-----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, FBd8YFKFIk6lxKU+W3PR1j00v5xC/MBWJ8yGCgvfHLR7giHC+Lu82S96zcTdtpKA K43wFB4VYUyuL4XqB2Nu5Q== 0001036050-97-000141.txt : 19970424 0001036050-97-000141.hdr.sgml : 19970424 ACCESSION NUMBER: 0001036050-97-000141 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970410 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970423 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20404 FILM NUMBER: 97585498 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 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 10, 1997 ENVIROGEN, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-20404 22-2899415 - ------------------------------ ------------- ------------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 4100 Quakerbridge Road Lawrenceville, New Jersey 08648 - ---------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 936-9300 -------------- Not Applicable ------------------------------------------------------------ (Former name or former address, if changed since last report) ITEM 2. Acquisition or Disposition of Assets. ------------------------------------ Acquisition of Fluid Management, Inc. - ------------------------------------- On April 10, 1997, Envirogen, Inc. ("Envirogen") acquired Fluid Management, Inc., a Wisconsin corporation ("FMI"), in accordance with an Agreement and Plan of Merger dated January 14, 1997 among Envirogen, FMI and the stockholders of FMI (the "Merger Agreement"). Pursuant to the Merger Agreement, FMI was merged with and into Envirogen, with Envirogen being the surviving corporation (the "Merger"). Immediately prior to the Merger, FMI operated as a full-service environmental consulting and engineering firm with offices in Wisconsin and Illinois. The merger consideration received by the stockholders of FMI consisted of, in the aggregate, (i) 4,190,477 shares of Envirogen's Common Stock (the "FMI Shares"), of which 419,048 shares were placed in escrow to satisfy potential claims for indemnification by Envirogen against the FMI stockholders, and (ii) approximately $11 million in cash, subject to adjustment pursuant to the Merger Agreement, approximately $4.5 million of which was used to repay certain outstanding indebtedness of FMI and $900,000 of which was deposited in escrow. Envirogen also repaid approximately $1.4 million of additional outstanding indebtedness of FMI. The cash portion of the merger consideration paid by Envirogen was financed by the issuance and sale of Envirogen Common Stock to Warburg, Pincus Ventures, L.P. as described in Item 5 below. ITEM 5. Other Events. ------------- On April 10, 1997, Envirogen issued 6,095,238 shares of Common Stock (the "Warburg Shares") to Warburg, Pincus Ventures, L.P., a Delaware limited partnership ("Warburg"), pursuant to a Securities Purchase Agreement dated as of January 14, 1997 between Envirogen and Warburg (the "Purchase Agreement"), for an aggregate cash purchase price of $16 million. The net proceeds from the issuance of the Warburg Shares were used to finance the cash portion of the merger consideration in connection with the Merger and to provide additional working capital for Envirogen. In connection with the transactions contemplated by the Merger Agreement and the Purchase Agreement, on April 10, 1997, Envirogen entered into a Registration Rights Agreement with Warburg and the former stockholders of FMI (the "Registration Rights Agreement"), pursuant to which Envirogen agreed to file, as soon as practicable, a Registration Statement with the Securities and Exchange Commission to register the sale of the FMI Shares and the Warburg Shares to the public. However, the Registration Rights Agreement provides that Warburg and the former stockholders of FMI will not sell, transfer or otherwise dispose of the Warburg Shares or the FMI Shares, respectively, prior to April 10, 1998 without the prior consent of Envirogen. * * * Envirogen and Stone & Webster, Incorporated ("Stone & Webster") entered into a collaborative marketing agreement in 1994 to provide treatment technologies and services to various sectors of the hazardous waste market. On April 16, 1997, Envirogen announced that it is part of a team assembled by Stone & Webster that was awarded a Remedial Action Contract ("RAC") worth $50 million over five years by the New England Division of the U.S. Army Corps of Engineers. The indefinite delivery/indefinite quantity contract is for cleanup of hazardous waste at military and EPA Superfund sites within the New England states and supports a successful Corps of Engineers/EPA partnership to clean up hazardous waste sites throughout the region. As part of the Stone & Webster team under the newly-awarded RAC contract, Envirogen will provide products and services in the areas of in situ bioremediation, biofiltration and soil vapor extraction. Envirogen's share of the contract could potentially be $3 million. -2- Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. -------------------------------------------------------------------
(a) Financial Statements of Business Acquired. Page ------------------------------------------ ---- Report of Independent Public Accountants F-1 Balance Sheets of Fluid Management, Inc. as of December 31, 1996 and 1995 F-2 Statements of Operations and Retained Earnings (Deficit) of Fluid Management, Inc. for the years ended December 31, 1996, 1995 and 1994 F-3 Statements of Cash Flows of Fluid Management, Inc. for the years ended December 31, 1996, 1995 and 1994 F-4 Notes to Financial Statements of Fluid Management, Inc. F-5 (b) Pro Forma Financial Information. ------------------------------- Pro Forma Condensed Consolidated Financial Information F-13 Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1996 (Unaudited) F-14 Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1996 (Unaudited) F-15 Notes to Pro Forma Condensed Consolidated Pro Forma Financial Information (Unaudited) F-16
-3- Report of Independent Accountants To the Board of Directors and Stockholders Fluid Management, Inc. We have audited the accompanying balance sheets of Fluid Management, Inc. (the "Company") as of December 31, 1996 and 1995 and the related statements of operations and retained earnings (deficit) and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fluid Management, Inc. as of December 31, 1996 and 1995 and the results of its operations and cash flows for the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Milwaukee, Wisconsin February 21, 1997 F-1 FLUID MANAGEMENT, INC. Balance Sheets
