<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-12
</TABLE>
ENVIROGEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ENVIROGEN, INC.
4100 QUAKERBRIDGE ROAD
LAWRENCEVILLE, NEW JERSEY 08648
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME 10:00 a.m. on Thursday, May 18, 2000
PLACE Envirogen, Inc.
4100 Quakerbridge Road
Lawrenceville, New Jersey 08648
ITEMS OF BUSINESS 1. To elect six directors to hold office as specified
in the proxy statement.
2. To approve the Envirogen, Inc. 2000 Incentive Stock
Option and Non-Qualified Stock Option Plan.
3. To appoint Ernst & Young LLP to serve as auditors
for the Company for the current fiscal year.
4. To act upon any other matters properly coming before
the meeting or any adjournment or postponement
thereof.
RECORD DATE The close of business on March 31, 2000 has been fixed
as the record date for the meeting. All stockholders of
record at that time are entitled to notice of, and all
such holders of Common Stock are entitled to vote at,
the meeting and any adjournment or postponement thereof.
ANNUAL REPORT The 1999 Annual Report of Envirogen, Inc. is being
mailed simultaneously herewith. The Annual Report is not
to be considered part of the proxy solicitation
materials.
IMPORTANT In order to avoid additional soliciting expense to the
Company, please MARK, SIGN, DATE and MAIL your proxy
PROMPTLY in the return envelope provided, even if you
plan to attend the meeting. If you attend the meeting
and wish to vote your shares in person, arrangements
will be made for you to do so.
By order of the Board of Directors,
/s/ Morgan R. Jones
Lawrenceville, New Jersey Morgan R. Jones
April 14, 2000 Secretary
<PAGE>
ENVIROGEN, INC.
4100 QUAKERBRIDGE ROAD
LAWRENCEVILLE, NEW JERSEY 08648
________________________
PROXY STATEMENT
________________________
This proxy statement, which is being sent to stockholders on or about April 14,
2000, is furnished in connection with the solicitation of proxies by the Board
of Directors of Envirogen, Inc. (the "Company") for use at the forthcoming
Annual Meeting of Stockholders to be held on Thursday, May 18, 2000, and at any
adjournment or postponement thereof.
The close of business on March 31, 2000 has been fixed as the record date
for the meeting (the "Record Date"). All stockholders at that time are entitled
to notice of, and all holders of record of the Company's Common Stock are
entitled to vote at, the meeting and any adjournment or postponement thereof.
On the Record Date, there were 3,966,670 outstanding shares of Common Stock,
which constituted the only outstanding securities of the Company entitled to
vote.
VOTING AND REVOCABILITY OF PROXIES
Each record holder of Common Stock will be entitled to one vote per share.
Directors are to be elected by a plurality of the votes of the shares present,
in person or by proxy, at the meeting and entitled to vote. Cumulative voting
in the election of directors is not permitted. Approval of Proposals 2 and 3
requires the affirmative vote of the holders of a majority of the shares
present, in person or by proxy, at the meeting and entitled to vote. If a proxy
is marked as "Withhold Authority" or "Abstain" on any matter, or if specific
instructions are given that no vote be cast on any specific matter (a "Specified
Non-Vote"), the shares represented by such proxy will not be voted on such
matter. Abstentions will be included within the number of shares present at the
meeting and entitled to vote for purposes of determining whether such matter has
been authorized, but nominee and other Specified Non-Votes will not be so
included.
Shares may be voted at the meeting in person or by proxy. All valid proxies
received prior to the meeting will be voted. Unless marked to the contrary, such
proxies will be voted "FOR" the election of all directors, "FOR" the approval of
the Envirogen, Inc. 2000 Incentive Stock Option and Non-Qualified Stock Option
Plan and "FOR" the appointment of Ernst & Young LLP as the Company's independent
accountants for 2000. If any other business is brought before the meeting, the
proxies will be voted, to the extent permitted by the rules of the Securities
and Exchange Commission (the "Commission"), in accordance with the judgment of
the persons voting the proxies. A stockholder who has given a proxy may revoke
it at any time prior to such proxy being voted at the meeting by filing with the
Secretary of the Company an instrument revoking it or a duly executed proxy
bearing a later date, or by attending the meeting and giving notice of such
revocation. Attendance at the meeting does not by itself constitute revocation
of a proxy.
All expenses of this solicitation, including the cost of preparing and mailing
this proxy statement, will be borne by the Company. In addition to the use of
the mails, proxies may be solicited by the directors, officers and employees of
the Company, without additional compensation, by personal interview, telephone,
telegram, or otherwise. Arrangements also may be made with brokerage firms and
other custodians, nominees and fiduciaries who hold the voting securities of
record for the forwarding of solicitation material to the beneficial owners
thereof. The Company will reimburse such brokers, custodians, nominees and
fiduciaries for the reasonable out-of-pocket expenses incurred by them in
connection therewith.
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors has nominated six persons for election as directors
whose terms will expire at the 2001 Annual Meeting of Stockholders, or when
their successors are elected and qualified. The nominees are Robert F.
Hendrickson, Robert S. Hillas, Robert F. Johnston, Robert C. Miller, Peter J.
Neff and William C. Smith, each of whom is currently a director of the Company.
Warburg, Pincus Ventures, L. P. has waived its rights to designate one nominee
to the Board of Directors with respect to the election of its nominee at this
year's Annual Meeting of Stockholders.
If any nominee should be unable to serve as a director, an event not now
anticipated, it is intended that the shares represented by proxies will be voted
for election of such substitute as the Board of Directors may nominate. Set
forth below is certain information with respect to the persons nominated as
directors of the Company.
ROBERT F. HENDRICKSON has been a director of the Company since March 1992
and served as Chairman of the Board from March 1994 to April 1997. He serves on
the Executive Compensation and Stock Option Committee. Mr. Hendrickson was
employed by Merck & Co., Inc. from 1961 until his retirement in 1990, most
recently as Senior Vice President, Manufacturing and Technology. He is also a
director of Cytogen Co., Inc., The Liposome Co., Inc. and Unigene Laboratories,
Inc. and has served as a consultant to a number of other biotechnology firms.
Mr. Hendrickson is 67 years old.
ROBERT S. HILLAS has been a director of the Company since April 1997 and
has served as President, Chief Executive Officer and Chairman of the Board of
the Company since April 1998. Mr. Hillas served as a Managing Director and a
member of E.M. Warburg, Pincus & Co., L.L.C., an investment banking firm, and
its predecessors from 1993 until April 1998. He is also a director of ATMI,
Inc. Mr. Hillas is 51 years old.
ROBERT F. JOHNSTON is a founder of the Company and has been a director
since its incorporation in June 1988. Mr. Johnston served as Chairman of the
Board from March 1992 to March 1994. He serves on the Audit Committee and the
Executive Compensation and Stock Option Committee. Since 1967, Mr. Johnston has
been President of Johnston Associates, Inc., a mergers, acquisitions and venture
capital firm located in Princeton, New Jersey. Mr. Johnston is also a director
of several privately held companies. Mr. Johnston is 63 years old.
ROBERT C. MILLER has been a director of the Company since June 1994 and
serves on the Audit Committee. Mr. Miller is a Vice President and director of
the investment banking firm of Allen & Company Incorporated and has been
associated with that firm since June 1986. Mr. Miller is a director of Applied
Imaging Corp. as well as several privately held companies. Mr. Miller is 34
years old.
PETER J. NEFF has been a director of the Company since July 1996 and
serves on the Executive Compensation and Stock Option Committee. Mr. Neff is an
international business management consultant. He was Chairman and Chief
Executive Officer of Genovo, Inc., a gene therapy company, from January 1997
until December 1997. Mr. Neff was employed by Rhone-Poulenc Inc., a specialty
chemical company, from June 1987 to December 1996, where he served as President
and Chief Operating Officer until 1991 and as Chief Executive Officer until
December 1996. Prior to joining Rhone-Poulenc, Mr. Neff was President and Chief
Executive Officer of St. Joe Minerals Corporation, a subsidiary of Fluor
Corporation. He is also a director of Homestake Mining Co., UST, Inc., the
Chemical Manufactures Association and the French-American Chamber of Commerce
and serves on the Board of Trustees of Rider University. Mr. Neff is 61 years
old.
WILLIAM C. SMITH has been a director of the Company since April 1997. Mr.
