is willing to disclose to the other party that portion of its Information which the disclosing party determines, in its sole discretion, is necessary for the specific purposes(s) set forth in this Agreement; and WHEREAS, the parties wish to set forth the conditions and obligations which will govern the disclosure, use and evaluation of any Information which may be disclosed by either party (hereinafter referred to as the "Discloser") to the other party (hereinafter referred to as the "Recipient"); NOW, THEREFORE, RP and Envirogen agree as follows: 1. RP has developed, will continue to develop and owns certain Information which it deems its proprietary, confidential Information relating to the field of waste processing. All such Information is hereinafter referred to as "RP"s Confidential Information" or "the Discloser's Confidential Information". 2. Envirogen has developed, will continue to develop and owns certain Information which it deems its proprietary, confidential Information relating to the field of waste processing. All of such information is hereinafter referred to as "Envirogen's Confidential Information" or "the Discloser's Confidential Information". 3. Each party is willing to disclose to the other party that portion of its Confidential Information which the Disclosure determines, in its sole discretion, is necessary for the specific and sole purpose of sharing economic and technical information relating to the field of waste processing with the intent of forming a joint relationship. Confidential Information shall include the existence of this Agreement, together with any other agreement and the discussions between the parties with respect to the subject matter hereof. 1 4. Recipient shall (i) hold in strict confidence all Confidential Information received from Discloser in writing and identified as confidential (or, if orally transmitted, summarized and confirmed in writing within thirty (30) days after such oral disclosure), by plant visit(s) and/or by samples received from Discloser with a confidentiality notice affixed thereto (hereinafter called the "Sample(s)"; (ii) use such Confidential Information only for the specific purpose described in Paragraph 3, above and for no other purpose whatsoever; (iii) not disclose such Confidential Information to any third parties or to any of its employees who do not have a need to know of the Confidential Information for the purpose set forth in Paragraph 3, above (including any subsidiary or affiliate of the Recipient); (iv) take all reasonable and appropriate measures to safeguard the Discloser's Confidential Information from theft, loss or disclosure to others, and (v) limit access to Discloser's Confidential Information only to those of Recipient's officers, directors and employees who have a need to know of the Confidential Information for the purpose set forth in Paragraph 3, above. 5. The obligations of Paragraph 4, shall not apply with respect to any Confidential Information (i) which is known to Recipient prior to the date of disclosure by Discloser, or (ii) which, through no fault or action of Recipient, is or becomes published or otherwise comes within the public domain, or (iii) otherwise properly becomes available to Recipient from a third party who had a lawful right to disclose it without breach of a confidential relationship with the Discloser, or (iv) which is independently developed by Recipient in the course of its normal activities, as demonstrated by its records or persons who had no access to Discloser's Confidential Information. Specific Confidential Information shall not be deemed to be available to the public or in the prior possession of the Recipient merely because it is embodied in more general information available to the public or in Recipient's prior possession. 6. The burdon of showing that any of Discloser's Confidential Information is not subject to the obligations of Paragraph 4, shall rest with Recipient. 7. Recipient shall have confidentiality agreements with all of its employees to whom any of Discloser's Confidential Information is disclosed which bind them to the same extent and in the same manner as provided in this Agreement. 8. If Recipient is required by any governmental agency, court or other quasi- judicial or regulatory body to provide any of Discloser's Confidential Information received under this Agreement, Recipient shall, as promptly as possible, give notice to Discloser of the requirement to provide such Confidential Information so that the Discloser, in its discretion, may contest or oppose such requirement. 2 9. Disclosure of Information hereunder will be in accordance with regulations promulgated by the United States Department of Commerce to control the export of technical data. 10. At the request of Discloser, Recipient agrees to provide Discloser with a summary of the results of Recipient's tests upon and evaluation of any Samples provided by Discloser. 11. It is understood and agreed that no license or right of any kind is granted to any of Discloser's Confidential Information or to any patents now or hereafter issued, by reason of this Agreement or any disclosure hereunder. All Confidential Information shall remain the sole property of Discloser. 12. This Agreement shall terminate one (1) year from the effective date of this Agreement, except that Recipient's obligations set forth in Paragraph 4, shall survive the termination of this Agreement for a period of ten (10) years from the termination date of this Agreement. 13. Upon termination of this Agreement and upon Discloser's request in writing, Recipient shall return to Discloser all tangible forms of Discloser's Confidential Information received from Discloser or developed by Recipient in the course of its evaluation, without making copies of same, including all written material or Samples which contain Discloser's Confidential Information, together with all copies or parts thereof in Recipient's possession. 14. This Agreement shall be binding upon and inure to the benefit of each of the parties, its successors, legal representatives and assigns. This Agreement shall be assignable by Discloser. This Agreement may be assignable by Recipient, with the prior written consent of Discloser, to a successor to that portion of Recipient's business which relates to the subject matter of this Agreement, provided such successor assumes all of the obligations of Recipient set forth herein. Any such assignment shall not relieve Recipient of any of the obligations set forth in this Agreement. 15. This is the entire agreement between the parties with respect to the subject matter hereof and there are no understandings or agreements of any kind not expressly set forth herein. No amendment or modification of this Agreement shall be effective or binding upon the parties unless made in writing and signed by both parties hereto. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives effective as of the day and year first above written. RHONE-POULENC, INC ENVIROGEN By: /s/ Myron Galuskin By: /s/ H.S. Gill ----------------------------- --------------------------- Name: Myron Galuskin Name: H.S. Gill Title: Vice President - Environmental Title: President and CEO Services Enterprise 4 EX-27 4 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 4,722,318 0 2,826,717 (235,134) 55,972 9,287,752 5,751,044 (4,507,259) 13,058,613 2,520,962 0 0 0 129,291 10,351,213 13,058,613 0 8,908,837 0 11,271,605 0 0 19,320 (2,258,367) 0 (2,258,367) 0 0 0 (2,258,367) ($0.21) 0
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