<PAGE>
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): January 14, 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)
<PAGE>
ITEM 5. Other Events.
-------------
On January 14, 1997, Envirogen, Inc. ("Envirogen") and Fluid Management,
Inc., a Wisconsin corporation ("FMI"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing for the merger of FMI with and into
Envirogen, with Envirogen being the surviving corporation (the "Merger").
Pursuant to the Merger Agreement, all of the shares of FMI common stock
outstanding at the effective time of the Merger will be converted into the right
to receive an aggregate of 4,190,477 shares (the "FMI Shares") of common stock,
par value $.01 per share (the "Common Stock"), of Envirogen and $11,000,000
cash, subject to adjustment pursuant to the Merger Agreement. FMI is a full-
service environmental consulting and engineering firm with offices in Wisconsin
and Illinois.
On January 14, 1997, Envirogen also entered into a Securities Purchase
Agreement (the "Purchase Agreement") with Warburg, Pincus Ventures, L.P., a
Delaware limited partnership ("Warburg"), providing for the issuance by
Envirogen of 6,095,238 shares of Common Stock (the "Warburg Shares") to Warburg
at an aggregate cash purchase price of $16 million. The net proceeds from the
issuance of the Warburg Shares will be used to finance the cash portion of
merger consideration in connection with the Merger and to provide additional
working capital for Envirogen.
Pursuant to the Merger Agreement and the Purchase Agreement, Envirogen has
agreed to enter into a Registration Rights Agreement with Warburg and the
stockholders of FMI, pursuant to which Envirogen, as soon as practicable after
the Merger, will file 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, Warburg and the stockholders of FMI have agreed that they will
not sell, transfer or otherwise dispose of the Warburg Shares or the FMI Shares,
respectively, for a period of 12 months after the closing of the Merger without
the prior consent of Envirogen.
The closing of the transactions contemplated by the Merger Agreement and
the Purchase Agreement are scheduled to occur concurrently and are subject to
customary conditions, including the satisfactory operating results of FMI and
Envirogen prior to closing and the receipt of necessary stockholder and
regulatory approvals.
-2-
<PAGE>
Item 7. 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
the Registrant
2.2 Securities Purchase Agreement dated January
14, 1997 by and between Warburg, Pincus
Ventures, L.P. and the Registrant
Schedules (and similar attachments) to Exhibits 2.1 and 2.2 are not being filed.
The Registrant agrees to furnish supplementally a copy of any omitted schedules
or attachments to the Commission upon request.
-3-
<PAGE>
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: January 21, 1997 By: /s/ Harcharan S. Gill
-------------------------------------
Harcharan S. Gill,
President and Chief Executive Officer
-4-
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
among
ENVIROGEN, INC.,
FLUID MANAGEMENT, INC.
and
WILLIAM C. SMITH,
DOUGLAS W. JACOBSON,
GARY W. HAWK
and
RICHARD W. SCHOWENGERDT
Dated January 14, 1997
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. THE MERGER................................................................. 1
1.01 Merger; Surviving Corporation.............................................. 1
1.02 Certificate of Incorporation............................................... 1
1.03 By-Laws.................................................................... 2
1.04 Directors and Officers..................................................... 2
1.05 Effective Time............................................................. 2
1.06 Conversion of Company Shares............................................... 3
1.07 Exchange of Certificates................................................... 3
SECTION 2. THE MERGER CONSIDERATION................................................... 3
2.01 Merger Consideration....................................................... 3
2.02 Manner of Payment.......................................................... 4
2.03 Closing Certificate........................................................ 5
2.04 Closing Statement.......................................................... 5
2.05 Post-Closing Adjustment.................................................... 7
2.06 Anti-Dilution Provision.................................................... 7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
STOCKHOLDERS...................................................................... 8
3.01 Organization and Good Standing............................................. 8
3.02 Power and Authorization.................................................... 8
3.03 No Conflicts............................................................... 9
3.04 Capitalization............................................................. 10
3.05 Company Investments and Subsidiaries....................................... 10
3.06 Compliance with Laws....................................................... 10
3.07 Litigation................................................................. 11
3.08 Financial Statements....................................................... 11
3.09 Accounts Receivable........................................................ 12
3.10 Product Design; Warranties................................................. 12
3.11 Real Property.............................................................. 12
3.12 Personal Property.......................................................... 13
3.13 List of Properties, Contracts, etc......................................... 13
3.14 Contracts.................................................................. 15
3.15 Insurance.................................................................. 15
3.16 Intellectual Property...................................................... 16
3.17 Customers and Suppliers.................................................... 17
3.18 Taxes...................................................................... 17
3.19 Employee Benefit Plans..................................................... 19
3.20 Labor Matters.............................................................. 21
3.21 Directors, Officers and Employees.......................................... 22
3.22 Affiliate Agreements....................................................... 22
3.23 Environmental Matters...................................................... 23
3.24 Absence of Certain Changes and Events...................................... 25
3.25 Books and Records.......................................................... 27
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.26 Brokers.................................................................... 27
3.27 Full Disclosure............................................................ 27
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ENVIROGEN................................. 28
4.01 Organization and Good Standing............................................. 28
4.02 Power and Authorization.................................................... 28
4.03 No Conflicts............................................................... 28
4.04 Brokers.................................................................... 29
4.05 Capital Stock.............................................................. 29
4.06 Envirogen Reports.......................................................... 29
4.07 Information Included in Proxy Statement.................................... 30
4.08 Opinion of Financial Advisor............................................... 30
4.09 Vote Required.............................................................. 30
4.10 Securities Purchase Agreement.............................................. 30
SECTION 5. AGREEMENTS AND COVENANTS................................................... 31
5.01 Special Stockholders Meeting............................................... 31
5.02 Proxy Statement............................................................ 31
5.03 Further Action; Reasonable Best Efforts.................................... 32
5.04 Access to Information; Confidentiality..................................... 32
5.05 Public Announcements....................................................... 32
5.06 No Solicitation............................................................ 32
5.07 Notification of Certain Matters............................................ 33
5.08 Conduct of the Company's Business.......................................... 35
5.09 Conduct of Envirogen's Business............................................ 36
5.10 Sale of Shares of the Company.............................................. 37
5.11 Retirement of Certain Loans................................................ 37
5.12 Financial Information...................................................... 38
5.13 Adoption by Stockholders................................................... 38
5.14 Stock Options.............................................................. 38
5.15 Costs and Expenses......................................................... 38
5.16 Covenant Not-to-Compete.................................................... 39
5.17 Voting Agreement of Allen & Company Incorporated........................... 40
5.18 Repayment of Company Debt.................................................. 40
5.19 Envirogen Board Nominee.................................................... 40
5.20 Indemnification of the Company's Directors and Officers.................... 40
5.21 Post-Closing Operation of the Company...................................... 41
5.22 Continuation of PAC Plans.................................................. 41
5.23 Insurance Matters.......................................................... 41
SECTION 6. CONDITIONS................................................................. 41
6.01 Conditions Precedent to the Obligations of All Parties..................... 41
6.02 Additional Conditions Precedent to the Obligations of Envirogen............ 43
6.03 Additional Conditions Precedent to the Obligations of the Company
and Stockholders........................................................... 44
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION> Page
----
<S> <C>
6.04 Waiver..................................................................... 45
SECTION 7. SECURITIES MATTERS......................................................... 45
7.01 Investment Representations and Covenants of Stockholders................... 45
7.02 Registration Rights Agreement.............................................. 47
SECTION 8. INDEMNIFICATION; ESCROW.................................................... 47
8.01 Indemnification............................................................ 47
8.02 Escrow..................................................................... 49
SECTION 9. TERMINATION................................................................ 51
9.01 Termination................................................................ 51
9.02 Effect of Termination...................................................... 51
SECTION 10. GENERAL PROVISIONS......................................................... 52
10.01 Amendment.................................................................. 52
10.02 Extension; Waiver.......................................................... 52
10.03 Notices.................................................................... 52
10.04 Assignment and Benefit..................................................... 54
10.05 Severability............................................................... 54
10.06 Other Remedies............................................................. 54
10.07 Further Assurances......................................................... 54
10.08 Governing Law.............................................................. 54
10.09 Section Headings and Defined Terms......................................... 54
10.10 Counterparts............................................................... 55
10.11 Entire Agreement........................................................... 55
10.12 Income Tax Position........................................................ 55
10.13 Enforcement Expenses....................................................... 55
10.14 Access to Records.......................................................... 55
</TABLE>
EXHIBITS
- --------
Exhibit 1.05(i) Form of Delaware Certificate of Merger
Exhibit 1.05(ii) Form of Wisconsin Articles of Merger
Exhibit 2.02(b) Form of Escrow Agreement
Exhibit 2.03 Form of Closing Certificate
Exhibit 5.17 Voting Agreement of Allen & Company Incorporated
Exhibit 6.01(i) Form of Employment Agreement between Envirogen and each
Stockholder
Exhibit 6.02(d) Matters to be opined upon by counsel to the Company and
the Stockholders
Exhibit 6.02(f) Form of Stockholder Release
Exhibit 6.02(i) Contracts, Plans and Agreements to be Terminated At or
Before Closing
Exhibit 6.03(b) Matters to be opined upon by counsel to Envirogen
Exhibit 6.03(c) Form of Registration Rights Agreement
SCHEDULES
- ---------
Disclosure Schedule of the Company and Stockholders
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") made and entered into on
this 14th day of January, 1997 by and among Envirogen, Inc., a Delaware
corporation ("Envirogen"), Fluid Management, Inc., a Wisconsin corporation (the
"Company"), and William C. Smith, Douglas W. Jacobson, Gary W. Hawk and Richard
W. Schowengerdt, being all of the stockholders of the Company (individually, a
"Stockholder" and, collectively, the "Stockholders").
BACKGROUND
The parties desire that the Company merge with and into Envirogen upon the
terms and conditions set forth herein and in accordance with the laws of the
State of Delaware and the State of Wisconsin.
It is intended that the merger of the Company with and into Envirogen will
be a tax-free reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW THEREFORE, in consideration of the mutual terms and conditions herein
contained, and intending to be legally bound, it is agreed between the parties
hereto as follows:
SECTION 1. THE MERGER
1.01 Merger; Surviving Corporation. In accordance with the provisions of
-----------------------------
this Agreement, the General Corporation Law of the State of Delaware ("DGCL")
and the Business Corporation Law of the State of Wisconsin ("WBCL"), at the
Effective Time (as such term is defined in Section 1.05 hereof), the Company
shall be merged with and into Envirogen (the "Merger"), and Envirogen shall be
the surviving corporation in the Merger (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Delaware. At the Effective Time, the separate existence of
the Company shall cease. All properties, franchises and rights belonging to the
Company and Envirogen, by virtue of the Merger and without further act or deed,
shall be deemed to be vested in the Surviving Corporation, which shall
thenceforth be responsible for all the liabilities and obligations of each of
Envirogen and the Company.
1.02 Certificate of Incorporation. At the Effective Time, Article Fourth
----------------------------
of the Certificate of Incorporation of Envirogen, as in effect immediately prior
to the Effective Time, shall be amended and restated to read in its entirety as
follows:
"FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is 52,000,000 shares,
divided into two classes, one class consisting of 50,000,000 shares
of common stock, par value $.01 per share, and the other class
consisting of 2,000,000 shares of preferred stock, par value $.01 per
share.
<PAGE>
The Board of Directors of the Corporation is hereby expressly
authorized, at any time and from time to time, to divide the
preferred stock into one or more series, to issue from time to time
in whole or in part the stock of any such series, and in the
resolution or resolutions providing for the issue of stock of a
series to fix and determine the dividend rates, voting rights,
designations, preferences, qualifications, privileges, limitations,
options, conversion rights, redemption rights, restrictions and
special or relative rights of the series that may be desired.
Except for and subject to the rights expressly granted to the holders
of preferred stock or any series thereof, pursuant to the authority
hereby vested in the Board of Directors, and except as may be
provided by the laws of the State of Delaware, the holders of common
stock shall have exclusively the rights of stockholders."
Except as provided herein, Envirogen's Certificate of Incorporation, as amended,
as in effect immediately prior to the Effective Time shall thereafter continue
in full force and effect as the Certificate of Incorporation of the Surviving
Corporation until altered or amended as provided therein or by law.
1.03 By-Laws. Envirogen's By-Laws, as amended, in effect immediately
-------
prior to the Effective Time shall be the By-Laws of the Surviving Corporation
until altered, amended or repealed as provided therein or by law.
1.04 Directors and Officers. The directors of Envirogen immediately prior
----------------------
to the Effective Time shall serve as directors of the Surviving Corporation
following the Effective Time in accordance with the Certificate of Incorporation
and By-laws of the Surviving Corporation and the DGCL, except that (i) Seymour
L. Meisel shall tender his resignation as a director, (ii) William C. Smith, the
designee of the Stockholders, shall be appointed by the Board of Directors of
Envirogen to fill the vacancy created thereby and (iii) Robert S. Hillas, the
designee of Warburg, Pincus Ventures, L.P., shall be appointed by the Board of
Directors of Envirogen to fill a previously existing vacancy, in each case
effective as of the Effective Time. The officers of Envirogen immediately prior
to the Effective Time shall serve in such capacities at the pleasure of the
Board of Directors of the Surviving Corporation following the Effective Time in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation and the DGCL, except that William C. Smith shall be appointed by the
Board of Directors of Envirogen to serve as the Chairman of the Board, effective
as of the Effective Time.
1.05 Effective Time. The Merger shall become effective at the time and
--------------
date that the last of the following two events has occurred: (i) the acceptance
for filing of a certificate of merger (the "DGCL Certificate of Merger"), in
substantially the form attached hereto as Exhibit 1.05(i), by the Secretary of
State of the State of Delaware in accordance with the provisions of Section 252
of the DGCL; and (ii) the acceptance for filing of articles of merger (the "WBCL
Articles of Merger"), in substantially the form attached hereto as Exhibit
1.05(ii), by the Department of Financial Institutions of the State of Wisconsin
in accordance with Section 180.1107 of the WBCL. The DGCL Certificate of Merger
and the WBCL Articles of Merger shall be executed by Envirogen and the Company
and delivered to the Secretary of State of the State of Delaware and the
Department of Financial Institutions of the State of Wisconsin,
2
<PAGE>
respectively, for filing, as stated above, on the Closing Date provided for in
Section 1.07(b). The date and time when the Merger shall become effective are
referred to herein as the "Effective Time."
1.06 Conversion of Company Shares. All shares of common stock, $.10 par
----------------------------
value per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holders thereof, be converted at the
Effective Time into the Merger Consideration (as defined in Section 2.01
hereof).
1.07 Exchange of Certificates; Closing. (a) At the Closing provided for
---------------------------------
in paragraph (b) below, immediately after the Effective Time of the Merger, the
Stockholders shall surrender to the Surviving Corporation all of the outstanding
certificates theretofore representing shares of Company Common Stock in exchange
for the Merger Consideration payable to the Stockholders at Closing as provided
for in Section 2. Until such certificates are surrendered, outstanding
certificates formerly representing shares of Company Common Stock shall be
deemed for all purposes as evidencing the right to receive the Merger
Consideration into which such shares have been converted as though said
surrender and exchange had taken place. In no event will a holder of shares of
Company Common Stock be entitled to interest on the Merger Consideration
issuable in respect of such shares.
(b) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place on the later of (a) the second business day
after the date on which Envirogen stockholder approval is obtained, as
contemplated by Section 5.01 hereof, or (b) the first business day after
satisfaction or waiver of the latest to occur of the conditions set forth in
Section 6 hereof (the "Closing Date"), at the offices of Drinker Biddle & Reath,
47 Hulfish Street, Princeton, New Jersey, or such other date and place as the
parties shall agree.
SECTION 2. THE MERGER CONSIDERATION
2.01 Merger Consideration. Subject to adjustment as herein provided, all
--------------------
of the issued and outstanding shares of Company Common Stock shall be converted
at the Effective Time of the Merger into (a) 4,190,477 shares of common stock,
par value $.01 per share, of Envirogen ("Envirogen Common Stock") and (b) cash
in an amount equal to (i) Eleven Million Dollars ($11,000,000), plus (ii) the
amount of all cash and cash equivalents of the Company on the Closing Date that
exceeds Fifty Thousand Dollars ($50,000), minus (iii) the amount by which all
cash and cash equivalents of the Company on the Closing Date is less than Fifty
Thousand Dollars ($50,000), minus (iv) the amount of all Company Debt (as
defined below) that is outstanding on the Closing Date; provided, however, that
-------- -------
in the event the Company's Estimated Adjusted Net Worth (as defined in Section
2.03(b) hereof) is less than Two Million Dollars ($2,000,000) (and, if less than
One Million Dollars ($1,000,000) and Envirogen in its sole and absolute
discretion waives the closing condition set forth in Section 6.02(c) hereof),
the amount of cash payable under this clause (b) shall be further reduced by the
amount by which the Company's Estimated Adjusted Net Worth is less than
$2,000,000 (the consideration referred to in clauses (a) and (b) above being
together referred to herein as the "Merger Consideration"). For purposes of
this Section 2, the term "Company Debt" shall mean the principal amount of all
3
<PAGE>
outstanding indebtedness of the Company for borrowed money on the Closing Date,
provided that such term shall exclude any outstanding indebtedness of the
Company for borrowed money on the Closing Date to the extent such money has been
used to distribute to the Stockholders Permitted Tax Dividends (as defined
below) or has been used by the Company to pay on or about March 15, 1997 amounts
of the Permitted Accrual (as defined in Section 2.03(c) hereof) which become
payable within 75 days of December 31, 1996 in accordance with the existing
terms and conditions of the Company's PAC Plans (as defined in Section 5.22
hereof) (such excluded debt being referred to herein as the "Permitted Debt").
For purposes of this Agreement, "Permitted Tax Dividends" shall mean
distributions of cash to the Stockholders in an amount equal to the
Stockholders' federal, state and local income taxes attributable to the
Company's Taxable Income (as defined below) for the year ended December 31,
1996, less amounts previously paid to the Stockholders in respect of such income
taxes. The parties hereto agree that Permitted Tax Dividends will equal in the
aggregate 46.875% of the Company's Taxable Income and that $2,188,000 of
Permitted Tax Dividends has already been distributed by the Company to the
Stockholders during the period commencing January 1, 1996 and ending on the date
of this Agreement and that $660,000 of Permitted Debt was incurred by the
Company in connection with the payment of such Permitted Tax Dividends. As used
in this Agreement, the term "Taxable Income" shall mean the Company's net income
plus the provision for unrealized sales, in each case as reflected on the
Company's audited statement of income for the year ended December 31, 1996, to
be delivered to Envirogen at Closing pursuant to Section 6.02(j) hereof.
2.02 Manner of Payment.
-----------------
(a) Upon presentation of the certificates representing the shares of
Company Common Stock owned by the Stockholders, Envirogen shall, subject to the
escrow provisions of paragraphs (b) and (c) below, make payment of the Merger
Consideration payable to the Stockholders. The Merger Consideration shall be
allocated among the Stockholders in proportion to the number of shares of
Company Common Stock owned by each Stockholder at the Effective Time of the
Merger. Subject to the escrow provisions of paragraphs (b) and (c) below, the
cash portion of the Merger Consideration payable to each Stockholder shall be
paid in immediately available U.S. dollars by wire transfer of funds to a bank
account designated by such Stockholder.
(b) At the Closing, Envirogen shall pay to the Escrow Agent (as
defined in Section 8.02 hereof) an aggregate amount of One Million One Hundred
Thousand Dollars ($1,100,000) of the cash portion of the Merger Consideration
(the "Escrow Money") to be held in an escrow account (the "Escrow Account")
pursuant to the provisions of Section 8.02 hereof and the Escrow Agreement
substantially in the form attached hereto as Exhibit 2.02(b) (the "Escrow
Agreement").
(c) At the Closing, immediately after the delivery to the
Stockholders of certificates for the shares of Envirogen Common Stock to be
issued in the Merger, the Stockholders shall deliver to the Escrow Agent a
certificate or certificates representing in the aggregate a total of 419,048 of
such shares (the "Escrow Shares"), duly endorsed in blank for transfer by the
Stockholders, to be held in escrow by the Escrow Agent pursuant to the
provisions of Section 8.02 hereof and the Escrow Agreement.
4
<PAGE>
2.03 Closing Certificate. On the Closing Date, the Company and the
-------------------
Stockholders shall deliver to Envirogen a certificate, in substantially the form
attached hereto as Exhibit 2.03, dated the Closing Date and signed by the
Stockholders and by the Company's President on behalf of the Company, as to the
matters set forth below, along with such records, documents and supporting
information that Envirogen may request with respect thereto:
(a) the amount of the Company's cash and cash equivalents on the
Closing Date;
(b) a good faith estimate of the amount of the Company's Adjusted
Net Worth (as defined in Section 2.04(b) hereof) ("Estimated Adjusted Net
Worth"), Company Debt (the "Estimated Company Debt"), Permitted Debt ("Estimated
Permitted Debt") and Permitted Reserve (as defined in Section 2.04(b) hereof)
("Estimated Permitted Reserve"), in each case on the Closing Date, and the
calculation thereof; and
(c) a good faith estimate of the accrual at December 31, 1996 for
unpaid bonuses for the years ended December 31, 1995 and 1996 under the
Company's PAC Plans (as defined in Section 5.22 hereof) ("Permitted Accrual")
and the outstanding balance, if any, of such Permitted Accrual on the Closing
Date, and the calculation thereof.
2.04 Closing Statement.
-----------------
(a) The Closing Statement. For purposes of determining actual
---------------------
Adjusted Net Worth, actual Company Debt, actual Permitted Debt and actual
Permitted Reserve, in each case on the Closing Date, and actual Permitted
Accrual on December 31, 1996, the Surviving Corporation shall prepare or cause
to be prepared promptly following the Closing, a balance sheet of the Company as
of the Closing Date and income statements of the Company for the year ended
December 31, 1996 and for the period commencing January 1, 1997 and ending on
the Closing Date. Such balance sheet and income statements shall be prepared in
accordance with GAAP. Such balance sheet and income statements prepared and
finally determined as provided in this Section 2.04 is referred to herein as the
"Closing Statement." Within 45 days following the Closing, the Surviving
Corporation shall deliver to the Stockholders a final draft of the Closing
Statement. All determinations of the Stockholders with respect to all matters
referred to in this Section 2.04 shall require the approval of all of the
Stockholders.
(b) Adjusted Net Worth. As used in this Agreement, "Adjusted Net
------------------
Worth" shall be that amount equal to the excess of all assets of the Company on
the Closing Date over all liabilities of the Company on the Closing Date, in
each case determined in accordance with United States generally accepted
accounting principles applied on a basis consistent with the accounting
principles used in preparing the Company's Audited Financial Statements
described in Section 3.08(a) hereof (such accounting principles are herein
referred to as "GAAP"), except that in the determination of Adjusted Net Worth
no effect will be given to (i) the Company Debt on the Closing Date, (ii) the
Permitted Debt on the Closing Date, (iii) the Permitted Accrual to the extent
outstanding on the Closing Date, (iv) the Permitted Reserve on the Closing Date
or (v) any accounting or other effect of the transactions described in this
Agreement, and except further that for purposes of calculating Adjusted Net
Worth only, the Company's cash and cash equivalents
5
<PAGE>
as of the Closing Date shall be deemed to equal $50,000. For purposes of this
Agreement, "Permitted Reserve" shall mean the Company's accrual for unrealized
sales on the Closing Date less 1.86% of all PECFA (as defined in Section 6.01(h)
hereof) draw requests subject to adjustment as of the Closing Date.
(c) Discussions. The Stockholders and Envirogen shall, throughout
-----------
the entire period from the date of this Agreement to the date of the deliveries
required by Sections 2.03 and 2.04(a) of this Agreement, meet and discuss any
and all financial and business matters relating to such process and the
preparation of the Closing Certificate and the Closing Statement. If the
Stockholders and Envirogen cannot resolve any disagreement between themselves
with respect to the Closing Statement, then the procedures described in Sections
2.04(d) and 2.04(e) of this Agreement shall be used. The Stockholders and their
auditors may observe the taking of the inventory in connection with the Closing
Statement and may review the work papers of Envirogen's auditors in connection
with the preparation of the Closing Statement.