Smith served as Chairman of the Board of the Company from April 1997 until April
1998 and as Chief Executive Officer from October 1997 until April 1998. He also
served as the President and Chief Executive Officer of the Company's Wisconsin
Operations Group until his retirement on December 31, 1998. Mr. Smith was the
President and Chief Executive Officer of Fluid Management, Inc. ("FMI"), an
environmental consulting and engineering firm, from 1989 until April 1997, when
FMI was merged into the Company. He has over 40 years of technical and
financial management experience in the wood chemicals, plastics and petroleum
products industries. Mr. Smith is 68 years old.
2
<PAGE>
INFORMATION CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held five meetings during 1999. The Company has a
standing Audit Committee and an Executive Compensation and Stock Option
Committee of its Board of Directors.
The Audit Committee makes recommendations to the Board of Directors
concerning the engagement, retention and discharge of independent auditors,
reviews with the Company's independent auditors the plans and results of the
auditing engagement, the Company's financial statements and the adequacy of the
Company's system of internal accounting controls, and directs any investigations
into matters within the scope of the foregoing duties. During 1999, the Audit
Committee met five times.
The Executive Compensation and Stock Option Committee makes recommendations
to the Board of Directors concerning the remuneration arrangements for senior
management and the adoption, extension, amendment and termination of
compensation plans in which senior management and other employees may
participate. It also exercises administrative power pursuant to certain of
those plans, including the Company's 1990 Incentive Stock Option and Non-
Qualified Stock Option Plan. The Executive Compensation and Stock Option
Committee held two formal meetings during 1999.
During 1999, all incumbent directors attended in person or by conference
telephone at least 75% of the total number of meetings of the Board of Directors
and committees of the Board on which they served during their incumbency.
COMPENSATION OF DIRECTORS
Non-employee directors (the "Non-Employee Directors") currently receive a
$2,000 quarterly retainer and an additional $1,000 for each Board of Directors
meeting attended in person and are eligible for stock option grants pursuant to
the Company's 1993 Directors' Non-Qualified Stock Option Plan (the "1993 Plan").
Prior to June 30, 1999, the quarterly retainer was $1,000. Directors are also
reimbursed for out-of-pocket expenses for attendance at meetings. Pursuant to
the Deferred Fee Plan for Non-Employee Directors approved by the Company's
stockholders, the quarterly retainer and meeting fees were deferred and credited
to stock accounts, established at the time of each deferral, equivalent to
shares of the Company's Common Stock, at prices contemporaneous with each
deferral date.
Under the 1993 Plan, upon the initial election of each Non-Employee
Director, he will automatically be granted an option to purchase 2,500 shares of
Common Stock, and an option to purchase an additional 834 shares of Common Stock
shall be granted on June 1 of each year to each Non-Employee Director elected at
subsequent Annual Meetings of Stockholders, except that the Chairman of the
Board (if he is a Non-Employee Director) shall be granted an option to purchase
1,250 shares instead of 834 shares of Common Stock. The option to purchase
2,500 shares vests over five years, and the option to purchase 834 shares vests
on the first anniversary of grant. Non-Employee Directors who are not initially
elected at an Annual Meeting of Stockholders will receive (i) an option to
purchase 2,500 shares of Common Stock and (ii) an option to purchase a pro rata
portion of 834 shares (or 1,250 shares with respect to the Chairman of the
Board, if he is a Non-Employee Director) of Common Stock based on the number of
full months remaining from the date of election until the next Annual Meeting of
Stockholders, divided by twelve. Any fractional shares resulting from such
calculation shall be rounded up to the nearest whole number. To date, Messrs.
Smith, Neff, Miller, Johnston, Hendrickson and Hillas have received stock
options pursuant to the 1993 Plan.
3
<PAGE>
PROPOSAL 2. APPROVAL OF 2000 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
The term of the Envirogen, Inc. 1990 Incentive Stock Option and Non-
Qualified Stock Option Plan, as amended (the "1990 Plan"), expired on March 31,
2000. Pursuant to the terms of the 1990 Plan, no additional options could be
granted after March 31, 2000, although outstanding options extend to their term.
Under the amended terms of the 1990 Plan, the Company's Executive Compensation
and Stock Option Committee was authorized to grant options to purchase an
aggregate of 583,334 shares of Common Stock. At the termination date of March
31, 2000, there were 46,601 shares available for grant under the 1990 Plan.
The Board believes that the Envirogen, Inc. 2000 Incentive Stock Option and
Non-Qualified Stock Option Plan (the "Plan") enhances the ability of the Company
to attract, retain and motivate key employees (collectively, "Key Employees")
and consultants (together with the Key Employees, the "Optionees") and to
motivate them to exercise their best efforts on behalf of the Company and any
subsidiary or parent of the Company (a "Related Corporation"). Approval of the
Plan requires the affirmative vote of the holders of at least a majority of
the shares present, in person or by proxy, at the meeting and entitled to vote.
Accordingly, the Board recommends that the stockholders approve the Plan.
Options granted under the Plan may be designated as "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or may be designated as options not intended
to be ISOs ("non-qualified stock options").
The text of the Plan is attached as Appendix A to this Proxy Statement.
----------
The following description of the Plan is intended merely as a summary of its
principal features and is qualified in its entirety by reference to the Plan.
1. Stock. Options may be granted under the Plan to purchase up to a
maximum of three hundred fifty thousand (350,000) shares of the Company's Common
Stock, provided, however that no Optionee may be granted options in one calendar
year with respect to more than one third of the total number of shares of the
Company's Common Stock reserved for issuance pursuant to the Plan. Shares
issuable under the Plan may be authorized but unissued shares or reacquired
shares, and the Company may purchase shares required for this purpose, from time
to time, if it deems such purchase to be advisable.
If any option granted under the Plan expires or otherwise terminates for
any reason whatever without having been exercised, the shares subject to the
unexercised portion of such option shall continue to be available for the
granting of options under the Plan as fully as if such shares had never been
subject to an option.
2. Administration. The Plan will be administered by the Company's
Executive Compensation and Stock Option Committee (the "Committee"), the members
of which are designated by the Board of Directors. The Committee shall have
full power and authority to administer the Plan, including the power to (a)
promulgate forms to be used with respect to the Plan, (b) promulgate rules of
administration, (c) settle any disputes as to rights or benefits arising from
the Plan, (d) interpret and construe the terms of the Plan, including, but not
limited to, determining entitlement to benefits and the amount of such benefits,
and (e) make such decisions or take such action as the Committee, in its sole
discretion, deems necessary or advisable to aid in the proper administration of
the Plan. Currently, the members of the Committee are Robert F. Hendrickson,
Robert F. Johnston and Peter J. Neff.
3. Eligibility. Key Employees of the Company and/or a Related Corporation
or who are otherwise associated with the Company are eligible to receive ISOs
under the Plan. Non-qualified stock options may be granted to all Optionees.
4. Term of Plan. No option may be granted under the Plan after February
28, 2010, although options outstanding on February 28, 2010 may extend beyond
that date.
5. Term of Options. Subject to earlier termination, the term of each
option shall be not more than ten years (five years in the case of ISOs granted
to more than ten percent (10%) stockholders) from the date of grant.
6. Price. The option price shall be determined and fixed by the Committee
in its discretion but, in the case of an ISO, shall not be less than the higher
of one hundred percent (100%) (one hundred ten percent (110%) in the case of
more than ten percent (10%) stockholders) of the fair market value of the
optioned shares of Common Stock, or the par value thereof, on the date the ISO
is granted and, in the case of a non-qualified stock option, shall not be less
than the higher of seventy-five percent (75%) of the fair market value of the
optioned shares of Common Stock, or the par value thereof, on the date the non-
qualified stock option is granted.
4
<PAGE>
7. Payment. An Optionee may, in the discretion of the Committee, pay for
shares covered by his or her option (i) in cash or its equivalent, (ii) in
shares of the Company's Common Stock previously acquired by the Optionee
(subject to certain holding period requirements), (iii) through a combination of
(i) and (ii) above, or (iv) by delivering a properly executed notice of exercise
of the option to the Company and a broker, with irrevocable instructions to the
broker promptly to deliver to the Company the amount of sale or loan proceeds
necessary to pay the exercise price of the option.