DECEMBER 31, ----------------------- 1996 1995 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 368,656 $ 1,799,829 Accounts receivable and unbilled revenues, less reserve for doubtful accounts of $120,000 in December 31, 1996 and 1995 7,047,105 6,333,482 Prepaid expenses 303,926 140,400 ----------- ----------- Total current assets 7,719,687 8,273,711 Property and equipment, net 965,664 770,644 Investment in joint venture 73,790 63,706 ----------- ----------- Total assets $ 8,759,141 $ 9,108,061 =========== =========== LIABILITIES Current liabilities: Current portion of note payable $ 1,000,000 $ 1,000,000 Accounts payable 2,957,331 2,773,465 Accrued expenses 846,789 739,397 Reserve for PECFA claim adjustments 3,049,092 2,270,744 Dividends payable 813,000 816,000 ----------- ----------- Total current liabilities 8,666,212 7,599,606 Note payable, less current portion 1,500,000 2,000,000 Commitments and contingencies (Note 6) SHAREHOLDERS' EQUITY (DEFICIT) Common stock, $.10 par value, 560,000 shares authorized, 40,000 shares issued and outstanding 4,000 4,000 Additional paid-in capital 36,000 36,000 Retained earnings (deficit) (1,447,071) (531,545) ----------- ----------- Total shareholders' equity (deficit) (1,407,071) (491,545) ----------- ----------- Total liabilities and shareholders' equity (deficit) $ 8,759,141 $ 9,108,061 =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-2 FLUID MANAGEMENT, INC. Statements of Operations and Retained Earnings (Deficit)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ Revenues $ 21,577,171 $ 21,306,444 $ 18,698,662 Provisions for PECFA claims adjustments and doubtful accounts 1,063,919 1,061,417 966,978 ------------ ------------ ------------ Net revenues 20,513,252 20,245,027 17,731,684 Expenses: Cost of commercial service 13,904,208 13,973,144 12,958,206 General and administrative 2,071,645 1,511,664 1,113,890 ------------ ------------ ------------ Total costs and expenses 15,975,853 15,484,808 14,072,096 ------------ ------------ ------------ Other income (expense): Interest income 18,658 24,520 8,467 Interest expense (224,667) (159,633) (195,542) Equity in earnings of joint venture 10,084 17,060 34,146 ------------ ------------ ------------ Other expense, net (195,925) (118,053) (152,929) ------------ ------------ ------------ Net income 4,341,474 4,642,166 3,506,659 Retained earnings (deficit): Beginning of year (531,545) 692,489 (661,900) Dividends declared 5,257,000 5,866,200 2,152,270 ------------ ------------ ------------ End of year $ (1,447,071) $ (531,545) $ 692,489 ============ ============ ============ Net income per share $ 109 $ 116 $ 88 ============ ============ ============ Weighted average number of shares outstanding 40,000 40,000 40,000 ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-3 FLUID MANAGEMENT, INC. Statements of Cash Flows
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1996 1995 1994 --------- --------- ---------- Cash flows from operating activities: Net income $ 4,341,474 $ 4,642,166 $ 3,506,659 Adjustments to reconcile net income to net cash provided by operating activities: Provisions for PECFA claim adjustments and doubtful accounts 1,063,919 1,061,417 966,978 Depreciation 250,982 193,284 115,785 (Gain) loss on sale of property and equipment 1,627 6,889 (1,855) Equity in earnings of joint venture (10,084) (17,060) (34,146) ----------- ----------- ----------- 5,647,918 5,886,696 4,553,421 Changes in assets and liabilities: Accounts receivable and unbilled revenues (713,623) 1,644,362 (2,668,731) Prepaid expenses (163,526) (39,052) (20,553) Accounts payable 152,922 (818,388) 1,507,748 Accrued liabilities 107,392 206,290 117,761 Reserve for PECFA claim adjustments (285,571) (311,973) (212,388) ----------- ----------- ----------- Net cash provided by operating activities 4,745,512 6,567,935 3,277,258 Cash flows from investing activities: Purchase of property and equipment (416,685) (399,985) (480,733) Proceeds from sale of property and equipment 17,100 6,814 Investment in joint venture (12,500) ----------- ----------- ----------- Net cash used in investing activities (416,685) (382,885) (486,419) Cash flows from financing activities: Dividends paid (5,260,000) (5,894,470) (1,691,000) Payments on notes payable (3,250,000) (2,200,000) (800,000) Proceeds on notes payable 2,750,000 3,000,000 ----------- ----------- ----------- Net cash used in financing activities (5,760,000) (5,094,470) (2,491,000) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (1,431,173) 1,090,580 299,839 Cash and cash equivalents: Beginning of year 1,799,829 709,249 409,410 ----------- ----------- ----------- End of year $ 368,656 $ 1,799,829 $ 709,249 =========== =========== =========== Supplemental cash flow information: Interest paid $ 227,589 $ 156,091 $ 196,209 =========== =========== =========== Dividends declared but not paid $ 813,000 $ 745,000 $ 702,270 =========== =========== =========== Property and equipment purchased but not paid for $ 30,944 $ - $ 95,736 =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-4 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: NATURE OF BUSINESS Fluid Management, Inc. (the Company) is a consulting engineering firm providing comprehensive environmental science services to customers located primarily in Wisconsin. Such services include: soil and groundwater remediation, compliance management, air sciences and engineering, solid waste and landfill management, wastewater and stormwater management, storage tank management and solid waste management, planning, permitting, engineering and construction supervision services. Storage tank removal and remediation totaled approximately 88%, 85% and 87% of the Company's revenues for the years ended December 31, 1996, 1995 and 1994, respectively. The majority of such work is eligible to be reimbursed to the Company's customers under the State of Wisconsin Petroleum Environmental Cleanup Fund Act (PECFA). Such reimbursement is not made until certain remediation milestones have been reached and all work costs have been approved by the State of Wisconsin Department of Commerce (DCOM), the state's administrator of the PECFA program. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company's most significant estimates relate to accounts receivable valuation reserves and PECFA reserves. REVENUE RECOGNITION Revenue is recognized as services are provided and costs are incurred. Cost of commercial services include all direct materials, labor and subcontracting costs related to work performed. RESERVES FOR PECFA CLAIM ADJUSTMENTS The Company provides for an estimate of potential amounts it will repay to customers related to remediation costs which are determined by DCOM to be ineligible for reimbursement by PECFA. F-5 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Claims for customer reimbursement are submitted to PECFA upon completion of certain remediation milestones. Final review of the PECFA claims by DCOM and determination of any ineligible costs is typically not completed until one to three years after the related revenues have been recognized and collected by the Company. Total revenues recognized in 1996 and prior years for which claims are yet to be approved by DCOM were approximately $45,500,000 at December 31, 1996. CASH AND CASH EQUIVALENTS The Company considers checking accounts and money market accounts to be cash and cash equivalents. Substantially all the Company's cash and cash equivalents are maintained at two banks in southwestern Wisconsin and one bank in northeastern Illinois and balances will normally exceed federally insured limits. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost and consists primarily of vehicles, office and field equipment, and leasehold improvements. Leasehold improvements are amortized over the shorter of the terms of the related leases or the estimated useful lives of the assets. Depreciation and amortization is calculated on the straight-line method over the estimated useful lives of the assets which range from three to seven years. Gains and losses on disposals are recognized in the year of disposal. Repair and maintenance expenditures are expenses as incurred; significant renewals and betterments are capitalized. INVESTMENT IN JOINT VENTURE The Company has a 50% ownership in Miller Environmental Technologies LLC (MET). Such ownership investment is accounted for under the equity method. Summarized unaudited financial information for MET as of and for the years ended December 31, 1996, 1995 and 1994 is set forth below: 1996 1995 1994 -------- --------- --------- Current assets $ 208,000 $ 181,000 $ 186,000 Current liabilities 61,000 54,000 93,000 Members capital 147,000 127,000 93,000 Revenues 124,000 194,000 218,000 Net income 20,000 34,000 68,000 F-6 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): The Company provides consulting and engineering services to MET under a subcontracting arrangement. Billings for such services amounted to $67,000, $106,000 and $82,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The Company is paid a monthly fee of $1,000 by MET to provide office and recordkeeping functions. Such fees totaled $12,000, $12,000 and $3,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The Company is also reimbursed for any expenses incurred related to MET matters. The Company had accounts receivable from MET of $51,000 and $33,000 at December 31, 1996 and 1995. INCOME TAXES By unanimous consent of its shareholders, the Company elected S Corporation status under the provisions of the Internal Revenue Code. Under those provisions and most state laws, the Company generally does not pay federal or state income taxes on its taxable income. As an S Corporation, any taxable income or loss of the Company is includable in the individual income tax returns of the shareholders. It is the intent of the shareholders to withdraw amounts as distributions at least equivalent to the income taxes that will be payable by them on S Corporation earnings. As of December 31, 1996, the amount of accumulated earnings taxed to the shareholders but not distributed was approximately $2,850,000 (before payment of any dividends payable). EARNINGS PER SHARE Earnings per share calculations are based on the weighted average shares outstanding during the period. F-7 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): RECLASSIFICATIONS Certain reclassifications have been made to the December 31, 1995 and 1994 amounts to conform them to the December 31, 1996 presentation. 2. PROPERTY AND EQUIPMENT: Property and equipment, net consisted of the following: DECEMBER 31, ------------------------- 1996 1995 ------------------------- Vehicles $ 135,883 $ 135,883 Field equipment 365,076 329,535 Furniture and office equipment 1,020,791 634,152 Leasehold improvements 61,282 47,131 ---------- ---------- 1,583,032 1,146,701 Less: accumulated depreciation 617,368 376,057 ---------- ---------- Property and equipment, net $ 965,664 $ 770,644 ========== ========== 3. ACCRUED EXPENSES: Accrued expenses consisted of the following: DECEMBER 31, ------------------------- 1996 1995 ---------- ---------- Bonuses $ 800,375 $ 695,547 Commissions 6,229 13,607 Other 40,185 30,243 ----------- ---------- $ 846,789 $ 739,397 =========== ========== F-8 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. LINE OF CREDIT: The Company has a demand line of credit which allows borrowings up to the lesser of $500,000 ($1,200,000 effective January 1997) or a defined borrowing base. Borrowings bear interest at prime and are secured by substantially all of the assets of the Company. There was no balance outstanding at December 31, 1996 or 1995. 5. NOTE PAYABLE: The Company has a $2,500,000 bank note payable at December 31, 1996. The note is due in monthly principal installments of $83,333 plus interest at 8.5% and is collateralized by substantially all assets of the Company. The related loan agreement contains certain covenant restrictions. The most restrictive of which is the maintenance of a debt service coverage ratio (as defined) of 1.5 to 1.0. The fair value of the note payable approximates the carrying value. Scheduled annual principal payments as of December 31, 1996 are set forth below: 1997 $ 1,000,000 1998 1,000,000 1999 500,000 ------------ $ 2,500,000 ============ At December 31, 1995, the Company had a $3,000,000 bank note payable. During 1996, $1,250,000 was refinanced (representing the balance of the loan at the time of refinancing) as part of the bank note payable discussed above. F-9 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. COMMITMENTS AND CONTINGENCIES: OPERATING LEASES The Company leases office and warehouse facilities and office equipment under operating leases. Rent expense was $529,000, $255,000, and $205,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Under the terms of the leases, the lessee is responsible for substantially all operating expenses. Minimum future annual rental payments are set forth below: 1997 $ 759,000 1998 589,000 1999 491,000 2000 303,000 2001 7,000 EMPLOYMENT