(d) Objections.
----------
(i) If the Stockholders object to any matter on the Closing
Statement the Stockholders shall, within thirty (30) calendar days after the
date of the Closing Statement, notify Envirogen of such objection and specify
the grounds for such objection.
(ii) If Envirogen does not agree with the objection of the
Stockholders, Envirogen shall, within thirty (30) calendar days after receipt of
such objection, notify the Stockholders of such fact.
(e) Independent Accountants. Any disagreement between the
-----------------------
Stockholders and Envirogen with respect to any matter on the Closing Statement
shall be submitted by either the Stockholders or Envirogen for resolution to
Price Waterhouse LLP (the "Independent Accountants"). Each of the parties shall
furnish, at its own expense, the Independent Accountants and the other parties
hereto with such documents and other written information as the Independent
Accountants may request. Each party may also furnish to the Independent
Accountants such other written information and documents as it deems relevant,
with appropriate copies or notification being given to the other parties hereto.
The Independent Accountants may, at their discretion, conduct a conference
concerning the disagreement between the Stockholders and Envirogen, at which
conference each party shall have the right to present such additional documents,
materials and other information and to have present such advisors, counsel and
accountants as each party shall choose in its sole discretion. In connection
with such process, there shall be no hearings, oral examinations, testimony,
depositions, discovery or other similar proceedings conducted by any party or by
the Independent Accountants. The determination of the Independent Accountants
shall be final and binding. The Independent Accountants shall determine the
proportion of their fees and expenses to be paid by the Stockholders and by
Envirogen, the greater the degree to which the Independent Accountants have
accepted the position of a party, the smaller the proportion of fees and
expenses assessed against that party.
6
<PAGE>
2.05 Post-Closing Adjustment.
-----------------------
(a) Post-Closing adjustments to the Merger Consideration shall be
made in the following manner:
(i) In the event Estimated Adjusted Net Worth equals or
exceeds $2,000,000 and the actual Adjusted Net Worth of the Company is less than
$2,000,000, then the Stockholders shall pay to the Surviving Corporation an
amount equal to the difference between $2,000,000 and the amount of the actual
Adjusted Net Worth of the Company;
(ii) In the event Estimated Adjusted Net Worth is less than
$2,000,000 (and the appropriate adjustment to the Merger Consideration is
accordingly made pursuant to Section 2.01 hereof) and the actual Adjusted Net
Worth of the Company is less than such Estimated Adjusted Net Worth, then the
Stockholders shall pay to the Surviving Corporation an amount equal to such
deficiency;
(iii) In the event Estimated Adjusted Net Worth is less than
$2,000,000 (and the appropriate adjustment to the Merger Consideration is
accordingly made pursuant to Section 2.01 hereof) and the actual Adjusted Net
Worth of the Company is greater than such Estimated Adjusted Net Worth, then the
Surviving Corporation shall pay to the Stockholders an amount equal to the
difference between (A) the lesser of $2,000,000 and the actual Adjusted Net
Worth of the Company as reflected on the Closing Statement and (B) the Estimated
Adjusted Net Worth of the Company;
(iv) In the event Estimated Company Debt is less than actual
Company Debt, then the Stockholders shall pay to the Surviving Corporation an
amount equal to any such deficiency; and
(v) In the event Estimated Company Debt is greater than
actual Company Debt, then the Surviving Corporation shall pay to the
Stockholders an amount equal to any such excess.
(b) Any amounts payable by the Stockholders to the Surviving
Corporation pursuant to this Section 2.05 shall be made first from the Escrow
Account in accordance with the terms set forth in Section 8.02 hereof and then,
if necessary, by the Stockholders by certified check or wire transfer of
immediately available funds to an account designated by the Surviving
Corporation. Any amounts payable by the Surviving Corporation to the
Stockholders shall be made by certified check or wire transfer of immediately
available funds to an account or accounts designated by the Stockholders.
2.06 Anti-Dilution Provision. In the event that, between the date of this
-----------------------
Agreement and the Effective Time, the issued and outstanding shares of Envirogen
Common Stock shall have been changed into a different number of shares as the
result of a stock split, reverse stock split, stock dividend, recapitalization,
reclassification or other similar transaction, then the number of shares of
Envirogen Common Stock set forth in Section 2.01(a) and the number of Escrow
Shares set forth in Section 2.02(c) shall be adjusted appropriately.
7
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND STOCKHOLDERS
Certain information relating to the representations and warranties of the
Company and the Stockholders is set forth in a Disclosure Schedule hereto (the
"Disclosure Schedule") prepared by the Company and the Stockholders and
delivered to Envirogen pursuant to this Agreement as of the date hereof. The
disclosures in the Disclosure Schedule shall relate only to the representations
and warranties to which they expressly refer and shall be deemed to be
representations and warranties as if made hereunder. In the event of any
inconsistency between the statements made in the body of this Agreement and
those contained in the Disclosure Schedule (other than a disclosure in the
Disclosure Schedule which expressly relates to a specifically identified
representation and warranty), those in this Agreement shall control. All
capitalized terms used in the Disclosure Schedule have the definitions specified
in this Agreement. Disclosure of a matter or document in the Disclosure
Schedule shall not be deemed to be an acknowledgement that such matter is
material or outside the ordinary course of business of the Company. The Company
and the Stockholders may supplement the Disclosure Schedule from time to time
subject to and in accordance with Section 5.07(c) of this Agreement, and from
and after any such supplement the term "Disclosure Schedule" as used in this
Agreement shall mean the Disclosure Schedule as so supplemented.
The Company and each Stockholder (provided that in the case of a reference
in this Section 3 to the business, affairs or status of a Stockholder, such
Stockholder shall be deemed to make such representation solely with respect to
himself) represent and warrant to Envirogen as follows:
3.01 Organization and Good Standing. The Company is a corporation duly
------------------------------
organized, validly existing and in active status (meaning it has filed the
required Domestic Corporation Annual Reports with the Wisconsin Department of
Financial Institutions and has not filed Articles of Dissolution) under the laws
of the State of Wisconsin and has all necessary corporate power and authority to
carry on its business, to own and lease the assets that it owns and leases and
to perform all its obligations. The Company is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction identified in the Disclosure Schedule, which includes each
jurisdiction in which its ownership or leasing of assets or properties or the
nature of its activities requires such qualification.
3.02 Power and Authorization. The Company has full legal right, power and
-----------------------
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Company Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by the Company of this Agreement and the Company
Transaction Documents have been duly authorized by the Board of Directors of the
Company and approved by the Stockholders, and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or the Company
Transaction Documents. Each Stockholder has full power, authority and capacity
to execute, deliver and perform this Agreement and the other agreements and
documents (the "Stockholder Transaction Documents") required to be delivered by
such Stockholder prior to or at the Closing. This Agreement has been duly and
validly executed and delivered by the Company and each Stockholder and
8
<PAGE>
constitutes the Company's and each Stockholder's legal, valid and binding
obligation, enforceable against the Company and each Stockholder in accordance
with its terms, and when executed and delivered as contemplated herein, each of
the Company Transaction Documents and the Stockholder Transaction Documents
shall constitute the legal, valid and binding obligation of the Company and each
Stockholder, respectively, enforceable against the Company and each Stockholder
in accordance with its terms, except as such enforceability of this Agreement or
any Company Transaction Document or any Stockholder Transaction Document may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding therefor may be brought.
3.03 No Conflicts.
------------
(a) Except as described in the Disclosure Schedule, the execution,
delivery and performance of this Agreement, the Company Transaction Documents
and the Stockholder Transaction Documents do not and will not (with or without
the passage of time or the giving of notice):
(i) violate or conflict with any provision of the certificate
or articles of incorporation or bylaws of the Company or of any law, statute,
regulation, Permit (as defined in Section 3.06(b) hereof), license, certificate,
judgment, order, award or other decision or requirement of any arbitrator,
court, government or governmental agency or instrumentality (each, a "Law" and
collectively, "Laws") binding upon the Company or any Stockholder;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any agreement
or other obligation to which the Company or any Stockholder is a party or by
which the Company or its assets are bound, or give to others any rights
(including rights of termination, foreclosure, cancellation or acceleration) in
or with respect to the Company or any Stockholder or any of the assets of
either; or
(iii) result in, require or permit the creation or imposition
of any restriction, mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance of any nature upon or with respect to the
Company Common Stock, the Company or any of its assets.
(b) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of the
Company or any Stockholder, threatened, that question any of the transactions
contemplated by this Agreement or the validity of this Agreement or any of the
other agreements or instruments contemplated hereby or which, if adversely
determined, would have an adverse effect upon the Company's or any Stockholder's
ability to enter into or perform its obligations under this Agreement or any of
the other agreements or instruments contemplated hereby. Neither the Company
nor any Stockholder has received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
9
<PAGE>
3.04 Capitalization. The Company's authorized, issued and outstanding
--------------
capital stock and its other securities are fully and accurately described in the
Disclosure Schedule. The Stockholders own all of the issued and outstanding
shares of Company Common Stock, beneficially and of record, and no other person
has any rights, title or interest, whether legal or equitable, in said shares.
No person has any preemptive or other rights with respect to any such capital
stock or securities and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) relating to the
issuance, conversion, registration, sale or transfer of any equity interests or
other securities of the Company or obligating the Company or any other person to
purchase or redeem any such equity interests or other securities. All of the
issued and outstanding shares of Company Common Stock have been duly authorized
and are validly issued and outstanding, fully paid and (except as otherwise
provided by Section 180.622(2)(b) of the WBCL, including judicial
interpretations of such Section and of its predecessor statute, Section
180.40(6) of the WBCL) nonassessable, and have been issued in compliance with
applicable securities and other Laws.
3.05 Company Investments and Subsidiaries. Except as disclosed on the
------------------------------------
Disclosure Schedule, the Company does not own, control or have any investment or
other interest in any corporation, partnership, joint venture, business trust or
other entity, and the Company has not agreed, contingently or otherwise, to
share any profits, losses, costs or liabilities, or to indemnify any person or
entity or to guaranty the obligations of any person or entity.
3.06 Compliance with Laws.
--------------------
(a) Except as described in the Disclosure Schedule, the Company is,
and at all times has been, in compliance with all applicable Laws, except where
noncompliance would not have a material adverse effect on the business,
properties, profits, prospects or condition (financial or otherwise) of the
Company (a "Material Adverse Effect"), and the Company does not have any basis
to expect, and has not received any notice, order or other communication from
any governmental agency or instrumentality of, any alleged, actual, or potential
violation or failure to comply with any Law. There are no unsatisfied
judgments, penalties or awards against or affecting the Company or any of its
businesses, properties or assets.
(b) All federal, foreign, state, local and other governmental
consents, licenses, permits, franchises, grants and authorizations required to
be obtained and held by the Company for the operation of its business as
currently conducted and as conducted since December 31, 1993 (collectively,
"Permits") are, except as otherwise described in the Disclosure Schedule, in
full force and effect without any default or violation thereunder by the Company
or, to the knowledge of the Company, by any other party thereto (except where
the failure to have such a Permit in full force and effect or where any default
or violation thereunder would not have a Material Adverse Effect), and the
Company has not received any notice of any claim or charge that the Company is
or had been in violation of or in default under any such Permit. Except as
described in the Disclosure Schedule: (i) no proceeding is pending or, to the
knowledge of the Company, threatened by any person to revoke or deny the renewal
of any Permit of the Company; and (ii) the Company has not been notified that
any such Permit may not in the ordinary course be renewed upon its expiration or
that by virtue of the transactions contemplated hereby any such Permit may not
be granted or renewed.
10
<PAGE>
3.07 Litigation. Except as described in the Disclosure Schedule or the
----------
Financial Statements (as defined in Section 3.08 hereof), there are no, and
since the date of the Interim Balance Sheet (as defined in Section 3.08 hereof)
there have not been any, claims, actions, suits, proceedings (arbitration or
otherwise) or investigations involving or affecting the Company, its businesses
or assets, or its directors, officers or shareholders in their capacities as
such, before or by any court or governmental agency or instrumentality, or
before an arbitrator of any kind. Any description set forth on the Disclosure
Schedule pursuant to this Section 3.07 with respect to any such claims, actions,
suits, proceedings or investigations shall include, to the extent applicable,
the name of the court or agency in which the proceedings are pending, the date
instituted, the principal parties thereto, a description of the factual basis
alleged to underlie the proceeding and the relief sought. To the knowledge of
the Stockholders and the Company, (a) no such claims, actions, suits,
proceedings or investigations are presently threatened or contemplated and (b)
there are no facts that could reasonably serve as a basis for any such claim,
action, suit, proceeding or investigation.
3.08 Financial Statements.
--------------------
(a) The Disclosure Schedule contains: (i) the balance sheet of the
Company as at December 31, 1995 (including the notes thereto, the "Balance
Sheet"), and the related statements of income, changes in stockholders' equity
and cash flow for the fiscal year then ended, together with the report thereon
of Vrakas, Blum & Co., S.C., independent certified public accountants (the
"Audited Financial Statements"); (ii) the unaudited balance sheets of the
Company as of December 31, 1993 and 1994, and the related unaudited statements
of income, changes in stockholders' equity and cash flow for each of the fiscal
years then ended; and (iii) an unaudited balance sheet of the Company as at
September 30, 1996 (including the notes thereto, the "Interim Balance Sheet")
and the related unaudited statements of income, changes in stockholders' equity
and cash flow for the nine months then ended, together with the corresponding
unaudited financial statements as of and for the corresponding period of the
preceding fiscal year, including in each case all notes thereto (the financial
statements referred to in this clause (iii) being referred to collectively as
the "Interim Financial Statements" and the financial statements referred to in
clauses (i), (ii) and (iii) above being referred to collectively as the
"Financial Statements"). The Financial Statements and notes accurately and
fairly reflect the books and records of the Company and fairly present the
financial condition, cash flow and results of operations of the Company as at
the respective dates thereof and for the periods therein referred to, all in
accordance with generally accepted United States accounting principles,
consistently applied ("GAAP"), subject, in the case of the Interim Financial
Statements, to normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, be material) and the absence of notes
(which, if presented, would not differ materially from those included in the
Audited Financial Statements).
(b) The Balance Sheet and the Interim Balance Sheet reflect all
liabilities of the Company, whether absolute, accrued or contingent, as of the
respective dates thereof of the type required to be reflected or disclosed in a
balance sheet (or the notes thereto) prepared in accordance with GAAP. The
Company does not have any liabilities of any nature that are not reflected on
the Interim Balance Sheet except for liabilities disclosed on the Disclosure
Schedule and for current liabilities (within the meaning of GAAP) that have been
incurred since the date
11
<PAGE>
thereof in the ordinary course of business consistent in nature and amount with
past practice and that are not inconsistent with any of the representations and
warranties contained herein, and, to the knowledge of the Company and the
Stockholders, there is no basis for the assertion against the Company of any
liability (other than current liabilities referred to above) not fully reflected
or reserved against in the Interim Balance Sheet.
(c) The Balance Sheet and the Interim Balance Sheet reflect reserves
or other appropriate provisions at least equal to reasonably anticipated
liabilities, losses and expenses of the Company as of the respective dates
thereof, including those with respect to income and other taxes (including
alternative minimum tax), warranty claims, bad debts, unsalable inventories,
vacation pay, and plans and programs for the benefit of present and former
employees (including, without limitation, plans and programs relating to medical
coverage for employees).
3.09 Accounts Receivable. All accounts and notes receivable of the
-------------------
Company represent valid obligations from sales made or services rendered in the
ordinary course of business and in the aggregate have been or will be collected
in full in the ordinary course of business, without any set-off or discount,
except to the extent of any reserves for possible losses set forth on the
Interim Balance Sheet and any adjustments made to such reserve by the Company
after the date of the Interim Balance Sheet in accordance with the Company's
policies and in a manner consistent with past practices. The Disclosure
Schedule includes a correct and complete accounts and notes receivable aging of
the Company as of the date of the Interim Balance Sheet, reflecting the
designated and undesignated reserves for possible losses as of such date and the
aggregate dollar amount of all accounts and notes receivable due the Company
that have been outstanding for: 60 days or less; more than 60 but less than 90
days; more than 90 but less than 120 days; more than 120 but less than 150 days;
and more than 150 days.
3.10 Product Design; Warranties. Except as described in the Disclosure
--------------------------
Schedule: (a) the Company has not expressly agreed to become responsible for
consequential damages or made any express warranties to third parties with
respect to any products created, manufactured, sold, distributed or licensed, or
any services rendered, by the Company; (b) to the knowledge of the Company and
the Stockholders, there are no implied warranties outstanding with respect to
any such products or services other than any such implied pursuant to Sections
2-312 and 2-314 of the Uniform Commercial Code; and (c) there are no design,
manufacturing or other defects, latent or otherwise, with respect to any such
products.
3.11 Real Property. The Disclosure Schedule identifies each interest in
-------------
real property leased by the Company, including a listing of all leases and other
agreements under which any such property is held. The Company does not own or
have any other interest in real property other than pursuant to the leases
referred to above. The Company owns all right, title and interest in all
leasehold estates and other rights purported to be granted to them by the leases
and other agreements listed in the Disclosure Schedule, in each case free and
clear of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any nature except for liens
and restrictions described in said Schedule. All of the buildings and
structures constituting the premises leased by the Company are structurally
sound with no known defects, are in good operating condition and repair
(ordinary wear and tear excepted) and are suitable for the purposes for which
they are being used. No such building or structure, or any
12
<PAGE>
appurtenance thereto or equipment therein, or the operation or maintenance
thereof by the Company, violates any restrictive covenant or any provision of
any Law (including without limitation any such relating to health and safety or
zoning), which violation interferes with the use of such building, structure or
appurtenance, or encroaches on any property owned by others. No condemnation
proceeding is pending or, to the knowledge of the Company or the Stockholders,
threatened with respect to any real property identified in the Disclosure
Schedule.
3.12 Personal Property. Except as described in the Disclosure Schedule:
-----------------
(a) the Company has good and marketable title to all of its properties and
assets (other than real property) free and clear of any restriction, mortgage,
deed of trust, pledge, lien, security interest or other charge, claim or
encumbrance of any nature; and (b) all properties and assets owned or leased by
the Company are in the possession or under the control of the Company and are in
good condition and repair, ordinary wear and tear excepted, are suitable for the
purposes for which they are being used, and are of a condition, nature and
quantity sufficient for the conduct of the Company's business as it is presently
conducted.
3.13 List of Properties, Contracts, etc. The Disclosure Schedule contains,
----------------------------------
lists or adequately describes the following:
(a) each vehicle, item of machinery, equipment and other tangible
asset (other than real property) carried as an asset on the records of the
Company with a fair market or book value in excess of $5,000 in respect of any
item, and the location thereof;
(b) each vehicle, item of machinery, equipment and other tangible
asset (other than real property) leased to or by the Company under agreement
providing for annualized payments of more than $5,000, together with the
location of such asset, the identities of the lessor and lessee, the annual
rental and unexpired term of the lease;
(c) each Permit;
(d) each (i) fictitious business name, tradename, registered and
unregistered trademark, service mark and related application (together with the
name Fluid Management, Inc., "Marks"), (ii) patent, patent right and patent
application (collectively, "Patents"), (iii) copyright in published and material
unpublished works ("Copyrights"), computer program and software ("Software"),
(iv) proprietary formula, trade secret, formulation and unpatented invention
("Trade Secrets") and (v) licenses and permits issued or granted by any person
relating to any of the foregoing (the items referred to in clauses (i)-(iv)
above are collectively referred to herein as ("Intellectual Property"); in each
case owned, leased, used or held by, granted to or licensed by the Company as
licensor or licensee (excluding non-critical, off-the-shelf application software
licensed by the Company and software imbedded in machinery or equipment, which
software is owned or used by the Company and is licensed for use by the Company
in conjunction with its ownership or use of said equipment or machinery),
together with all other interests therein granted by the Company to any other
person and all agreements with respect to any of the foregoing to which the
Company is a party (including secrecy and non-disclosure agreements with current
or former employees, consultants or contractors);
13
<PAGE>
(e) each agreement or commitment that restricts or purports to
restrict the Company's business activities or the freedom of the Company to
engage in any business or to compete with any person;
(f) each outstanding loan or advance (excluding advances for
ordinary and necessary business expenses, receivables generated in connection
with the Company's bona fide sales of products and services, and prepaids, in
each case made or generated by the Company in the ordinary course of business
consistent with past practices) by the Company to any person (including any
Stockholder and any director, officer, or employee of the Company);
(g) each contract, agreement, purchase order or other commitment
(whether or not in writing) involving the performance of services or delivery of
goods or materials by or to the Company (i) outside of the continental United
States of America, (ii) of an aggregate amount or value in excess of $50,000 in
any 12-month period or (iii) which is not terminable by the Company without
payment of penalty or premium on 30 days notice or less;
(h) each capital project currently undertaken or which has been
approved by the Company;
(i) each evidence of indebtedness, note, advance, guaranty or letter
of credit entered into, issued or to be issued, contingently or otherwise, by,
to or from the Company, and all loan and other agreements relating thereto;
(j) each restriction, deed of trust, pledge, lien, security interest
or other charge, claim and encumbrance of any nature relating to or affecting
any of the assets or properties of the Company;
(k) each contract, agreement or commitment to which the Company is a
party or is otherwise bound providing for payments to or by any person or entity
based on sales, purchases or profits, other than direct payments for goods, and
each other agreement to which the Company is a party or is otherwise bound that
is material to its business, operation, financial condition or prospects;
(l) each policy and binder of insurance (including without
limitation, property, casualty, liability, life, health, accident, workers'
compensation and disability insurance and bonding arrangements) owned by, or
maintained for the benefit of, or the premiums for which are paid directly or
indirectly in whole or in part by, the Company;
(m) each form of contract, agreement or commitment used by the
Company as a standard form in the ordinary course of business;
(n) each outstanding power-of-attorney or similar power granted by
the Company for any purpose whatsoever; and
14
<PAGE>
(o) each bank or other financial institution in which the Company
has a deposit account, line of credit or safe deposit box, the relevant account
or other identifying number, and the names of all persons authorized to act or
deal in connection therewith.
The Company has furnished and will furnish or make available to Envirogen
true and complete copies of each agreement, plan and other document required to
be disclosed on the Disclosure Schedule.
3.14 Contracts. Each of the contracts, agreements and commitments to
---------
which the Company is a party or by which it or its assets are bound was made in
the ordinary course of business and is in full force and effect and is valid,
binding and enforceable in accordance with its terms against the Company and, to
the knowledge of the Company and the Stockholders, the other parties thereto.
Except as described in the Disclosure Schedule, the Company has performed all
obligations required to be performed by it under each such contract, agreement
and commitment through the date hereof, and no condition exists or event has
occurred that with notice or lapse of time would constitute a material default
or a basis for delay or nonperformance by the Company or by any other party to
any such contract, agreement or commitment, except where such failure in
performance or condition would not have a Material Adverse Effect. The Company
is not a party to any contract or commitment upon which, upon completion, it is
likely to recognize a material loss on its books and records. Except as
described in the Disclosure Schedule, each other party to each such contract,
commitment and agreement has consented or been given sufficient notice (when
such consent or notice is necessary) that the same shall remain in full force
and effect following the Closing.
3.15 Insurance.
---------
(a) The summary of the policies and binders of insurance contained
in the Disclosure Schedule identifies, among other things: (i) the respective
issuers and expiration dates thereof; (ii) deductible amounts and amounts of
coverage available and outstanding thereunder; (iii) whether such policies and
binders are "claims made" or "occurrences" policies; and (iv) any retrospective
premium adjustments. Such policies and binders are sufficient for compliance
with all requirements of Laws and all agreements to which the Company is a party
or by which it or its assets are bound, are valid and enforceable policies and
will not be affected by, terminate or lapse prior to the Closing by reason of
the transactions contemplated by this Agreement.