8. Option Document; Restriction on Transferability. All options will be
evidenced by a written option document containing provisions consistent with the
Plan and such other provisions as the Committee deems appropriate. No option
granted under the Plan may be assigned or transferred, except by will or the
laws of descent and distribution. If the Optionee is married at the time of
exercise and if the Optionee requests at the time of exercise, the certificate
will be registered in the name of the Optionee and his or her spouse, jointly,
with right of survivorship.
9. Change of Control Provisions. Notwithstanding any other provision of
the Plan, all outstanding options will become immediately exercisable in the
case of a merger, consolidation, or other business combination involving the
sale or transfer of all (or substantially all) of the assets of the Company, or
other business combination involving the sale or transfer of all (or
substantially all) of the capital stock of the Company in which the Company is
not the surviving entity, or, if it is the surviving entity, either (a) does not
survive as an operating ongoing concern in substantially the same line of
business, or (b) is controlled by persons or entities previously unaffiliated
with the Company.
10. Amendments to Options and the Plan; Discontinuance of the Plan.
Subject to the provisions of the Plan, the Committee may not amend an option
document without an Optionee's consent if the amendment is unfavorable to the
Optionee. The Board of Directors may suspend or discontinue the Plan or amend
it in any respect whatsoever, except that, without the approval of the holders
of at least a majority of the shares of the Company present, in person or by
proxy, and entitled to vote at a duly called meeting, no such action may be
taken to (a) with respect to ISOs, change the class of employees eligible to
participate in the Plan, increase the maximum number of shares of Common Stock
with respect to which ISOs may be granted under the Plan (except as permitted
under the Plan with respect to capital adjustments), or extend the duration of
the Plan, or (b) enact any amendment which would require shareholder approval
pursuant to Treasury Regulation (S)1.162-27(e)(4)(vi) (e.g., an amendment to
change the maximum number of shares for which grants may be made to any
employee). Compliance with Treasury Regulation (S)1.162-27 is desirable so that
compensation recognized upon the exercise of non-qualified stock options granted
under the Plan may be excepted from the compensation deduction limitation of
Section 162(m) of the Code.
11. Tax Aspects of the Plan. Based on the advice of counsel, the Company
believes that, under present federal tax laws and regulations, the federal
income tax consequences to the Company and to the Optionees receiving ISOs and
non-qualified stock options pursuant to the Plan will be as follows:
If an option is treated as an ISO, the Optionee will recognize no income
upon grant or exercise of the option except that at the time of exercise the
excess of the then fair market value of the Common Stock over the exercise price
will be a preference item for the alternative minimum tax. Upon an Optionee's
sale of his or her shares of Common Stock (assuming that the sale occurs no
sooner than two years after grant of the option and one year after exercise of
the option), any gain will be taxed to the Optionee as long-term capital gain.
If the Optionee disposes of his or her shares of Common Stock prior to the
expiration of the above holding periods, the Optionee generally will recognize
ordinary income in an amount measured as the difference between the exercise
price and the lower of the market value of the Common Stock at the exercise date
or the sale price of the Common Stock. Any gain or loss recognized on such a
disposition of the Common Stock in excess of the amount treated as ordinary
income will be characterized as capital gain or loss. The Company will be
allowed a business expense deduction to the extent the Optionee recognizes
ordinary income, subject to Sections 83, 162 (m) and 280G of the Code.
An Optionee will not recognize any taxable income at the time the Optionee
is granted a non-qualified stock option. However, upon exercise of the option,
the Optionee will recognize ordinary income for federal income tax purposes in
an amount generally measured as the excess of the then fair market value of the
Common Stock over the exercise price, and the Company will be entitled to a
deduction at the time of exercise, subject to Sections 83, 162(m) and 280G of
the Code. Upon an Optionee's sale of such shares, any difference between the
sale price and fair market value of such shares on the date of exercise will be
treated as capital gain or loss and will qualify for long-term capital gain or
loss treatment if the Common Stock has been held for more than one year.
Different rules for measuring ordinary income may apply if the Optionee is
subject to Section 16 of the Securities Exchange Act of 1934, as amended.
5
<PAGE>
Section 162(m) of the Code limits the extent to which the remuneration paid
to the Chief Executive Officer and the four highest compensated executives
(other than the Chief Executive Officer) (collectively, the "Covered Employees")
is deductible by a corporation when the annual remuneration for any of these
officers exceeds $1,000,000 in a calendar year. Remuneration for purposes of
Section 162(m) includes cash compensation and noncash benefits paid for services
(including, with respect to non-qualified stock options, the difference between
the exercise price and the market value of the stock at the time of exercise),
subject to certain exclusions.
The foregoing does not purport to be a complete summary of the effect of
federal income taxation upon holders of options or upon the Company. It also
does not reflect provisions of the income tax laws of any municipality, state or
foreign country in which an Optionee may reside.
12. Registration Statement on Form S-8. If the Plan is approved by the
stockholders of the Company, the Company intends to file with the Commission a
Registration Statement on Form S-8 relating to the Plan to register the issuance
and sale by the Company of the shares of Common Stock that may be issued upon
exercise of options granted pursuant to the Plan.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE PLAN AND
HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE "FOR" THE APPROVAL
OF THE PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF AUDITORS
The firm of Ernst & Young LLP served as the Company's independent
accountants for 1999.
The Company's stockholders will be asked to ratify the appointment of Ernst
& Young LLP at the meeting. The ratification of independent accountants by the
stockholders is not required by law or the Company's By-laws. Traditionally,
the Company has submitted this matter to the stockholders and believes that it
is good practice to continue to do so. A majority of the votes cast in favor of
the ratification of Ernst & Young LLP is necessary to approve this matter. If a
majority of the votes cast on this matter are not cast in favor of the
ratification of Ernst & Young LLP, the Company will appoint other independent
accountants as soon as practicable and before the close of the 2000 year.
A representative of Ernst & Young LLP is expected to be present at the
meeting and will be available to respond to appropriate questions. The Ernst &
Young LLP representative will also have the opportunity to make a statement if
he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
2000.
PROPOSAL 4. OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the meeting other than those set forth in the attached notice and customary
procedural matters. However, if any other matters should properly come before
the meeting or any adjournments or postponements thereof, the proxies solicited
hereby will be voted on such matters, to the extent permitted by the rules of
the Commission, in accordance with the judgment of the persons voting such
proxies.
ADDITIONAL INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, as
well as persons beneficially owning more than 10% of the Company's outstanding
shares of Common Stock and certain other holders of such shares (collectively,
"Covered Persons"), to file with the Commission and The Nasdaq Stock Market,
within specified time periods, initial reports of ownership, and subsequent
reports of changes in ownership, of Common Stock and other equity securities of
the Company.
Based solely upon the Company's review of copies of such reports furnished
to it and upon representations of Covered Persons that no other reports were
required, to the Company's knowledge, all of the Section 16(a) filings required
to be made by the Covered Persons with respect to 1999 were made on a timely
basis.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information, for the Company's last
three fiscal years, concerning the annual and long-term compensation paid to
each individual serving as the Company's Chief Executive Officer during 1999 and
each of the Company's four highest paid executive officers whose total annual
salary and bonus during 1999 exceeded $100,000 (collectively, the "Named
Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Awards
Annual Compensation(1) ---------
------------------------------ Securities All Other
Name and Underlying Compen-
Principal Position Year Salary Bonus Options sation(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert S. Hillas(3) 1999 $254,910 $3,000 25,000 $ 1,569
President, Chief Executive 1998 $175,000 -- 83,334 --
Officer and Chairman of 1997 -- -- 3,334 --
the Board
Ronald Unterman 1999 $147,946 $6,000 -- $ 2,979
Senior Vice President and 1998 $144,000 $2,000 38,302 $ 2,880
Chief Scientific Officer 1997 $144,000 -- 17,667 $ 2,326
David N. Enegess 1999 $144,946 $2,000 -- $ 2,949
Vice President of Systems 1998 $142,000 $2,500 18,302 $ 2,840
Sales and Services 1997 $142,000 -- 5,167 $ 2,839
Richard W. Schowengerdt(4) 1999 $141,907 $2,000 -- $ 2,549
Vice President, 1998 $134,564 $2,000 3,500 $ 1,838
Wisconsin Operations 1997 $ 96,250 -- 3,500 --
Mark J. Maten(5) 1999 $132,946 $1,000 -- $ 2,699
Vice President, Finance and 1998 $128,500 $2,000 33,334 $25,688
Chief Financial Officer 1997 -- -- -- --
</TABLE>
(1) The costs of certain perquisites and other personal benefits are not
included because they did not exceed, in the case of each Named Officer,
the lesser of $50,000 or 10% of the total annual salary and bonus indicated
in the above table.