AGREEMENTS The Company has employment agreements with the four shareholders of the Company. These agreements terminate in June 1998 and provide for annual salaries of $85,000 per shareholder. The agreements also provide for increased salaries upon change in control of the Company. The Company has an employment contract with an employee which provides for an annual salary of $125,000 per year and a bonus based on certain pre-tax profits. This agreement can be canceled upon written notice by the Company. BONUS PLAN The Company has a bonus plan for substantially all employees which provides for 10% of Company pre-tax profits to be distributed to employees. F-10 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. SELF-INSURED HEALTH BENEFITS: The Company self-insures health benefits for its employees and has obtained an insurance policy that limits its exposure to the first $10,000 per employee/family per year with an aggregate monthly limit. Health insurance costs, including claims, stop-loss premiums and administration fees, were $220,000, $187,000, and $120,000 for the years ended December 31, 1996, 1995 and 1994, respectively. 8. SALARY DEFERRAL PLAN: The Company has a 401(k) plan which provides for employee salary deferral contributions as allowed by the Internal Revenue Code. Substantially all employees are eligible to participate in this Plan. No Company contributions have been made to this plan. 9. STOCK PURCHASE AGREEMENTS: The Company is a party to stock purchase agreements with each shareholder, whereby, upon the death of a shareholder or at the option of a totally disabled shareholder, the Company is required to purchase the shares of common stock owned by the shareholder at fair market value, as determined by the agreement. The Company owns term life insurance on each of the shareholders to partially fund potential obligations related to a shareholder's death. 10. OTHER RELATED PARTY TRANSACTIONS: The Company provides technical and administrative services to a Company with common ownership. Amounts billed by the Company for such services amounted to $53,400, $26,600, and $16,600, for the years ended December 31, 1996, 1995 and 1994. Accounts receivable, which related to these services, amounted to $13,200 at December 31, 1996. F-11 FLUID MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. PROPOSED MERGER: In January 1997, the Company entered into a Merger Agreement to merge with and into Envirogen, Inc. The merger is subject to Envirogen, Inc. obtaining satisfactory capital to finance the merger and the approval of the merger by the stockholders of Envirogen. 12. SUBSEQUENT EVENTS (unaudited): In April 1997, an action was filed against the Company claiming infringement in the hiring of certain employees made by the Company. Also in April 1997, a settlement agreement was reached with the plaintiff. All claims related to this litigation have been settled and payment of $500,000, as settlement, has been made by the Company to the plaintiff. On April 10, 1997, the Company consummated the merger with Envirogen, Inc. as discussed in note 11. F-12 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) The following unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1996 and the unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 1996 are based on the historical financial statements of Envirogen, Inc. ("Envirogen") and Fluid Management, Inc. ("FMI"), as adjusted to give effect to the merger (the "Merger") of FMI into Envirogen and the issuance and sale by Envirogen to Warburg, Pincus Ventures, L.P. ("Warburg") of 6,095,238 shares of Envirogen Common Stock (the "Warburg Transaction"). The Pro Forma Condensed Consolidated Statements of Operations have also been adjusted for the acquisition of MWR, Inc. ("MWR") by Envirogen that closed on February 9, 1996. The Pro Forma Condensed Consolidated Balance Sheet has been prepared assuming that the Merger and the Warburg Transaction occurred on December 31, 1996, and the Pro Forma Condensed Consolidated Statements of Operations have been prepared assuming the Merger, the Warburg Transaction and the acquisition of MWR occurred on January 1, 1996. The related adjustments are described in the notes thereto. The Pro Forma Condensed Consolidated Financial Statements are based on certain assumptions and preliminary estimates which are subject to change. The Pro Forma Condensed Consolidated Financial Statements are not necessarily indicative of operating results or financial position that would have been achieved had the Merger, the Warburg Transaction and the acquisition of MWR been consummated on the respective dates indicated and should not be construed as representative of future operating results or financial position. In addition, the Pro Forma Condensed Consolidated Financial Statements do not give effect to any matters other than as described in the notes thereto. F-13 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the year ended December 31, 1996 (Unaudited)
Envirogen, Historical Fluid Pro Forma Pro Forma Inc. MWR, Inc. Mgmt., Inc. Adjustments As Adjusted ------------ ------------ ------------ ------------- ------------- Revenues: Commercial operations $10,892,871 $278,767 $21,577,171 $32,748,809 Research and development services 2,026,723 2,026,723 Provisions for PECFA claim adjustments and doubtful accounts (1,063,919) (1,063,919) ----------- ----------- ----------- ------------ Net revenues 12,919,594 278,767 20,513,252 33,711,613 ----------- ----------- ----------- ------------ Cost of commercial operations 9,676,960 82,230 13,904,208 23,663,398 Provision for contract claim 650,000 650,000 Research and development costs 2,403,566 2,403,566 Selling, general and administrative expenses 2,958,780 174,585 2,071,645 $ 260,000 (3) 6,705,074 1,220,964 (4) 19,100 (6) ----------- ----------- ----------- ---------- ------------ Total costs and expenses 15,689,306 256,815 15,975,853 1,500,064 33,422,038 ----------- ----------- ----------- ---------- ------------ Other income (expense): Interest income 193,776 18,658 212,434 Interest expense (22,993) (606) (224,667) (248,266) Equity in gain (loss) of joint venture (52,629) 10,084 (42,545) Other, net 7,601 7,601 ----------- ----------- ----------- ---------- ------------ Other income (expense), net 125,755 (606) (195,925) (70,776) ----------- ----------- ----------- ---------- ------------ Net income (loss) before income taxes (2,643,957) 21,346 4,341,474 (1,500,064) 218,799 Income tax provision 547,777 (5) 547,777 ----------- ----------- ----------- ---------- ------------ Net income (loss) (2,643,957) 21,346 4,341,474 (2,047,841) (328,978) Preferred stock dividends (36,458) (36,458) ----------- ----------- ----------- ---------- ------------ Net income (loss) applicable to Common Stock ($2,680,415) $21,346 $4,341,474 ($2,047,841) ($365,436) =========== =========== =========== =========== ============ Net income (loss) per share applicable to Common Stock ($0.24) $108.54 $(0.02) =========== =========== ============ Weighted average number of shares of Common Stock outstanding 11,374,922 40,000 11,802,733(1,2) 23,217,655 =========== =========== ============== ============