(b) The Company has not received (i) any notice of cancellation of
any policy or binder of insurance required to be identified in the Disclosure
Schedule or refusal of coverage thereunder; (ii) any notice that any issuer of
such policy or binder has filed for protection under applicable bankruptcy or
insolvency laws or is otherwise in the process of liquidating or has been
liquidated; or (iii) any other indication that any such policy or binder may no
longer be in full force or effect or that the issuer of any such policy or
binder may no longer be willing or able to perform its obligations thereunder.
The Company has never been refused any insurance nor has its coverage been
limited.
15
<PAGE>
3.16 Intellectual Property.
---------------------
(a) Except as otherwise described in the Disclosure Schedule: (i)
the Company is the sole owner or has the right to use all Intellectual Property
in the manner presently used by the Company, free and clear of any lien,
security interest, restriction, encumbrance or other adverse claim; (ii) the
Intellectual Property is sufficient for the conduct of the businesses of the
Company as such has been conducted since its inception and as it is presently
conducted; and (iii) the rights of the Company in and to all of the Intellectual
Property will not be limited or otherwise affected by virtue of the transactions
contemplated hereby.
(b) The Disclosure Schedule identifies, with respect to any
Intellectual Property not owned exclusively by the Company and the
unavailability to the Company of which would have a Material Adverse Effect, the
owner thereof or of any interest therein, principal terms of the license or
other agreement relating to such Intellectual Property, including the unexpired
term of such agreement, the consideration therefor, if any, and any limitations
upon the Company's use thereof.
(c) Except as described in the Disclosure Schedule, the Company is
not obligated, contingently or otherwise, to: (i) develop, update, distribute or
service any Software or other Intellectual Property; or (ii) pay royalties or
license or similar fees in excess of $25,000 per year, individually or in the
aggregate, to any person with respect to any Software or other Intellectual
Property now used by the Company or which is proposed to be used by the Company.
(d) All employees of the Company involved with the development,
implementation or marketing of any Intellectual Property have entered into
written agreements assigning to the Company all rights to inventions,
improvements, discoveries or information relating thereto.
(e) All of the Marks, Copyrights and Patents owned by the Company
have been duly registered. All of the Marks, Copyrights and Patents owned by
the Company are in compliance with all applicable legal requirements (including
payment of filing, examination and maintenance fees and proofs of working or
use), to the knowledge of the Company and the Stockholders are valid and
enforceable and are not subject to any maintenance fees or taxes or actions due
within 90 days after the Closing Date. No Mark, Copyright or Patent owned by
the Company has been or is involved in any interference, reissue, reexamination,
opposition, invalidation or cancellation proceeding and, to the knowledge of the
Company and each Stockholder, no such proceeding is threatened. To the
knowledge of the Company and each Stockholder, there is no patent or patent
application or trademark or trademark application pending that interferes or
potentially interferes with any Patent, Copyright or Mark owned by the Company
or any rights of the Company therein. No Mark, Copyright or Patent owned by the
Company has been infringed or, to the best knowledge of the Company and each
Stockholder, challenged or threatened in any way. None of the Marks, Patents,
Copyrights or Software, owned by the Company, nor any products manufactured or
sold by the Company, nor any processes or other Intellectual Property owned by
the Company infringe or are alleged to infringe any trademark, copyright, patent
or other proprietary right of any person. The Company has
16
<PAGE>
taken commercially reasonable precautions to preserve and document its Software
and Trade Secrets and to protect the secrecy, confidentiality and value of its
Software and Trade Secrets. All documentation relating to Trade Secrets and
Software of the Company has been maintained only at the Company's principal
office. The only Marks, Copyrights, Patents, Software or other Intellectual
Property owned by third parties which are used by the Company in the conduct of
its business as presently conducted either are available commercially to the
Company without any separately executed licenses or other written agreements on
the same terms they generally are available to the public, or their
unavailability to the Company would not have a Material Adverse Effect.
3.17 Customers and Suppliers. The Disclosure Schedule lists the names of
-----------------------
the ten (10) customers of the Company that generated the most revenue during
1995 and 1996 and the aggregate revenues attributable to each in each such
period, and of the ten (10) suppliers and vendors from whom the Company made the
most purchases during such periods and the aggregate expenditures attributable
to each in each such period. No customer that accounted for more than of 5% of
the revenues of the Company during 1995 or 1996 has terminated or materially
reduced, or has given notice that it intends to terminate or materially reduce,
the amount of business done with the Company; provided that Envirogen
understands that a significant portion of the Company's business is episodic and
not of a recurring nature with most customers, and that the representation made
in this sentence shall not be deemed breached by virtue of lack of a continuing
relationship between any customer and the Company by virtue of the fact that the
Company has completed or completes a contracted project for such customer. No
supplier or vendor that accounted for more than $10,000 of the purchases of the
Company during 1995 or 1996 has terminated or materially reduced, or has given
notice that it intends to terminate or materially reduce, the amount of business
done with the Company. The Company is not aware of any such intention on the
part of any such customer, supplier or vendor. Except as disclosed on the
Disclosure Schedule, there are no, and since December 31, 1993 there have not
been any, disputes or controversies involving, in the aggregate, more than
$5,000 between the Company and any customer, supplier or other person regarding
the quality, merchantability or safety of, or involving a claim of breach of
warranty that has not been fully resolved with respect to, or defect in, any
service or product purchased or sold by the Company. The Company is satisfied
with its working relationships under all arrangements and agreements with
customers and suppliers necessary to the normal operation of its businesses.
Alternative sources of supply, on substantially similar terms and conditions,
exist for all material goods or services purchased by or supplied to the
Company.
3.18 Taxes.
-----
(a) All federal, state, local and foreign returns and reports
relating to Taxes (as defined herein), or extensions relating thereto, required
to be filed by or with respect to the Company (including, without limitation,
all federal and state consolidated and combined tax returns and reports for any
consolidated group of which the Company has been a member during the last five
years (the "Consolidated Group")) have been timely and properly filed, and all
such returns and reports are correct and complete.
17
<PAGE>
(b) All federal, state, local, and foreign income, profits,
franchise, sales, use, payroll, premium, occupancy, property, severance, excise,
withholding, customs, unemployment, transfer and other taxes, including
interest, additions to tax and penalties (collectively "Taxes") due or properly
shown to be due on any return referred to in Subsection (a) above by the Company
with respect to taxable periods ending on or prior to, and the portion of any
interim period up to, the date hereof have been fully and timely paid or, in the
case of Taxes not yet due, fully provided for on the Interim Balance Sheet or,
in the case of Taxes accruing after the date of such financial statement, on the
books of account of the Company; and there are no levies, liens, or other
encumbrances relating to Taxes existing, threatened or pending with respect to
any asset of the Company, other than statutory liens for taxes not yet due and
payable.
(c) Except as described in the Disclosure Schedule, no issues have
been raised with any representative or employee of the Company (and are
currently pending) by the Internal Revenue Service ("IRS") or any other taxing
authority in connection with any of the returns and reports referred to in
subsection (a) above and no waivers of statutes of limitations have been given
or requested with respect to any such returns and reports or with respect to any
Taxes.
(d) To the knowledge of the Company and each Stockholder, no
federal, state, local or foreign income, franchise or sales and use tax returns
of or with respect to the Company have been examined since 1993, or are
currently under examination, by the IRS or by other taxing authorities, or with
respect to which the applicable statue of limitations (including all extensions
and tolling periods) has not yet run. There are no unpaid deficiencies asserted
or assessments made by any taxing authority against the Company.
(e) The Disclosure Schedule lists all elections by or with respect
to the Company for federal or state income or franchise tax purposes that are
currently applicable. The Company has been an S corporation for federal and
state tax purposes since inception and will maintain such S status until the
Merger. The Company uses the accrual method of accounting for federal income tax
purposes. The Company has not: filed any consent under section 341(f)(1) of the
Code, or agreed to have the provisions of Code section 341(f)(2) apply to any
dispositions of "subsection (f) assets" as such term is defined in Code section
341(f)(4); agreed to or is required to make any adjustments under Code section
481(a) by reason of a change in accounting method or otherwise; or made a
transfer of intangible property on which Code section 367(d) or 482 will require
the recognition of additional income for any period after the date hereof. The
Company does not own stock in a "passive foreign investment company" within the
meaning of Code section 1296(a). The books and records of the Company are
sufficient to prove the correctness of all tax returns for open tax years and to
determine and to prove the adjusted tax basis for federal income tax purposes of
each asset of the Company.
(f) The Company is not obligated to make any payments that would
constitute an "excess parachute payment" as defined in Code section 280G. The
Company is not a party to any tax sharing agreement or tax indemnification
agreement.
18
<PAGE>
3.19 Employee Benefit Plans.
----------------------
(a) The Disclosure Schedule contains a complete and correct list of
all employee benefit plans, arrangements, commitments and payroll practices
(whether or not employee benefit plans ("Employee Benefit Plans") as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including, without limitation, sick leave, vacation pay, severance
pay, salary continuation for disability, consulting or other compensation
arrangements, retirement, deferred compensation, bonus, incentive compensation,
stock purchase, stock option, health including hospitalization, medical and
dental, life insurance and scholarship programs maintained for the benefit of
any employees of the Company or any ERISA Affiliate (as defined below) or to
which the Company or any ERISA Affiliate has contributed or is or was within the
last six years obligated to make payments. The Company has delivered to
Envirogen, with respect to all benefit plans, arrangements, commitments or
payroll practices required to be listed on the Disclosure Schedule, true,
complete and correct copies of the following: all plan documents, handbooks,
manuals, collective bargaining agreements and similar documents governing
employment policies, practices and procedures; all the most recent summary plan
descriptions and any subsequent summaries of material modifications and all
other material employee communications discussing any employee benefit; Forms
series 5500 as filed with the IRS for the most recent three plan years; the most
recent report of the enrolled actuary for all defined benefit plans, funded
welfare plans or other plans requiring actuarial valuation; all trust agreements
with respect to employee benefit plans; plan contracts with service providers
and plan contracts with insurers providing benefits for participants or
liability insurance for fiduciaries and other parties in interest or bonding;
most recent annual audit and accounting of plan assets for all funded plans; and
most recent IRS determination letter for all plans qualified under Code section
401(a). As used herein, "ERISA Affiliate" shall refer to any trade or business,
whether or not incorporated, under common control with the Company within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
(b) With respect to each Employee Benefit Plan required to be listed
on the Disclosure Schedule: (i) each Employee Benefit Plan has been
administered in compliance with its terms and is in compliance in all material
respects with the applicable provisions of ERISA, the Code and all other
federal, foreign, state and other applicable laws, rules and regulations, as
they relate to such plan (including, without limitation, funding, filing,
termination, reporting and disclosure and continuation coverage obligations
pursuant to Section 601 et seq. of ERISA); (ii) the Company and each ERISA
------
Affiliate has made all contributions to all Employee Benefit Plans as required
under the terms of such Plans; (iii) no "Employee Pension Benefit Plan" (as
defined in Section 3(2) of ERISA) has been the subject of a "reportable event"
(as defined in Section 4043 of ERISA) and there have been no "prohibited
transactions" (as described in Section 4975 of the Code or in Part 4 of Subtitle
B of Title I of ERISA) with respect to any Employee Benefit Plan; (iv) there are
and during the past three years there have been no inquiries, proceedings,
claims or suits pending or, to the knowledge of the Company and the
Stockholders, threatened by any governmental agency or authority or by any
participant or beneficiary against any of the Employee Benefit Plans, the assets
of any of the trusts under such Plans or the Plan sponsor or the Plan
administrator, or against any fiduciary of any of such Employee Benefit Plans
with respect to the design or operation of the Employee Benefit Plans; (v) the
actuarial present value of accumulated benefits (both vested and unvested) of
each of the Employee Pension Benefit
19
<PAGE>
Plans, which are defined benefit plans, are fully funded in accordance with the
actuarial assumptions used by the Pension Benefit Guaranty Corporation ("PBGC")
to determine the level of funding required in the event of the termination of
such Plan; (vi) each Employee Pension Benefit Plan that is intended to be
"qualified" within the meaning of Section 401(a) of the Code is, and has from
its inception been so qualified, both in form and in operation, and any trust
created pursuant to any such Employee Pension Benefit Plan is exempt from
federal income tax under Section 501(a) of the Code and the IRS has issued each
such Plan a favorable determination letter which is currently applicable; and
(vii) neither the Stockholders and the Company nor, to the knowledge of the
Company and the Stockholders, any ERISA Affiliate is aware of any circumstance
or event which would jeopardize the tax-qualified status of any such Employee
Pension Benefit Plan or the tax-exempt status of any related trust, or would
cause the imposition of any liability, penalty or tax under ERISA or the Code
with respect to any Employee Benefit Plan.
(c) Neither the Company nor any ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to a "Multiemployer Plan" (as
such term is defined by Section 4001(a)(3) of ERISA).
(d) With respect to each Employee Benefit Plan maintained by the
Company or any ERISA Affiliate: (i) no unsatisfied liabilities to participants,
the IRS, the United States Department of Labor ("DOL"), the PBGC or to any other
person or entity have been incurred as a result of the termination of any
Employee Benefit Plan; (ii) no Employee Pension Benefit Plan, which is subject
to the minimum funding requirements of Part 3 of subtitle B of Title I of ERISA
or subject to Section 412 of the Code, has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code and there has been no waived funding deficiency within the meaning of
Section 303 of ERISA or Section 412 of the Code; (iii) there has been no event
with respect to an Employee Pension Benefit Plan that would require disclosure
under Sections 4062(c), 4063(a) or 4041(e) of ERISA.
(e) All reports and information required to be filed with the DOL,
IRS and PBGC and with plan participants and their beneficiaries with respect to
each Employee Benefit Plan required to be listed on the Disclosure Schedule have
been filed and all annual reports (Form 5500 series) of such Plans were
certified without qualification by each Plan's accountants and actuaries. Any
annual reports that are not yet due but are required to be filed with respect to
a plan year that ended on or prior to the Closing Date shall be filed by the
Company before the Closing Date.
(f) Except as set forth on the Disclosure Schedule, all Employee
Benefit Plans, arrangements, commitments, and payroll practices required to be
listed on the Disclosure Schedule have been administered in compliance with
federal, state, and local law, including, but not limited to, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, and the Family and
Medical Leave Act, except where noncompliance would not have a Material Adverse
Effect.
(g) Except as set forth on the Disclosure Schedule, all Employee
Benefit Plans, arrangements, commitments, and payroll practices required to be
listed on the Disclosure
20
<PAGE>
Schedule and all other Employee Benefit Plans currently maintained by the
Company or an ERISA Affiliate may, without liability, be amended, terminated or
otherwise discontinued.
(h) Any bonding required under ERISA with respect to any Employee
Benefit Plan required to be listed on the Disclosure Schedule and any other
Employee Benefit Plan currently maintained by the Company or an ERISA Affiliate
has been obtained and is in full force and effect and no funds held by or under
the control of the Company are plan assets.
(i) Except as set forth on the Disclosure Schedule, neither the
Company nor any ERISA Affiliate maintains any retiree life and/or retiree health
insurance plans that provide for continuing benefits or coverage for any
employee or any beneficiary of an employee after such employee's termination of
employment, other than as required by Section 601 et seq. of ERISA.
------
(j) Except as set forth on the Disclosure Schedule, the consummation
of the transactions contemplated by this Agreement will not, alone or together
with any other event, (i) entitle any person to severance pay, an excess
parachute payment within the meaning of Section 280G of the Code, unemployment
compensation or any other payment, (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due to any such employee or
(iii) result in any liability under Title IV of ERISA or otherwise.
3.20 Labor Matters.
-------------
(a) No application for certification of a collective bargaining
agent is pending and none of the employees of the Company are, or have ever
been, represented by any union or other bargaining representative; there has not
been, and there is not currently pending, any labor arbitration or proceeding in
respect of the grievance of any employee, any application or complaint filed by
any employee or union with the National Labor Relations Board or any comparable
state or local agency, any strike, slowdown, picketing or work stoppage by any
employees at any facility of the Company, any lockout of any such employees or
any labor trouble or other labor-related controversy, occurrence or condition of
a similar character; no agreement restricts the Company from relocating, closing
or terminating any of its operations or facilities; and to the best knowledge of
each Stockholder and the Company, no such agreement, action, proceeding or
occurrence is threatened or contemplated by any person.
(b) Except as described in the Disclosure Schedule, the Company has
not been cited for violations of the Occupational Safety and Health Act of 1970,
29 U.S.C. sec. 651 et seq. ("OSHA"), any regulation promulgated pursuant to
OSHA, or any other statute, ordinance, rule, or regulation establishing
standards of workplace safety or paid any fines or penalties with respect to any
such citation. Except as described in the Disclosure Schedule: (i) since
January 1, 1994, there have been no inspections of any of the facilities of the
Company by representatives of the Occupational Safety and Health Administration
or any other government agency vested with authority to enforce any statute,
ordinance, rule or regulation establishing standards of workplace safety; (ii)
to the knowledge of the Company and the Stockholders, no representative of the
Occupational Safety and Health Administration or any other such government
agency has attempted to conduct any such inspection or sought entry to any of
such facilities for that
21
<PAGE>
purpose; (iii) the Company has not been notified of any complaint or charge
filed by any employee or any labor union or other employee representative with
the Occupational Safety and Health Administration or any other such government
agency that alleges that the Company has violated OSHA or any other statute,
ordinance, rule or regulation establishing standards of workplace safety; (iv)
the Company has not been notified that any employee, labor union or other
employee representative has requested that the Occupational Safety and Health
Administration or any other such government agency conduct an inspection of any
facilities of the Company to determine whether violations of OSHA or any other
such statute, ordinance, rule or regulation exists; and (v) the Company does not
maintain any condition, process, practice or procedure at any of its facilities
that violate OSHA or any other statute, ordinance, regulation or rule
establishing standards or workplace safety where any such violation has or
reasonably can be expected in the future to have a Material Adverse Effect.
3.21 Directors, Officers and Employees. The Disclosure Schedule sets
---------------------------------
forth the following information for each officer and employee of the Company and
for each consultant and independent contractor regularly retained, whose
aggregate compensation for the year ended December 31, 1995 exceeded $50,000 or
whose current aggregate annual rate of compensation exceeds such amount
(including each such person on leave or layoff status): employee name and job
title; current annual rate of compensation (identifying bonuses separately) and
any change in compensation since the date of the Balance Sheet; vacation accrued
and service credited for purposes of vesting and eligibility to participate in
applicable Employee Benefit plans and programs; and any automobile leased or
owned by the Company primarily for use by any of the foregoing persons. Since
the date of the Interim Balance Sheet, no employees of the Company have been
reassigned or transferred to, or hired or employed by, any Stockholder or any
affiliate of a Stockholder other than the Company. Except as described in the
Disclosure Schedule, to the knowledge of each Stockholder and the Company, none
of the employees or officers of the Company is a party to, or is otherwise bound
by, any agreement or arrangement with any person or entity other than the
Company (including, without limitation, any confidentiality, non-competition or
proprietary rights agreement) that in any way limits or adversely affects the
performance of his or her duties, the ability of the Company to conduct its
businesses, or his or her freedom to engage in any of the businesses conducted
by the Company. The Disclosure Schedule lists each written, and lists and
describes the principal terms of each oral, employment, severance, change of
control, consulting, commission, agency and representative agreement to which
the Company is a party or is otherwise bound, including, without limitation, all
agreements and commitments relating to wages, hours or other terms or conditions
of employment (other than unwritten employment arrangements terminable at will
without payment of any contractual severance or other amount).
3.22 Affiliate Agreements. Except as described in the Disclosure
--------------------
Schedule, there are no, and during the last three years there have not been any,
agreements, arrangements or understandings between the Company, on the one hand,
and any Stockholder or any member of the immediate family of such Stockholder,
on the other. Except as described in the Disclosure Schedule, neither the
Stockholders nor any present or former director, shareholder or officer of the
Company nor any member of the immediate family of or any person or entity
controlling or controlled by any of such persons has, or during the last three
years has had: any interest in any material property (real or personal, tangible
or intangible) sold to, purchased by or otherwise
22
<PAGE>
used in or pertaining to the business of the Company; or any direct or indirect
interest in any person or entity that has had business dealings or a financial
interest in any transaction with the Company or that is in competition with any
business of the Company. Except as described in the Disclosure Schedule, all
agreements between the Company and any person or entity described in the
preceding sentence are terminable by the Company, upon less than ten days
notice, without payment of penalty or premium of any kind. No Stockholder has
any claim or right against the Company except as described in the Disclosure
Schedule.
3.23 Environmental Matters.
---------------------
(a) Except as described in the Disclosure Schedule:
(i) The Company, including all of its businesses and
operations, are and always have been operated in compliance with all
Environmental Laws (as defined below), except where noncompliance would not have
a Material Adverse Effect of $100,000 or more;
(ii) During the Company's period of ownership or tenancy of
any real property that is now owned or leased to or by the Company ("Current
Real Property") and, to the knowledge of the Company and the Stockholders
without investigation or inquiry, prior to the Company's period of ownership or
tenancy of any Current Real Property, there are no conditions on, about, beneath
or arising from any Current Real Property that might, under any Environmental
Law, (A) give rise to liability or the imposition of a statutory lien, or (B)
that would or may require any "Response," "Removal" or "Remedial Action" (as
those terms are defined below) or any other action, including without limitation
reporting, monitoring, cleanup or contribution;
(iii) During the Company's period of ownership or tenancy of
any real property that was, but is no longer, owned or leased to or by the
Company ("Former Real Property") and, to the knowledge of the Company and the
Stockholders without investigation or inquiry, prior to and after the Company's
period of ownership or tenancy of any Former Real Property, there were no
conditions on, about, beneath or arising from any Former Real Property, during
the period of such ownership, use or lease, that might, under any Environmental
Law, (A) give rise to liability or the imposition of a statutory lien, or (B)
that would or may require any "Response," "Removal" or "Remedial Action" or any
other action, including without limitation reporting, monitoring, cleanup or
contribution;
(iv) The Company has not received any notification of a
release or threat of a release of a "Hazardous Substance" (as defined below)
with respect to any Current Real Property or Former Real Property;
(v) During the Company's period of ownership or tenancy of
any Current Real Property and, to the knowledge of the Company and the
Stockholders without investigation or inquiry, prior to the Company's period of
ownership or tenancy of any Current Real Property, no Hazardous Substances have
been used, handled, generated, processed, treated, stored, transported to or
from, released, discharged or disposed of by the Company or, to the
23
<PAGE>
knowledge of the Company and each Stockholder, any third party, on, about or
beneath any Current Real Property in violation of any applicable Environmental
Law;
(vi) During the Company's period of ownership or tenancy of
any Former Real Property and, to the knowledge of the Company and the
Stockholders without investigation or inquiry, prior to and after the Company's
period of ownership or tenancy of any Former Real Property, no Hazardous
Substances were used, handled, generated, processed, treated, stored,
transported to or from, released, discharged or disposed of by the Company or
any third party, on, about or beneath the Former Real Property in violation of
any applicable Environmental Law;
(vii) There are no above or underground storage tanks, asbestos
containing materials, or transformers containing or contaminated with
polychlorinated biphenyls on, about or beneath the Current Real Property.
During the Company's period of ownership or tenancy of any Former Real Property
and, to the knowledge of the Company and the Stockholders without investigation
or inquiry, prior to and after the Company's period of ownership or tenancy of
any Former Real Property, there were no above or underground storage tanks,
asbestos containing materials, or transformers containing or contaminated with
polychlorinated biphenyls on, about or beneath the Former Real Property;
(viii) The Company has not received notice and does not have
actual or constructive knowledge of:
(A) any claim, demand, investigation, enforcement
action, Response, Removal, Remedial Action, statutory lien or other governmental
or regulatory action instituted or threatened against the Company, the Current
Real Property or Former Real Property pursuant to any of the Environmental Laws;
(B) any claim, demand notice, suit or action, made or
threatened by any person against the Company, the Current Real Property or the
Former Real Property relating to (i) any form of damage, loss or injury
resulting from, or claimed to result from, any Hazardous Substance on, about,
beneath or arising from the Current Real Property or Former Real Property or
(ii) any alleged violation of the Environmental Laws by the Company; or
(C) any communication to or from any governmental or
regulatory agency arising out of or in connection with Hazardous Substances on,
about, beneath, arising from or generated at the Current Real Property or Former
Real Property, including without limitation, any notice of violation, citation,
complaint, order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule;
(ix) No wastes generated by the Company have ever been
directly or indirectly sent, transferred, transported to, treated, stored, or
disposed of at any site listed or formally proposed for listing on the National
Priority List promulgated pursuant to "CERCLA" (as defined below) or to any site
listed on any state list of sites required or recommended for investigation or
clean-up. None of the Current Real Property or Former Real Property is listed
24
<PAGE>
on the National Priorities List or any state list of sites requiring or
recommended for investigation or clean up; and
(x) To the knowledge of the Company and the Stockholders
there is no proposed change in any Environmental Law that could have a Material
Adverse Effect.