(2) With the exception of the amounts listed for Messrs. Maten and
Schowengerdt, this column consists of the Company's matching contributions
to the Envirogen, Inc. 401(k) Plan. For Mr. Maten, the amount listed for
1998 consists of reimbursement of relocation expenses in connection with
Mr. Maten's employment with the Company. For Mr. Schowengerdt, the amount
listed for 1998 consists of reimbursement of certain medical expenses.
(3) Mr. Hillas' employment with the Company commenced in April 1998.
(4) Mr. Schowengerdt joined the Company when Fluid Management, Inc., a company
of which he was a founder, was merged into the Company in April 1997.
(5) Mr. Maten's employment with the Company commenced in January 1998.
7
<PAGE>
The following tables set forth certain information concerning stock options
granted to the Named Officers during 1999 and unexercised options held by them
at December 31, 1999. No options were exercised by the Named Officers during
1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual
----------------------------------------------------------------------------------------
Number of
Securities % of Total Options Exercise
Underlying Granted to Employees Price Expiration Grant Date
Name Options Granted in Fiscal Year(2) Per Share Date Present Value(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert S. Hillas 25,000(1) 50.0% $1.28 02/23/09 $21,000
Ronald Unterman -- -- -- -- --
David N. Enegess -- -- -- -- --
Richard W. Schowengerdt -- -- -- -- --
Mark J. Maten -- -- -- -- --
</TABLE>
_____________
(1) Such option was granted under the 1990 Plan at an exercise price equal to
or greater than the fair market value of the Company's Common Stock on the
date of grant. Such option is non-transferable and is exercisable in equal
installments over a five-year period commencing with the date of grant;
provided, however, that such option is immediately exercisable in the case
of certain business combinations involving the Company.
(2) The Company granted options to employees to purchase a total of 49,954
shares of Common Stock during 1999.
(3) The grant date present value was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: risk-
free interest rate of 5.39%; dividend yield of 0%; expected life of 6.5
years; and expected volatility of 63.8%.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
Number of Securities Underlying Unexercised Value of Unexercised In-the-Money
Options at Fiscal Year-End Options at Fiscal Year-End(2)
------------------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert S. Hillas 18,502 93,166 -- $10,188
Ronald Unterman 7,661 30,641 -- --
David N. Enegess 3,661 14,641 -- --
Richard W. Schowengerdt 700 2,800 -- --
Mark J. Maten 3,334 13,333 -- --
_________________
</TABLE>
(1) No options were exercised by the Named Officers in 1999.
(2) In-the-money options are those where the fair market value of the
underlying securities exceeds the exercise price of the option. The
closing price of the Company's Common Stock on December 31, 1999 was
$1.6875 per share.
8
<PAGE>
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The following report of the Executive Compensation and Stock Option
Committee is required by the rules of the Commission to be included in this
Proxy Statement and addresses the Company's executive compensation policies for
the year ended December 31, 1999. This report shall not be deemed incorporated
by reference into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, by virtue of any general statement in
such filing incorporating this Proxy Statement by reference, except to the
extent that the Company specifically incorporates the information contained in
this section by reference, and shall not otherwise be deemed filed under either
the Securities Act or the Exchange Act. Throughout fiscal 1999, the Executive
Compensation and Stock Option Committee was composed of Robert F. Hendrickson,
Robert F. Johnston and Peter J. Neff, all non-employee directors.
General. The Company's compensation policies for executives are intended
to further the interests of the Company and its stockholders by encouraging
growth of its business through securing, retaining and motivating management
employees of high caliber who possess the skills necessary to the development
and growth of the Company. The Committee is mindful of the need to align the
interests of management with the interests of the Company's stockholders. The
establishment of the Company's stock option plans was designed to permit the
Company to attract and retain talented managers and motivate such managers to
enhance profitability and stockholder returns. The Committee believes that the
utilization of stock option plans serves the interests of the stockholders,
especially by permitting the Company to preserve cash for operational purposes.
The Company's compensation package consists of three major components: base
compensation, performance bonuses and stock options. Together these elements
comprise total compensation value. The total compensation paid to the Company's
executive officers is influenced significantly by the need to attract management
employees with a high level of expertise and to motivate and retain key
executives for the long-term success of the Company and its stockholders.
Base Compensation. The Committee establishes annual base salary levels for
executives based on competitive data, level of experience, position,
responsibility, and individual and Company performance. The Company has sought
to align base compensation levels comparable to its competitors and other
companies in similar stages of development.
Performance Bonuses. The Company supplements base compensation with awards
of performance bonuses in the form of cash and stock options. In establishing
bonuses for the fiscal year ended December 31, 1999, the Committee determined
that it was in the Company's best interest to pay a combination of cash bonuses
and to award stock options.
Stock Options. The Company grants stock options to its executive
management under its stock option plans. Option grants are intended to bring the
total compensation to a level that the Company believes is competitive with
amounts paid by the Company's competitors and which will offer significant
returns if the Company is successful and, therefore, provides significant
incentives to management to devote the effort called for by the Company's
strategy. The Committee believes that executives' interests are directly tied
to enhanced stockholder value. Thus, stock options are used to provide the
executive management team with a strong incentive to perform in a manner that
will benefit the long-term success of the Company and its stockholders.
Other Benefits. The Company makes available health care benefits and a
401(k) plan for executive officers on terms generally available to all Company
employees. The Committee believes that such benefits are comparable to those
offered by other companies of similar size. The amount of perquisites, as
determined in accordance with the rules of the Commission relating to executive
compensation, did not exceed $50,000 or 10% of the salary of any executive
officer in the last fiscal year.
Chief Executive Officer Compensation. Mr. Hillas served as the Company's
President and Chief Executive Officer during 1999. His compensation was paid by
the Company pursuant to the terms and conditions of his employment agreement
with the Company. See "Executive Compensation" and "Employment and
Noncompetition Agreements" for a description of Mr. Hillas' compensation.
The Executive Compensation and Stock Option
Committee of the Board of Directors
Robert F. Hendrickson, Robert F. Johnston and Peter J. Neff
9
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total stockholder return of
the Company's Common Stock, the Nasdaq Stock Market-U.S. Index and a peer group
index constructed by the Company for the five-year period ended December 31,
1999. The peer group index consists of Roy F. Weston Inc., Harding Lawson
Associates, Versar Inc., Calgon Carbon Corporation and Osmonics Inc., each of
which are involved in various aspects of remediation services or water
treatment. The graph assumes $100 invested on December 31, 1994 in Envirogen
and each of the other two indices.
COMPARISON OF CUMULATIVE TOTAL RETURN
Value of Investment of $100 on December 31, 1994
[ENVIROGEN GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Comparison of Cumulative Total Return among Envirogen, Inc., the
Nasdaq Stock Market - U.S. Index and a Peer Group Index
<S> <C> <C> <C> <C> <C> <C>
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
Envirogen, Inc. $ 100 $ 181 $ 245 $ 109 $ 17 $ 20
Nasdaq Stock Market - U.S. Index (1) $ 100 $ 141 $ 174 $ 213 $ 300 $ 542
Peer Group Index (2) $ 100 $ 135 $ 145 $ 113 $ 70 $ 65
- --------------
</TABLE>
(1) The Company selected the Nasdaq Stock Market - U.S. Index as a comparative
published market index as its operations are U.S. based.
(2) Peer Group Index created by aggregating share prices for all companies
included in the group, weighted according to their respective stock market
capitalization.
10
<PAGE>
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
In April 1998, Robert S. Hillas entered into an employment agreement with
the Company providing for his employment as Chairman, President and Chief
Executive Officer effective April 20, 1998. The employment agreement is for an
initial term of three years with automatic renewals for successive one-year
terms unless either party provides notice of non-renewal at least three months
prior to the then-current expiration date. Mr. Hillas will receive an annual
salary of $250,000, subject to such increases, if any, as may be approved by the
Board of Directors. He will be eligible to receive annual incentive bonuses
based upon corporate and individual performance goals fixed by the Board of
Directors and grants of stock options under such stock option plans of the
Company as are in effect from time to time, in such amounts and on such terms as
the Executive Compensation and Stock Option Committee may determine. Mr. Hillas
received upon commencement of his employment an option under the 1990 Plan to
purchase 83,334 shares of the Company's Common Stock, initially exercisable in
equal increments on each of the first five anniversaries of the grant date. Mr.