The Notes are an integral part of these Pro Forma Consolidated Financial Statements F-14 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET At December 31, 1996 (Unaudited)
Historical ---------------------------- Fluid Pro Forma Pro Forma Envirogen, Inc. Mgmt., Inc. Adjustments As Adjusted --------------- ----------- --------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 4,614,062 $ 368,656 $ 15,800,000 (1) $ 6,291,465 (11,991,253)(2) (2,500,000)(7) Accounts receivable, net 3,100,447 7,047,105 10,147,552 Unbilled revenue 1,776,004 1,776,004 Inventory 55,027 55,027 Prepaid expenses and other current assets 175,941 303,926 479,867 ----------- ----------- ------------ ----------- Total current assets 9,721,481 7,719,687 1,308,747 18,749,915 Property and equipment, net 922,320 965,664 1,887,984 Restricted cash 309,300 309,300 Investment in and advances to joint venture 228,934 73,790 302,724 Intangible assets, net 1,348,677 24,419,279(2) 25,767,956 Other 185,912 185,912 ----------- ----------- ------------ ----------- Total assets $12,716,624 $ 8,759,141 $ 25,728,026 $47,203,791 =========== =========== ============ =========== LIABILITIES Current liabilities: Accounts payable $ 1,335,954 $ 2,957,331 $ 4,293,285 Accrued expenses and other liabilities 955,886 846,789 1,802,675 Income taxes payable Deferred revenue 312,784 312,784 Current portion of note payable 4,287 1,000,000 ($1,000,000)(7) 4,287 Current portion of capital lease obligations 18,304 18,304 Reserve for PECFA claim adjustments 3,049,092 3,049,092 Dividends payable 813,000 813,000 ----------- ----------- ------------ ----------- Total current liabilities 2,627,215 8,666,212 (1,000,000) 10,293,427 Deferred rent 12,222 12,222 Note payable, net of current portion 1,500,000 (1,500,000)(7) Capital lease obligations, net of current portion 29,954 29,954 ----------- ----------- ------------ ----------- Total liabilities 2,669,391 10,166,212 (2,500,000) 10,335,603 ----------- ----------- ------------ ----------- STOCKHOLDERS' EQUITY Common stock 129,319 4,000 60,952 (1) 232,176 41,905 (2) (4,000)(2) Additional paid-in capital 31,925,861 36,000 15,739,048 (1) 58,643,959 10,979,050 (2) (36,000)(2) Retained earning (deficit) (22,001,997) (1,447,071) 1,447,071 (2) (22,001,997) Less: Treasury stock (5,950) (5,950) ----------- ----------- ------------ ----------- Total stockholders' equity 10,047,233 (1,407,071) 28,228,026 36,868,188 ----------- ----------- ------------ ----------- Total liabilities and stockholders' equity $12,716,624 $ 8,759,141 $ 25,728,026 $47,203,791 =========== =========== ============ ===========
The Notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements F-15 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) The unaudited Pro Forma Condensed Consolidated Financial Statements reflect the Merger, the Warburg Transaction and the acquisition of MWR. The unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared using the purchase method of accounting for both the Merger and the acquisition of MWR. NOTE 1. Represents the issuance and sale to Warburg of 6,095,238 shares of Envirogen Common Stock at $2.625 per share for net cash proceeds of $15.8 million, after expenses estimated at $200,000. NOTE 2. Represents the Merger of FMI into Envirogen, including the issuance by Envirogen of 4,190,477 shares of Envirogen Common Stock valued at approximately $11 million and the payment by Envirogen of approximately $10.9 million of cash and estimated transaction expenses of $1.1 million in connection therewith. The shares of Envirogen Common Stock issued in the Merger have been valued at $2.625 per share, which represents the value of such Common Stock during a reasonable period of time before and after the terms of the transaction were agreed and announced, discounted to reflect the difference between the shares traded in the public market and the shares issued in the Merger. The Merger has been be accounted for under the purchase method of accounting, and it has been assumed that the fair market value of the assets and liabilities acquired are equal to their book value. The Merger resulted in goodwill of approximately $24.4 million which will be amortized over 20 years. NOTE 3. Represents increased compensation for FMI executives upon consummation of the Merger. NOTE 4. Represents the amortization over 20 years of costs in excess of net assets acquired as a result of the Merger. NOTE 5. Represents the tax impact of the conversion of FMI to a C Corporation from an S Corporation and the merger of FMI into Envirogen. The pro forma tax calculation assumes no reduction in Envirogen's valuation allowance as a result of the Merger. This tax calculation includes the impact of the utilization of Envirogen's net operating loss carryforward to offset a portion (due to IRS section 382 limitations) of the Pro Forma tax liability and the tax impact of Pro Forma adjustments on the tax rate for non-deductible items. NOTE 6. Represents the amortization of intangible assets as a result of the acquisition of MWR. NOTE 7. Represents the repayment in full of all indebtedness of FMI outstanding at December 31, 1996. Pursuant to the Merger Agreement, all outstanding indebtedness of FMI on the Closing Date was repaid in full. The amount of outstanding indebtedness of FMI on the Closing Date was approximately $6 million. NOTE 8. Represents the results of operations of MWR from January 1, 1996 through February 9, 1996. F-16 (c) Exhibits. --------
Exhibit Number (Referenced to Item 601 of Regulation S-K) Description of Exhibit - --------------- ---------------------- 2.1 Agreement and Plan of Merger dated January 14, 1997 by and among Fluid Management, Inc., William C. Smith, Douglas W. Jacobson, Gary W. Hawk, Richard W. Schowengerdt and Envirogen, Inc. (1)(Exh. 2.1) 10.1 Securities Purchase Agreement dated January 14, 1997 by and between Warburg, Pincus Ventures, L.P. and Envirogen, Inc. (1)(Exh. 2.2) 10.2 Registration Rights Agreement dated April 10, 1997 by and among Envirogen, Inc., Warburg, Pincus Ventures, L.P., William C. Smith, Douglas W. Jacobson, Gary W. Hawk and Richard W. Schowengerdt. 23 Consent of Coopers & Lybrand L.L.P. - ------------------------------