(b) As used in this Agreement:
(i) the term "Environmental Laws" means all Laws presently or
heretofore in effect concerning or relating to industrial hygiene or protection
of human health or the environment;
(ii) the terms "Response," "Removal" and "Remedial Action"
shall have the meanings ascribed to them in Sections 101(23)-101(25) of the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended by the Superfund Amendments and Reauthorization Act ("SARA"), 42
U.S.C. (S)(S) 9601(23)-9601(25) and other comparable Laws as presently or
heretofore in effect; and
(iii) The term "Hazardous Substances" or "Hazardous Substance"
shall mean any substance presently or heretofore regulated under any of the
Environmental Laws including, without limitation, any substance that is (A)
petroleum, asbestos or asbestos-containing material, or polychlorinated
biphenyls; (B) defined, designated or listed as a "Hazardous Substance" pursuant
to Sections 307 and 311 of the Clean Water Act, 33 U.S.C. (S)(S)1317, 1321,
Section 101(14) of CERCLA, 42 U.S.C. (S)9601; (C) listed in the United States
Department of Transportation Hazardous Material Tables, 49 C.F.R. (S)172.101; or
(D) defined, designated or listed as a "Hazardous Waste" under Section 1004(5)
of the Resource and Conservation and Recover Act, 42 U.S.C. 6903(5).
3.24 Absence of Certain Changes and Events.
-------------------------------------
(a) Except as described in the Disclosure Schedule, since the date
of the Interim Balance Sheet, the Company has conducted its business only in the
usual and ordinary course consistent with past practice and there has not been
any:
(i) declaration or payment of any dividend or other
distribution or payment in respect of the shares of capital stock of the
Company, or any repurchase or redemption of any such shares of capital stock;
(ii) payment by the Company of any bonus, or increase of any
salary or other compensation payable to any director or officer, payment by the
Company of any bonus or increase of any salary or other compensation payable to
any non-officer employee other than ordinary merit bonuses and merit salary
increases consistent with past practices, nor has the Company entered into any
employment, severance or similar agreement with any director, officer or
employee other than employment at will arrangements;
25
<PAGE>
(iii) adoption of or change in any plan or policy that is
required to be disclosed pursuant to Section 3.20;
(iv) damage, destruction or loss to any material asset or
property of the Company, whether or not covered by insurance (including, without
limitation, any extraordinary loss as defined in Opinion Number 30 of the
Accounting Principles Board of The American Institute of Certified Public
Accountants);
(v) entry into, amendment, termination or receipt of notice
of termination of any agreement that is required to be disclosed in the
Disclosure Schedule hereto, other than in the ordinary course of business
consistent with past practices;
(vi) sale, assignment, conveyance, lease, or other disposition
of any material asset or property of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material asset or material
property of the Company;
(vii) incurrence or repayment of any liability or obligation
(whether absolute or contingent) to any affiliated person, or incurrence or
repayment of any liability or obligation to any other person other than current
liabilities incurred and obligations under agreements entered into in the
ordinary course of business consistent with past practice, or any discharge or
satisfaction of any lien, claim or encumbrance other than in the ordinary course
of business consistent with past practice;
(viii) write-down or write-off of the value of any asset, except
for write-downs and write-offs of accounts receivable in the ordinary course of
business consistent with past practice or any cancellation or waiver of any
other material claims or rights;
(ix) change in the business or operations of the Company or in
the manner of conducting the same or entry by the Company into any transaction,
other than in the ordinary course of business consistent with past practice;
(x) change in the accounting methods, principles or practices
followed by the Company, except as required by GAAP, or any change in any of
assumptions underlying, or methods of calculating, any bad debt, contingency or
other reserve; or
(xi) agreement, whether or not in writing, to do any of the
foregoing by the Company.
(b) Since the date of the Interim Balance Sheet, there has not been
any material adverse change in the business, operations, properties, assets,
prospects, working capital, or condition (financial or otherwise) of the Company
or, to the knowledge of the Company and each Stockholder, any event, condition
or contingency that is likely to result in such a material adverse change.
26
<PAGE>
3.25 Books and Records.
-----------------
(a) The copies of the articles of incorporation of the Company, as
certified by the Wisconsin Department of Financial Institutions, and of its
bylaws, as certified by the secretary or assistant secretary of the Company,
which have been delivered to Envirogen, are true, complete and correct and are
in full force and effect as of the date hereof.
(b) The stock records of the Company fairly and accurately reflect
the record ownership of all of its outstanding shares of capital stock. The
minute books of the Company contain complete and accurate records of all
meetings held of, and corporate action taken by, the shareholders, the board of
directors and each committee of the board of directors of the Company and no
meetings of such shareholders or of such board of directors or committee have
been held for which minutes have not been prepared and are not contained in such
minute books. The other books and records of the Company, including financial
records and books of account, are complete and accurate in all material respects
and have been maintained in accordance with sound business practices. Complete
and accurate copies, as of the date hereof, of all such minute books and stock
records have been made available to Envirogen.
3.26 Brokers. Except as disclosed on the Disclosure Schedule, no person
-------
acting on behalf of any Stockholder or the Company or under the authority of
either of the foregoing is or will be entitled to any brokers' or finders' fee
or any other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement.
3.27 Full Disclosure.
---------------
(a) All documents and other papers delivered by or on behalf of the
Company in connection with the transactions contemplated by this Agreement are
accurate and complete and are authentic. No representation or warranty of the
Company or any Stockholder contained in this Agreement or any Schedule hereto
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
(b) Except as described in this Agreement or the Schedules hereto,
there is no fact known to any Stockholder or the Company (other than general
economic or industry conditions) that materially adversely affects or, so far as
the Company and each Stockholder can reasonably foresee, materially threatens,
the assets, business, prospects, financial condition or results of operations of
the Company or the ability of the Stockholders or the Company to perform this
Agreement.
27
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ENVIROGEN
Envirogen hereby represents and warrants to the Stockholders and the
Company as follows:
4.01 Organization and Good Standing. Envirogen is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary corporate power and authority to carry on its
business as presently conducted, to own and lease the assets that it owns and
leases and to perform all of its obligations under each agreement and instrument
by which it is bound. Envirogen is duly qualified to do business as a foreign
corporation and is good standing under the laws of each jurisdiction in which
its ownership or leasing of assets or properties or the nature of its activities
requires such qualification.
4.02 Power and Authorization. Envirogen has full legal right, power and
-----------------------
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Envirogen Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by Envirogen of this Agreement and the Envirogen
Transaction Documents have been duly authorized by the Board of Directors of
Envirogen. This Agreement has been duly and validly executed and delivered by
Envirogen. This Agreement is, and when executed and delivered by Envirogen at
the Closing each of the Envirogen Transaction Documents to which Envirogen is a
party shall constitute, the legal, valid and binding obligation of Envirogen,
enforceable against it in accordance with its terms, except as such may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding therefor may be brought.
4.03 No Conflicts.
------------
(a) The execution, delivery and performance of this Agreement and
the Envirogen Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with any provision of the certificate
of incorporation or bylaws, each as amended, of Envirogen or of any Law binding
upon Envirogen;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any material
agreement or other material obligation to which Envirogen is a party; or
(iii) require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
except as set forth on Schedule 2.5 to the Securities Purchase Agreement (as
defined in Section 5.01 hereof).
28
<PAGE>
(b) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of
Envirogen, threatened, that question any of the transactions contemplated by
this Agreement or the validity of this Agreement or any of the other agreements
or instruments contemplated hereby or which, if adversely determined, would have
an adverse effect upon the ability of Envirogen to enter into or perform its
obligations under this Agreement or any of the other agreements or instruments
contemplated hereby. Envirogen has not received any request from any
governmental agency or instrumentality for information with respect to the
transactions contemplated hereby.
4.04 Brokers. No person acting on behalf of Envirogen or any of its
-------
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, other than Allen & Company
Incorporated, whose fees and expenses shall be the sole responsibility of
Envirogen.
4.05 Capital Stock.
-------------
(a) On the date hereof, the authorized capital stock of Envirogen
consists of 22,000,000 shares, including 20,000,000 shares of Envirogen Common
Stock, and 2,000,000 shares of preferred stock, par value $.01 per share, of
which 12,872,440 shares of Envirogen Common Stock and no shares of Envirogen's
preferred stock are issued and outstanding, 1,531,335 shares of Envirogen Common
Stock are reserved for issuance pursuant to outstanding stock options, and
1,608,024 shares of Envirogen Common Stock are reserved for issuance pursuant to
outstanding warrants. Except for the foregoing, as of the date of this
Agreement there are no options, warrants or other rights, agreements,
arrangements or commitments of any character (including without limitation
voting agreements or arrangements known to Envirogen) relating to the issued or
unissued capital stock of Envirogen or obligating Envirogen to issue or sell any
shares of capital stock of, or other equity interests in, Envirogen.
(b) All shares of Envirogen Common Stock to be issued and delivered
in the Merger will be, at the time of issuance and delivery in accordance with
the terms of this Agreement, duly authorized, validly issued, fully paid and
nonassessable by Envirogen and will not be issued in violation of the preemptive
rights of any Envirogen stockholder.
4.06 Envirogen Reports. Envirogen has delivered to the Stockholders and
-----------------
the Company copies of Envirogen's (a) Proxy Statement dated April 10, 1996, (b)
Annual Report on Form 10-K for 1995 containing audited financial statements for
1995, as amended by its Form 10-K/A dated April 17, 1996, (c) Quarterly Reports
on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1996,
(d) Form 10-C dated May 31, 1996, (e) Registration Statement on Form S-3
(Registration No. 333-12883) effective October 3, 1996 and (f) Current Reports
on Form 8-K dated January 5, 1996, February 23, 1996 (as amended by its Form 8-
K/A dated April 22, 1996) and June 27, 1996, all of which have been filed by
Envirogen with the Securities and Exchange Commission (the "Envirogen Reports").
The audited consolidated financial statements and unaudited interim financial
statements of Envirogen included in such reports have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto) and fairly present the financial position of Envirogen and its
29
<PAGE>
consolidated subsidiary as at the dates thereof and for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein. The Envirogen
Reports do not contain any untrue statements of a material fact or omit to state
a material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
4.07 Information Included in Proxy Statement. The information to be
---------------------------------------
included or incorporated in the Proxy Statement (as defined in Section 5.02
hereof), other than information provided by the Company or the Stockholders for
the express purpose of including the same in the Proxy Statement, shall not, at
the date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to stockholders of Envirogen, or at any time thereafter up to and
including the time of the Envirogen Stockholder Meeting, be false or misleading
with respect to any material fact required to be stated therein, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not misleading; or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Envirogen
Stockholder Meeting which has become false or misleading. The Proxy Statement
shall comply in all material respects as to form and substance with the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder. Notwithstanding the foregoing, Envirogen makes no
representation or warranty with respect to any information about, or supplied or
omitted by, the Company or any Stockholder which is contained in the Proxy
Statement.
4.08 Opinion of Financial Advisor. Envirogen has received the written
----------------------------
opinion of its financial advisor, Allen & Company Incorporated, stating that the
terms of the Merger and the Securities Purchase Agreement are fair to the
stockholders of Envirogen from a financial point of view.
4.09 Vote Required. The affirmative vote of the holders of a majority of
-------------
the outstanding shares of Envirogen Common Stock and entitled to vote at the
Envirogen Stockholder Meeting in which a quorum is present is necessary to
approve this Agreement and the transactions contemplated hereby and the
amendment to Envirogen's Certificate of Incorporation to increase the number of
authorized shares of Envirogen Common Stock from 20,000,000 to 50,000,000, and
the affirmative vote of the holders of a majority of the outstanding shares of
Envirogen Common Stock present, in person or by proxy, and entitled to vote at
the Envirogen Stockholder Meeting in which a quorum is present is necessary to
approve the Securities Purchase Agreement and the transactions contemplated
thereby and the amendment to Envirogen's Option Plan (as defined in Section 5.14
hereof) to, among other things, increase the number of shares of Envirogen
Common Stock reserved for issuance upon the exercise of options granted under
such plan from 2,000,000 to 3,000,000.
4.10 Securities Purchase Agreement. All representations and warranties of
-----------------------------
Envirogen contained in the Securities Purchase Agreement (as defined in Section
5.01 below) and the Schedules thereto are true and correct in all material
respects. The Securities Purchase Agreement and the agreements attached as
Exhibits thereto constitute the entire understanding and agreement of Envirogen
and Warburg, Pincus Ventures, L.P. with respect to the subject matter thereof,
and there are no side letters or other agreements, whether written or oral, that
modify or supplement the provisions of the Securities Purchase Agreement, or
that relate in any way to the subject matter of the Securities Purchase
Agreement.
30
<PAGE>
SECTION 5. AGREEMENTS AND COVENANTS
5.01 Special Stockholders Meeting. Envirogen shall duly call, give notice
----------------------------
of, convene and hold a special stockholders meeting (the "Envirogen Stockholder
Meeting") to approve, among other things, (i) this Agreement and the
transactions contemplated hereby, (ii) the Securities Purchase Agreement dated
the date hereof between Envirogen and Warburg, Pincus Ventures, L.P. (the
"Securities Purchase Agreement") and the transactions contemplated thereby,
(iii) the amendment to Envirogen's Certificate of Incorporation to increase the
number of authorized shares of Envirogen Common Stock from 20,000,000 to
50,000,000 and (iv) an amendment to Envirogen's Option Plan (as defined in
Section 5.14 hereof) to, among other things, increase the number of shares of
Envirogen Common Stock reserved for issuance upon the exercise of options
granted under such plan from 2,000,000 to 3,000,000. The Board of Directors of
Envirogen will recommend to its stockholders approval of such matters, and
Envirogen shall take all such actions to obtain such approvals as promptly as
practicable, including without limitation the solicitation of proxies.
5.02 Proxy Statement. Envirogen shall prepare as promptly as practicable,
---------------
with the cooperation of the Company and the Stockholders, a proxy statement (the
"Proxy Statement") in compliance with the provisions of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for purposes of soliciting the
approval of the stockholders of Envirogen of, among other things, (i) this
Agreement and the transactions contemplated hereby, (ii) the Securities Purchase
Agreement and the transactions contemplated thereby (iii) the amendment to
Envirogen's Certificate of Incorporation to increase the number of authorized
shares of Envirogen Common Stock from 20,000,000 to 50,000,000, and (iv) an
amendment to Envirogen's Option Plan (as defined in Section 5.14 hereof) to,
among other things, increase the number of shares of Envirogen Common Stock
reserved for issuance upon the exercise of options granted under such plan from
2,000,000 to 3,000,000. The Company and each Stockholder agree to provide
promptly to Envirogen for inclusion in the Proxy Statement, or any amendments or
supplements thereto, such information concerning its business and financial
statements and affairs as, in the reasonable judgment of Envirogen or its
counsel, may be required by applicable law or the rules and regulations of the
Securities and Exchange Commission (including without limitation audited
financial statements of the Company) and unaudited interim financial statements
of the Company and to cause its counsel and auditors to cooperate with
Envirogen's counsel and auditors in the preparation of the Proxy Statement. The
Company and the Stockholders agree that the information to be included in the
Proxy Statement with respect to the Company and its business and the
Stockholders shall not, at the date the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to stockholders of Envirogen, or
at any time thereafter up to and including the time of the Envirogen Stockholder
Meeting, be false or misleading with respect to any material fact required to be
stated therein, or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not misleading; or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Envirogen Stockholder Meeting which has become false or
misleading. The Company and the Stockholders will promptly advise Envirogen in
writing if at any time prior to the Effective Time of the Merger the Company or
any Stockholder shall obtain knowledge of any facts that might make it necessary
or
31
<PAGE>
appropriate to amend or supplement the Proxy Statement in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law.
5.03 Further Action; Reasonable Best Efforts. Upon the terms and subject
---------------------------------------
to the conditions hereof, each of the parties hereto shall use its reasonable
best efforts to take, or cause to be taken, all appropriate action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including without limitation (i) cooperation in
the preparation and filing of the Proxy Statement and (ii) using its reasonable
best efforts to make all required regulatory filings and applications and to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger. In
case any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties
hereto shall use their reasonable best efforts to take all such necessary
action.
5.04 Access to Information; Confidentiality. From the date of this
--------------------------------------
Agreement to the Closing Date, each party will give to the other party (and to
Warburg, Pincus Ventures, L.P.) and its officers, employees, counsel,
accountants and other representatives free and full access to and the right to
inspect, during normal business hours, all of the assets, records, contracts and
other documents relating to its business as the other party may reasonably
request. Neither party will use such information for purposes other than in
connection with the Merger and each party will otherwise hold such information
in confidence until such time as such information otherwise becomes publicly
available, and in the event of termination of this Agreement for any reason will
promptly return, destroy or cause to be returned or destroyed, to the other
party all nonpublic documents obtained from the other party, and any copies made
of such documents.
5.05 Public Announcements. Except as and to the extent required by law in
--------------------
the opinion of their respective counsel, as the case may be, without the prior
written consent of the other party, neither the Company, any Stockholder nor
Envirogen will, and each will direct its representatives not to, directly or
indirectly, make any public comment, statement or communication with respect to,
or otherwise disclose or permit the disclosure of any of the terms, conditions
or other aspects of, the transactions contemplated hereby. In the event any
party determines that it is required by law to make any such public comment,
statement or communication, such party shall advise the other parties of that
fact as soon as reasonably practicable so that, to the extent feasible and
desired by the other parties, such public comment, statement or other
communication can be made jointly by the parties.
5.06 No Solicitation. The Company and each Stockholder shall not, and
---------------
the Company shall cause its officers, employees, representatives and agents not
to, directly or indirectly, continue, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any nonpublic
information to, any person (other than Envirogen, Warburg, Pincus Ventures, L.P.
and their respective representatives in connection with the transactions
contemplated by this Agreement) concerning any sale of assets (other than in the
ordinary course of its business consistent with past practice) or shares of
capital stock of the Company or any merger,
32
<PAGE>
consolidation, recapitalization, liquidation or similar transaction involving
the Company (collectively, a "Company Acquisition Transaction"). The Company
and each Stockholder agrees that it or he will promptly communicate to Envirogen
the terms of any inquiry or proposal that it or he may receive in respect of a
Company Acquisition Transaction, to the extent he or it can do so without
breaching any confidentiality provision contained in such proposal. Subject to
any such confidentiality provision, any notification under this Section 5.06
shall include the identity of the person making such proposal, the terms of such
proposal and any other information with respect thereto as Envirogen may
reasonably request.
5.07 Notification of Certain Matters.
-------------------------------
(a) Certain Events. The Company and the Stockholders shall give
--------------
prompt notice to Envirogen, and Envirogen shall give prompt notice to the
Company and the Stockholders, of (i) the occurrence, or failure to occur, of any
event that such party believes would likely cause any of its representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time, (ii) any material failure of the Company, any Stockholder or Envirogen, as
the case may be, or any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement, and (iv) any actions, suits,
claims, investigations or proceedings commenced or, to the best of its
knowledge, threatened against, relating to or involving or otherwise affecting
the Company, any Stockholder or Envirogen, as the case may be, or any of the
transactions contemplated by this Agreement.
(b) Other Acquisitions. Envirogen promptly shall notify the Company
------------------
and the Stockholders of any proposal it makes or receives that constitutes, or
may reasonably be expected to lead to, any Envirogen Acquisition Transaction (as
such term is defined below), or in the event Envirogen retains an investment
banker or other financial adviser for the purpose of initiating, soliciting or
encouraging an Envirogen Acquisition Transaction. Any such notice shall provide
relevant details relating to such proposal. For purposes of this Agreement,
"Envirogen Acquisition Transaction" shall mean any of the following involving
Envirogen and/or its affiliates, other than the transactions contemplated by
this Agreement and those contemplated by the Securities Purchase Agreement: (i)
any merger, consolidation, share exchange, business combination or other similar
transaction in which Envirogen is not the surviving corporation; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of all or
substantially all of the assets of Envirogen in a single transaction or series
of transactions; (iii) any issuance and sale of 25% or more of shares of capital
stock of Envirogen (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock of Envirogen); (iv) any tender offer or exchange offer for 25% or
more of outstanding shares of capital stock or the filing of a registration
statement under the Securities Act in connection therewith; or (v) any person
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder) shall have been formed which beneficially owns or has
the right to
33
<PAGE>
acquire beneficial ownership of, 25% or more of the then-outstanding shares of
capital stock of Envirogen.
(c) Update of Disclosure Schedule. In the event the Company or any
-----------------------------
Stockholder discovers any matter which would cause any of the representations
and warranties made herein by the Company or any Stockholder to become
inaccurate or untrue, or in the event any developments should occur between the
date of this Agreement and the Closing Date which cause any representation or
warranty made by the Company or any Stockholder herein to become inaccurate or
untrue, then the Company and the Stockholders shall supplement the Disclosure
Schedule to disclose such discovery or development, and shall notify Envirogen
of the proposed change to the Disclosure Schedule in accordance with the notice
provisions of Section 10.03 of this Agreement. If requested by Envirogen in
writing within ten days of notice of the proposed change to the Disclosure
Schedule, the Company and the Stockholders shall meet and discuss any such
proposed change to the Disclosure Schedule with representatives of Envirogen.
If the parties cannot resolve any differences regarding the proposed change to
the Disclosure Schedule within a reasonable period of time (not to exceed 15
days), and the discovery or development described in the Company's and the
Stockholders' notice would, or could reasonably be expected to, result in a
Material Adverse Effect, individually or together with any other such
discoveries and developments brought to the attention of Envirogen pursuant to
this subsection (c) after the date of this Agreement, then Envirogen shall have
the right, upon notice to the Company and the Stockholders, to terminate this
Agreement pursuant to Section 9.01(b) hereof. If Envirogen does not make a
request to meet with the Company and the Stockholders within ten days of
Envirogen's receipt of their notice of a proposed change to the Disclosure
Schedule, then the discovery or development described in such notice shall be
deemed to be incorporated into and to become a part of the Disclosure Schedule
as of the date hereof and this Agreement shall continue in full force and
effect.
(d) Update of Envirogen Representations. In the event Envirogen
-----------------------------------
discovers any matter which would cause any of the representations and warranties
made herein by Envirogen to become inaccurate or untrue, or in the event any
developments should occur between the date of this Agreement and the Closing
Date which cause any representation or warranty made by Envirogen herein to
become inaccurate or untrue, then Envirogen shall notify the Company and the
Stockholders of such discovery or development, and the corresponding proposed
amendment or supplement to the Envirogen representation and warranty, in
accordance with the notice provisions of Section 10.03 of this Agreement. If
requested by the Company and the Stockholders in writing within ten days of
notice of the proposed change to the Envirogen representation and warranty,
Envirogen shall meet and discuss any such proposed change to the Envirogen
representation and warranty with representatives of the Company and the
Stockholders. If the parties cannot resolve any differences regarding the
proposed change to the Envirogen representation and warranty within a reasonable
period of time (not to exceed 15 days), and the discovery or development
described in Envirogen's notice would, or could reasonably be expected to,
result in a Material Adverse Effect, individually or together with any other
such discoveries and developments brought to the attention of the Company and
the Stockholders pursuant to this subsection (d) after the date of this
Agreement, then the Company shall have the right, upon notice to Envirogen, to
terminate this Agreement pursuant to Section 9.01(c) hereof. If the Company and
the Stockholders do not make a request to meet with
34
<PAGE>
Envirogen within ten days of their receipt of Envirogen's notice of a proposed
change to the Envirogen representation and warranty, then the discovery or
development described in such notice shall be deemed to be incorporated into and
to become a part of the Envirogen representation and warranty as of the date
hereof and this Agreement shall continue in full force and effect.