Hillas purchased an additional 83,334 shares of Common Stock from the Company at
$7.50 per share in April 1998, and the Company granted Mr. Hillas certain
registration rights with respect to such shares. If Mr. Hillas' employment is
terminated prior to the expiration date due to disability, or by the Company
without cause (as defined), or by Mr. Hillas with good reason (as defined),
including without limitation an election to terminate employment within six
months following a change in control (as defined), or if the Company elects not
to renew his employment after the expiration date, the Company is obligated to
continue to pay salary and provide fringe benefits for 12 months following
termination (provided that if he terminates his employment for good reason due
to his good faith determination within six months following a change in control
that he has been assigned, without his prior written consent, duties or
responsibilities inconsistent with his positions, duties, responsibilities and
status immediately prior to the change in control, such amounts shall be paid
for an additional 12 months so long as he is unable to obtain satisfactory full-
time employment, provided he continuously and diligently seeks the same) and to
pay a prorated portion of any bonus that would have been paid to him for the
year in which such termination occurs. If his employment is terminated by the
Company without cause or by Mr. Hillas with good reason, all options held by Mr.
Hillas which would vest in such 12-month period will become exercisable on the
date of termination. During the term of his employment, Mr. Hillas may not,
directly or indirectly, participate in the United States, Canada or any other
jurisdiction in which the Company has derived at least $250,000 in revenues
during the period the employment agreement was in effect, in any business or
enterprise which is directly competitive with any principal line of business of
the Company or any of its subsidiaries or affiliates, nor may Mr. Hillas induce
any customers or employees of the Company to take actions disadvantageous to the
Company for two years after termination of employment.
Mr. Schowengerdt's employment with the Company began on April 10, 1997 when
FMI was merged into the Company. His employment agreement with the Company
provided for an annual base salary of $140,000. Mr. Schowengerdt is also
eligible to receive annual incentive bonuses based upon attainment of corporate
and individual performance goals and grants of stock options under such stock
option plans of the Company as are in effect from time to time. In November
1998, the agreement was modified and the term extended to December 31, 1999,
when the agreement expired.
The Company has noncompetition agreements with Messrs. Enegess and Unterman
which provide one-year covenants not to compete following termination of
employment; provided, however, that if employment is terminated by the Company
without cause and the Company elects not to pay an amount equal to such person's
annual salary for such one-year period, then there is no such post-termination
covenant.
11
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 25, 2000 by (a) each
stockholder known to the Company to be the beneficial owner, as defined in Rule
13d-3 under the Exchange Act, of more than 5% of the Common Stock, based upon
Company records or Securities and Exchange Commission filings, (b) each director
of the Company, (c) each of the Named Officers and (d) all executive officers
and directors of the Company as a group. Each of the stockholders named below
has sole voting power and sole investment power with respect to the shares
indicated as beneficially owned, unless otherwise indicated.
<TABLE>
<CAPTION>
Shares Owned
------------
Name of Beneficial Owner Number Percent
- ------------------------ ------ -------
<S> <C> <C>
Warburg, Pincus Ventures, L.P. 1,015,873(1) 25.6%
466 Lexington Avenue
New York, NY 10017-3147
Nicholas J. Lowcock, Director 1,017,207(2) 25.6
Allen & Company Incorporated 199,899(3) 5.0
711 Fifth Avenue
New York, NY 10022
Richard W. Schowengerdt, Named Officer 175,304(4) 4.4
William C. Smith, Director 174,770(5) 4.4
Robert S. Hillas, Director and Named Officer 155,924(6) 3.9
Robert F. Johnston, Director 78,010(7) 2.0
Robert C. Miller, Director 45,438(8) 1.1
Robert F. Hendrickson, Director 26,004(9) *
David N. Enegess, Named Officer 15,478(10) *
Ronald Unterman, Named Officer 7,661(11) *
Peter J. Neff, Director 4,169(12) *
Mark J. Maten, Named Officer 3,334(13) *
All executive officers and directors as a group 1,703,299(14) 42.1
(eleven persons)
</TABLE>
___________________
* Less than 1%.
(1) The sole general partner of Warburg, Pincus Ventures, L.P. ("Warburg") is
Warburg, Pincus & Co., a New York general partnership ("WP"). E.M. Warburg,
Pincus & Co., LLC, a New York limited liability company ("EMW LLC"),
manages Warburg. The members of EMW LLC are substantially the same as the
partners of WP. Lionel I. Pincus is the managing partner of WP and the
managing member of EMW LLC and may be deemed to control both WP and EMW
LLC. Nicholas J. Lowcock, a director of the Company, is a Managing Director
and member of EMW LLC. Mr. Lowcock may be deemed to have an indirect
pecuniary interest (within the meaning of Rule 16a-1 under the Exchange
Act) in an indeterminate portion of the shares beneficially owned by
Warburg and WP. See Note 2 below.
(2) Mr. Lowcock is a Managing Director and member of EMW LLC. Mr. Lowcock may
be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Exchange Act) in an indeterminate portion of the
shares beneficially owned by Warburg and WP. All shares indicated as owned
by Mr. Lowcock are included because of his affiliation with the Warburg
entities, other than the 1,334 shares issuable to Mr. Lowcock upon exercise
of options that are currently exercisable. Mr. Lowcock disclaims beneficial
ownership of all shares owned by the Warburg entities. See Note 1 above.
(3) Consists of 163,416 shares beneficially held by Allen & Company and 36,483
shares issuable upon exercise of currently exercisable warrants to Allen &
Company. Does not include shares owned by officers and directors of Allen &
Company for which Allen & Company disclaims beneficial ownership, including
shares held by Robert C. Miller, a director of the Company. Allen Holding
Inc. owns 100% of the outstanding stock of Allen & Company and may be
deemed to beneficially own all shares owned by Allen & Company.
(4) Includes 700 shares issuable upon exercise of options that are currently
exercisable.
(5) Does not give effect to the transfer by Mr. Smith in March 1998 of 100,000
shares to a limited partnership of which Mr. Smith and his wife are the
sole general partners and trusts for the benefit of his children are the
sole limited partners.
(Footnotes to table continued on following page).
12
<PAGE>
__________________
(6) Includes 23,502 shares issuable upon exercise of options that are currently
exercisable.
(7) Includes 2,502 shares issuable upon exercise of options that are currently
exercisable.
(8) Includes 27,903 shares issuable upon exercise of options and warrants that
are currently exercisable.
(9) Includes 9,753 shares issuable upon exercise of options that are currently
exercisable.
(10) Includes 3,661 shares issuable upon exercise of options that are currently
exercisable.
(11) Includes 7,661 shares issuable upon exercise of options that are currently
exercisable.
(12) Includes 3,585 shares issuable upon exercise of options that are currently
exercisable.
(13) Includes 3,334 shares issuable upon exercise of options that are currently
exercisable.
(14) See Notes 2 and 4 through 13 above.
CERTAIN TRANSACTIONS
In April 1998, Robert S. Hillas, the Company's Chairman, President and
Chief Executive Officer, purchased 83,334 shares of Common Stock from the
Company at $7.50 per share in connection with the execution of his employment
agreement. In December 1998, the Company filed a Registration Statement on Form
S-3 with the Commission registering the sale of such shares of Common Stock,
which Registration Statement was declared effective in July 1999. Mr. Hillas
has not sold any of the shares covered by such Registration Statement.
STOCKHOLDER PROPOSALS
The deadline for stockholders to submit proposals pursuant to Rule 14a-8 of
the Exchange Act for inclusion in the Company's proxy statement and form of
proxy for the 2001 Annual Meeting of Stockholders (the "Annual Meeting") is
December 15, 2000. The date after which notice of a stockholder proposal
submitted outside of the process of Rule 14a-8 of the Exchange Act is considered
untimely is February 28, 2001. If notice of a stockholder proposal submitted
outside of the process of Rule 14a-8 of the Exchange Act is received by the
Company after February 28, 2001, then the Company's proxy for the Annual Meeting
may confer discretionary authority to vote on such matter without any discussion
of such matter in the proxy statement for the Annual Meeting.