(1) Incorporated by reference to the indicated exhibit to Envirogen's Report on Form 8-K filed with the Commission on January 21, 1997. Certain schedules (and similar attachments) to Exhibits 2.1 and 10.1 are not being filed. Envirogen agrees to furnish supplementally a copy of any omitted schedules or attachments to the Commission upon request. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ENVIROGEN, INC. Date: April 23, 1997 By: /s/ Harcharan S. Gill ---------------------------------------- Harcharan S. Gill, President and Chief Executive Officer -4- EXHIBIT INDEX -------------
Exhibit No. Title - ------------- ----- 2.1 Agreement and Plan of Merger dated January 14, 1997 by and among Envirogen, Inc., Fluid Management, Inc., William C. Smith, Gary W. Hawk, Richard W. Schowengerdt and Douglas W. Jacobson.(1) (Exh. 2.1) 10.1 Securities Purchase Agreement dated January 14, 1997 by and between Envirogen, Inc. and Warburg, Pincus Ventures, L.P.(1) (Exh. 2.2) 10.2 Registration Rights Agreement dated April 10, 1997 by and among Envirogen, Inc., Warburg, Pincus Ventures, L.P., William C. Smith, Douglas W. Jacobson, Gary W. Hawk and Richard W. Schowengerdt. 23 Consent of Coopers & Lybrand L.L.P. - -------------------------
(1) Incorporated by reference to the indicated exhibit to Envirogen's Report on Form 8-K filed with the Commission on January 21, 1997. Certain schedules (and similar attachments) to Exhibits 2.1 and 10.1 are not being filed. Envirogen agrees to furnish supplementally a copy of any omitted schedules or attachments to the Commission upon request. -5- EX-10.2 2 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 ENVIROGEN, INC. REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of April 10, 1997, among the investors listed on Schedule I hereto (the "Investors") and Envirogen, Inc., a Delaware corporation (the "Company"). R E C I T A L S - - - - - - - - WHEREAS, Warburg, Pincus Ventures, L.P., a Delaware limited partnership ("Warburg"), has agreed, pursuant to the terms of the Securities Purchase Agreement, dated as of January 14, 1997, by and between Warburg and the Company (the "Purchase Agreement"), to purchase 6,095,238 shares of the common stock, par value $0.01 per share, of the Company (the "Common Stock") at the aggregate cash purchase price of $15,999,999.75; and WHEREAS, the Company has agreed, as a condition precedent to Warburg's obligations under the Purchase Agreement, to grant Warburg certain registration rights; and WHEREAS, pursuant to the Agreement and Plan of Merger, dated January 14, 1997 (the "Merger Agreement"), by and among the Company, Fluid Management, Inc., a Wisconsin corporation ("Fluid Management"), and William C. Smith, Douglas W. Jacobson, Gary W. Hawk and Richard W. Schowengerdt (Messrs. Smith, Jacobson, Hawk and Schowengerdt collectively, the "Other Investors"), the Other Investors shall receive, collectively, up to 4,190,477 shares of Common Stock in connection with the transactions contemplated by the Merger Agreement; and WHEREAS, the Company has agreed, as a condition precedent to Fluid Management's and the Other Investors' obligations under the Merger Agreement, to grant the Other Investors certain registration rights; and WHEREAS, the Investors and the Company desire to define the registration rights of the Investors on the terms and subject to the conditions herein set forth. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the parties hereby agree as follows: 1 1. DEFINITIONS ----------- As used in this Agreement, the following terms have the respective meaning set forth below: Commission: shall mean the Securities and Exchange Commission or any ---------- other federal agency at the time administering the Securities Act; Exchange Act: shall mean the Securities Exchange Act of 1934, as ------------ amended; Holder: shall mean any holder of Registrable Securities; ------ Person: shall mean an individual, partnership, joint-stock company, ------ corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof; register, registered and registration: shall mean to a registration -------- ---------- ------------ effected by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement; Registrable Securities: shall mean (A) shares of Common Stock ---------------------- acquired by Warburg pursuant to the Purchase Agreement and shares of Common Stock acquired by the Other Investors pursuant to the Merger Agreement, and (B) any common stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares of Common Stock referred to in clause (A); Registration Expenses: shall mean all expenses incurred by the --------------------- Company in compliance with Section 2 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and expenses of one counsel for all the Holders in an amount not to exceed $15,000 in connection with an underwritten transaction or $5,000 in connection with a non-underwritten transaction, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company); Security, Securities: shall have the meaning set forth in Section -------------------- 2(1) of the Securities Act; Securities Act: shall mean the Securities Act of 1933, as amended; -------------- and 2 Selling Expenses: shall mean all underwriting discounts and selling ---------------- commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for each of the Holders other than fees and expenses of one counsel for all the Holders in an amount not to exceed $15,000 in connection with an underwritten transaction or $5,000 in connection with a non-underwritten transaction. 