5.08 Conduct of the Company's Business. From the date hereof to the
---------------------------------
Effective Time, except with the prior written consent of Envirogen, the Company
will (and the Stockholders will use their best efforts to cause the Company to):
(a) carry on its business in, and only in, the usual, regular and
ordinary course, consistent with past practice and in substantially the same
manner as heretofore conducted and, to the extent consistent with such business,
use its best efforts to preserve intact its present business organization, keep
available the services of its present officers and employees, and preserve its
relationships with customers, contractors, and others having business dealings
with it to the end that its goodwill and going business shall be unimpaired at
the Effective Time;
(b) to pay and discharge all of its debts, liabilities and
obligations as they become due;
(c) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by it;
(d) perform all of its obligations under agreements, contracts and
instruments relating to or affecting its properties, assets and business;
(e) maintain its facilities and assets in the same state of repair,
order and condition as they were on the date hereof, reasonable wear and tear
excepted;
(f) maintain its books of account and records in the usual, regular
and ordinary manner and to use best efforts to maintain in full force and effect
all Permits;
(g) comply with all statutes, laws, ordinances, rules and
regulations applicable to it and to the conduct of its business;
(h) promptly advise Envirogen in writing of any material adverse
change in its financial condition, operations, assets, prospects or business;
(i) maintain the Company's S corporation status for federal and
state income tax purposes;
(j) not enter into, assume or amend in any material respect any
agreement, contract, purchase order or commitment of the character described in
Section 3.13, except in the ordinary course of business consistent with past
practice;
35
<PAGE>
(k) not take, or permit to be taken, any action that is represented
and warranted in Section 3.24 not to have been taken since the date of the
Interim Balance Sheet (with the exception of (A) that described in Subsection
3.24(a)(iv) and (B) the payment and distributions to the Stockholders and (C)
the incurrence of Company Debt or Permitted Debt, or both, as described in
Section 5.08(m) below);
(l) not increase salaries or other compensation of its officers or
directors or any other employee other than normal year-end merit increases for
non-officer employees made in the ordinary course of the Company's business
consistent with past practice;
(m) not create, incur, assume, guarantee or otherwise become
directly or indirectly liable with respect to any indebtedness for borrowed
money other than (i) Company Debt, (ii) indebtedness for borrowed money in the
ordinary course of business under agreements existing on the date hereof and
identified on the Disclosure Schedule pursuant to Section 3.13 and (iii)
Permitted Debt to the extent the terms thereof are not inconsistent with the
terms of the Company's indebtedness for borrowed money outstanding on the date
hereof and do not provide for any premium or other penalty upon payment prior to
maturity thereof;
(n) not make any change in the Company's authorized or issued
capital stock; grant any stock option or other right to purchase shares of the
Company's capital stock or other securities; issue or make any commitment to
issue any security by the Company, including any security convertible into
capital stock; grant any registration rights; or purchase, redeem, retire or
make any other acquisition of any shares of its capital stock or other
securities;
(o) not amend the certificate or articles of incorporation or bylaws
(or equivalent governing documents) of the Company;
(p) not enter any contract with any Stockholder or any affiliate of
any Stockholder; and
(q) not enter into any agreement or understanding to do or engage in
any of the foregoing actions described in paragraphs (j) through (p).
5.09 Conduct of Envirogen's Business. From the date hereof to the
-------------------------------
Effective Time, except with the prior written consent of all of the
Stockholders, Envirogen will, and will cause its affiliates to:
(a) carry on their businesses in, and only in, the usual, regular
and ordinary course, consistent with past practice and in substantially the same
manner as heretofore conducted and, to the extent consistent with such
businesses, use their best efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees, and preserve their relationships with customers, contractors, and
others having business dealings with them to the end that their goodwill and
going business shall be materially unimpaired at the Effective Time;
36
<PAGE>
(b) pay and discharge all of their debts, liabilities and
obligations as they become due;
(c) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by them;
(d) perform all of their obligations under agreements, contracts and
instruments relating to or affecting their properties, assets and business;
(e) maintain their facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear and
tear accepted;
(f) maintain their books of account and records in the usual,
regular and ordinary manner and to use their best efforts to maintain in full
force and effect all licenses, permits and other authorizations issued to them
with respect to their assets or businesses by any government or regulatory or
administrative agency;
(g) comply with all statues, laws, ordinances, rules and regulations
applicable to them and to the conduct of their businesses;
(h) promptly advise the Stockholders in writing of any material
adverse change in the financial condition, operations, assets, prospects or
business of Envirogen and its affiliates, taken as a whole;
(i) except as expressly provided in Section 1.02, not make any
change in Envirogen's authorized capital stock or purchase, redeem retire or
make any other acquisition of any shares of Envirogen's capital stock or other
securities;
(j) except as expressly provided in Section 1.02, not take any
action to amend Envirogen's Certificate of Incorporation or Bylaws;
(k) not take any action to amend or otherwise modify the Securities
Purchase Agreement; or
(l) not enter into any agreement or understanding to do or engage in
any of the foregoing actions described in paragraphs (i) through (k).
5.10 Sale of Shares of the Company. From the date hereto to the
-----------------------------
Effective Time, except with the prior written consent of Envirogen, each
Stockholder will not sell, assign, transfer, or otherwise encumber any of his
shares of Company Common Stock, or any rights of such Stockholder in such
shares.
5.11 Retirement of Certain Loans. Prior to the Merger, all loans by the
---------------------------
Company to any Stockholder or any other company or other person controlled by or
affiliated with such Stockholder shall be paid in full, and all loans to the
Company from any Stockholder or any other company or other person controlled by
or affiliated with such Stockholder shall be repaid.
37
<PAGE>
5.12 Financial Information.
---------------------
(a) Until the Closing, the Company shall provide Envirogen, as soon
as practicable and in any event no later than the 30th day after the end of each
month, with an unaudited balance sheet and income statement of the Company as of
and for the month then ended, prepared on the same basis as the interim
financial statements referred to in Section 3.08, and certified as such by the
President of the Company.
(b) The Company shall provide Envirogen as soon as practicable and
in any event not later than February 15, 1997, the balance sheet of the Company
as at December 31, 1996 (including the notes thereto), and the related
statements of income, changes in stockholders' equity and cash flow for the
fiscal year then ended, together with an "unqualified opinion" thereon of
Vrakas, Blum & Co., S.C., independent public accountants.
(c) Until the Closing, Envirogen shall provide to the Company, at
the same time and to the same extent such information is provided to Envirogen's
executive officers, an unaudited consolidated balance sheet and income statement
of Envirogen as of and for the month ended, prepared on the same basis as the
interim financial statements included in the Envirogen Reports described in
Section 4.06 of this Agreement, certified as such by the Controller of
Envirogen.
5.13 Adoption by Stockholders. The Stockholders, constituting the
------------------------
holders of all of the issued and outstanding capital stock of the Company, by
executing this Agreement, consent to the adoption of this Agreement by the
Company and agree that such consent shall be treated for all purposes as a vote
duly adopted at a meeting of the shareholders of the Company held for this
purpose. Each Stockholder acknowledges receipt of a notice of his rights to
dissent from the Merger under the WBCL and to demand an appraisal of his shares
and shall provide Envirogen with a copy of such notice prior to the Closing
Date. The Company and each Stockholder waives any rights it or he may have under
the Stock Purchase Agreement dated June 6, 1990 among the Stockholders and the
Company with respect to this Agreement and the transactions contemplated hereby,
and agrees that as of the Closing Date such Stock Purchase Agreement shall be
terminated and be of no further force or effect.
5.14 Stock Options. Following the Effective Time, Envirogen shall make
-------------
available to certain employees of the Company that remain with the Surviving
Corporation after the Merger options to purchase an aggregate of 600,000 shares
of Envirogen Common Stock under the Envirogen, Inc. 1990 Incentive Stock Option
and Non-Qualified Stock Option Plan (the "Option Plan") at an exercise price per
share equal to the closing price of Envirogen's Common Stock on the Closing
Date. The identity of such employees, the number of shares subject to such
options, the exercise price, whether such options will be incentive or non-
qualified options, the vesting schedule for such options (which will not be
longer than 20% per year over a five-year vesting period) and the other terms
and conditions thereof shall be mutually agreed to by the Company and Envirogen
prior to Closing.
5.15 Costs and Expenses. Except as otherwise provided herein, the
------------------
Stockholders and Envirogen shall each pay their own fees and expenses and those
of their respective agents and
38
<PAGE>
advisors incurred in connection with the transactions contemplated by this
Agreement (including, without limitation, all legal and accounting fees
(collectively, "Transaction Costs")), it being agreed that the proposed
acquisition of the Company contemplated by this Agreement is not in the ordinary
course of the Company's business and that none of the Transaction Costs incurred
in connection with the transactions contemplated hereby shall be borne by the
Company. Notwithstanding the foregoing, (a) if the transactions contemplated by
this Agreement are consummated, Envirogen shall pay up to a maximum of $350,000
in the aggregate of the reasonable Transaction Costs (other than the fees and
expenses of any brokers or finders required to be set forth on the Disclosure
Schedule pursuant to Section 3.26 hereof) incurred by the Stockholders, upon
submission to Envirogen of reasonably detailed invoices and such other
information related thereto as Envirogen may reasonably request, and (b) if this
Agreement is terminated by the Company pursuant to Section 9.01(d) hereof on
account of the failure to fulfill the condition set forth in Section 6.03(f)
herein, then Envirogen (or any successor to Envirogen) shall pay up to a maximum
of $350,000 in the aggregate of all reasonable Transaction Costs incurred by the
Stockholders upon submission to Envirogen (or such successor) of reasonably
detailed invoices and such other information related thereto as Envirogen (or
its successor) may reasonably request. It is agreed and acknowledged that all
fees and expenses of Coopers & Lybrand LLP incurred in connection with the
transactions described in this Agreement (including the audit of any financial
statements of the Company) are fees and expenses incurred by Envirogen and are
not Transaction Costs of the Stockholders.
5.16 Covenant Not-to-Compete.
-----------------------
(a) Except as otherwise permitted in this Section 5.16(a), for a
period of five (5) years from and after the Closing Date, no Stockholder shall,
directly or indirectly, operate, manage, own, control, provide consulting
services to, or in any way be connected with or be concerned with or be
interested in any person, entity or business (other than Envirogen or its
affiliates) that (i) does research with respect to, designs, develops, produces
or manufactures any products which are the same as or substantially similar to
or are intended for uses similar to those with respect to which Envirogen or any
affiliate designs, develops, produces or manufactures; or (ii) furnishes
services similar to those furnished by Envirogen or any affiliate. The
provisions of this paragraph, however, shall not prohibit any Stockholder from
investing in the securities of any such business or enterprise which are traded
publicly and constitute less than one percent (1%) of the particular class of
such business's or enterprises's securities outstanding from time to time.
(b) From and after the Closing Date, no Stockholder shall disclose
directly or indirectly to any person outside of the employ of the Surviving
Corporation, without the express authorization of the Surviving Corporation, any
customer lists, pricing strategies, customer and employee files and records, any
proprietary data or trade secrets of the Surviving Corporation, or any financial
or other information about the Surviving Corporation not in the public domain.
(c) For a period of five (5) years from and after the Closing Date,
no Stockholder shall engage or participate in any effort or act to induce any of
the customers, suppliers, associates, employees or independent contractors of
the Surviving Corporation to take any action or to refrain from taking any such
action or inaction which might be disadvantageous
39
<PAGE>
to the Surviving Corporation, including, but not limited to, the solicitation of
the Surviving Corporation's customers, suppliers, associates, employees or
independent contractors to cease doing business, or their association or
employment, with the Surviving Corporation.
(d) Each Stockholder expressly acknowledges that damages alone will
be an inadequate remedy for any breach or violation of any of the provisions of
this Section 5.16, and that the Surviving Corporation, in addition to all other
remedies under this Agreement, shall be entitled as a matter of right to
injunctive relief, including specific performance, with respect to any such
breach or violation, in any court of competent jurisdiction.
(e) The invalidity or unenforceability of any provision or
provisions of this Section 5.16 shall not affect the validity or enforceability
of any other provision of this Section 5.16, which shall remain in full force
and effect, and in the event that any provision of this Section 5.16 shall be
determined to be invalid or unenforceable for any reason, such provision shall
be construed by limiting it so as to be valid and enforceable to the fullest
extent compatible with and possible under applicable law.
5.17 Voting Agreement of Allen & Company Incorporated. Contemporaneously
------------------------------------------------
with the execution and delivery of this Agreement, Allen & Company Incorporated
shall deliver to the Company a duly executed voting agreement in the form
attached hereto as Exhibit 5.17.
5.18 Repayment of Company Debt. Contemporaneously with the Closing, the
-------------------------
Company shall repay in full all of the then outstanding Company Debt, without
the payment of any prepayment premium or other similar penalty, and each
Stockholder shall receive at the Closing, in form and substance reasonably
satisfactory to such Stockholder, a copy of a satisfaction statement from each
lender of the Company Debt and a release from each lender of any and all
personal guarantees from the Stockholders held with respect to any Company Debt
and any Permitted Debt.
5.19 Envirogen Board Nominee. For so long as the Stockholders
-----------------------
beneficially own (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934, as amended), in the aggregate, at least 7.5% of the issued and
outstanding shares of the Envirogen Common Stock, Envirogen will nominate and
use its best efforts to elect and cause to remain as a director on Envirogen's
Board of Directors one individual as such Stockholders as a group may designate
(provided that no Stockholder shall have a vote on such matter if such
Stockholder does not then own shares of Envirogen Common Stock). Such designee
shall be William C. Smith, provided that Mr. Smith is willing and able to serve
in such position. Any vacancy created by Mr. Smith's unwillingness or inability
to act or by his death, disability, retirement, resignation or removal shall be
filled by the majority vote of the number of shares of Envirogen Common Stock
owned by the Stockholders on the date of such vote.
5.20 Indemnification of the Company's Directors and Officers. For a
-------------------------------------------------------
period of at least six (6) years after the Effective Time, Envirogen will
indemnify the directors and officers of the Company and its affiliates who serve
as such immediately prior to the Effective Time to the same extent as such
persons presently are indemnified by the Company pursuant to the Company's
Articles of Incorporation or Bylaws or the provisions of the WBCL (as in effect
at the Effective
40
<PAGE>
Time and notwithstanding any subsequent change to the WBCL) with respect to
matters which arose prior to the Effective Time.
5.21 Post-Closing Operation of the Company. Envirogen agrees that, at
-------------------------------------
least through December 31, 1998, it will maintain and operate the assets,
operations and business of the Company as a separate operating division of
Envirogen (the "Division"). In this regard, separate books and records,
including budgets, expenses, revenues, operating profits and the like, will be
maintained with respect to the Division's operations; provided, that there shall
be no corporate charges by Envirogen to the Division except for actual service
provided by Envirogen to the Division and then only at the actual cost of such
services.
5.22 Continuation of PAC Plans. Envirogen agrees that, at least through
-------------------------
December 31, 1998, it will retain the Company's PAC Plans (as defined below) and
will award bonuses to employees of the Division during that period and will pay
out all such bonuses awarded at the times and otherwise in accordance with the
provisions of the PAC Plans based on the financial results of the Division. For
purposes of this Agreement, the term "PAC Plans" shall mean (a) the Company's
Provisional Additional Compensation Plan for Employees, (b) the Company's bonus
plan for the employees of its Engineering Solutions division, (c) the Company's
bonus agreement with the Director of its Air Sciences and Engineering Group and
(d) the Company's bonus agreements with the two directors of its Remediation
Services Group, in each case as in effect on the date hereof.
5.23 Insurance Matters. Prior to the Closing, Envirogen shall make
-----------------
arrangements with insurers so that, as of the Effective Time, the assets,
business, operations and personnel of the Company will be covered under a
Commercial General Liability Insurance Policy and a Combined Professional and
Contractors Pollution Liability Policy for the period after the Effective Time.
Such coverage shall insure the assets, business, operations and personnel of the
Company against losses associated with any claims made after the Effective Time,
whether relating to the conduct of the Company's business prior to the Effective
Time or after the Effective Time, and shall be subject to such terms and
conditions as may be mutually agreed to by the Company and Envirogen prior to
the Closing. Prior to the Closing, the Company shall file with its insurer all
necessary incident reports, if any, and will deliver copies of such reports to
Envirogen. At or prior to the Closing, Envirogen shall deliver to the
Stockholders certificates of such insurance, endorsements or other evidence of
such insurance coverage.
SECTION 6. CONDITIONS
6.01 Conditions Precedent to the Obligations of All Parties.
------------------------------------------------------
Notwithstanding any other provision of this Agreement, the obligations of
Envirogen, the Company and the Stockholders to effect the Merger shall be
subject to the fulfillment, at or prior to the Effective Time, of each of the
following conditions:
(a) this Agreement and the transactions contemplated hereby
(including without limitation the amendment to Envirogen's Certificate of
Incorporation to increase the number of authorized shares of Envirogen Common
Stock from 20,000,000 to 50,000,000 and the amendment to Envirogen's Option Plan
to, among other things, increase the number of shares
41
<PAGE>
of Envirogen Common Stock reserved for issuance upon exercise of options granted
under such plan from 2,000,000 to 3,000,000) shall have been approved by the
affirmative vote of the stockholders of Envirogen by the requisite vote in
accordance with Envirogen's certificate of incorporation, as amended, and the
DGCL;
(b) the Securities Purchase Agreement shall have been approved by
the affirmative vote of the stockholders of Envirogen by the requisite vote in
accordance with Envirogen's certificate of incorporation, as amended, and the
DGCL, and the transactions contemplated thereby shall have been consummated;
(c) all permits, approvals and consents of any governmental body or
agency necessary or appropriate for consummation of the Merger shall have been
obtained;
(d) no preliminary or permanent injunction or other order of a court
or governmental agency or authority in the United States shall have been issued
and be in effect, and no federal or state statute, rule or regulation shall have
been enacted or promulgated after the date hereof and be in effect that
prohibits the consummation of the Merger or imposes material limitations on the
ability of the Surviving Corporation to exercise full rights of ownership of the
Company's assets or business;
(e) there shall not be any action or proceeding commenced by or
before any court or governmental agency or authority in the United States that
challenges the consummation of the Merger or seeks to impose material
limitations on the ability of the Surviving Corporation to exercise full rights
of ownership of the assets or business of the Company;
(f) Envirogen shall have received an opinion from its financial
advisor, Allen & Company Incorporated, dated the Closing Date, stating that in
the opinion of such financial advisor the terms of the Merger and the Securities
Purchase Agreement are fair to the stockholders of Envirogen from a financial
point of view;
(g) the holders of no more than 10% of the shares of Envirogen's
Common Stock outstanding and entitled to vote on the matters described in
Section 5.01 of this Agreement shall have exercised dissenters' rights with
respect to any or all of such matters in accordance with the provisions of the
DGCL;
(h) Envirogen shall have received all Permits necessary for it to
qualify and act as a "service provider" under and in accordance with the
Petroleum Environmental Clean Up Fund Act of Wisconsin ("PECFA");
(i) Envirogen and each Stockholder shall have executed and delivered
an Employment Agreement in the form attached hereto as Exhibit 6.01(i)
containing the appropriate information for each Stockholder as listed on
Schedule A to Exhibit 6.01(i) attached hereto; and
(j) Envirogen and the Company shall have received from each lender
of Company Debt a pay-off statement with respect to such Company Debt and a
representation that upon the payment to such lender of the amount stated in the
pay-off statement such lender will
42
<PAGE>
deliver to Envirogen, the Company and each Stockholder a satisfaction statement
to the effect that all such Company Debt has been satisfied in full and that
Envirogen, the Company and each Stockholder have no further liability of any
kind to such lender.
6.02 Additional Conditions Precedent to the Obligations of Envirogen. In
---------------------------------------------------------------
addition to the conditions contained in Section 6.01, the obligations of
Envirogen to effect the Merger shall also be subject to the fulfillment at the
Effective Time of each of the following conditions:
(a) there shall not have occurred any material adverse change in the
business, financial condition, prospects, assets or operations of the Company
since the date of the Interim Balance Sheet;
(b) the representations and warranties of the Company and the
Stockholders contained in Section 3 and Section 7.01 shall be true and correct
in all material respects at and as of the date hereof and as of the Effective
Time as if made at and as of such time; the Company and each Stockholder shall
have duly performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed or complied with by it or him prior
to or at the Effective Time; and the Company and each Stockholder shall have
delivered to Envirogen a certificate dated the Effective Time and signed on
behalf of the Company by its President and by each Stockholder to the effect set
forth in this paragraph (b);
(c) Envirogen shall have received a certificate pursuant to Section
2.03(a) dated the Effective Time signed on behalf of the Company by its
President and by each Stockholder, which certificate shall evidence that the
Company's Estimated Adjusted Net Worth as of the Closing Date is at least One
Million Dollars ($1,000,000);
(d) Envirogen shall have received from Quarles & Brady, counsel for
the Company and the Stockholders, an opinion dated the Effective Time in form
and substance satisfactory to Envirogen and its counsel, with respect to the
matters set forth on Exhibit 6.02(d) hereto;
(e) all approvals or consents of any third party required for the
execution, delivery or performance of this Agreement by the Company or the
Stockholders, as required to be disclosed on the Disclosure Schedule pursuant to
Sections 3.03(a) and 3.14(a), shall have been obtained and delivered to
Envirogen;
(f) each Stockholder shall have executed and delivered to Envirogen
a Release in the form attached hereto as Exhibit 6.02(f);
(g) each Stockholder shall not have exercised dissenters' rights
under the WBCL in connection with the Merger, and shall have executed and
delivered a waiver of such rights, in form and substance acceptable to
Envirogen;
(h) each Stockholder and the Escrow Agent shall have executed and
delivered to Envirogen the Escrow Agreement;
43
<PAGE>
(i) evidence satisfactory to Envirogen of termination of the
Company's contracts, plans and agreements listed on Exhibit 6.02(i) without any
liability to the Company, Envirogen or the Surviving Corporation other than the
repayment of the Company Debt and the Permitted Debt;
(j) Envirogen shall have received the financial statements of the
Company at and for the fiscal years ended December 31, 1994, 1995 and 1996, as
audited by Coopers & Lybrand L.L.P. and accompanied by an "unqualified opinion"
of Coopers & Lybrand L.L.P. thereon; and
(k) all Permits required to be disclosed on the Disclosure Schedule
pursuant to Section 3.06(b)(ii) hereof shall have been granted or renewed in
accordance with applicable law.
6.03 Additional Conditions Precedent to the Obligations of the
---------------------------------------------------------
Company and Stockholders. In addition to the conditions contained in Section
- ------------------------
6.01, the obligations of the Company and the Stockholders to effect the Merger
shall also be subject to the fulfillment at the Effective Time of each of the
following conditions:
(a) the representations and warranties of Envirogen contained in
Section 4 shall be true and correct in all material respects at and as of the
date hereof and as of the Effective Time as if made at and as of the Effective
Time; Envirogen shall have duly performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the Effective Time; and Envirogen shall have delivered
to the Stockholders a certificate dated the Effective Time and signed on its
behalf by its President to the effect set forth in this paragraph (a);
(b) the Stockholders shall have received from Drinker Biddle &
Reath, counsel for Envirogen, an opinion dated the Effective Time, in form and
substance satisfactory to the Company, the Stockholders and counsel thereto,
with respect to the matters set forth on Exhibit 6.03(b) hereto;
(c) Envirogen and Warburg shall have executed and delivered to the
Stockholders a Registration Rights Agreement in the form attached hereto as
Exhibit 6.03(c) (the "Registration Rights Agreement");
(d) there shall not have occurred any material adverse change in the
business, financial condition, prospects, assets or operations of Envirogen
since September 30, 1996;
(e) all approvals or consents of any third party required for the
execution, delivery, or performance of this Agreement by Envirogen shall have
been obtained and delivered to the Stockholders;
(f) there shall not have been completed any Envirogen Acquisition
Transaction, nor shall there have been any public announcement of a bona fide
proposal or plan with respect to an Envirogen Acquisition Transaction;
44
<PAGE>
(g) the Envirogen Common Stock shall continue to be quoted and
traded in the Nasdaq SmallCap Market, and the Envirogen Shares shall have been
approved for quotation, upon notice of issuance, in the Nasdaq SmallCap Market;
(h) the average of the daily closing prices of a share of Envirogen
Common Stock as reported on the Nasdaq SmallCap Market during the period of ten
trading days ending on the last trading day prior to the Envirogen Stockholder
Meeting shall not be less than $1.90; and
(i) Envirogen and the Escrow Agent shall have executed and delivered
to the Stockholders the Escrow Agreement.