MISCELLANEOUS
A copy of the Company's 1999 Annual Report to Stockholders is being mailed
simultaneously herewith to stockholders but is not to be regarded as proxy
solicitation material.
The Company, upon request, will furnish to record and beneficial holders of
its Common Stock, free of charge, a copy of its Annual Report on Form 10-K
(including financial statements and schedules but without exhibits) for fiscal
1999. Copies of exhibits to the Form 10-K also will be furnished upon request
and the payment of a reasonable fee. All requests should be directed to
Investor Relations, at the offices of the Company set forth on page one of this
Proxy Statement.
By order of the Board of Directors,
/s/ Morgan R. Jones
Morgan R. Jones, Secretary
April 14, 2000
13
<PAGE>
Appendix A
ENVIROGEN, INC.
2000 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
-------------------------------
1. PURPOSE. This Envirogen, Inc. 2000 Incentive Stock Option and Non-
-------
Qualified Stock Option Plan ("Plan") is intended to provide a means whereby
Envirogen, Inc. (the "Company") may, through the grant of incentive stock
options ("ISOs") to purchase common stock of the Company ("Common Stock") to
officers and other key employees ("Key Employees") and through the grant of
nonqualified stock options ("NQSOs" and, collectively with ISOs, "Options") to
Key Employees, directors, scientific advisory board members and consultants
(together with Key Employees, "Optionees"), attract and retain such Key
Employees and other Optionees and motivate such Key Employees and other
Optionees to exercise their best efforts on behalf of the Company and of any
related corporation ("Related Corporation").
For purposes of the Plan, a Related Corporation of the Company shall mean
either a corporate subsidiary of the Company, as defined in section 424(f) of
the Internal Revenue Code of 1986, as amended ("Code"), or the corporate parent
of the Company, as defined in section 424(e) of the Code. Further, as used in
the Plan, (a) the term "incentive stock option" shall mean an option which, at
the time such option is granted under the Plan, qualifies as an ISO within the
meaning of section 422 of the Code and is designated as an ISO in the Option
Agreement (as hereinafter defined); and (b) the term "nonqualified stock option"
shall mean an option which, at the time such option is granted, does not qualify
as an ISO and/or is designated as an NQSO in the Option Agreement.
2. ADMINISTRATION. The Plan shall be administered by the Company's
--------------
Executive Compensation and Stock Option Committee ("Committee"), which shall
consist of not less than three (3) non-employee directors (within the meaning of
Rule 16b-3(b)(3) under the Securities Exchange Act of 1934 (the "Exchange Act"),
or any successor thereto) who are also outside directors (within the meaning of
Treas. Reg. (S)1.162-27(e)(3), or any successor thereto) of the Company who
shall be appointed by, and shall serve at the pleasure of, the Company's Board
of Directors ("Board"). Each member of such Committee, while serving as such,
shall be deemed to be acting in his capacity as a director of the Company.
The Committee shall have full authority, subject to the terms of the Plan,
to select the Key Employees and other Optionees to be granted ISOs and NQSOs
under the Plan, to grant options on behalf of the Company and to set the date of
grant and the other terms of such Options. The Committee also shall have the
authority to establish such rules and regulations, not inconsistent with the
provisions of the Plan, for the proper administration of the Plan, and to amend,
modify or rescind any such rules and regulations, and to make such
determinations and interpretations under, or in connection with, the Plan, as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
stockholders and all employees, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons claiming under
or through any of them.
3. ELIGIBILITY. The class of employees who shall be eligible to receive
-----------
ISOs under the Plan and the class of persons who shall be eligible to receive
NQSOs under the Plan shall be, respectively, the Key Employees of the Company
and/or a Related Corporation and the other Optionees employed by or otherwise
associated with the Company and/or of a Related Corporation. More than one
Option may be granted to an Optionee under the Plan.
A-1
<PAGE>
4. STOCK. Options may be granted under the Plan to purchase up to a
-----
maximum of three hundred fifty thousand (350,000) shares of the Company's
Common Stock, par value $.01 per share, subject to adjustment as hereinafter
provided; provided, however that no optionee may be granted Options in one
calendar year with respect to more than one half of the total number of shares
of the Company's Common Stock reserved for issuance pursuant to the Plan.
Shares issuable under the Plan may be authorized but unissued shares or
reacquired shares, and the Company may purchase shares required for this
purpose, from time to time, if it deems such purchase to be advisable.
If any Option granted under the Plan expires or otherwise terminates for
any reason whatever (including, without limitation, the Optionee's surrender
thereof) without having been exercised, the shares subject to the unexercised
portion of such Option shall continue to be available for the granting of
Options under the Plan as fully as if such shares had never been subject to an
Option; provided, however, that (a) if an Option is cancelled, the cancelled
Option is counted against the maximum number of shares for which Options may be
granted to a Key Employee, and (b) if the Option price is reduced after the date
of grant, the transaction is treated as a cancellation of an Option and the
grant of a new Option for purposes of counting the maximum number of shares for
which Options may be granted to a Key Employee.
5. GRANTING OF OPTIONS. From time to time until the expiration or earlier
-------------------
suspension or discontinuance of the Plan, the Committee may, on behalf of the
Company, grant to Optionees under the Plan such Options as it determines are
warranted; provided, however, that grants of ISOs and NQSOs shall be separate
and not in tandem. The granting of an Option under the Plan shall not be deemed
either to entitle the Optionee to, or to disqualify the Optionee from, any
participation in any other grant of Options under the Plan. In making any
determination as to whether an Optionee shall be granted an Option and as to the
number of shares to be covered by such Option, the Committee shall take into
account the duties of the Optionee, his present and potential contributions to
the success of the Company or a Related Corporation, and such other factors as
the Committee shall deem relevant in accomplishing the purposes of the Plan.
Moreover, the Committee may provide in the Option that said Option may be
exercised only if certain conditions, as determined by the Committee, are
fulfilled.
6. ANNUAL LIMIT.
------------
a. ISOs.
----
The aggregate fair market value (determined as of the time the ISO is
granted) of the Common Stock with respect to which ISOs are exercisable for the
first time by a Key Employee during any calendar year (under this Plan and any
other ISO plan of the Company or a Related Corporation) shall not exceed one
hundred thousand dollars ($100,000).
b. NQSOs.
-----
The annual limits set forth above for ISOs shall not apply to NQSOs.
7. TERMS AND CONDITIONS OF OPTIONS. The Options granted pursuant to the
-------------------------------
Plan shall expressly specify whether they are ISOs or NQSOs. In addition, the
Options granted pursuant to the Plan shall include expressly or by reference the
following terms and conditions, as well as such other provisions not
inconsistent with the provisions of this Plan and, for ISOs granted under this
Plan, the provisions of section 422(b) of the Code, as the Committee shall deem
desirable:
a. Number of Shares.
----------------
A statement of the number of shares to which the Option pertains.
A-2
<PAGE>
b. Price.
-----
A statement of the Option price which shall be determined and fixed by the
Committee in its discretion but, in the case of an ISO, shall not be less than
the higher of one hundred percent (100%) (one hundred ten percent (110%) in the
case of more than ten percent (10%) stockholders as discussed in (j) below) of
the fair market value of the optioned shares of Common Stock, or the par value
thereof, on the date the ISO is granted and, in the case of an NQSO, shall not
be less than the higher of seventy-five percent (75%) of the fair market value
of the optioned shares of Common Stock, or the par value thereof, on the date
the NQSO is granted.
The fair market value of the optioned shares of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be (i) the
mean between the highest and lowest quoted selling price, if there is a market
for the Common Stock on a registered securities exchange or in an over the
counter market, on the date of grant, or (ii) the weighted average of the means
between the highest and lowest sales on the nearest date before and the nearest
date after the date of grant, if there are no sales on the date of grant but
there are sales on dates within a reasonable period both before and after the
date of grant, or (iii) the means between the bid and asked prices, as reported
by the National Quotation Bureau on the date of grant, if actual sales are not
available during a reasonable period beginning before and ending after the date
of grant, or (iv) such other method of determining fair market value as shall be
authorized by the Code, or the rules or regulations thereunder, and adopted by
the Committee. Where the fair market value of the optioned shares of Common
Stock is determined under (ii) above, the average of the means between the
highest and lowest sales on the nearest date before and the nearest date after
the date of grant is to be weighted inversely by the respective numbers of
trading days between the date of grant and such sales dates, in accordance with
Treas. Reg. (S) 20.2031-2(b)(1)
c. Term
----
Subject to earlier termination as provided in Subsections (e), (f), (g) and
(j) below and in Section 9 hereof, the term of each Option shall be not more
than ten (10) years (five (5) years in the case of ISOs granted to more than ten
percent (10%) stockholders as discussed in (j) below) from the date of grant.
d. Exercise.