2. REGISTRATION RIGHTS ------------------- (a) Shelf Registration. ------------------ (i) As soon as practicable after the Closing Date, but in any event within nine (9) months after the Closing Date, the Company shall file with the Commission and cause to be declared effective a registration statement pursuant to Rule 415 under the Securities Act (a "Shelf Registration Statement") relating to the offer and sale of Registrable Securities by the Holders thereof from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement. (ii) The Company shall supplement or amend, if necessary, the Shelf Registration Statement as required by the applicable registration form or by the Securities Act or the rules and regulations promulgated thereunder or as reasonably requested by the Holders of a majority of the Registrable Securities (the "Majority Holders"), and the Company shall furnish to the holders of the Registrable Securities to which the Shelf Registration Statement relates copies of any such supplement or amendment prior to its being used and/or filed with the Commission. (b) Expenses of Registration. All Registration Expenses ------------------------ incurred in connection with any registration, qualification or compliance pursuant to this Section 2 shall be borne by the Company, and all Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. (c) Registration Procedures. In connection with the Shelf ----------------------- Registration Statement filed pursuant to this Section 2, the Company will keep the Holders, as applicable, advised in writing as to the initiation of such registration and as to the completion thereof. Subject to Section 2(g) hereof, at its expense, the Company will, as expeditiously as possible: (i) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by 3 such registration statement or as may be reasonably requested by the Majority Holders, until such time (x) as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (y) as set forth in Section 2(h) hereof; (ii) use its best efforts (x) to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as the sellers of Registrable Securities covered by such registration statement shall reasonably request, (y) to keep such registration or qualification in effect for so long as such registration statement remains in effect, and (z) to take any other action which may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (ii) be obligated to be so qualified, subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (iii) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the seller or sellers of Registrable Securities to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (iv) promptly notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of any such Holder promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to 4 make the statements therein not misleading in the light of the circumstances under which they were made; (v) furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (1) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders participating in such registration, addressed to the underwriters and to the Holders participating in such registration and (2) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders participating in such registration, addressed to the underwriters, and if permitted by applicable accounting standards, to the Holders participating in such registration; and (vi) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and promptly furnish to each Holder of Registrable Securities a copy of any amendment or supplement to such registration statement or prospectus. Notwithstanding the foregoing, if any such registration or comparable statement refers to any Holder by name or otherwise as the holder of any securities of the Company and in its sole and exclusive judgment such Holder is or might be deemed to be a controlling person of the Company, such Holder shall have the right to require the insertion therein of language, in form and substance reasonably satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company. (d) Indemnification. --------------- (i) The Company will indemnify each of the Holders, as applicable, each of its officers, directors and partners, and each person controlling each of the Holders, 5 with respect to the registration which has been effected pursuant to this Section 2, and each underwriter, if any, and each person who controls any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each of the Holders, each of its officers, directors and partners, and each person controlling each of the Holders, each such underwriter and each person who controls any such underwriter, for any reasonable legal and any other expenses incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any -------- such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by the Holders or underwriter and stated to be specifically for use therein. (ii) Each of the Holders severally will, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and each underwriter, if any, of the Company's securities covered by such registration statement, each person who controls the Company or such underwriter and each of their officers, directors, and partners against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in such registration statement, prospectus, offering circular or other document made by such Holder, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Holder therein not misleading, and will reimburse the Company and such directors, officers, partners, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration 6 statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided, however, -------- ------- that the obligations of each of the Holders hereunder shall be limited to an amount equal to the net proceeds to such Holder of securities sold as contemplated herein. (iii) Each party entitled to indemnification under this Section 2(d) (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided -------- that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of counsel shall be at the expense of the Indemnifying Party, provided that in such event the Indemnifying Party shall not be responsible for the fees of more than one counsel (plus one local counsel) to the Indemnified Parties), and provided further that the failure of any Indemnified Party to give -------- ------- notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2 unless the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (iv) If the indemnification provided for in this Section 2(d) is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault 7 of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with any underwritten public offering contemplated by this Agreement are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall be controlling. (vi) The foregoing indemnity agreement of the Company and the Holders is subject to the condition that, insofar as they relate to any loss, claim, liability or damage made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question becomes effective or the amended prospectus filed with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of (i) any underwriter if a copy of the Final Prospectus was furnished to the underwriter and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act and (ii) any Holder if the loss, claim, liability or damage relates to a transaction pursuant to which shares of Common Stock were not distributed pursuant to an underwritten offering and if a copy of the Final Prospectus was furnished to the Holder and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. (e) Information by the Holders. Each of the Holders holding -------------------------- securities included in any registration shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 2. 