6.04 Waiver. Any time prior to the Effective Time, any party hereto may
------
(i) in the case of Envirogen, extend the time for the performance of any of the
obligations or other acts of the Company or any Stockholder or waive compliance
with any of the agreements of the Company or any Stockholder or with any
conditions to its own obligations or (ii) in the case of the Company and the
Stockholders, extend the time for the performance of any of the obligations or
other acts of Envirogen or waive compliance with any of the agreements of
Envirogen or with any conditions to its own obligations. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party by a duly
authorized officer.
SECTION 7. SECURITIES MATTERS
7.01 Investment Representations and Covenants of Stockholders.
--------------------------------------------------------
(a) Each Stockholder understands (subject to the express obligation
of Envirogen to register the shares of Envirogen Common Stock to be issued to
the Stockholders in the Merger (the "Envirogen Shares") as provided in Section
7.02 hereof) that the issuance of the Envirogen Shares will not be registered
under the Securities Act of 1933, as amended (the "1933 Act"), on the grounds
that the issuance of the Envirogen Shares is exempt from registration pursuant
to Section 4(2) of the 1933 Act and/or Regulation D promulgated under the 1933
Act ("Regulation D"), and that the reliance of Envirogen on such exemptions is
predicated in part on such Stockholder's representations, warranties, covenants
and acknowledgements set forth in this Section.
(b) Each Stockholder hereby represents and warrants to Envirogen
that he is an Accredited Investor, as that term is defined in Regulation D, and
that the Envirogen Shares will be acquired by him for his own account, not as a
nominee or agent, for investment and without a view to resale or other
distribution within the meaning of the 1933 Act, and the rules and regulations
thereunder, and such Stockholder will not distribute or transfer any of the
Envirogen Shares in violation of the 1933 Act. Each Stockholder is a resident of
Wisconsin for purposes of state securities laws.
(c) Each Stockholder: (i) acknowledges that the Envirogen Shares are
not registered under the 1933 Act and may not be sold by such Stockholder unless
the Envirogen
45
<PAGE>
Shares are first registered under the 1933 Act (in accordance with Section 7.02
hereof or otherwise) or an exemption from registration is available with respect
to such sale transaction, (ii) is aware that any sales of the Envirogen Shares
made under Rule 144 of the Securities and Exchange Commission under the 1933 Act
may be made only in limited amounts and in accordance with the terms and
conditions of that Rule and that in such cases where the Rule is not applicable,
registration or compliance with some other registration exemption will be
required, (iii) is aware that Rule 144 is not presently, and for a period of at
least two years following the Closing Date hereof may not be, available for use
by such Stockholder for resale of the Envirogen Shares, and (iv) is aware that
Envirogen is not obligated to register any sale, transfer or other disposition
of the Envirogen Shares except in accordance with the provisions of Section 7.02
hereof.
(d) Each Stockholder represents and warrants to Envirogen that such
Stockholder has such knowledge and experience in financial and business matters
that he is fully capable of evaluating the risks and merits of such
Stockholder's investment in the Envirogen Shares.
(e) Each Stockholder acknowledges receipt of the Envirogen Reports,
the Securities Purchase Agreement and the exhibits and schedules thereto and
such other documents, agreements and information as each Stockholder has
required and confirms and acknowledges that: (i) Envirogen has afforded such
Stockholder the opportunity to ask questions of and receive answers from
Envirogen's officers and various directors concerning the terms and conditions
of this Agreement and such Stockholder's investment in the Envirogen Shares and
to obtain such additional information as such Stockholder has requested, and
(ii) such Stockholder has availed himself of such opportunity to the extent he
deems necessary and has received the information requested.
(f) In order to ensure compliance with the provisions of subsection
(b) hereof, each Stockholder covenants and agrees that, after the Closing, he
will not sell, transfer or otherwise dispose of any of the Envirogen Shares or
any interest therein (unless such sale, transfer or disposition has been
registered under the 1933 Act in accordance with the provisions of Section 7.02
hereof or otherwise) or otherwise without there first having been compliance
with either of the following conditions:
(i) Envirogen shall have received a written opinion of
counsel in form and substance reasonably satisfactory to Envirogen, or
a copy of a "no-action" or interpretive letter of the SEC, specifying
the nature and circumstances of the proposed transfer and indicating
that the proposed transfer will not be in violation of any of the
provisions of the 1933 Act and the rules and regulations promulgated
thereunder; or
(ii) Envirogen shall have received an opinion from its own
counsel to the effect that the proposed transfer will not be in
violation of any of the provisions of the 1933 Act and the rules and
regulations promulgated thereunder.
46
<PAGE>
(g) Each Stockholder agrees that he will not sell, transfer or
otherwise dispose of Envirogen Shares for a period of twelve (12) months after
the Effective Time without the prior written consent of Envirogen.
(h) Each Stockholder also acknowledges and agrees that the
certificates representing the Envirogen Shares issuable to him will contain a
restrictive legend noting the restrictions on transfer described in this Section
7.01 and under federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Envirogen's stock
transfer agent.
7.02 Registration Rights Agreement. Envirogen shall register the shares
-----------------------------
of Envirogen Common Stock as described in, and subject to the terms and
conditions provided under, the Registration Rights Agreement.
SECTION 8. INDEMNIFICATION; ESCROW
8.01 Indemnification.
---------------
(a) Indemnities. Each Stockholder (and, prior to the Closing Date,
-----------
the Company) agrees to indemnify and hold harmless each of Envirogen and the
Surviving Corporation and their respective directors, officers, employees and
agents, and Envirogen agrees to indemnify and hold harmless each Stockholder
(and, prior to the Closing Date, the Company) and their respective agents (the
party referred to as indemnifying another party being hereinafter referred to as
the "indemnifying party") against any and all losses, costs, expenses, claims,
damages or liabilities, including the amount of any settlement approved by such
indemnifying party and expenses of enforcing this Agreement (collectively,
"Loss"), which the party entitled to such indemnification (the "indemnified
party") has suffered, incurred or become subject to, and to reimburse the
indemnified party for any reasonable legal, audit or other expenses incurred by
it in connection with investigating any claims and defending any actions,
insofar as any such Loss arises out of or is based upon: (i) any false
representation or the breach of any warranty made by the indemnifying party
herein or in any schedule, document, list, certificate or other instrument
delivered to the indemnified party pursuant to this Agreement; or (ii) any
breach or default in performance by the indemnifying party of any of its
covenants or agreements with the indemnified party contained herein.
(b) Notices. A party seeking indemnification hereunder shall
-------
promptly notify the party from whom it is seeking indemnification of the
assertion of any claim or the discovery of any fact upon which the party seeking
indemnification intends to base a claim for indemnification hereunder. With
respect to any claim made by a third party against which a party hereto is
seeking indemnification hereunder (other than a claim made by a taxing authority
with respect to any consolidated, combined or unitary return filed by Envirogen
or an affiliate thereof), the party from whom indemnification is sought shall
have the right, at its own expense, to participate in or assume control of the
defense of such claim, and the party seeking indemnification shall fully
cooperate with the party from whom indemnification is sought subject to
reimbursement for actual out-of-pocket expenses incurred as the result of such
request by the party from whom indemnification is sought. If the party from whom
indemnification is sought
47
<PAGE>
either does not elect to assume control or otherwise participate in the defense
of any third-party claim, that party shall be bound by the results obtained by
the other with respect to such claim.
(c) Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations and warranties of each party hereto shall survive for a period
commencing on the date hereof and ending on the first anniversary of the
Effective Time (the "Claims Period"). If no claim for indemnification relating
to any misrepresentation or breach of warranty has been initiated within the
Claims Period, then no claim for indemnification hereunder or any other claim
may be asserted under law or under this Agreement for any misrepresentation or
breach of warranty hereunder; provided, however, that in the case of (i) the
-------- -------
representations and warranties of the Company and the Stockholders contained in
Sections 3.18, 3.19 and 3.23 of this Agreement and (ii) the representations and
warranties of Envirogen in Sections 2.14, 2.15 and 2.24 of the Securities
Purchase Agreement, relating to income and other tax claims, ERISA claims and
environmental claims, claims may be made within the period of the applicable
statute of limitations provided that neither party takes, nor permits to be
taken, any action to extend such period of limitations without the other's
written consent in advance; and provided further, that notwithstanding anything
----------------
contained herein to the contrary, this paragraph shall not impose any time
limitation on the assertion of claims for breach of any covenant or agreement
made by any party hereunder.
(d) Investigations. Any indemnity agreements contained in this
--------------
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made or omitted by or on behalf of any indemnified party.
(e) Exclusivity. The rights of indemnity provided by this Section
-----------
8.01 shall, after the Effective Time, be exclusive of all other rights of
indemnity or contribution, whether created by law or otherwise, relating in any
way to the subject matter of this Agreement except as provided in Section
5.16(d) hereof; provided that notwithstanding the provisions of this Section
--------
8.01 or any other provision of this Agreement, nothing contained in this
Agreement shall limit any liability of any party hereto arising out of any act
of fraud or intentional misrepresentation by such party occurring in connection
with this Agreement, and the rights of indemnity of the parties hereto from any
Loss incurred in connection therewith shall be in addition to any other rights
to indemnification that the parties hereto may have pursuant to law or
otherwise.
(f) Limitations.
-----------
(i) An indemnified party shall not be entitled to recovery
for any Loss relating to a matter covered by a reserve established for such
matter on the latest financial statements of the indemnifying party delivered to
the indemnified party on or before the Effective Time unless, and only to the
extent that, the cumulative Loss suffered by such indemnified party exceeds the
amount of such reserve. For these purposes only, the reserves of the Company on
the Closing Statement shall be deemed to be a reserve of the Stockholders.
(ii) An indemnified party shall not be entitled to more than
one recovery for any single Loss even though such Loss may have resulted from
the breach or
48
<PAGE>
inaccuracy of more than one of the representations, warranties, covenants and
agreements made by an indemnifying party in or pursuant to this Agreement.
(iii) With respect to claims for breaches by an indemnifying
party of its representations and warranties, the indemnified party shall not be
entitled to indemnification hereunder unless and until the aggregate of all
valid claims of the indemnified party relating to breaches of representations or
warranties exceeds the sum of $50,000 (the "Threshold"), and then only to the
extent of the amount in excess of the Threshold.
(iv) The liability of each Stockholder under this Section 8.01
shall be limited to the Escrow Money and the Escrow Shares (and, after the
expiration of the Claims Period with respect to a misrepresentation or breach of
warranty with respect to the representations and warranties of the Company and
the Stockholders contained in Sections 3.18, 3.19 and 2.23 of this Agreement,
the liability of the Stockholders shall be limited to an aggregate amount equal
to the Escrow Money and the value of the Escrow Shares as of the expiration of
the Claims Period, but the liability of each Stockholder in such case shall be
several and not joint); provided, however, that any Loss of the Surviving
Corporation that arises out of any act of fraud or intentional misrepresentation
by the Stockholders shall not be so limited to the Escrow Money and the Escrow
Shares (or the value thereof as of the expiration of the Claims Period), but the
liability of each Stockholder in such case shall be several and not joint with
respect to such Loss.
(v) The cumulative liability of Envirogen and the Surviving
Corporation under this Section 8.01 shall be limited in the aggregate to an
amount equal to the amount of the Escrow Money and the value of the Escrow
Shares on the Closing Date.
(vi) The amounts for which an indemnifying party shall be
liable under this Section 8.01 of this Agreement shall be: (A) net of any tax
benefit realized or to be realized by the indemnified party by reason of the
facts and circumstances giving rise to the indemnifying party's liability; and
(B) net of any insurance proceeds received by the indemnified party in
connection with the facts giving rise to the right of indemnification.
8.02 Escrow.
------
(a) At the Closing, immediately after the delivery to the
Stockholders of certificates for the shares of Envirogen Common Stock to be
issued in the Merger, (i) the Stockholders shall deliver to Summit Bank as
escrow agent (the "Escrow Agent"), certificates representing the Escrow Shares
duly endorsed in blank for transfer by the Stockholders and (ii) Envirogen will
deliver to the Escrow Agent the Escrow Money. The Escrow Shares and the Escrow
Money shall be held by the Escrow Agent in escrow pursuant to the terms of this
Section 8.02 and the terms of the Escrow Agreement, and the Escrow Agent and the
Surviving Corporation are hereby granted a security interest in the Escrow
Shares and the Escrow Money, as security for any right to indemnification the
Surviving Corporation may have under Section 8.01 hereof and as security for the
Stockholders' timely performance of the their obligations under Section 2.05
hereof.
49
<PAGE>
(b) If the Surviving Corporation determines that it is entitled to
be indemnified pursuant to Section 8.01 or that an amount is owed pursuant to
Section 2.05 hereof, it shall so notify the Stockholders of the nature of the
claim and the amount (estimated or actual) of the Loss. Subject to the rights of
the Stockholders pursuant to Section 8.02(c) hereof, all amounts payable to the
Surviving Corporation pursuant to Sections 8.01 and 2.05 shall be paid first in
cash from the Escrow Money and then from the Escrow Shares. The number of Escrow
Shares to be transferred to the Surviving Corporation pursuant to this Section
8.02(b) shall equal the remaining amount of the Loss so incurred (after any
payments in cash in respect thereof from the Escrow Money) divided by the
average of the daily closing prices of a share of Envirogen Common Stock as
reported by the Nasdaq SmallCap Market during the period of ten trading days
ending on the last trading day prior to the date of receipt by the Stockholders
of the notice described in this Section 8.02(b) (the "Average Price"). To the
extent that the Surviving Corporation has a right to receive any of the Escrow
Shares, it shall give a notice to the Stockholders and the Stockholders may,
within the ten (10) day period after such notice, pay to the Escrow Agent cash
in an amount equal to the amount of such Loss, and the Escrow Agent shall then
in lieu of the transfer of Escrow Shares to the Surviving Corporation pay to the
Surviving Corporation cash in the amount of such Loss and release to the
Stockholders that number of the Escrow Shares calculated by dividing the amount
of cash paid by the Stockholders to the Escrow Agent by the Average Price.
(c) If the Stockholders do not deliver to the Surviving Corporation
written objection to the notice described in Section 8.02(b) within twenty (20)
business days after the date of such notice, the amount of loss shall be deemed
accepted by the Stockholders and the appropriate number of Escrow Shares and
Escrow Money shall become the property of the Surviving Corporation in
accordance with Section 8.02(b). If the Stockholders deliver to the Surviving
Corporation written notice of objection within such twenty (20) business day
period, then the Stockholders and the Surviving Corporation shall, within twenty
(20) business days after receipt of such notice of objection, attempt to resolve
the dispute. If the Stockholders and the Surviving Corporation fail to do so
within said period of time, the matter shall be determined by a court of
competent jurisdiction.
(d) All Escrow Shares that have not theretofore been transferred to
the Surviving Corporation pursuant to this Section 8.02 shall be delivered by
the Escrow Agent to the Stockholders promptly after the expiration of the Claims
Period; provided that if, at the expiration of the Claims Period, the Surviving
Corporation shall have given written notice to the Stockholders of a Loss
(actual or potential) hereunder, the Escrow Agent shall continue to withhold a
number of Escrow Shares and Escrow Money in accordance with the terms of Section
8.02(b) above as is appropriate, in its reasonable judgment, to satisfy the
amount of the Loss. Such Escrow Shares and Escrow Money shall continue to be
withheld until there has been a final determination as to whether the Surviving
Corporation has suffered any such Loss.
(e) The Stockholders shall not transfer any of the Escrow Shares, or
any interest therein, or attempt to pledge any of the Escrow Shares, so long as
the Escrow Shares are held in escrow by the Escrow Agent hereunder.
50
<PAGE>
(f) Unless and until the Escrow Shares become the property of the
Surviving Corporation as above provided, each cash dividend declared and paid
with respect to such Escrow Shares shall be delivered, as paid, to the
Stockholders. In the case of any stock dividend, stock split, reverse stock
split or similar event, the additional shares shall be added to the Escrow
Shares. All other rights incident to the Escrow Shares, except as provided for
in, or limited by, this Section 8.02, shall be in the Stockholders. With respect
to the right to vote the Escrow Shares, each Stockholder shall have the right to
vote the Escrow Shares to the extent of his pro rata ownership interest in such
Escrow Shares.
SECTION 9. TERMINATION
9.01 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time:
(a) by mutual agreement of the Company and Envirogen;
(b) by Envirogen, if events have occurred which have made it
impossible to satisfy a consition precedent to Envirogen's obligations to
consummate the transactions described in this Agreement, unless Envirogen's
breach of this Agreement has caused the condition to be unsatisfied;
(c) by the Company and the Stockholders, if events have occurred
which have made it impossible to satisfy a condition precedent to the Company's
and the Stockholders' obligations to consummate the transactions described in
this Agreement, unless the Company's or any Stockholder's breach of this
Agreement has caused the condition to be unsatisfied;
(d) by Envirogen or the Company, upon notice to the other, if the
Merger shall not have become effective on or before May 31, 1997 (unless such
date is extended in writing by the parties hereto), except that the right to
terminate this Agreement under this Section 9.01(d) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date; or
(e) by Envirogen or the Company, upon notice to the other, if the
required approval of the stockholders of Envirogen contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required vote at the Envirogen Stockholder Meeting or at any adjournment or
postponement thereof.
9.02 Effect of Termination. Except as provided in Section 5.04 hereof
---------------------
with respect to information obtained in connection with the transactions
contemplated hereby and as provided in Section 5.15 hereof with respect to the
payment of reasonable Transaction Costs under certain circumstances, in the
event of the termination of this Agreement pursuant to the provisions of Section
9.01, the provisions of this Agreement shall become void and have no effect,
with no liability on the part of any party hereto or its shareholders or
directors or officers in respect thereof, provided that nothing contained herein
shall be deemed to relieve any party of any liability it may have to any other
party with respect to a breach of its obligations, covenants, representations or
warranties contained in this Agreement.
51
<PAGE>
SECTION 10. GENERAL PROVISIONS
10.01 Amendment. This Agreement may be amended by the parties hereto at
---------
any time before or after approval of the Merger by the stockholders of
Envirogen; provided that following approval of the Merger by the stockholders of
Envirogen, no amendment shall be made which by law requires the further approval
of such stockholders without obtaining such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
10.02 Extension; Waiver. At any time prior to the Effective Time of the
-----------------
Merger, Envirogen, on the one hand, and the Company and the Stockholders, on the
other, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties made to it contained herein
or in any document delivered pursuant hereto and (iii) waive compliance with any
of the agreements or conditions for the benefit of it contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
10.03 Notices. All notices or other communications permitted or required
-------
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
(a) If to Envirogen, to:
Envirogen, Inc.
4100 Quakerbridge Road
Lawrenceville, New Jersey 08648
Telecopier No.: 609-936-9221
Attn: Harch S. Gill
with a copy to:
Drinker Biddle & Reath
47 Hulfish Street
Princeton, New Jersey 08542
Telecopier No.: 609-921-2265
Attn: John E. Stoddard III, Esq.
52
<PAGE>
(b) If to the Company, to:
Fluid Management, Inc.
2831 No. Grandview Blvd.
P.O. Box 90
Pewaukee, Wisconsin 53072-0090
Telecopier No.: 414-549-6938
Attn: William C. Smith
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4497
Telecopier No.: 414-271-3552
Attn: Patrick M. Ryan, Esq.
(c) If to the Stockholders, to:
William C. Smith
S38 W33688 Highway D
Dousman, Wisconsin 53118
Douglas W. Jacobson
2518 N. 81st Street
Wauwatosa, Wisconsin 53213
Gary W. Hawk
W272 N1347 Spring Hill Drive
Pewaukee, Wisconsin 53072
Richard W. Schowengerdt
250 N. Summit Moors Drive
Oconomowoc, Wisconsin 53066
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4497
Telecopier No.: 414-271-3552
Attn: Patrick M. Ryan, Esq.
53
<PAGE>
10.04 Assignment and Benefit.
----------------------
(a) Prior to the Closing Date, this Agreement and the rights and
obligations set forth herein may not be transferred or assigned by operation of
law or otherwise without the consent of each party hereto. After the Closing
Date, any party may assign its rights (but not its obligations) under this
Agreement upon written notice to the other parties. This Agreement is binding
upon and will inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(b) This Agreement shall not be construed as giving any person,
other than the parties hereto and their permitted successors, heirs and assigns,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any of the provisions herein contained, this Agreement and all
provisions and conditions hereof being intended to be, and being, for the sole
and exclusive benefit of such parties, and permitted successors, heirs and
assigns and for the benefit of no other person or entity.
10.05 Severability. If any provision of this Agreement, or the application
------------
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void unenforceable provision.
10.06 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party, and the exercise of any one remedy will not preclude the exercise of
any other.
10.07 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
10.08 Governing Law. This Agreement is made pursuant to, and shall be
-------------
construed and enforced in accordance with, the laws of the State of Delaware,
without giving effect to otherwise applicable principles of conflicts of law,
except insofar as the corporation laws of Delaware and Wisconsin apply to the
Merger.
10.09 Section Headings and Defined Terms. The section headings contained
----------------------------------
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement. The terms defined herein and in
any agreement executed in connection herewith include the plural as well as the
singular and the singular as well as the plural. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time
54
<PAGE>
amended or supplemented or the terms thereof waived or modified in accordance
herewith and therewith.
10.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
10.11 Entire Agreement. This Agreement, together with the Disclosure
----------------
Schedule and the agreements, exhibits, schedules and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings.
10.12 Income Tax Position. None of Envirogen, the Company, or the
-------------------
Stockholders shall take a position for income tax purposes which is inconsistent
with this Agreement, including the position stated in the Recitals to this
Agreement to the effect that the Merger is intended to be a tax-free
reorganization under Section 368(a)(1)(A) of the Code.
10.13 Enforcement Expenses. In the event of any litigation, arbitration,
--------------------
or other legal proceeding to enforce, interpret or recover damages for breach of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs incurred in the proceeding in addition to any other
relief to which the prevailing party is entitled.
10.14 Access to Records. Envirogen agrees that the Stockholders and their
-----------------
attorneys, agents, accountants and designees may have such access to the books
and records of the Company and such right to make copies thereof, for the one-
year period from and after the Effective Time, as the Stockholders may
reasonably deem necessary or desirable. Any such examination shall be at the
expense of the Stockholders, shall be performed at the place where such books
and records are regularly maintained by Envirogen during Envirogen's normal
business hours and shall not interfere with Envirogen's normal business
activities. Such access to the Company's books and records shall extend only
insofar as such books and records relate to the Stockholders and/or matters or
events arising prior to the Closing Date relating to the Company or the
Stockholders.
55
<PAGE>
IN WITNESS WHEREOF, Envirogen and the Company have caused this Agreement to
be signed by their respective duly authorized officers, and the Stockholders
have signed this Agreement, on the date first above written.
ATTEST: ENVIROGEN, INC.
/s/ Gale Smith /s/ Harcharan S. Gill
________________________________ By:_________________________________
Gale Smith Harcharan S. Gill
Assistant Secretary President
ATTEST: FLUID MANAGEMENT, INC.