--------
Options shall be exercisable in such installments and on such dates as the
Committee may specify, provided that (i) unless approved by the Stock Option
Committee, in no event shall any Option become exercisable at a rate in excess
of 20% per annum from the date of grant (except that all outstanding Options
shall be immediately exercisable in the case of merger, consolidation, or other
business combination involving the sale or transfer of all (or substantially
all) of the assets of the Company, or other business combination involving the
sale or transfer of all (or substantially all) of the capital stock of the
Company in which the Company is not the surviving entity, or, if it is the
surviving entity, either (a) does not survive as an operating ongoing concern in
substantially the same line of business, or (b) is controlled by persons or
entities previously unaffiliated with the Company), (ii) in the case of new
Options granted to an Optionee in replacement for options (whether granted under
the Plan or otherwise) held by the Optionee, the new Options may be made
exercisable, if so determined by the Committee, in its discretion, at the
earliest date the replaced options were exercisable, but not earlier than three
(3) months from the date of grant of the new Options, and (iii) the Committee
may accelerate the exercise date of any outstanding Options, in its discretion,
if it deems such acceleration to be desirable. Any Option shares, the right to
the purchase of which has accrued, may be purchased at any time up to the
expiration or termination of the Option. Exercisable Options may be exercised,
in whole or in part, from time to time by giving written notice of exercise to
the Company at its principal office, specifying the number of shares to be
purchased and accompanied by payment in full of the aggregate Option price for
such shares. Only full shares shall be issued under the Plan, and any
fractional share which might otherwise be issuable upon exercise of an Option
granted hereunder shall be forfeited.
The Option price shall be payable (i) in cash or its equivalent, (ii) in
the discretion of the
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<PAGE>
Committee, in Company Common Stock previously acquired by the Optionee, provided
that if such shares of Common Stock were acquired through exercise of an ISO and
are used to pay the Option price of an ISO, such shares have been held by the
Key Employee for a period of not less than the holding period described in
section 422(a)(1) of the Code on the date of exercise, or if such shares of
Common Stock were acquired through exercise of an NQSO or of an option under a
similar plan, such shares have been held by the Optionee for a period of more
than one (1) year on the date of exercise, (iii) in the discretion of the
Committee, in any combination of (i) and (ii) above, or (iv) in the discretion
of the Committee, by delivering a properly executed notice of exercise of the
Option to the Company and a broker, with irrevocable instructions to the broker
promptly to deliver to the Company the amount of sale or loan proceeds necessary
to pay the exercise price of the Option, provided that the payment procedure
specified in this clause (iv) shall not be available if such payment procedure
would result in a violation of section 16(b) of the Exchange Act.
In the event such Option price is paid, in whole or in part, with shares of
Common Stock, the portion of the Option price so paid shall be equal to the
"fair market value" on the date of tender, as such "fair market value" is
determined in Subsection (b) above, of the Common Stock so tendered in payment
of such Option price.
e. Termination of Employment.
-------------------------
If an Optionee's employment by the Company (and Related Corporations) is
terminated by either party prior to the expiration date fixed for this Option
for any reason other than death or disability, such Option may be exercised, to
the extent of the number of shares with respect to which the Optionee could have
exercised it on the date of such termination, by the Optionee at any time prior
to the earlier of (i) the expiration date specified in such option, or (ii) 30
days after the date of the Optionee's termination of employment, or (iii) an
accelerated termination date of the option determined by the Committee, in its
discretion, except that such accelerated termination date shall not be earlier
than the date of the Optionee's termination of employment.
For purposes of this Plan, in the case of an Optionee who is a director or
a scientific advisory board member of the Company or a Related Corporation but
who is not an employee of the Company or a Related Corporation, such Optionee's
"employment" with the Company and all related Corporations shall be deemed to
terminate when such Optionee ceases to be a director or a scientific board
member of the Company and all Related Corporations, and is no longer providing
ongoing consulting or advisory services to the Company and all Related
Corporations. For purposes of this Plan, in the case of an Optionee who is a
consultant to the Company or a Related Corporation, such Optionee's "employment"
with the Company and all Related Corporations shall be deemed to terminate when
such Optionee is no longer providing ongoing consulting or advisory services to
the Company and all Related Corporations.
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<PAGE>
f. Exercise upon Disability of Optionee.
------------------------------------
If an Optionee shall become disabled (within the meaning of section
22(e)(3) of the Code) during his employment and, prior to the expiration date
fixed for his Option, his employment is terminated as a consequence of such
disability, such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date of such
termination, or to any greater extent permitted by the Committee, by the
Optionee at any time prior to the earlier of (i) the expiration date specified
in such Option, or (ii) an accelerated termination date determined by the
Committee, in its discretion, except that such accelerated termination date
shall not be earlier than the date of the Optionee's termination of employment
by reason of disability, and in the case of ISOs, such date shall not be later
than one (1) year after such termination of employment. In the event of the
Optionee's legal disability, such Option may be so exercised by the Optionee's
legal representative.
g. Exercise upon Death of Optionee.
-------------------------------
If an Optionee shall die during his employment and prior to the expiration
date fixed for his Option, or if an Optionee whose employment is terminated by
reason of Optionee's disability (as described in Subsection (f) above) shall die
following his termination of employment but prior to the earliest of (i) the
expiration date fixed for his Option, or (ii) the expiration of the period
determined under Subsection (f) above, or (iii) in the case of an ISO, three (3)
months following termination of employment, such Option may be exercised, to the
extent of the number of shares with respect to which the Optionee could have
exercised it on the date of his death, or to any greater extent permitted by the
Committee, by the Optionee's estate, personal representative or beneficiary who
acquired the right to exercise such option by bequest or inheritance or by
reason of the death of the Optionee, at any time prior to the earlier of (i) the
expiration date specified in such Option or (ii) an accelerated termination date
determined by the Committee, in its discretion, except that such accelerated
termination date shall not be later than one (1) year after the date of death.
h. Non-Transferability.
-------------------
No Option shall be assignable or transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and during the lifetime
of the Optionee, the Option shall be exercisable only by him or by his guardian
or legal representative. If the Optionee is married at the time of exercise and
if the Optionee so requests at the time of exercise, the certificate or
certificates shall be registered in the name of the Optionee and the Optionee's
spouse, jointly, with right of survivorship.
i. Rights as a Stockholder.
-----------------------
An Optionee shall have no rights as a stockholder with respect to any
shares covered by his Option until the issuance of a stock certificate to him
for such shares.
j. Ten Percent Stockholder.
-----------------------
If the Key Employee owns more than ten percent (10%) of the total combined
voting power of all shares of stock of the Company or of a Related Corporation
at the time an ISO is granted to him, the Option price for the ISO shall be not
less than one hundred ten percent (110%) of the fair market value of the
optioned shares of Common Stock on the date the ISO is granted, and such ISO, by
its terms, shall not be exercisable after the expiration of five (5) years from
the date the ISO is granted. The conditions set forth in this Subsection (j)
shall not apply to NQSOs.
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<PAGE>
k. Listing and Restriction of Shares.
---------------------------------
Each Option shall be subject to the requirement that, if at any time the
Committee shall determine, in its discretion, that the listing, registration or
qualifications of the shares covered thereby upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the purchase of shares thereunder, or that
action by the Company or by the Optionee should be taken in order to obtain an
exemption for any such requirement, no such Option may be exercised, in whole or
in part, unless and until such action shall have been effected, obtained, or
taken under conditions acceptable to the Committee. Without limiting the
generality of the foregoing, each Optionee or his legal representative or
beneficiary may also be required to give satisfactory assurance that shares
purchased upon exercise of an Option are being purchased for investment and not
with a view to distribution, and certificates representing such shares may be
legended accordingly.
l. Withholding and Use of Shares to Satisfy Tax Obligations.