8 (f) Rule 144 Reporting. ------------------ With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of restricted securities to the public without registration, the Company agrees to: (i) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act ("Rule 144"); (ii) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) so long as the Holder owns any Registrable Securities, furnish to the Holder upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration. (g) Holdback Periods. Notwithstanding anything in this ---------------- Agreement to the contrary if (i) the Company shall determine in good faith that it would be significantly disadvantageous to the Company and its stockholders for any such Shelf Registration Statement to be amended or supplemented, and (ii) the need for such an amendment or supplement is not caused by a proposed public offering of any securities of the Company by any of its securityholders (other than an offering made pursuant to a registration on Form S-8), the Company may defer such amending or supplementing of such Shelf Registration Statement for not more than 60 days and in such event, upon appropriate notice to the Holders, the Holders shall be required to discontinue disposition of any Registrable Securities covered by such Shelf Registration Statement during such period; provided, however, that this right may not be exercised by the Company -------- ------- more than once in any twelve-month period. (h) Termination. The registration rights set forth in this ----------- Section 2 shall not be available to any Holder if, in the opinion of counsel to the Company, all of the Registrable Securities then owned by such Holder could be sold in any 90-day period pursuant to Rule 144 under the Securities Act (without giving effect to the provisions of Rule 144(k)). Upon termination of such registration rights in accordance with this Section 2(h), the obligations of the Company to continue the effectiveness of the Shelf Registration Statement shall terminate. 9 3. MISCELLANEOUS ------------- (a) Directly or Indirectly. Where any provision in this ---------------------- Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. (c) Section Headings. The headings of the sections and ---------------- subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. (d) Notices. ------- (i) All communications under this Agreement shall be in writing and shall be delivered by hand or mailed by overnight courier or by registered or certified mail, postage prepaid: (A) if to the Company, to 4100 Quakerbridge Road, Lawrenceville, NJ 08648, Attention: Harch S. Gill, or at such other address as it may have furnished in writing to the Investors; (B) if to the Investors, at the addresses listed on Schedule I hereto, or at such other addresses as may have been furnished to the Company in writing. (iii) Any notice so addressed shall be deemed to be given: if delivered by hand, on the date of such delivery; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. (e) Reproduction of Documents. This Agreement and all documents ------------------------- relating thereto, including, without limitation, any consents, waivers and modifications which may hereafter be executed may be reproduced by the Investor by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and the Investors may destroy any original document so reproduced. The parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Investors in the regular course of business) and that any 10 enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. (f) Successors and Assigns. This Agreement shall inure to the ---------------------- benefit of and be binding upon the successors and assigns of each of the parties. (g) Entire Agreement; Amendment and Waiver. This Agreement -------------------------------------- constitutes the entire understanding of the parties hereto and supersedes all prior understanding among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and the Investors holding a majority of the then outstanding Registrable Securities. (h) Severability. In the event that any part or parts of this ------------ Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not effect the remaining provisions of this Agreement which shall remain in full force and effect. (i) Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. 11 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. ENVIROGEN, INC. By: /s/ Harcharan S. Gill ------------------------------- Harcharan S. Gill President INVESTORS: WARBURG, PINCUS VENTURES, L.P. By: Warburg, Pincus & Co., General Partner By: /s/ Robert S. Hillas ------------------------------- Name: Robert S. Hillas Title: Partner /s/ William C. Smith ---------------------------------- WILLIAM C. SMITH /s/ Douglas W. Jacobson ---------------------------------- DOUGLAS W. JACOBSON /s/ Gary W. Hawk ---------------------------------- GARY W. HAWK /s/ Richard W. Schowengerdt --------------------------------- RICHARD W. SCHOWENGERDT 12 SCHEDULE I Name and Address of Investor - ----------- Warburg, Pincus Ventures, L.P. 466 Lexington Avenue New York, NY 10017 Attention: Robert S. Hillas William C. Smith S38 W33688 Highway D Dousman, WI 53118 Douglas W. Jacobson 2518 N. 81st Street Wauwatosa, WI 53213 Gary W. Hawk W272 N1347 Spring Hill Drive Pewaukee, WI 53072 Richard W. Schowengerdt 250 N. Summit Moors Drive Oconomowoc, WI 53066 13 EX-23 3 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We consent to the incorporation by reference in the registration statements of Envirogen, Inc. on Form S-8 (File No. 333-09267), Form S-8 (File No. 33-54708), Form S-3 (File No. 333-12883), Form S-3 (File No. 333-6991), and Form S-3 (File No. 33-78982) of our report dated February 21, 1997, on our audits of the financial statements of Fluid Management, Inc. as of December 31, 1996 and 1995, and the years ended December 31, 1996, 1995, and 1994, which report is included in this Report on Form 8-K. Princeton, New Jersey Coopers & Lybrand L.L.P. April 23, 1997 -----END PRIVACY-ENHANCED MESSAGE-----