/s/ Douglas W. Jacobson /s/ William C. Smith
________________________________ By:_________________________________
Douglas W. Jacobson William C. Smith
Secretary President
WITNESS: STOCKHOLDERS:
/s/ Douglas W. Jacobson /s/ William C. Smith
________________________________ ____________________________________
William C. Smith
Social Security No: ###-##-####
/s/ William C. Smith /s/ Douglas W. Jacobson
________________________________ ____________________________________
Douglas W. Jacobson
Social Security No.: ###-##-####
/s/ Richard W. Schowengerdt /s/ Gary W. Hawk
________________________________ ____________________________________
Gary W. Hawk
Social Security No.: ###-##-####
/s/ Gary W. Hawk /s/ Richard W. Schowengerdt
________________________________ ____________________________________
Richard W. Schowengerdt
Social Security No.: ###-##-####
56
<PAGE>
Exhibit 2.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
between
WARBURG, PINCUS VENTURES, L.P.
and
ENVIROGEN, INC.
January 14, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. PURCHASE AND SALE OF SECURITIES....................... 1
1.1. Issuance of Common Stock.............................. 1
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 1
2.1. Corporate Organization................................ 1
2.2. Subsidiaries.......................................... 2
2.3. Capitalization........................................ 2
2.4. Corporate Proceedings, etc............................ 3
2.5. Consents and Approvals................................ 3
2.6. Absence of Defaults, Conflicts, etc................... 4
2.7. SEC Reports........................................... 4
2.8. Absence of Certain Developments....................... 5
2.9. Compliance with Law................................... 5
2.10. Litigation............................................ 6
2.11. Material Contracts.................................... 6
2.12. Absence of Undisclosed Liabilities.................... 6
2.13. Employees............................................. 7
2.14. Tax Matters........................................... 7
2.15. Employee Benefit Plans................................ 7
2.16. Patents, Licenses, etc................................ 8
2.17. Title to Tangible Assets.............................. 9
2.18. Condition of Properties............................... 9
2.19. Insurance............................................. 9
2.20. Transactions with Related Parties..................... 9
2.21. Interest in Competitors............................... 10
2.22. Registration Rights................................... 10
2.23. Private Offering...................................... 10
2.24. Environmental......................................... 11
2.25. Fluid Management Agreement Representations............ 12
2.26. Brokerage............................................. 12
2.27. Illegal or Unauthorized Payments; Political
Contributions......................................... 12
2.28. Takeover Statute...................................... 13
2.29. Material Facts........................................ 13
SECTION 3. REPRESENTATIONS AND WARRANTIES OF WARBURG............. 13
SECTION 4. ADDITIONAL COVENANTS OF THE PARTIES................... 15
4.1. Resale of Securities.................................. 15
4.2. Covenants Pending Closing............................. 16
4.3. Further Assurance..................................... 16
4.4. Board Nominee......................................... 16
4.5. Hart-Scott-Rodino..................................... 16
SECTION 5. WARBURG'S CLOSING CONDITIONS.......................... 17
5.1. Representations and Warranties........................ 17
5.2. Compliance with Agreement............................. 17
5.3. Officer's Certificate................................. 17
5.4. Injunction............................................ 17
5.5. Counsel's Opinion..................................... 17
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C>
5.6. Acquisition of Fluid Management....................... 18
5.7. Consents; Hart-Scott-Rodino........................... 19
5.8. Election of Directors................................. 18
5.9. Registration Rights Agreement......................... 18
5.10. Approval of Proceedings............................... 18
SECTION 6. COMPANY CLOSING CONDITIONS............................ 18
6.1. Representations and Warranties........................ 18
6.2. Compliance with Agreement............................. 19
6.3. Warburg's Certificate................................. 19
6.4. Consents; Hart-Scott-Rodino........................... 19
6.5. Injunction............................................ 19
6.6. Acquisition of Fluid Management....................... 19
SECTION 7. RESERVED.............................................. 19
SECTION 8. COVENANTS............................................. 19
8.1. Confidentiality....................................... 19
8.2. Lost, etc. Certificates Evidencing Shares of
Common Stock; Exchange................................ 20
SECTION 9. INTERPRETATION OF THIS AGREEMENT...................... 20
9.1. Terms Defined......................................... 20
9.2. Accounting Principles................................. 22
9.3. Directly or Indirectly................................ 22
9.4. Governing Law......................................... 22
9.5. Paragraph and Section Headings........................ 22
SECTION 10. MISCELLANEOUS......................................... 22
10.1. Notices............................................... 22
10.2. Expenses and Taxes.................................... 23
10.3. Reproduction of Documents............................. 23
10.4. Termination and Survival.............................. 24
10.5. Successors and Assigns................................ 24
10.6. Entire Agreement; Amendment and Waiver................ 24
10.7. Severability.......................................... 25
10.8. Limitation on Enforcement of Remedies................. 25
10.9. Counterparts.......................................... 25
</TABLE>
EXHIBIT A Certificate of Incorporation of the Company
EXHIBIT B Bylaws of the Company
EXHIBIT C Form of Opinion of Company Counsel
- ii -
<PAGE>
ENVIROGEN, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of January 14, 1997
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017
Dear Sirs:
Envirogen, Inc., a Delaware corporation (the "Company"), hereby agrees
with Warburg, Pincus Ventures, L.P., a Delaware limited partnership ("Warburg"),
as follows :
SECTION 1. PURCHASE AND SALE OF SECURITIES
-------------------------------
1.1. Issuance of Common Stock
------------------------
(a) Subject to the terms and conditions set forth in this Agreement
and in reliance upon the Company's and Warburg's representations set forth
below, on the Closing Date (as defined below) the Company shall sell to Warburg,
and Warburg shall purchase from the Company, 6,095,238 shares (the "Shares") of
the Company's Common Stock, par value $.01 per share (the "Common Stock"), at
the aggregate cash purchase price of $15,999,999.75 (the "Purchase Price"). Such
sale and purchase shall be effected on the Closing Date by the Company executing
and delivering to Warburg, duly registered in its name, a duly executed stock
certificate evidencing the Shares being purchased by it, against delivery by
Warburg to the Company of the Purchase Price by wire transfer of immediately
available funds to such account as the Company shall designate.
(b) The closing of such sale and purchase (the "Closing") shall take
place contemporaneously with the merger of Fluid Management, Inc. with and into
the Company pursuant to the Fluid Management Agreement, or such other date as
Warburg and the Company agree in writing (the "Closing Date"), at the offices of
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York, or such
other location as Warburg and the Company shall mutually select.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Warburg that:
2.1. Corporate Organization
----------------------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Attached hereto as
Exhibits A and B, respectively, are true and complete copies of the Certificate
of Incorporation
<PAGE>
and Bylaws of the Company, each as amended through the date hereof
(collectively, the "Organizational Documents").
(b) The Company has all requisite power and authority and has all
necessary approvals, licenses, permits and authorization to own its properties
and to carry on its business as now conducted. The Company has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder.
(c) The Company has filed all necessary documents to qualify to do
business as a foreign corporation in, and the Company is in good standing under
the laws of, each jurisdiction in which the conduct of the Company's business or
the nature of the property owned requires such qualification, except where the
failure to so qualify would not have a material adverse affect on the business,
properties, prospects, profits or condition (financial or otherwise) of the
Company and its subsidiaries taken as a whole (a "Material Adverse Effect").
2.2. Subsidiaries
------------
Except as set forth on Schedule 2.2, the Company has no subsidiaries
------------
and no interests or investments in any partnership, trust or other entity or
organization. Each subsidiary of the Company listed on Schedule 2.2 has been
------------
duly incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its properties and to conduct its business and is duly
registered, qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the nature
of its properties requires such registration, qualification or authorization,
except where the failure to so register, qualify or be authorized would not have
a Material Adverse Effect; all of the issued and outstanding capital stock of
each subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable, and is owned by the Company free and clear of any mortgage,
pledge, lien, encumbrance, security interest, claim or equity.
2.3. Capitalization
--------------
(a) On the date hereof, the authorized capital stock of the Company
consists of 20,000,000 shares of its Common Stock and 2,000,000 shares of its
preferred stock, par value $.01 per share (the "Preferred Stock"). As of the
Closing Date, the authorized capital stock of the Company will consist of
50,000,000 shares of its Common Stock and 2,000,000 shares of its Preferred
Stock. The issued and outstanding shares of capital stock of the Company on the
date hereof consist of 12,872,440 shares of Common Stock.
(b) All the outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and
-2-
<PAGE>
non-assessable, and were issued in accordance with the registration or
qualification requirements of the Securities Act and any relevant state
securities laws or pursuant to valid exemptions therefrom. Upon issuance, sale
and delivery as contemplated by this Agreement, the Shares will be duly
authorized, validly issued, fully paid and non-assessable shares of the Company,
free of all preemptive or similar rights, and entitled to the rights therein
described.
(c) Except for the conversion rights which attach to the warrants,
options and convertible securities which are listed on Schedule 2.3 hereto, on
------------
the Closing Date there will be no shares of Common Stock, Preferred Stock or any
other equity security of the Company issuable upon conversion or exchange of any
security of the Company nor will there be any rights, options or warrants
outstanding or other agreements to acquire shares of Common Stock or Preferred
Stock nor will the Company be contractually obligated to purchase, redeem or
otherwise acquire any of its outstanding shares. Schedule 2.3 sets forth the
------------
exercise price, vesting provisions, expiration date and other material terms of
all warrants, options and convertible securities listed therein. No stockholder
of the Company is entitled to any preemptive or similar rights to subscribe for
shares of capital stock of the Company.
2.4. Corporate Proceedings, etc.
--------------------------
The Board of Directors of the Company has authorized the execution,
delivery, and performance of this Agreement and each of the transactions and
agreements contemplated hereby. No other corporate action (other than
stockholder approval) is necessary to authorize such execution, delivery and
performance of this Agreement, and this Agreement constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and general principles of equity. The Board
of Directors of the Company has authorized the issuance and delivery of the
Shares in accordance with this Agreement.
2.5. Consents and Approvals
----------------------
The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby do not require the Company
or any of its subsidiaries to obtain any consent, approval or action of, or make
any filing with or give any notice to, any corporation, person or firm or any
public, governmental or judicial authority, except such approvals, consents, or
filings that have been made or obtained or as disclosed on Schedule 2.5.
------------
-3-
<PAGE>
2.6. Absence of Defaults, Conflicts, etc.
-----------------------------------
The execution and delivery of this Agreement do not, and the
fulfillment of the terms hereof by the Company, and the issuance of the Shares
will not, result in a breach of any of the terms, conditions or provisions of,
or constitute a default under, or permit the acceleration of rights under or
termination of, any material indenture, mortgage, deed of trust, credit
agreement, note or other evidence of indebtedness, or other material agreement
of the Company or any of its subsidiaries (collectively the "Key Agreements and
Instruments"), or the Organizational Documents, or any rule or regulation of any
court or federal, state or foreign regulatory board or body or administrative
agency having jurisdiction over the Company or any of its subsidiaries or over
their respective properties or businesses. No event has occurred and no
condition exists which, upon notice or the passage of time (or both), would
constitute a default under any such Key Agreements and Instruments or in any
license, permit or authorization to which the Company or any subsidiary is a
party or by which any of them may be bound.
2.7. SEC Reports
-----------
The Company has previously furnished Warburg with true and complete
copies of its (i) Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1995, as filed with the SEC, (ii) Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30,
1996, as filed with the SEC, (iii) proxy statements related to all meetings of
its stockholders (whether annual or special) since January 1, 1996 and (iv) all
other reports or registration statements filed by the Company with the SEC since
January 1, 1996, except registration statements on Form S-8 relating to employee
benefit plans, which are all the documents (other than preliminary material)
that the Company was required to file with the SEC since that date (the
documents described in clauses (i) through (iv) being referred to herein
collectively as the "SEC Reports"). As of their respective dates, the SEC
-----------
Reports complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Reports. As of their
respective dates, the SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of the Company included in
the SEC Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The financial statements included in the SEC Reports: have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis (except as may be indicated therein or in
the notes
-4-
<PAGE>
thereto); present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flow for the periods then
ended subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments and any other adjustments described therein
and the fact that certain information and notes have been condensed or omitted
in accordance with the Exchange Act and the rules promulgated thereunder; and
are in all material respects, in accordance with the books of account and
records of the Company.
2.8. Absence of Certain Developments
-------------------------------
Except as disclosed in the SEC Reports or on Schedule 2.8, since
------------
December 31, 1995, there has been no (i) material adverse change in the
condition, financial or otherwise, of the Company and its subsidiaries taken as
a whole or in their assets, liabilities, properties, or business or prospects,
(ii) declaration, setting aside or payment of any dividend or other distribution
with respect to the capital stock of the Company, (iii) issuance of capital
stock (other than pursuant to the exercise of options, warrants, or convertible
securities outstanding at such date) or options, warrants or rights to acquire
capital stock (other than the rights granted to Warburg hereunder), (iv)
material loss, destruction or damage to any property of the Company or any
subsidiary, whether or not insured, (v) acceleration or prepayment of any
indebtedness for borrowed money or the refunding of any such indebtedness, (vi)
material labor trouble involving the Company or any subsidiary or any material
change in their personnel or the terms and conditions of employment, (vii)
waiver of any valuable right, (viii) loan or extension of credit to any officer
or employee of the Company or any subsidiary or (ix) acquisition or disposition
of any material assets (or any contract or arrangement therefor), or any other
material transaction by the Company or any subsidiary otherwise than for fair
value in the ordinary course of business.
2.9. Compliance with Law
-------------------
(a) Neither the Company nor any of its subsidiaries is in material
violation of any laws, ordinances, governmental rules or regulations to which it
is subject, including without limitation laws or regulations relating to the
environment or to occupational health and safety, and no material expenditures
are or will be required in order to cause its current operations or properties
to comply with any such laws, ordinances, governmental rules or regulations.
(b) The Company and its subsidiaries have all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
their property or to the conduct of their respective businesses, which if
violated or
-5-
<PAGE>
not obtained is reasonably likely to have a Material Adverse Effect. Neither the
Company nor any subsidiary has finally been denied any application for any such
licenses, permits, franchises or other governmental authorizations necessary to
its business.
2.10. Litigation
----------
Except as disclosed in the SEC Reports or on Schedule 2.10, there is
-------------
no legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding, whether federal, state, local
or foreign (collectively "Legal Proceedings"), pending or, to the best of the
Company's knowledge, threatened against or affecting the Company or any
subsidiary or any of their respective properties, assets or businesses, nor is
there any Legal Proceeding pending or, to the knowledge of the Company,
threatened, relating to this Agreement or the transactions contemplated hereby.
After reasonable inquiry of its officers, the Company is not aware of any fact
which might result in or form the basis for any Legal Proceeding which could
have a Material Adverse Effect. Neither the Company nor any subsidiary is
subject to any order, writ, judgment, injunction, decree, determination or award
of any court or of any governmental agency or instrumentality (whether federal,
state, local or foreign).
2.11. Material Contracts
------------------
Except as disclosed in the SEC Reports or on Schedule 2.11, there are
-------------
no material contracts, agreements, instruments, commitments and other
arrangements to which the Company or any subsidiary is a party or otherwise
relating to or affecting any of their respective assets, including without
limitation, employment, severance or consulting agreements; loan, credit or
security agreements; joint venture agreements and distribution agreements (each,
a "Contract"). Each such Contract is valid, binding and enforceable against the
Company or such subsidiary and, to the Company's best knowledge, the other
parties thereto, in accordance with its terms, except that such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
general principles of equity. Each such Contract is in full force and effect on
the date hereof.
2.12. Absence of Undisclosed Liabilities
----------------------------------
Except as disclosed in the SEC Reports or on Schedule 2.12, neither
-------------
the Company nor any of its subsidiaries has any debt, obligation or liability
(whether accrued, absolute, contingent, liquidated or otherwise, whether due or
to become due, whether or not known to the Company) arising out of any
transaction entered into at or prior to the Closing, or any act or omission at
or prior to the Closing, or any state of facts existing at or prior to the
Closing, including taxes with respect to or based upon the transactions or
events occurring at or prior
-6-
<PAGE>
to the Closing, and including, without limitation, unfunded past service
liabilities under any pension, profit sharing or similar plan, except current
liabilities incurred, and obligations under agreements entered into, in the
usual and ordinary course of business, none of which (individually or in the
aggregate) could have a Material Adverse Effect.
2.13. Employees
---------
(a) The Company and its subsidiaries are in compliance with all
applicable foreign, federal, state and local laws and regulations regarding
occupational safety and health standards except to the extent that noncompliance
will not have a Material Adverse Effect, and has received no complaints from any
foreign, federal, state or local agency or regulatory body alleging violations
of any such laws and regulations.
(b) The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted.
(c) The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing.
2.14. Tax Matters
-----------
There are no federal, state, county or local taxes due and payable by
the Company or any of its subsidiaries which have not been paid. The provisions
for taxes on the audited and unaudited balance sheets contained in the SEC
Reports are sufficient for the payment of all accrued and unpaid federal, state,
county and local taxes of the Company whether or not assessed or disputed as of
the respective dates of such balance sheets. The Company and its subsidiaries
have duly filed all federal, state, county and local tax returns required to
have been filed by it and there are in effect no waivers of applicable statutes
of limitations with respect to taxes for any year. Neither the Company nor any
of its subsidiaries has been subject to a federal or state tax audit of any
kind.
2.15. Employee Benefit Plans
----------------------
Except as disclosed on Schedule 2.15, the Company and its subsidiaries
-------------
have no employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974) covering former and current employees of
the Company or any of its subsidiaries, or under which the Company or any of its
-7-
<PAGE>
subsidiaries has any obligation or liability. True and complete copies of all
material plans, contracts, bonuses, commissions, profit-sharing, savings, stock
options, insurance, deferred compensation, or other similar fringe or employee
benefits covering former or current employees of the Company or any of its
subsidiaries or under which the Company or any of its subsidiaries has any
obligation or liability (each, a "Benefit Arrangement") have been provided or
made available to Warburg prior to the date hereof. The Benefit Arrangements are
and have been administered in compliance in all material respects with their
terms and with the requirements of applicable law. Except as disclosed on
Schedule 2.15, all payments to current or former employees of the Company or any
of its subsidiaries pursuant to the Benefit Arrangements are and have been fully
deductible under the Code.
2.16. Patents, Licenses, etc.
----------------------
Except as provided on Schedule 2.16, the Company or one of its
-------------
subsidiaries owns, free and clear of all encumbrances, restrictions, liens,
security interests and charges, and has good and marketable title to, or holds
adequate licenses or otherwise possess all such rights as are necessary to use
all patents (and applications therefor), patent disclosures, trademarks, service
marks, trade names, copyrights (and applications therefor), inventions,
discoveries, processes, know-how, scientific, technical, engineering and
marketing data, formulae and techniques used or proposed to be used, in or
necessary for the conduct of its business as now conducted or as proposed to be
conducted (collectively, "Intellectual Property").
Except as provided on Schedule 2.16, neither the Company nor any of
-------------
its subsidiaries has received notice nor otherwise has reason to know of any
conflict or alleged conflict with the rights of others pertaining to the
Intellectual Property described in this Section 2.16. To the Company's best
knowledge, the Company's business, as presently conducted and as proposed to be
conducted, does not infringe upon or violate any patent rights or trade secrets
of others. To the Company's best knowledge, the Company and its subsidiaries
have the unrestricted right to use, free and clear of any rights or claims of
others, all trade secrets, processes, customer lists and other rights incident
to their respective businesses as now conducted or as proposed to be conducted.
Except as disclosed in the SEC Reports or on Schedule 2.16, neither
-------------
the Company nor any of its subsidiaries is currently obligated or under any
existing liability to make royalty or other payments to any owner of, licensor
of, or other claimant to, any patent, trademark, service names, trade names,
copyrights, or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business as now conducted or as proposed to
be conducted, or otherwise. To the Company's best knowledge, no employee of the
Company or any of
-8-
<PAGE>
its subsidiaries has violated any employment agreement or proprietary
information agreement which he had with a previous employer or any patent policy
of such employer, or is a party to or threatened by any litigation concerning
any patents, trademarks, trade secrets, service names, trade names, copyrights,
licenses and the like.
2.17. Title to Tangible Assets
------------------------
Except as disclosed in the SEC Reports, the Company and its
subsidiaries have good title to their properties and assets and good title to
all their leasehold estates, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than or resulting from taxes which have not
yet become delinquent and minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company and its subsidiaries and which have not
arisen otherwise than in the ordinary course of business.
2.18. Condition of Properties
-----------------------
All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company and its subsidiaries are in good
operating condition and repair, are reasonably fit and usable for the purposes
for which they are being used, are adequate and sufficient for the Company's or
such subsidiary's business and comply in all material respects with all
applicable ordinances, regulations and laws.
2.19. Insurance
---------
The Company and its subsidiaries and their respective properties are
insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and businesses
of the Company and its subsidiaries. Schedule 2.19 sets forth a true and
-------------
complete listing of the insurance policies of the Company and its subsidiaries
as in effect on the date hereof, including in each case the applicable coverage
limits, deductibles and the policy expiration dates. No notice of any
termination or threatened termination of any of such policies has been received
and such policies are in full force and effect.
2.20. Transactions with Related Parties
---------------------------------
Except as disclosed in the SEC Reports or on Schedule 2.20, neither
-------------
the Company nor any subsidiary is a party to any agreement with any of the
Company's directors, officers or stockholders or any Affiliate or family member
of any of the foregoing under which it: (i) leases any real or personal property
(either to or from such Person), (ii) licenses technology (either to or from
such Person), (iii) is obligated to
-9-
<PAGE>
purchase any tangible or intangible asset from or sell such asset to such
Person, (iv) purchases products or services from such Person or (v) has borrowed
money from or lent money to such Person. Except as set forth in Schedule 2.20,
-------------
neither the Company nor any subsidiary employs as an employee or engages as a
consultant any family member of any of the Company's directors, officers or
stockholders. To the best knowledge of the Company, there exist no agreements
among stockholders of the Company to act in concert with respect to their voting
or holding of Company securities.
2.21. Interest in Competitors
-----------------------
Neither the Company nor any of its officers or, to the best of its
knowledge, any of its directors, has any interest, either by way of contract or
by way of investment (other than as holder of not more than 2% of the
outstanding capital stock of a publicly traded Person) or otherwise, directly or
indirectly, in any Person other than the Company that (i) provides any services
or designs, produces or sells any product or product lines or engages in any
activity similar to or competitive with any activity currently proposed to be
conducted by the Company or any of its subsidiaries or (ii) has any direct or
indirect interest in any asset or property, real or personal, tangible or
intangible, of the Company.
2.22. Registration Rights
-------------------
Except as disclosed in the SEC Reports or on Schedule 2.22, or
-------------
pursuant to the Registration Rights Agreement, the Company will not, as of the
Closing Date, be under any obligation to register any of its securities under
the Securities Act of 1933, as amended (the "Securities Act").
2.23. Private Offering
----------------
Neither the Company nor anyone acting on its behalf has sold or has
offered any of the Shares for sale to, or solicited offers to buy from, or
otherwise approached or negotiated with respect thereto with, any prospective
purchaser, other than Warburg. Neither the Company nor anyone acting on its
behalf shall offer the Shares for issue or sale to, or solicit any offer to
acquire any of the same from, anyone so as to bring the issuance and sale of
such Shares within the provisions of Section 5 of the Securities Act. Based upon
the representations of Warburg set forth in Section 3, the offer, issuance and
sale of the Shares are exempt from the registration and prospectus delivery
requirements of the Securities Act, and have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws.
-10-
<PAGE>
2.24. Environmental
-------------
Except as disclosed in the SEC Reports or on Schedule 2.24,
-------------
(a) except for such noncompliance which would not, individually or in
the aggregate, result in losses, costs, or liability in excess of $100,000, the
Company and its operations are in compliance with all applicable laws,
regulations and other requirements of governmental or regulatory authorities or
duties under the common law relating to toxic or hazardous substances, wastes,
pollution or to the protection of health, safety or the environment
(collectively, "Environmental Laws") and have obtained or filed timely
applications for and maintained in effect all licenses, permits and other
authorizations or registrations (collectively "Environmental Permits") required
under all Environmental Laws and are in compliance with all such Environmental
Permits.