--------------------------------------------------------
The obligation of the Company to deliver shares of Common Stock upon the
exercise of any Option shall be subject to applicable federal, state and local
tax withholding requirements.
If the exercise of any Option is subject to the withholding requirements of
applicable federal tax laws, the Committee, in its discretion (and subject to
such withholding rules ("Withholding Rules") as shall be adopted by the
Committee), may permit the Optionee to satisfy the federal withholding tax, in
whole or in part, by electing to have the Company withhold (or by returning to
the Company) shares of Common Stock, which shares shall be valued, for this
purpose, at their fair market value on the date the amount of tax required to be
withheld is determined (the "Determination Date"). Such election must be made
in compliance with and subject to the Withholding Rules, and the Company may not
withhold shares in excess of the number necessary to satisfy the minimum federal
income tax withholding requirements. In the event shares of Common Stock
acquired under the exercise of an ISO are used to satisfy such withholding
requirement, such shares of Common Stock must have been held by the Key Employee
for a period of not less than the holding period described in section 422(a)(1)
of the Code on the Determination Date. In the event shares of Common Stock
acquired through exercise of an NQSO or of an option under a similar plan are
used to satisfy such withholding requirements, such shares must have been held
by the Optionee for a period of more than one (1) year on the Determination
Date.
8. OPTION INSTRUMENTS - OTHER PROVISIONS. Options granted under the Plan
-------------------------------------
shall be evidenced by written documents ("Option Agreements") in such form as
the Committee shall, from time to time, approve, which Option Agreements shall
contain such provisions, not inconsistent with the provisions of the Plan for
NQSOs granted pursuant to the Plan, and such conditions, not inconsistent with
the provisions of the Plan and section 422(b) of the Code for ISOs granted
pursuant to the Plan, as the Committee shall deem advisable, and which Option
Agreements shall specify whether the Option is an ISO or NQSO. Each Optionee
shall enter into, and be bound by, such Option Agreements, as soon as
practicable after the grant of an Option.
9. CAPITAL ADJUSTMENTS. The number of shares which may be issued under
-------------------
the Plan, as stated in Section 4 hereof, and the maximum number of shares with
respect to which options may be granted to any Key Employee under the Plan as
stated in Section 4 hereof, and the number of shares issuable upon exercise of
outstanding Options under the Plan (as well as the Option price per share under
such outstanding Options), shall, subject to the provisions of section 424(a) of
the Code, be proportionately adjusted, as may be deemed appropriate by the
Committee, to reflect any stock dividend, stock split, share combination, or
similar change in the capitalization of the Company.
A-6
<PAGE>
10. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
---------------------------------------
(a) General. The Board from time to time may suspend or discontinue the
-------
Plan or amend it in any respect whatsoever, except that the following amendments
shall require stockholder approval (given in the manner set forth in Section
10(b) below):
(i) With respect to ISOs, any amendment which would: (A) change the
class of employees eligible to participate in the Plan, (B) except as
permitted under Section 9 hereof, increase the maximum number of shares of
Common Stock with respect to which ISOs may be granted under the Plan, or
(C) extend the duration of the Plan under Section 15 hereof with respect to
any ISOs granted hereunder; and
(ii) With respect to Options, any amendment which would require
stockholder approval pursuant to Treas. Reg. (S) 1.162-27(e)(4)(vi) or any
successor thereto.
Notwithstanding the foregoing, no such suspension, discontinuance or amendment
shall materially impair the rights of any holder of an outstanding Option
without the consent of such holder.
(b) Stockholder Approval Requirements. The approval of stockholders must
---------------------------------
comply with all applicable provisions of the corporate charter, bylaws, and
applicable state law prescribing the method and degree of stockholder approval
required for the issuance of corporate stock or options. If the applicable
state law does not prescribe a method and degree of stockholder approval in such
case, the approval of stockholders must be effected:
(i) By a method and in a degree that would be treated as adequate
under applicable state law in the case of an action requiring stockholder
approval (i.e., an action on which stockholders would be entitled to vote
if the action were taken at a duly held stockholders' meeting); or
(ii) By a majority of the votes cast at a duly held stockholders'
meeting at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the plan.
11. RIGHTS. Neither the adoption of the Plan nor any action of the Board
------
or the Committee shall be deemed to give any individual any right to be granted
an Option, or any other right hereunder, unless and until the Committee shall
have granted such individual an Option, and then his rights shall be only such
as are provided by the Option Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a stockholder of the Company prior to the exercise of such Option and
the issuance of the shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or the Option Agreement with an Optionee, the Company
shall have the right, in its discretion, to retire an Optionee at any time in
accordance with its policies or otherwise to terminate his employment at any
time in accordance with its policies for any reason whatsoever.
12. APPLICATION OF FUNDS. The proceeds received by the Company from the
--------------------
sale of Common Stock pursuant to Options granted under the Plan shall be used
for general corporate purposes. Any cash received in payment for shares upon
exercise of an Option to purchase Common Stock shall be added to the general
funds of the Company and shall be used for its corporate purposes. Any Common
Stock received in payment for shares upon exercise of an Option to purchase
Common Stock shall become treasury stock.
13. EFFECTIVE DATE. This Plan shall become effective on May 18, 2000 (the
--------------
date the Plan was approved by the stockholders).
14. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall
--------------------------------
impose no obligation
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<PAGE>
upon an Optionee to exercise such Option.
15. TERMINATION OF THE PLAN. Unless earlier terminated as provided in the
-----------------------
Plan, the Plan and all authority granted hereunder shall terminate absolutely at
12:00 midnight on February 28, 2010, which date is within ten (10) years after
the date the Plan was adopted by the Board, and no Options hereunder shall be
granted thereafter. Nothing contained in this Section 15, however, shall
terminate or affect the continued existence of rights created under Options
issued hereunder and outstanding on February 28, 2010, which by their terms
extend beyond such date.
16. GOVERNING LAW. With respect to any ISOs granted pursuant to the Plan
-------------
and the Option Agreements thereunder, the Plan, such Option Agreements and any
ISOs granted pursuant thereto shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the State of
Delaware shall govern the operation of, and the rights of Optionees under, the
Plan, the Option Agreements and any Options granted thereunder.
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<PAGE>
ENVIROGEN, INC.
4100 QUAKERBRIDGE ROAD
LAWRENCEVILLE, NEW JERSEY 08648
PROXY -- Annual Meeting of Stockholders - Thursday, May 18, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert S. Hillas and Mark J. Maten as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side hereof, all the shares
of Common Stock of Envirogen, Inc. (the "Company") held of record by the
undersigned on March 31, 2000 at the Annual Meeting of Stockholders to be held
on Thursday, May18, 2000 or at any adjournment or postponement thereof.
(Continued, and to be signed, on Reverse Side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
ENVIROGEN, INC.
May 18, 2000
+ Please Detach and Mail in the Envelop Provided +
| | Please mark your
A | X | votes as in this
| | example
FOR all nominees WITHHOLD AUTHORITY
listed (except as To vote for all
marked to the nominees listed at
contrary below) right
1. ELECTION OF | | | | Nominees: Robert F. Hendrickson
DIRECTORS. | | | | Robert S. Hillas
Robert F. Johnston
(INSTRUCTIONS: To withhold authority to vote Robert C. Miller
for any individual nominee, write that nominee's Peter J. Neff
name below.) William C. Smith
- ------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to approve and adopt the Envirogen, Inc. | | | | | |
2000 Incentive Stock Option and Non-Qualified Stock | | | | | |
Option Plan. | | | | | |
3. Proposal to ratify the appointment of Ernst & Young | | | | | |
LLP as the independent accountants for the Company | | | | | |
for the year ending December 31, 2000. | | | | | |
In their discretion, the Proxies are authorized to the extent permitted by the
rules of the Securities and Exchange Commission, to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN
FAVOR OF ALL NOMINEES LISTED FOR ELECTION AS DIRECTORS UNDER PROPOSAL 1; FOR
PROPOSALS 2 AND 3; AND IN ACCORDANCE WITH THE PROXIES' BEST JUDGEMENT UPON OTHER
MATTERS PROPERLY COMING BEFORE THE MEETING AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOP.
SIGNATURE ____________ DATE __________ SIGNATURE ____________ DATE __________
NOTE: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign with full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