(b) the Company has not performed or suffered any act which could
give rise to, or has otherwise incurred, liability to any person (governmental
or not) under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (S) 9601 et seq. ("CERCLA"), or any other Environmental
-- ---
Laws, nor has the Company received notice of any such liability or any claim
therefor or submitted notice pursuant to Section 103 of CERCLA to any
governmental agency with respect to any of its assets.
(c) during the period of the Company's ownership or lease, and to the
best of the Company's knowledge prior to that time, no hazardous substance,
hazardous waste, contaminant, pollutant or toxic substance (as such terms are
defined in any applicable Environmental Law and collectively referred to herein
as "Hazardous Materials") has been released, placed, dumped or otherwise come to
be located on, at, or beneath any of the assets or properties owned or leased by
the Company or any surface waters or groundwaters thereon or thereunder.
(d) the Company does not own or operate, and has never owned or
operated, aboveground or underground storage tanks or surface improvements
containing Hazardous Materials.
(e) with respect to any or all of the real properties leased by the
Company: (i) there are no asbestos-containing materials, urea formaldehyde
insulation, polychlorinated biphenyls or lead-based paints present at any such
properties; and (ii) there are no wetlands as defined under any Environmental
Law located on any such properties.
(f) during the period of the Company's ownership or lease, and to the
best of the Company's knowledge prior to that time, none of the real properties
leased by the Company: (i) has been used or is now used for the generation,
transportation,
-11-
<PAGE>
storage, handling, treatment or disposal of any Hazardous Materials except in
the ordinary course of the Company's business and in compliance with
Environmental Laws, except for noncompliance which would not, individually or in
the aggregate, result in losses, costs, or liability in excess of $100,000; or
(ii) is identified on a federal, state or local listing of sites which require
or might require environmental investigation, mitigation, remediation or
corrective action.
(g) no condition exists on any of the real properties leased by the
Company or, to the best of the Company's knowledge, existed prior to the
Company's lease of such property, that upon the failure to act, the passage of
time or the giving of notice would give rise to liability or the imposition of a
lien under any Environmental Law.
(h) there are no ongoing investigations or negotiations, pending or,
to the best of the Company's knowledge, threatened administrative, judicial or
regulatory proceedings, or consent decrees or other agreements in effect that
relate to environmental conditions or Hazardous Materials in, on, under, about
or related to the Company, its operations or the real properties leased by the
Company.
(i) neither the Company nor its operations is subject to reporting
requirements under the federal Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. (S) 11001 et seq., or analogous state statutes and related
-- ---
regulations.
2.25. Fluid Management Agreement Representations
------------------------------------------
All representations and warranties of the Company and, to the best of
the Company's knowledge, all the representations and warranties of Fluid
Management, Inc. contained in the Fluid Management Agreement are true and
correct in all material respects.
2.26. Brokerage
---------
There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of the Company (other
than Allen & Company Incorporated, whose fees and expenses shall be the sole
responsibility of the Company) and the Company agrees to indemnify and hold
Warburg harmless against any costs or damages incurred as a result of any such
claim.
2.27. Illegal or Unauthorized Payments; Political Contributions
---------------------------------------------------------
Neither the Company or any of its subsidiaries nor, to the best of the
Company's knowledge (after reasonable inquiry of its officers and directors),
any of the officers, directors,
-12-
<PAGE>
employees, agents or other representatives of the Company or any of its
subsidiaries or any other business entity or enterprise with which the Company
or any subsidiary is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (a) as
a kickback or bribe to any Person or (b) to any political organization, or the
holder of or any aspirant to any elective or appointive public office except for
personal political contributions not involving the direct or indirect use of
funds of the Company or any of its subsidiaries.
2.28 Takeover Statute
----------------
Assuming Warburg and its "associates" and "affiliates" (as defined in
Section 203 of the Delaware Code) collectively beneficially own and have
beneficially owned at all times during the three year period prior to the date
hereof less than fifteen percent (15%) of the Common Stock outstanding, Section
203 of the Delaware Code is, and shall be, inapplicable to this Agreement and
the transactions contemplated hereby.
2.29 Material Facts
--------------
This Agreement, the schedules furnished contemporaneously herewith,
and the other agreements, documents, certificates or written statements
furnished or to be furnished to Warburg through the Closing Date by or on behalf
of the Company in connection with the transactions contemplated hereby taken as
a whole, do not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements contained therein or herein, in
light of the circumstances in which they were made, not misleading. There is no
fact which is known to the Company (other than general economic or industry
conditions) and which has not been disclosed herein or otherwise by the Company
to Warburg which may materially adversely affect the business, properties,
assets or condition, financial or otherwise, of the Company and its subsidiaries
taken as a whole.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF WARBURG
-----------------------------------------
Warburg represents and warrants to the Company as follows:
(a) It has full power and legal right to execute and deliver this
Agreement and to perform its obligations hereunder.
(b) It is a validly existing limited partnership, duly organized and
in good standing under the laws of Delaware.
(c) It has taken all action necessary for the authorization,
execution, delivery, and performance of this Agreement and its obligations
hereunder. This Agreement has been
-13-
<PAGE>
duly and validly executed and delivered by Warburg and constitutes the valid and
binding obligation of Warburg, enforceable against Warburg in accordance with
its terms, except that such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and general principles of equity.
(d) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of Warburg (other than
Ivan Burns and Alan Craft, whose fees and expenses shall be the sole
responsibility of Warburg) and Warburg agrees to indemnify and hold the Company
harmless against any costs or damages incurred as a result of any such claim.
(e) The execution and delivery by Warburg of this Agreement, the
performance by Warburg of its obligations hereunder and the consummation by
Warburg of the transactions contemplated hereby do not require Warburg to obtain
any consent, approval or action of, or make any filing with or give any notice
to, any corporation, person or firm or any public, governmental or judicial
authority, other than consents, approvals, actions, filings or notices in
connection with the HSR Act.
(f) It understands (subject to the express obligations of the Company
to register the Shares as provided in the Registration Rights Agreement) that
the issuance of the Shares is exempt from registration pursuant to Section 4(2)
of the Securities Act and/or Regulation D promulgated under the Securities Act
("Regulation D"), and that the reliance of the Company on such exemptions is
predicated in part on its representations, warranties, covenants and
acknowledgments set forth in this Section.
(g) It is an Accredited Investor, as that term is defined in
Regulation D, and has such knowledge and experience in financial and business
matters that it is fully capable of evaluating the risks and merits of its
investment in the Shares. The Shares will be acquired by it for its own account,
not as a nominee or agent, for investment and without a view to resale, transfer
or other distribution within the meaning of the Securities Act and the rules and
regulations thereunder, and it will not distribute nor transfer any of the
Shares in violation of the Securities Act. It is a resident of the State of New
York for purposes of state securities laws.
(h) It: (i) acknowledges that the Shares are not registered under the
Securities Act and must be held indefinitely by it unless the Shares are
subsequently registered under the Securities Act (in accordance with the
Registration Rights Agreement or otherwise) or an exemption from registration is
available, (ii) is aware that any routine sales of the Shares
-14-
<PAGE>
made under Rule 144 of the Securities and Exchange Commission under the
Securities Act may be made only in limited amounts and in accordance with the
terms and conditions of that Rule and that in such cases where the Rule is not
applicable, registration or compliance with some other registration exemption
will be required, (iii) is aware that Rule 144 is not presently, and for a
period of at least two years following the Closing Date hereof probably will not
be, available for use by it for resale of the Shares, and (iv) is aware that the
Company is not obligated to register any sale, transfer or other disposition of
the Shares except in accordance with the provisions of the Registration Rights
Agreement.
(i) It acknowledges receipt of the SEC Reports and such other
documents, agreements and information as it has required and confirms and
acknowledges that: (i) the Company has afforded it the opportunity to ask
questions of and receive answers from the Company's officers and directors
concerning the terms and conditions of this Agreement and its investment in the
Shares and to obtain such additional information as it has requested, and (ii)
it has availed itself of such opportunity to the extent it deems necessary and
has received the information requested.
(j) It acknowledges and agrees that the certificates representing the
Shares issuable to it will contain a restrictive legend noting the restrictions
on transfer described in this Section 3 and Section 4.1(a) hereof and under
federal and applicable state securities laws, and that appropriate "stop-
transfer" instructions will be given to the Company's stock transfer agent.
SECTION 4. ADDITIONAL COVENANTS OF THE PARTIES
4.1 Resale of Securities
--------------------
(a) Subject to the provisions of Section 3 hereof, Warburg covenants
that it will not sell or otherwise transfer any Shares until one (1) year after
the Closing Date without the written consent of the Company.
(b) In order to ensure compliance with the provisions of Section 3
hereof, Warburg covenants and agrees that, after the Closing, it will not sell,
transfer or otherwise dispose of any of the Shares or any interest therein
(unless such sale, transfer or disposition has been registered under the
Securities Act in accordance with the provisions of Section 7 hereof or
otherwise) or otherwise without there first having been compliance with either
of the following conditions:
(i) the Company shall have received a written opinion of counsel
in form and substance reasonably satisfactory to the Company, which
counsel shall include Willkie Farr & Gallagher, or a copy of a "no-
-15-
<PAGE>
action" or interpretive letter of the SEC, specifying the nature and
circumstances of the proposed transfer and indicating that the
proposed transfer will not be in violation of any of the provisions of
the Securities Act and the rules and regulations promulgated
thereunder; or
(ii) the Company shall have received an opinion from its own
counsel to the effect that the proposed transfer will not be in
violation of any of the provisions of the Securities Act and the rules
and regulations promulgated thereunder.
4.2. Covenants Pending Closing
-------------------------
Pending the Closing the Company will not, without Warburg's prior
written consent, take any action which would result in any of the
representations or warranties contained in this Agreement not being true at and
as of the time immediately after such action, or in any of the covenants
contained in this Agreement becoming incapable of performance. The Company will
promptly advise Warburg of any action or event of which it becomes aware which
has the effect of making incorrect any of such representations or warranties or
which has the effect of rendering any of such covenants incapable of
performance.
4.3. Further Assurance
-----------------
Each of the parties shall execute such documents and other papers and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated hereby. Each such
party shall use its reasonable efforts to fulfill or obtain the fulfillment of
the conditions to the Closing as promptly as practicable.
4.4. Board Nominee
-------------
For so long as Warburg owns beneficially (within the meaning of Rule
13d-3 under the Exchange Act) at least 7.5% of the issued and outstanding shares
of the Company's Common Stock, the Company will nominate and use its best
efforts to elect and to cause to remain as a director on the Company's Board of
Directors one individual as Warburg may designate. Any vacancy created by the
death, disability, retirement or removal of any such individual may be filled by
Warburg. The initial nominee of Warburg shall be Robert S. Hillas.
4.5. Hart-Scott-Rodino
-----------------
As promptly as practicable following the execution and delivery of
this Agreement by the parties, the Company and Warburg shall each prepare and
file, or shall cause its "ultimate parent" (as defined in the HSR Act) to
prepare and file, any required notification and report form under the HSR Act,
in
-16-
<PAGE>
connection with the transactions contemplated hereby, each party paying its
own filing fees; the Company and Warburg shall, or shall cause their ultimate
parents to, take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable to obtain prompt termination of the
waiting period under the HSR Act.
SECTION 5. WARBURG'S CLOSING CONDITIONS
The obligation of Warburg to purchase and pay for the Shares on the
Closing Date, as provided in Section 1 hereof, shall be subject to the
performance by the Company of its agreements theretofore to be performed
hereunder and to the satisfaction, prior thereto or concurrently therewith, of
the following further conditions:
5.1. Representations and Warranties
------------------------------
The representations and warranties of the Company contained in this
Agreement shall be true on and as of the Closing Date as though such warranties
and representations were made at and as of such date, except as otherwise
affected by the transactions contemplated hereby.
5.2. Compliance with Agreement
-------------------------
The Company shall have performed and complied with all agreements,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by the Company prior to or on the Closing Date.
5.3. Officer's Certificate
---------------------
Warburg shall have received a certificate, dated the Closing Date,
signed on behalf of the Company by each of the President and the Controller of
the Company, certifying that the conditions specified in the foregoing Sections
5.1 and 5.2 hereof have been fulfilled.
5.4. Injunction
----------
There shall be no effective injunction, writ, preliminary restraining
order or any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided.
5.5. Counsel's Opinion
-----------------
Warburg shall have received from the Company's counsel, Drinker Biddle
& Reath, an opinion, dated the Closing Date, substantially in the form of
Exhibit C hereto.
-17-
<PAGE>
5.6. Acquisition of Fluid Management
-------------------------------
All conditions to the consummation of the transactions contemplated by
the Fluid Management Agreement shall have been satisfied or waived with the
consent of Warburg in its sole and absolute discretion.
5.7. Consents; Hart-Scott-Rodino
---------------------------
All consents, approvals and actions which are listed on Schedule 2.5
------------
hereto shall have been obtained or performed, and all applicable waiting periods
(and any extensions thereof) under the HSR Act shall have expired or otherwise
been terminated.
5.8 Election of Directors
---------------------
Robert S. Hillas (in accordance with Section 4.4 hereof) and William
C. Smith shall have been elected to the Board of Directors of the Company,
effective upon the Closing.
5.9. Registration Rights Agreement
-----------------------------
The Company, Warburg and the shareholders of Fluid Management, Inc.
shall have entered into the Registration Rights Agreement, the terms of which
shall be satisfactory to the Company and Warburg.
5.10. Approval of Proceedings
-----------------------
All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
satisfactory in form and substance to Warburg and its special counsel, Willkie
Farr & Gallagher; and Warburg shall have received copies of all documents or
other evidence which it and Willkie Farr & Gallagher may request in connection
with such transactions and of all records of corporate proceedings in connection
therewith in form and substance satisfactory to Warburg and Willkie Farr &
Gallagher.
SECTION 6. COMPANY CLOSING CONDITIONS
The obligation of the Company to issue and deliver the Shares on the
Closing Date, as provided in Section 1 hereof, shall be subject to the
performance by Warburg of its agreements theretofore to be performed hereunder
and to the satisfaction, prior thereto or concurrently therewith, of the
following further conditions:
6.1. Representations and Warranties
------------------------------
The representations and warranties of Warburg contained in this
Agreement shall be true on and as of the Closing Date as though such warranties
and representations were made at and as of
-18-
<PAGE>
such date, except as otherwise affected by the transactions contemplated hereby.
6.2. Compliance with Agreement
-------------------------
Warburg shall have performed and complied with all agreements,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by it prior to or on the Closing Date.
6.3. Warburg's Certificate
---------------------
The Company shall have received a certificate from Warburg, dated the
Closing Date, signed by a duly authorized representative of Warburg, certifying
that the conditions specified in the foregoing Sections 6.1 and 6.2 hereof have
been fulfilled.
6.4. Consents; Hart-Scott-Rodino
---------------------------
All consents, approvals and actions which are listed on Schedule 2.5
hereto shall have been obtained or performed, and all applicable waiting periods
(and any extensions thereof) under the HSR Act shall have expired or otherwise
been terminated.
6.5. Injunction
----------
There shall be no effective injunction, writ, preliminary restraining
order or any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided.
6.6. Acquisition of Fluid Management
-------------------------------
All conditions to the consummation of the transactions contemplated by
the Fluid Management Agreement shall have been satisfied or waived.
SECTION 7. RESERVED
--------
SECTION 8. COVENANTS
---------
8.1. Confidentiality
---------------
As to so much of the information and other material furnished under or
in connection with this Agreement (whether furnished before, on or after the
date hereof, including without limitation information furnished pursuant to
Section 8.1 hereof) as constitutes or contains confidential business, financial
or other information of the Company or any subsidiary, Warburg covenants for
itself and its directors, officers and partners that it will use due care to
prevent its officers, directors,
-19-
<PAGE>
partners, employees, counsel, accountants and other representatives from
disclosing such information to Persons other than their respective authorized
employees, counsel, accountants, partners and other authorized representatives;
provided, however, that Warburg may disclose or deliver any information or other
- -------- -------
material disclosed to or received by it should Warburg be advised by its counsel
that such disclosure or delivery is required by law, regulation or judicial or
administrative order. In the event of termination of this Agreement for any
reason, upon the written request of the Company, Warburg will promptly return or
cause to be returned to the Company, or promptly destroy or cause to be
destroyed, all such information and material obtained from the Company, and any
copies made of such information and materials. For purposes of this Section 8.1,
"due care" means at least the same level of care that Warburg would use to
protect the confidentiality of its own sensitive or proprietary information, and
this obligation shall survive termination of this Agreement.
8.2. Lost, etc. Certificates Evidencing Shares of Common Stock;
-----------------------------------------------------------------
Exchange
--------
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any certificate evidencing any
shares of Common Stock owned by Warburg, and (in the case of loss, theft or
destruction) of an unsecured indemnity satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such certificate, if mutilated, the Company
will make and deliver in lieu of such certificate a new certificate of like
tenor and for the number of shares evidenced by such certificate which remain
outstanding. Warburg's agreement of indemnity shall constitute indemnity
satisfactory to the Company for purposes of this Section 8.2. Upon surrender of
any certificate representing any shares of Common Stock for exchange at the
office of the Company, the Company at its expense will cause to be issued in
exchange therefor new certificates in such denomination or denominations as may
be requested for the same aggregate number of shares of Common Stock, as the
case may be, represented by the certificate so surrendered and registered as
such holder may request. The Company will also pay the cost of all deliveries
of certificates for such shares to the office of Warburg (including the cost of
insurance against loss or theft in an amount satisfactory to the holders) upon
any exchange provided for in this Section 8.2.
SECTION 9. INTERPRETATION OF THIS AGREEMENT
--------------------------------
9.1. Terms Defined
-------------
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
-20-
<PAGE>
Affiliate: means any Person or entity, directly or indirectly,
---------
controlling, controlled by or under common control with such Person or entity.
Business Day: shall mean a day other than a Saturday, Sunday or other
------------
day on which banks in the State of New York are required or authorized to close.
Closing: shall have the meaning set forth in Section 1.1(b).
-------
Closing Date: shall have the meaning set forth in Section 1.1(b).
------------
Code: shall mean the Internal Revenue Code of 1986, as amended.
----
Common Stock: shall have the meaning set forth in Section 1.1(a).
------------
Exchange Act: shall mean the Securities Exchange Act of 1934, as
------------
amended.
Fluid Management Agreement: shall mean the Agreement and Plan of
--------------------------
Merger among the Company, Fluid Management, Inc. and William C. Smith, Douglas
W. Jacobson, Gary W. Hawk and Richard W. Schowengerdt, dated January 14, 1997.
GAAP: shall have the meaning set forth in Section 2.7.
----
HSR Act: refers to the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
Intellectual Property: shall have the meaning set forth in Section
---------------------
2.16.
Material Adverse Effect: shall have the meaning set forth in Section
-----------------------
2.1(c).
Person: shall mean an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a government or agency or political subdivision thereof.
Registration Rights Agreement: shall mean a registration rights
-----------------------------
agreement to entered into by the Company, Warburg and Fluid Management, Inc.
relating to the registration of the Shares and shares of Common Stock to be
acquired by the shareholders of Fluid Management, Inc., pursuant to the
preparation and filing of a registration statement in compliance with the
Securities Act.
SEC: shall mean the Securities and Exchange Commission.
---
-21-
<PAGE>
SEC Reports: shall have the meaning set forth in Section 2.7.
-----------
Securities Act: shall mean the Securities Act of 1933, as amended.
--------------
Subsidiary: shall mean a corporation of which a Person owns, directly
----------
or indirectly, more than 50% of the Voting Stock.
Voting Stock: shall mean securities of any class or classes of a
------------
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
9.2. Accounting Principles
---------------------
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP at the
time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
9.3. 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.
9.4. 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.
9.5. Paragraph and 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.
SECTION 10. MISCELLANEOUS
-------------
10.1. Notices
-------
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered mail
or certified mail, postage prepaid:
(1) if to Warburg, at 466 Lexington Avenue, New York, New York 10017,
marked for attention of Robert S.
-22-
<PAGE>
Hillas, or at such other address as Warburg may have furnished the
Company in writing,
(2) if to the Company, at 4100 Quakerbridge Road, Lawrenceville, NJ
08648, marked for the attention of Harch S. Gill, or at such other
address as it may have furnished in writing to Warburg.
(b) 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.
10.2. Expenses and Taxes
------------------
(a) The Company agrees to pay fifty percent (50%) of the fee required
to be paid under the HSR Act in connection with the transaction contemplated
hereby and the reasonable fees and disbursements of Willkie Farr & Gallagher,
special counsel for Warburg, incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other instruments
and agreements entered into pursuant to this Agreement, and any amendments to
the same, in an amount not to exceed $50,000.00, said payment to be made no
later than 30 days after a bill for such fees and/or disbursements has been sent
to the Company (provided, however, that in no event shall said payment be
required to be made by the Company prior to the Closing Date). Notwithstanding
the foregoing, (i) the Company shall be required to pay fifty percent (50%) of
such legal fees and expenses in an amount not to exceed $25,000 in the event
that the transactions contemplated by the Fluid Management Agreement are not
consummated as a result of the failure by Fluid Management, Inc. or its
stockholders to satisfy the conditions set forth in Section 6.02 of the Fluid
Management Agreement on or prior to the Closing Date and (ii) the Company shall
not be required to pay any such legal fees and expenses in the event that the
transactions contemplated hereby are not consummated as a result of the failure
by Warburg to satisfy the conditions set forth in Sections 6.1, 6.2, 6.3, 6.4,
or 6.5 hereto on or prior to the Closing Date.
(b) The Company will pay, and save and hold Warburg harmless from any
and all liabilities (including interest and penalties) with respect to, or
resulting from any delay or failure in paying, stamp and other taxes (other than
income taxes), if any, which may be payable or determined to be payable on the
acquisition by Warburg of the Shares.
10.3. Reproduction of Documents
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents
-23-
<PAGE>
received by Warburg on the Closing Date (except for certificates evidencing the
Shares themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to Warburg, may be reproduced by
Warburg by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and Warburg may destroy any original
document so reproduced. All 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 Warburg in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
10.4. Termination and Survival
------------------------
Unless the Closing has occurred prior thereto, this Agreement and,
except as herein provided, all the rights of the parties hereto, shall terminate
on May 31, 1997 (unless such date is extended by mutual written consent).
Notwithstanding the termination of this Agreement, Section 8.1 hereof shall
survive the termination of this Agreement. All warranties, representations, and
covenants made by Warburg to the Company, or by the Company to Warburg, herein
or in any certificate or other instrument delivered by Warburg or the Company
under this Agreement shall be considered to have been relied upon by the Company
or Warburg, as the case may be, and shall survive all deliveries to Warburg of
the Shares, or payment to the Company for such Shares, until the thirtieth day
following the date on which Warburg receives the Company's audited financial
statements for the fiscal year ending December 31, 1997, except for the
warranties and representations set forth in Sections 2.14 and 2.24 herein, which
shall survive until expiration of any applicable statute of limitations,
regardless of any investigation made by the Company or Warburg, as the case may
be, or on the Company's or Warburg's behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company and Warburg, as the case may be, hereunder.
10.5. Successors and Assigns
----------------------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
10.6. Entire Agreement; Amendment and Waiver
--------------------------------------
This Agreement constitutes the entire understandings of the parties
hereto and supersede all prior agreements or understandings with respect to the
subject matter hereof 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 Warburg.
-24-
<PAGE>
10.7. 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.
10.8. Limitation on Enforcement of Remedies
-------------------------------------
The Company hereby agrees that it will not assert against the limited
partners of Warburg any claim it may have under this Agreement by reason of any
failure or alleged failure by Warburg to meet its obligations hereunder.
10.9. Counterparts
------------
This Agreement may be executed in one or more counterparts, both of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.
Very truly yours,
ENVIROGEN, INC.
By:/s/ Harcharan S. Gill
__________________________
Name: Harcharan S. Gill
Title: President and Chief
Executive Officer
WARBURG, PINCUS VENTURES, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By:/s/ Robert S. Hillas
____________________________
Name: Robert S. Hillas
Title: Partner
-25-
